Kirby thinks airfares should be double

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Old Sep 14, 18, 2:55 pm
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Kirby thinks airfares should be double

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Old Sep 14, 18, 3:04 pm
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I think it is hard to disagree with him.

Airfare isn't much different than the 90's - and since prices haven't kept with rising costs, things get cut - like your seat in economy - food - good champagne, etc....

You can't provide the same things you did in the 90's (or earlier) and charge the same amount of money.
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Old Sep 14, 18, 3:16 pm
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I have no qualms with this, so long as they don't touch my airfare! Just double the cost of checked bag fees and other ancillary fees on to the kettles. Pass the costs on to the kettle not to the UA loyalists

-James
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Old Sep 14, 18, 3:32 pm
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I don't think there is any reason that the airline industry should receive a fixed percentage of the GDP. But I am not an economist.

One thing pointed out is that “in the last 30 years airline revenue as a percentage or GDP has gone to about .6 from about 1.2%.” The conclusion [Kirby] draws is that airfares should double, “we are under pricing our product by 50%.”
There is nothing stopping him from doubling fares if that's what he chooses to. I suspect you may a few more empty middle seats than normal!
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Old Sep 14, 18, 4:02 pm
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Considering the amount of consolidation and bankruptcy in the industry over the last 30 years, I'm actually surprised fares haven't doubled.

In 1988 your legacy carriers were DL, NW, UA, AA, TW, PA, EA, and CO (ish -- they were a mess in '88, less than two years removed from bankruptcy #1 and well on their way to their second bankruptcy in five years). Plus Southwest was out there making the southwest effect a thing.

Down to three legacy carriers and fares are still pretty reasonable. I guess despite it all, there still is competition in the aviation marketplace.
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Old Sep 14, 18, 4:11 pm
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So....Kirby seems to think that airfare should be proportional to the relative growth of every other industry? Because, you know, individual industries always underperform the market because their prices are too low. This is the dirty secret economists have been keeping from you for years, they solved this simple relationship generations ago and have just been faffing about, publishing the occasional paper with some random symbols and made up words like 'endogenous' to keep the charade going!
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Old Sep 14, 18, 4:13 pm
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a computer is an example of a product that dropped in price.
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Old Sep 14, 18, 4:16 pm
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Originally Posted by oopsz View Post
Considering the amount of consolidation and bankruptcy in the industry over the last 30 years, I'm actually surprised fares haven't doubled.

In 1988 your legacy carriers were DL, NW, UA, AA, TW, PA, EA, and CO (ish -- they were a mess in '88, less than two years removed from bankruptcy #1 and well on their way to their second bankruptcy in five years). Plus Southwest was out there making the southwest effect a thing.

Down to three legacy carriers and fares are still pretty reasonable. I guess despite it all, there still is competition in the aviation marketplace.
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
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Old Sep 14, 18, 4:31 pm
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Actually, he might just be confused about the difference between real and nominal GDP
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Old Sep 14, 18, 5:08 pm
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Originally Posted by HNLbasedFlyer View Post
I think it is hard to disagree with him.

Airfare isn't much different than the 90's - and since prices haven't kept with rising costs, things get cut - like your seat in economy - food - good champagne, etc....

You can't provide the same things you did in the 90's (or earlier) and charge the same amount of money.
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.
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Old Sep 14, 18, 5:23 pm
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Originally Posted by azepine00 View Post
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.
Read the article, typical airline double speak. Obviously, all airlines are working their darnedest to squeeze the next nickel out of pax. So long as they don't touch my PQM and BIS earning I'll be happy. Otherwise this'll:

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Old Sep 14, 18, 5:33 pm
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This is such b.s. In the 90s there was free food in coach, no checked baggage fees or other ancillary charges ... and here just base fares are compared, Let's review what UA makes money on these days ... if they dial that back ... sure, raise airfares.
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Old Sep 14, 18, 5:39 pm
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Originally Posted by cfischer View Post
This is such b.s. In the 90s there was free food in coach, no checked baggage fees or other ancillary charges ... and here just base fares are compared, Let's review what UA makes money on these days ... if they dial that back ... sure, raise airfares.
Yeah and the average fare was a lot more than it is today! The prices of domestic fares have dropped by about a quarter since the 90s. Back then they punished elites for flying them with charging such high fares instead of passing on the costs to kettles and FoTSGs who can afford to bear the additional cost. I'll take a Quiznos sub at DEN over any inflight meal offered by UA!

-James
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Old Sep 14, 18, 5:52 pm
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Kirby as always doesn't know what he's talking about. And for those of you saying "airfare is as cheap as it ever was", you're lying. The cheapest time for airfare was in the 2002-2014 time-frame, depending on the airline. Most of the time with those fares you would get a carry-on bag, seat assignment (including exit rows on certain airlines 24 hours before checkin), and the fees for changes/checked bags were cheaper than they are now. Airfare is even more expensive today, with the "basic economy" fares becoming those new base 2002-2014 fares and the "regular economy" experience being in the $20-$50 range higher on domestic flights.
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Old Sep 14, 18, 6:00 pm
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Originally Posted by DCP2016 View Post
Kirby as always doesn't know what he's talking about. And for those of you saying "airfare is as cheap as it ever was", you're lying. The cheapest time for airfare was in the 2002-2014 time-frame, depending on the airline. Most of the time with those fares you would get a carry-on bag, seat assignment (including exit rows on certain airlines 24 hours before checkin), and the fees for changes/checked bags were cheaper than they are now. Airfare is even more expensive today, with the "basic economy" fares becoming those new base 2002-2014 fares and the "regular economy" experience being in the $20-$50 range higher on domestic flights.
I think this is very much a case of YMMV. If you keep your eyes peeled you'll find deals I doubt were around back then. A couple data points: YOW to HKG for $650 USD, YYZ to SIN for $625 and last but certainly not least LHR->LAX outbound and EWR-> LHR for $395 USD. Were some in Econpmy Basic? Sure but as a UA Gold those restrictions largely don't apply, I can choose my E+ seating, check in 3 bags, get priority everything, lounge access and last but not least earn miles on this BISness class fare (At least for now). Compared to what I would get flying Norwegian or Wow cross the Atlantic this makes alot of sense especially when the fares are virtually the same!

Safe Travels,

James
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