Originally Posted by
brunos
It is fun to hear an aviation expert stating that European LCCs and ME3 do not have a profitable business model.
There are many ways to earn a buck and it seems irrelevant where the money comes from.
You missed the most important point, two of the major income streams, Sale and LB and airport subsidies, are eroding fast, so the game will be over soon (by the end of the decade in case of airport subsidies in the EU)
Originally Posted by
brunos
For someone who lives in Asia, there is little doubt that the ME3 "butterfly model" (fly to huge number of European and Asian airports while hubbing in DXB or DOH or AUH) is doing remarkably well. No European (Asian) airline can profitably fly to so many Asian/OZ (European) destinations; the economics are simply not there.
Again, the ME3 are not turning profits and the only routes which might be profitable are trunk routes from Europe to Asia, routes on which they simply benefit from the fact that the EU3 are packed already giving the ME3 the opportunity to charge solid fares as alternative carriers with an inferior product (time is still the factor when it comes to profitable customers...)
Everything else was a major bucket case, ultra long-haul A380 flights from Miami or Dallas are the prime example. Oil has become cheaper, so we might see some profits, money desperately needed to pay off the huge amounts of debt they created while expanding over the last decade(s)
Originally Posted by
brunos
And from a finance viewpoint that reminds me of many comments I read about Amazon (no accounting profits, growth for growth,..). Well, AMZN market value went up by some 280% over 5 years compared to 60% for S&P. The analogy is clearly not totally relevant, but I am impressed on how EK and QR (I don't know EY) have been smart, efficient and dynamic. In a few years, QR moved from the status of an unknown airline to a major one. It attracted pax by offering an unbelievable onboard product and heavily-discounted fares in J. Now that it is a major factor (at least on the Asia/Europe routes), it is moving more mainstream, and profitable, by cutting costs and reducing discounts.
QR is far away from being smart and efficient, however they are comparable to Amazon insofar that they do not allow unions or do not talk to unions and make use of unskilled labour paying low wages…
They were also comparable, because of negative cash flows, simply because the costs of setting up the infrastructure needed to serve customers should not be underestimated.
Maybe, they can harvest the fruits later on, probably more likely for Amazon than QR, but we never know. Same day delivery, A380’s on 8000 mile RT to Mia are expensive…
Disruption is nice, I love to see it happening, but do not underestimate the incumbents, who know how to play the game
Just to be safe here, playing the game equals turning profits constantly and in a modern world it also means paying decent wages, paying for social and health insurance.
I do not see that happening for quite some time at Uber, Tesla, QR etc.