Airlines Risk Deeper Seat Cuts on Economy

[marmar]

(Bloomberg) U.S. airlines may have to cut back on flying as the slowing economy erodes their ability to boost fares while they struggle with higher costs for jet fuel.

That squeeze “calls for contraction,” said Hunter Keay, an analyst at New York-based Wolfe Trahan & Co. A benchmark of fuel-refining expenses rose to record highs last week, adding to pressure on carriers to match Delta Air Lines Inc. (DAL) and Southwest Airlines Co. (LUV) in paring current capacity or future growth.

Consumer confidence tumbled this month to the lowest since 1980, stoking concern that Americans will curb spending. That gauge of public sentiment on Aug. 12 followed record swings in U.S. stocks as the Standard & Poor’s 500 Index whipsawed to gains or losses of at least 4.4 percent for four straight days.

“I don’t think airlines should view that nervousness as short term,” Keay said in an interview. “If executives are going to go out and assume high fuel prices are here to stay, then they should assume that fear and destruction of consumer wealth are here indefinitely as well.” ...........(more)

The complete piece is at: http://www.bloomberg.com/news/2011-08-15/airlines-risk-deeper-seat-cuts-amid-u-s-wealth-destruction-.html

[KurtNYC]

1. weird headline

seems like reducing scheduled flights is the SAFE thing to do.

One more sign that the lower middle class is getting slammed.

[xchrom]

2. Very interesting. Nt

[FarCenter]

3. Higher fuel prices = higer ticket prices = fewer travelers = fewer seats

So airlines are cutting schedules, flying smaller planes, and dropping airports.

This will continue, since the US economy cannot run trade deficits to import crude oil indefinitely.

[RC]

4. The airlines are but a symptom and not the first one either.

The more the middle class and lower are squeezed by a flat or sinking economy, the more business will start to feel the pinch.
The root cause? Not enough Living Wage Jobs. Not enough jobs means not enough demand. Not enough demand means businesses cut back. They can only cut back until they themselves go out of business, adding to the lack of Living Wage Jobs. Decreasing the demand, domino style, taking other business with them.

The greedy are starting to get bit by their own policy of only looking at the next bottom line.