Airlines are Losing Money (Again?)
This is great. Once again, the airlines find that they are losing money. Apparently, this time rising fuel prices are to blame.
I really wonder why nobody in the executive ranks at all of these companies had the forsight to hedge rising fuel costs. Cereal companies hedge the cost of their raw materials namely the grains, corn etc., that goes into the products that they make. Haven’t the folks at the airlines caught on yet?
What truly makes this scary is that it would appear that almost all of them are losing money.
American Airlines is by one estimate, losing almost $3.5 million a day. Ticket prices have risen 6% while jet fuel prices have risen more than 92% over the past year. Clearly something has to give.
What would happen if market-rate fuel surcharges were added? Would people fly less? Perhaps, perhaps not.
If people flew less as a result of the higher fuel surcharge, planes would probably fly closer to their capacity and fewer flights would be needed.
If people flew the same amount as they did before the spike, airline fuel bills would be covered and there would be a little left over for profit–a pretty simple concept.
With recent price spikes for flour, my local bakery, bagel shop and pizza place have all raised prices and apologized for having to have had to do it. These businesses aren’t charities, they simple need to earn a profit for all of their value-added labor. I don’t like the higher prices but as a consumer, I know that if local retailers aren’t making money, they tend to close up shop fairly quickly and it’ll cost more in terms of time, money and quality to go to another store.
What I don’t understand is why major airlines, with legions of seemly intellegent people working for them, can’t make this concept work as well.
Something tells me that Chapter 11 is in the future for some, mergers for others.
At some point someone needs to yell “Dookie in the Pool! What we’re doing isn’t sustainable so we’ve got to try a rather novel concept for an airline, we’re going to try to make sure that our revenues exceed our expenses”
Unfortunately history is a pretty good indicator so I’d suggest that more of the same is on the horizon. I hope they’ll let me transfer my airline mikes.
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