Tuesday, May 20, 2008

AA Exec Assesses Impact Of Fuel "Tidal Wave"

You're not the only one in pain at the pump. American Airlines is losing $3 million per day under the current fuel prices. Fuel costs have become the airline industry's greatest expense.

Speaking to the Association of Corporate Travel Executives Global Education Conference and Corporate Travel World, American Airlines senior vice president of government affairs William Ris said
"For every $100 dollars of revenue that an airline takes, right off the top $20 or $25 go to taxes and fees. Now with the fuel prices, $40 goes just to fill up the tank. That leaves just 40 more dollars to buy airplanes, maintain the fleet, pay our people, fund pensions and healthcare, pay rent and a variety of other expenses. That is not a sustainable business model."


Ris says that the solution is not in raising fares or reducing operating costs. He feels that a reduction in capacity (fewer planes, fewer routes) is the direction to go. Since deregulation, airlines have lost about $1.76 per passenger. This year, 2008, they are losing $10.89 per passenger. The price of fuel has gone from 10% of American Airline's costs to more than 40%. Deregulation has created more problems than it solved, and this, along with the obscene prices for fuel, may bring the airline industry to its knees.

15 comments:

enigma4ever said...

really sad...yet more damage...I guess I should be glad that I am on the NO FLY list...

DivaJood said...

Enigma, with the rate of fuel, everybody is going to be on a goddamn no fly list.

Randal Graves said...

There's always rowboats. That rising tide will be lifting us all up soon enough. No wait, that's global warming.

DivaJood said...

Randal, isn't global warming that thing that gives everyone their own greenhouse?

Frederick said...

A gift from beyond the grave from Ronnie Raygun.

DivaJood said...

Frederick, did I ever tell you about seeing Nancy Raygun at the nail salon? I was going to get an appointment, when stopped by two Secret Service dudes. Nancy was upstairs. I had to wait for an hour, then she came teetering out. She looked like a raisin.

Larry said...

Eliminating flights will only cause more delays and backup.

The industry is a mess and will continue to slide unless the entire country changes direction.

The Future Was Yesterday said...

"Deregulation has created more problems than it solved, and this, along with the obscene prices for fuel, may bring the airline industry to its knees."
And it was the airlines (during Ray Gun The Great Deregulators nap), that cried and whimpered...."we can't make any money under regulation!

Like all of big business, what they were really saying is "We want it ALL!!"

Dusty said...

I am sure its hard for the Airlines, but frankly as many have pointed out here..another Rethug is to blame.

Perhaps now many will close up shop and how that will affect travelers is higher prices and less choice.

DivaJood said...

Larry, the entire industry is a mess, no doubt about it. Our phones are not ringing. Scary.

TUA, it's a real case of "be careful what you wish for."

Dusty, it actually got worse today. All the carriers had earlier decided to charge $25 per second checked bag. Today, American announced that June 15th, they will begin charging $15 for the FIRST checked bag. They also said they would raise other fees for services ranging from reservation help to oversized bags. The other fees will mostly range from $5 to $50 per service. Now the problem with this is that they do not provide enough space for carry-on bags. It's getting progressively uglier.

Frogette said...

I guess I'd have more sympathy for American Airlines if they hadn't paid their CEO over $6 million last year.

DivaJood said...

Frogette, of course that never enters into their pea-sized little brains when figuring out the way to cut costs. See me playing the world's smallest violin for the airline industry?

Fran said...

Sure enough- got a memo @ work today saying there will be a $15 per first checked in bag w American airlines, starting June 1.
Great! Now more jerk wads are going to try to lug the biggest damned bag they can into the plane to try to save $15 bucks.
Hey! You just spent $800 bucks on a plane ticket-- splurge & pay another $15 to check in your bag.

enigma4ever said...

could I try shipping myself somewhere? maybe that would be cheaper ?

DivaJood said...

Fran, it does boggle the mind - fewer routes domestically; oversold flights; overhead storage insufficient - but hey, let's squeeze another $15 bucks out of the stone. Oh, and mebbe give the CEO a huge raise.

Enigma, I tried to ship myself to the Beatles when I was 16. It didn't work out.