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?
1 comment:
*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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