Airline Industry profitable in 2009

Posted on 10. Sep, 2008 by in Featured

I’ll go out on a limb, why not, I’m a fiction writer/aviator not an industry analyst. As the price of oil stabilizes lower, South West the industry bell weather for pricing, will be forced to raise revenue as the hedge spread narrows. This added revenue for the industry will be accompanied by drastically lower costs due to fuel. Add to this a reduction in available seat miles system wide and you have the recipe for profitability.

It will not come with out pain. South West will turn it’s competitive attention toward the survivng Low Cost Carriers (LCC’s). Buoy’d by new revenue streams from international code share and re-alignment toward higher revenue markets. SWA will turn their attention to consolidating their LCC market share through aggressive penetration into the entire LCC market. With oil stabilized anywhere in the 80+ range SWA will be the only LCC with the cash reserves to survive a price war. IMO SWA will pick localized price wars with specific LCC companies and stay off the toes of the Legacy Network Carriers (LNC). Through consolidation and failure they will emerg as the LCC alternative to the LNCs.

A stabilized industry will emerg until one of the LNCs restructures to the point they feel emboldened enough to make a market share grab during the next up-swing of the economy.

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