Airlines cut flights, boost fares?
Compared to this month last year, the number of domestic airline seats have decreased by 5 percent. That is equal to 3.9 million airline seats, or an average of 126,000 seats each day, that aren't available this December that were last December. The airlines reduce the number of seats to help cut expenses and give them more control over pricing. The article states that the U.S. airlines have lost in the past four years a total of $32.3 billion, and the airlines are predicted to lose $10 billion this year. The capacity reduction will no doubt cause the price for a seat to increase, in the end producing more revenue for the airlines. If the airlines are decreasing their quantity of output, they are obviously trying to increase their profit. Do you think that if the airlines continue to lose money, they will go through a short-term shut-down? Could the airlines eventually have seasonal flights?
7 comments:
If the airlines continue to lose money they will cut back on the seat capacity and raise the price of tickets. This is no doubt increasing their revenue. As for seasonal flights, the airlines would have to "special" flights to certain cities. These seasonal flights would save them money on flights to certain cities that are not traveled to often during the non-holiday season.
As a whole the airline industry is hurting, but not every airline is losing money constantly. For those certain airlines that are failing, shut down might be a very real option. The industry as a whole will never shut down though. There are too many people who need to travel at non specific times for a seasonal airline to work by itself. Those companies in trouble need to realize their customer base and follow the precedents set by the airlines that are succeeding.
Yes, if they continue to lose money they may experience shut downs, but I believe they will only be temporary. They will probably shut down and possibly open back up if they kind find a way to make a profit
I agree that shut down will be an option for some companies. However, the decrease in airlines will only be temporary. Some will either open back up or new ones will come into the business. The airline industry will never completely shut down, too many people still fly. Other airlines are able to stay in business even with the losses.
I don't feel that the airlines will shut down, atleast not major ones. If it gets to a point where shut down may be considered, then larger corporations or enterprises will host their own flights for their own purposes. the airlines are just using the simple "decrease supplu, increase price" method to boost their profits. Very large employment cut backs may also take place, but as far as shutting down, I don't feel the loss in profits will cause that.
I think that the airline industry has the potential to only have seasonal flights. As a frequent flyer, I am definitely subject to price discrimination depending on when I purchase my plane ticket, however, on most flights that I have taken, there have always been empty seats. The airline definitely has the capacity to fill these seats, but I do not believe the demand is there for many flights. In fact, I think that airlines are limiting the number of flights they are taking to certain airports and trying to max out passengers on these flights, instead of limiting the number of seats available on each flight. Either way, the goal is to maximize profit over time and to prevent shutting down.
*Recovered post from December 6th, 2005 at 6:03 PM*
As a shareholder in US Airways (previously known as America West Airlines), I jump for joy whenever I see that they've announced cutbacks to flights. While this seems like a hassle to travelers, there is a perfectly logical reason for the cutbacks. In the airline industry, the major measures of costs and revenues are based on a "seat mile". This is a measure of how much the airlines earn or spend to fly one seat one mile in an airplane. In addition, there is a measure of capacity used on airplanes released periodically by the government, allowing us to see how much capacity is actually being used by travelers on planes. The main goal is to achieve the highest capacity, with the highest revenues and lowest costs per seat mile. The thinking is, given that capacity is hovering around 80 percent in the industry, that by cutting flights that are well under capacity, the cost per seat mile falls, the capacity is increased, and airlines can attempt to combat the rising threat of bankruptcy. Seasonal flights are an extreme idea, and likely will not be a reality unless there is a serious meltdown in the use of air travel.
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