Kirby thinks airfares should be double
Sep 14, 2018, 10:43 pm
#31
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Regardless, is there any example in the US of a reporter interview turning into a Sherman anti-trust issue? If Kirby held a private conference call with DAL and AA, and prices all went up the same I see that as an issue. An interview, I can't think of any examples.
It's not the airline industry, but I worked on a project about 15 years ago where a client was planning to introduce a new product in about 18-24 months' time, and we were tasked with building a website to help judge consumer demand. The initial project spec called for users to be shown one of several possible price points, as marketing was interested to see how demand would respond to the various prices.
IIRC, it was live for a day or two before we got an urgent call from the client's legal department, who needed the prices taken off of the website immediately; they were concerned it would be considered price signaling. Now, I don't know that this was a response to an FTC complaint; it was more likely lawyers being conservative. But a public website and a conference call are basically the same thing as far as anti-trust law would be concerned.
Sep 14, 2018, 10:56 pm
#32
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If the question is, do you think airfare has kept pace with cost since the 1990's is different than.....(and no reason to lie)
versus....
The question is -
The kitchen in Newark is having issues - why? "Well, airfare should double and Delta and AA should do the same"
Sep 14, 2018, 11:14 pm
#33
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I am not convinced.
Aircraft fuel efficiency nearly doubled since 1980 and fuel consumption further decreased with software use in planning. Reliability increased as well.
Far fewer staff is employed per pax.
Airfare is no longer bundled with all sorts of junk costs.
Kirby is not saying pay double and we ll bring back the level of service of the past. I read it as pay double and if we can get away with it we will keep the extra cash.
Aircraft fuel efficiency nearly doubled since 1980 and fuel consumption further decreased with software use in planning. Reliability increased as well.
Far fewer staff is employed per pax.
Airfare is no longer bundled with all sorts of junk costs.
Kirby is not saying pay double and we ll bring back the level of service of the past. I read it as pay double and if we can get away with it we will keep the extra cash.
But putting aside the facts, that Kirby would say something stupid like this shows how truly out of touch he is. The US airlines benefit from tax breaks and substantial public investment into infrastructure. They benefit from semi-monopoly conditions created by a combination of the market and also limited availability of public resources (gates, runways, ATC bandwidth) which allows them to gouge certain areas/routes. And they benefit from having foreign competitors kept out of their home market.
They are currently running at the best end (DL) a 14-17% margin, and at the worst end (United) a 8-9-10% margin.
If the airlines doubled fares (or ran substantially larger margins) the public would justifiably call for anti-trust and other actions to reign in the price gouging.
Sep 15, 2018, 12:21 am
#34
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No real surprise....except maybe that he doesn't think airfares should be triple.
Also wouldn't be shocked if he thought seats were an unnecessary luxury, and that passengers should all stand up during flight. A one class 777 in RBE (Rock Bottom Economy) could seat...err, I mean could 'stand' 800+ passengers.
Also wouldn't be shocked if he thought seats were an unnecessary luxury, and that passengers should all stand up during flight. A one class 777 in RBE (Rock Bottom Economy) could seat...err, I mean could 'stand' 800+ passengers.
Sep 15, 2018, 2:09 am
#35
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It is a moot point since airfare is not doubling.
Regardless, is there any example in the US of a reporter interview turning into a Sherman anti-trust issue? If Kirby held a private conference call with DAL and AA, and prices all went up the same I see that as an issue. An interview, I can't think of any examples.
Regardless, is there any example in the US of a reporter interview turning into a Sherman anti-trust issue? If Kirby held a private conference call with DAL and AA, and prices all went up the same I see that as an issue. An interview, I can't think of any examples.
. . . However, in 2006, the FTC challenged invitations to collude on pricing that were communicated publicly. In this case, the CEO had offered to collude with its only competitor in a conference call with financial analysts. The CEO allegedly stated that it planned to raise its prices, and that, if its competitor did not raise its prices, the ongoing price war would continue. In the FTC’s view, the public statements went far beyond disclosure for legitimate business reasons and presented a substantial danger of competitive harm. Accordingly, in a consent agreement, it prohibited the company from inviting collusion going forward.
Some more discussion on this topic.
https://www.bakermckenzie.com/en/ins...st-enforcement
Sep 15, 2018, 4:41 am
#36
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During the last 30 years, airline revenues fell by half as a percentage of GDP...because GDP increased significantly in the 1990s above the inflation rate and because they could fall due to airline costs falling significantly. The same decline in prices and costs happened to numerous transportation providers, particularly freight railroad companies.
Kirby lacks analytical thinking skills.
Kirby lacks analytical thinking skills.
Sep 15, 2018, 10:15 am
#37
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Kirby's logic would have had blacksmiths in 1910 complaining that they ought to double the price of horseshoes, too.
Sep 15, 2018, 10:40 am
#38
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Sep 15, 2018, 10:54 am
#39
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I think a major, and under-reported part of the story behind why airlines are faring so well in spite of dropping prices is the increased passenger load factors, removal of unprofitable routes (remember the infamous Chairman's Flight?) and hubs for that matter. Whereas in the 70s and 80s the average load factor was 60%, we're now seeing load factors at 80%, sometimes even creeping up to 90%. If you're an airline and your revenue (presumably) climbs by a third, you think that would mitigate the issue of losing money? Then there is the marked improvement in fuel economy on airliners. No longer due to we fly gas guzzling 747s across the pond, opting for more efficient 737s or 767 if the occasion calls for it. Combine that with ancillary fees and the growth in connecting flights and JVs and it's clear to see that while there is some downward pressure on the airlines (esp. from the ULCCs), they still manage to thrive.
Safe Travels,
James
Safe Travels,
James
Last edited by wanderingkev; Sep 15, 2018 at 2:54 pm Reason: spelling
Sep 15, 2018, 11:24 am
#40
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Apparently Kirby thinks airfare should be segmented based on individual passenger data - charge what the customer is willing to pay. Thankfully the GDS distribution system makes this almost impossible and the GDS companies are not really making any progress in coming up with a way to distribute differentiated pricing - not to mention it is, or could end up being illegal in some countries or jurisdictions.
While UA could devise a way to do this via the website, I can just book tickets in the GDS without the FFN, then go to UA.com after the ticket is issued and add the PNR to my profile, updating the frequent flyer info at that time.
Sorry Kirby - we don't always get what we want. Hopefully you'll keep talking, cross the line into anti-trust comments, and end up following Smisek into oblivion.
While UA could devise a way to do this via the website, I can just book tickets in the GDS without the FFN, then go to UA.com after the ticket is issued and add the PNR to my profile, updating the frequent flyer info at that time.
Sorry Kirby - we don't always get what we want. Hopefully you'll keep talking, cross the line into anti-trust comments, and end up following Smisek into oblivion.
Sep 15, 2018, 11:45 am
#41
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Probably because the number of flyers flying has doubled, what's lost on margins are made up on volume: https://data.worldbank.org/indicator...rue&start=1974
Sep 15, 2018, 12:22 pm
#42
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No real surprise....except maybe that he doesn't think airfares should be triple.
Also wouldn't be shocked if he thought seats were an unnecessary luxury, and that passengers should all stand up during flight. A one class 777 in RBE (Rock Bottom Economy) could seat...err, I mean could 'stand' 800+ passengers.
Also wouldn't be shocked if he thought seats were an unnecessary luxury, and that passengers should all stand up during flight. A one class 777 in RBE (Rock Bottom Economy) could seat...err, I mean could 'stand' 800+ passengers.
Sep 15, 2018, 12:59 pm
#44
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During the last 30 years, airline revenues fell by half as a percentage of GDP...because GDP increased significantly in the 1990s above the inflation rate and because they could fall due to airline costs falling significantly. The same decline in prices and costs happened to numerous transportation providers, particularly freight railroad companies.
Kirby lacks analytical thinking skills.
Kirby lacks analytical thinking skills.
Even if were here just talking airline industry, if Kirby was referring specifically to airfare, these days, it is only a portion of the cost many travelers pay. So assuming stagnant GDP in all other areas outside the price one pays an airline in the end to get from A-B, let’s not forget that airfare, 10-20 years ago, would have been close to 100% of that. Sure, there were some fees, like overweight bags or change fees, for example, but those were many fewer and also lower - and probably very low single digits of airline revenue. I don’t know what fees account for now, but it’s obviously much more because now there are fees for everything (bags, food, excess baggage, overweight baggage, premier access, E+, upgrades, etc), they are hard selling them, and they they are all rising (what were change fees and overweight bag fees 20 years ago compared to now). So even with that, airfares would be a lower amount of GDP.
Then tag in growth from everywhere else. While someone points to the lowering cost of say, computers, think of the tech industry now and categories that didn’t exist back then. Smartphones weren’t available, for example, and that industry is worth how many billion dollars and contributes how much to GDP? Even with computers, unit prices for sure have fallen, but how much bigger of an industry is it. How many people had laptops today vs. then? How many other industries that existed then have grown considerably since then, or didn’t exist and are a decent portion of the economy now.
This is just for the top of my head - In sure there’s a lot of stuff I haven’t even considered that would explain why it doesn’t make sense to compare airfares to percentage of GDP.
Sep 15, 2018, 1:58 pm
#45
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