Tuesday, June 03, 2008

Learning to love home more than ever...

We could be approaching a significant period where air travel is an enormous luxury. After yammering about everything from telecommuting and video conferences, they may be our only economically feasible choices.

In order to make any money, airlines will have to fly fewer people for higher prices. And there will likely be other changes as well.
This consolidation will come with a cost: Experts believe that for the U.S. industry to shrink to a size that would allow the surviving carriers to earn a profit will require hefty fare hikes and a 20%-to-25% cut in capacity. That means fewer routes, fewer flights, and even more crowded planes. The biggest losers would be smaller cities like Cedar Rapids, Iowa, and Baton Rouge, La., that became accustomed to dozens of daily flights, usually on 50-seat jets that the majors use to feed traffic to their hubs. But oil priced near $130 has rendered those smaller jets uneconomical, meaning that carriers are likely to fly one much larger plane on marginal routes each day, but no more. "We might keep one flight just to keep Congress off our back," muses one industry executive. Coast-to-coast flights will change, too. With roughly 30% of the weight of any transcontinental flight consisting of the fuel alone, meaning airlines are burning fuel just to carry fuel, carriers can be expected to replace many of those longer nonstops with one-stop flights, intended largely for refueling. The era of cheap fares will end, too. Since deregulation in 1978, fares have fallen by more than 50% in real, inflation-adjusted terms. Prices will rise, and airlines will become even more creative in how they set fares. Some experts like Mann wonder if carriers won't begin charging passengers by weight, as air-freight companies do to transport goods. "There's a huge cost difference between flying a grown man and a 50-pound child," Mann notes. Industry executives say they can't see that happening any time soon—"too politically incorrect," as one notes. Adds Southwest's Kelly: "I just don't think it makes a lot of sense." [More]
I travel more than I really want to speak to groups and I'm not looking forward to this scenario. More than a few CFO's are probably rewriting travel policy to compensate for soaring costs.
Costs are not the only problem. Just as worrying is that passenger numbers look vulnerable to a slowdown in the world’s big economies. According to IATA, global passenger numbers grew by a seemingly healthy 4% in the first four months of the year. But that compares badly with a 6.7% increase in the same period last year. Of greater concern is that fewer lucrative business and first-class flyers are taking to the air. Their numbers fell by 3.9% worldwide in March compared with a year before and by a staggering 8.5% in North America. [More]
Jut as our fuel costs have awakened a re-examination of tillage, more of us could soon be asking, "Is this trip really necessary?". And I'll bet we find out the answer is often "NO".

One possible side-effect for farmers could be a revision of our preference for face-to-face, oral communication. While we have taken to cell phones like ducks to an Illinois cornfield, there may be even more benefits awaiting those who can conduct the vast majority of their business without jumping into a pickup truck. (Of which there will be fewer, it seems.)

All the more reason to seriously consider broadband, balancing the cost against gas expenses.

4 comments:

Anonymous said...

Uh, John, Those are GEESE in the field.

John Phipps said...

Anon:

Ya know, you think you can get away with a witty "ducks to water" riff, but there's always an ornithological expert in the crowd with no sense of literary appreciation... :-)

Shoulda known better...

From Virginia said...

John,

Friends in NE and KS tell me some farmers are investing in Japenese "mini-pickups" to adjust to fuel costs. They use them both on the farm and to run errands instead of jumping in the F-250. I haven't seen them in Virginia yet. You can see them here:

http://www.minitruckoutlet.com/

More changes to come, I'm sure, to deal with fuel prices.

Nate said...

Virginia,

I will confirm about some of the conversions on the trucks. This has been going on since 2005 around here. Some farmers are jumping into their *gasp* "four-banger toyotas to get parts and check cows" But don't mistake this fact, they still own the F-250, they just take the efficient out more often.