First, this post is not about the banking industry, or the securities industry (regardless of the terrible market performance lately), or the mortgage banking industry, or even the much maligned morgage brokers.
It's about the airline industry.
An industry strategist was quoted recently as saying "many airline business models cease to work at $135-a-barrel oil prices." I guess they're not in much better shape at $145.
So what happened? We've known that oil prices were at risk since at least 2001 if not as far back as the 80's. And any industry that relies on fuel oil to fly a piece of metal machinery weighing upwards of a million pounds would want to have risk management issues resolved long before survival was at issue, wouldn't they? So why are they now trying to nit pick their customers with extra charges for checking baggage, food in flight, cutting schedules, etc.? Why is the Wall Street Journal writing about the possibility of their postponing the purchase of new planes - the fuel efficient ones, no less? Either they didn't plan ahead or they didn't like what their planning told them so they chose to ignore it. Oh, you say they saw it but were too poor to do anything about it? Rubbish! If you think your survival is at issue, you put up everything you have to prevent a bad outcome. Survival is the basic instinct, remember? If you don't do that, you either don't think it will happen or you think someone will bail you out if it gets too bad. And if you're big enough, you may get a bail out from the biggest free-of-charge insurance company in the country, the US government.
Airlines regularly go into bankruptcy, but none of the big ones ever stop flying, in spite of what seems from here like very poor strategic planning. What would happen if one of them actually put their planes on the ground and laid off all their pilots? Would Uncle come to the rescue?
I think we can survive with one or two fewer airlines, don't you?
I welcome your comments.
It's about the airline industry.
An industry strategist was quoted recently as saying "many airline business models cease to work at $135-a-barrel oil prices." I guess they're not in much better shape at $145.
So what happened? We've known that oil prices were at risk since at least 2001 if not as far back as the 80's. And any industry that relies on fuel oil to fly a piece of metal machinery weighing upwards of a million pounds would want to have risk management issues resolved long before survival was at issue, wouldn't they? So why are they now trying to nit pick their customers with extra charges for checking baggage, food in flight, cutting schedules, etc.? Why is the Wall Street Journal writing about the possibility of their postponing the purchase of new planes - the fuel efficient ones, no less? Either they didn't plan ahead or they didn't like what their planning told them so they chose to ignore it. Oh, you say they saw it but were too poor to do anything about it? Rubbish! If you think your survival is at issue, you put up everything you have to prevent a bad outcome. Survival is the basic instinct, remember? If you don't do that, you either don't think it will happen or you think someone will bail you out if it gets too bad. And if you're big enough, you may get a bail out from the biggest free-of-charge insurance company in the country, the US government.
Airlines regularly go into bankruptcy, but none of the big ones ever stop flying, in spite of what seems from here like very poor strategic planning. What would happen if one of them actually put their planes on the ground and laid off all their pilots? Would Uncle come to the rescue?
I think we can survive with one or two fewer airlines, don't you?
I welcome your comments.
