Airline economics can be a bore – until you understand that they directly affect where you can book a seat and the price you’ll pay for it. Then the intricacies of it all it starts to get your attention.
Here’s the bottom line from IATA, the International Air Transport Association. According to its latest Airlines Financial Monitor, “Air travel so far shows little sign of reflecting the slump in business and consumer confidence in many economies.” As a matter of fact, “Passenger capacity has trended higher unabated.” Carriers continue to use their aircraft a bunch, this even though utilization of widebody jets—the kind most prevalent on long-range international routes—“has dipped a bit recently.”
Interestingly, airplanes are still packed in a lot of places. That’s because carriers a few years back decided en masse to stop chasing market share on particular routes. Instead, they pursue profits. And that means they aren’t going to put too many aircraft in the air. Do that and their all-important yields fall off.
IATA’s Airlines Financial Monitor says at the end of this year’s third fiscal quarter, “Passenger load factors (the percentage of seats filled by paying passengers) were still close to all-time highs.” That “unabated” growth we talked about earlier “so far has been matched with careful capacity additions.” Translation: again, the airlines don’t want too many seats chasing too few fannies. That sort of scenario may temporarily dive down the price you pay on a particular route, but in the longer run it can also drive some airlines flat out of business, resulting is less competition.
There are lots of worries for airlines out there just now, including the European debt crisis and the price of petrol. Ironically, the Monitor concludes, “Despite the deterioration in economic conditions…jet fuel prices rose during the past month back above $130 a barrel.” That’s a key reason airfares this Thanksgiving were a full fifth—20 percent—higher than they were for the same holiday period in 2010.
IATA attributes this rose to “tight” oil markets that “have been subject to a supply squeeze for some time.”
Despite the fact airline passengers continue to be squeezed, however, they’re still flying. For all the uncertainty, all the angst, people are still traveling.
How about you? How are you wringing the most out of your travel budget these days?
Story by Jerry Chandler
(Image: digital cat)