State of the Airlines

Monday, January 10, 2005

What Really Ails the Industry

Finally, an article that makes sense mostly because it makes a point I have been yelling about.
The AP ran this article (Meg Richards, AP Business Writer) regarding the impact of the latest "fare war". While the title irks me (this is really so much more than a fare war) it goes on to dig into some relevant stuff about what's really wrong here. Ms. Richard rightly points out:
"If one of the big carriers did go out of business, it would actually help the remaining airlines survive. Almost everyone agrees the biggest problem facing the industry is excess capacity -- too many seats in the sky."
Spot on! She gets a good quote from Brian Hayward, airline analyst at Zacks Investment Research in Chicago.

"It's impossible. If you like layoffs and the threat of bankruptcy, then be in the airline business," said Hayward, of Zacks. "Until somebody bites the bullet and seats go away, and I mean go away permanently, not to be replaced by someone else, we'll see these problems continue."
So the analyst need to stop talking about how bad Delta's new fare structure is for the industry. The pressure to compete at these new levels is intense and, hopefully, this pressure is finally going to force the excess capacity out of the market. This will be GOOD for the industry on the whole.

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