Not so Hot
ARLINGTON (theHub.com) - An article in the Money section of today’s USA Today attempts to sum up the state of affairs in the airline industry, comparing the plight of mature network carriers to the low-cost competition. Although December passenger traffic shows that passenger demand has finally returned to pre-September 2001 levels, profits will take longer to materialize for large network carriers, according to the article. This is good news for low-cost carriers with low operating costs but “hardly a formula for profitability for the USA's big airlines,†according to Stan Pace, Bain & Co.'s head of aviation consulting and former president of American Trans Air. "The mix of traffic, business-to-leisure, is not back to where it was. And we think it is fundamentally changed and won't go back. It's a profitless recovery," says Pace.
Despite the economic recovery, business travelers continue to be more price conscious, and the growth of low-cost carriers means they have more options, according to the article. This is resulting in continuing losses for large U.S. carriers and continuing profits for low-cost carriers. "The economy is recovering, but business travelers are not going back to their old behavior," Pace says. "Instead of booking 30 to 40 percent of their travel on discount fares, as they did before the economy fell, they're now booking 60 to 70 percent of their business travel at discount fares.
Respectfully,
USA320Pilot
ARLINGTON (theHub.com) - An article in the Money section of today’s USA Today attempts to sum up the state of affairs in the airline industry, comparing the plight of mature network carriers to the low-cost competition. Although December passenger traffic shows that passenger demand has finally returned to pre-September 2001 levels, profits will take longer to materialize for large network carriers, according to the article. This is good news for low-cost carriers with low operating costs but “hardly a formula for profitability for the USA's big airlines,†according to Stan Pace, Bain & Co.'s head of aviation consulting and former president of American Trans Air. "The mix of traffic, business-to-leisure, is not back to where it was. And we think it is fundamentally changed and won't go back. It's a profitless recovery," says Pace.
Despite the economic recovery, business travelers continue to be more price conscious, and the growth of low-cost carriers means they have more options, according to the article. This is resulting in continuing losses for large U.S. carriers and continuing profits for low-cost carriers. "The economy is recovering, but business travelers are not going back to their old behavior," Pace says. "Instead of booking 30 to 40 percent of their travel on discount fares, as they did before the economy fell, they're now booking 60 to 70 percent of their business travel at discount fares.
Respectfully,
USA320Pilot
