$100 Oil and the Airlines

[c1ue]

Re: $100 Oil and the Airlines

My recent flights to Europe: under $500 for Zurich; under $600 for St. Petersburg, under $500 for London.

Admittedly these were winter fares, but still low by the standards of the past 7 years.

Flights were all full, but I'd bet average revenue was WAY down.

Flights to Asia, on the other hand, have been trending up for some time.

5 years ago I could regularly get $500 tix to Japan, now I'm dancing if I get something for $800.

My compatriots still in the semiconductor side are universally saying travel is restricted for the foreseeable future...not a good sign.

[BiscayneSunrise]

Re: $100 Oil and the Airlines

Interesting to note that today United Airlines said it was postponing its' new service from San Francisco to Guangzhou. They said it was due to high fuel prices. You'd figure that in one of the hottest markets in the world United could charge a high enough ticket price to cover the cost of the fuel.

The Boyd opinion says that the first routes to feel the heat of high fuel prices would be the tertiary cities. This united announcement is somewhat unexpected which leaves me with one of two conclusions:

Either United is afraid of drawing traffic away from some of its other trans-Pacific routes or maybe the traffic to China is beginning to wane.

[Verrocchio]

Re: $100 Oil and the Airlines

PS: I see Verrochio used the acronym of my screen name, BS. Unfortunate that my screen name is shortened to that. I guess I should have done better due diligence when I dreamed up Biscayne Sunrise. No worries, hopefully the group here doesn't think that postings from BS are BS!

No, BiscayneSunrise, I merely experienced a moment of laziness in keyboarding. Really, no BS!

[BiscayneSunrise]

Re: $100 Oil and the Airlines

Mega is just stating the obvious as he is want to do. I recently read that something like 40% of corporate jet deliveries over the next few years are slated for Asia.

In another generation, the airports around the ski resorts of Nepal will look like those in Aspen and Vail. ;)

[BiscayneSunrise]

Re: $100 Oil and the Airlines

Flying will become more of a luxury, so I expect not as much discretionary travel, at least at the low end. But for the harried business person traveling 200-600 miles, Day Jet will still offer an attractive alternative.

[dbarberic]

Re: $100 Oil and the Airlines

From Times OnlineApril 14, 2008
Oil price surge propels planes back to basics

http://business.timesonline.co.uk/to...cle3745007.ece

With oil prices hovering at close to $110 a barrel, many are betting that new technologies — biofuels, hydrogen cells and solar power among them — will solve the world's energy crisis. A large part of the airline industry, however, is looking back to basics: planes with propellers.

In the market for passenger planes with fewer than 70 seats, turboprop aircraft, once condemned for the relatively noisy and bumpy ride passengers endure, are now outselling the equivalent regional jets by two-to-one, according to industry estimates.

"Propeller-driven craft enjoy massive fuel benefits on shorter journeys," Kapil Kaul, the chief executive of the Centre for Asia Pacific Aviation, said.
For a journey of less than about 600 nautical miles, or about 90 minutes' flying time, a turboprob may use as much as 70 per cent less fuel than a similar-sized jet, he added.

Wow... I've heard of the fuel efficiency, but I didn't realize that it offers up to a 70% cut.

[GRG55]

Re: $100 Oil and the Airlines

Speculation from the Boyd Group of Denver about what the US airline industry will look like with oil making new highs. There has been much speculation about mergers in the US airline industry, all intended to reduce capacity, which would allow the surviving airline to raise prices. If industry consolidation can't happen for whatever reason, then the airlines will begin reducing capacity unilaterally.

If this pace continues, then airline flying will be what it was in the 30's and 50's; the preserve of the wealthy. No more weekend getaways to Vegas, etc.

Perhaps the beneficiaries of airline cutbacks will be the rent-a-car companies and those companies providing virtual conferencing...

It's not just in the USA or Europe where "irrational" capacity expansions leading to losses, leading to consolidation plays out in the aviation world. There was an article in yesterday's FT titled "Indian airlines face mergers as losses hit $ 1bn". Here's the reason...

Wednesday, April 16, 2008

Air passenger growth fails to keep pace with capacity addition

New Delhi: Domestic passenger traffic in the first quarter (January-March) of this calendar year grew by 11 per cent, but the much-talked-about consolidation of capacity was not evident as carriers added more flights and enhanced capacity, which grew by 26 per cent in the same period...
http://avindia.blogspot.com/2008/04/...keep-pace.html

[BiscayneSunrise]

Re: $100 Oil and the Airlines

Interesting. That looks like a replay of the US airline industry after de-regulation in 1978 where there were too many airlines fighting over market share with suicidal fare wars. The result ended badly.

[rj1]

Re: $100 Oil and the Airlines

So how about an update to this thread where oil is no longer $100, is now circa $135, airlines have cut flights and raised prices?

[GRG55]

Re: $100 Oil and the Airlines

So how about an update to this thread where oil is no longer $100, is now circa $135, airlines have cut flights and raised prices?

I am just trying to book a "cheap" cross-Atlantic flight to London, UK later this summer. Base fares for economy return still look pretty reasonable.

Here's the catch. Fuel surcharges are now running more than 40% on top of the base fare :eek:. The various airport fees and taxes on both ends add almost 20%. So the cheap fare isn't so cheap any more...

[c1ue]

Re: $100 Oil and the Airlines

Unless you have to be in the UK, I wouldn't use any of those airports for cross-Atlantic jaunts.

LHR in particular has jacked up taxes something like $100 per ticket, more for biz class. Toss in the single carry on policy and the general crappiness of the airport...

AMS, FRA, or even ZRH

I had a $497 ticket to ZRH earlier this year - admittedly off-peak - but including all taxes/fees.

My wife is headed for Russia in 2 weeks, and her ticket to FRA was only $940 all in.

[rj1]

Re: $100 Oil and the Airlines

Paul Krugman blog post titled "The World Gets Bigger":

http://krugman.blogs.nytimes.com/200...d-gets-bigger/

Many people have noticed that higher fuel prices are putting the brakes on globalization: if it costs more to ship stuff, there will be less shipping.
How big is this effect? We know that the volume of trade between any two countries falls a lot with distance; this indicates that trade is quite sensitive to transport costs. This study gives a number:

[D]oubling transport costs from their median value … reduces trade volumes by 45%. Moving from the median value of transport costs to the 75th percentile … cuts trade volumes by two-thirds.

Now, the fuel price increase doesn’t have that large an effect — at least not yet. But a very back-of-the envelope calculation using CIBC estimates of the fuel cost effect gives me a 17 percent contraction in trade if oil prices stay at current levels for a long time.
Business travel will also be affected. Via Felix Salmon, airlines are starting to cut long-distance nonstops. Why? Because a nonstop from, say, NY to Singapore is kind of like a rocket ship: a lot of the fuel it carries is being burned to carry additional fuel, which makes overall fuel efficiency lower than a journey with refueling stops along the way. Of course, those non-nonstop trips take longer, so the world in effect gets bigger.
Interesting stuff. Fortunately, I no longer have to do a lot of flying to SE Asia and South America to keep tabs on the world financial crisis; I can get there on New Jersey Transit.

[Wild Style]

Re: $100 Oil and the Airlines

From Times OnlineApril 14, 2008
Oil price surge propels planes back to basics

http://business.timesonline.co.uk/to...cle3745007.ece


Wow... I've heard of the fuel efficiency, but I didn't realize that it offers up to a 70% cut.

I flew from Philly to NYC the other day on one of these Prop planes. Seems companies are starting to use these on short flights. Man that ride was bumpy as hell.

[GRG55]

Re: $100 Oil and the Airlines

I flew from Philly to NYC the other day on one of these Prop planes. Seems companies are starting to use these on short flights. Man that ride was bumpy as hell.

It's bumpy because these aircraft fly at much lower altitudes than jets, and therefore are more subject to mechanical and convective turbulence because they can't get "above the weather". This is especially so in summer months, and particularly this summer in parts of the USA because the jet stream is well south of normal and that's creating huge swaths of unstable air across much of the center of the continent.

The other reason is that these aircraft are often STOL (short take-off and landing) with comparatively low wing loading to allow them to land and take-off from much shorter runways than a jet requires. The lower wing loading means they get bounced around more in the turbulence. Hopefully the coffee was good...:rolleyes:

[EJ]

Re: $100 Oil and the Airlines

It's bumpy because these aircraft fly at much lower altitudes than jets, and therefore are more subject to mechanical and convective turbulence because they can't get "above the weather". This is especially so in summer months, and particularly this summer in parts of the USA because the jet stream is well south of normal and that's creating huge swaths of unstable air across much of the center of the continent.

The other reason is that these aircraft are often STOL (short take-off and landing) with comparatively low wing loading to allow them to land and take-off from much shorter runways than a jet requires. The lower wing loading means they get bounced around more in the turbulence. Hopefully the coffee was good...:rolleyes:

"Propeller aircraft can fly the same distance at a low or high altitude. It will fly faster at the higher altitude however."

I do not miss riding around in the small planes that appear to achieve optimal fuel efficiency at altitudes where the weather seems to happen worldwide. Had to grab my laptop out of the air more than once on those things.

The VP sales of my company three companies ago called them Buddy Holly planes. When confronted with a flight in one he'd rent a car and drive.