Doom and gloom? Surely not? The US economy is riding high and everyone is better off than they were according to Trump. That’s the message but it’s just not believed. Most Americans aren’t feeling it, and airlines seem to be at the forefront of a different reality.
Despite record employment, disposable income is no higher, wages aren’t rising in line with inflation, fuel prices are well above it. This is giving little ground for increased air fares to cover the huge rises in airline costs.
Aviation fuel costs have risen 33% and currency and overall costs by 57% since 2014, that’s across all airlines in the US.
Some airlines are doing far worse than others. American is the leader in out of control costs, much of it brought on by self inflicted wounds – not least a public perception that its product offering is basically poor. Controversies over tiny seats and micro toilets have spread far beyond the reality, seeming to sink in to the public’s mindset as a general fact.
The figures are staggering for airlines that were reporting $1.5 billion in quarterly profits just a year ago – they’re down to just 8.2% of that in 12 months.
US airlines are not alone. Emirates reported huge downturns of 86% in profits yesterday – fuel and currency costs accounting for the vast amount of the extra expenses.
In Europe airlines like Flybe – small to medium sized airlines that struggle to compete in an already overly competitive environment, are either putting themselves up for sale as Flybe has, or in Administration like Small Planet.
The US market has little or no room for further consolidation. Regulators would balk at larger airlines buying up smaller ones, in a country where consolidation is felt to have gone too far.
In Europe everyone is waiting for the next medium sized airline to drop from the skies. Norwegian is high up on that menu, but seems to manage to stay just one step ahead, selling off new aircraft like its A321neos before it takes delivery to keep cash flowing.
WOW has already fallen and in two years Monarch, AirBerlin, Darwin, and many smaller airlines have all gone.
JetAirways in India is struggling to refinance and reset its costs, state owned Air India is in a mess, Etihad is barely keeping itself above water. Even stalwarts like Cathay Pacific are struggling, and Qatar is fighting an uphill battle against its neighbours, American Airlines and Qantas.
Even the worlds best, Singapore Airlines is looking at 80% drops in annual profits.
American Airlines Doug Parker, in a fit of hubris rarely seen, said it wouldn’t happen again – but here we are in the cusp of a dire down turn in airline fortunes – despite record passenger numbers and demand.