USA320Pilot
Veteran
- May 18, 2003
- 8,175
- 1,539
Turbulent Skies
ARLINGTON (theHub.com) - Excess capacity and high oil prices were among the challenges faced by U.S. airlines during the second quarter 2004. Although demand is up, airlines have added so much capacity to the market in anticipation of the recovery in demand, that fares remain low - in some cases, too low to turn a profit. And even though many airlines have cut costs in recent months, oil prices remain high, offsetting many of those cost cuts, according to a Dow Jones News report.
"Another bleak earnings season approaches. Expect continued red ink for the majors and profitability for the low-fare carriers," investment banking finance corporation Lehman Brothers Inc., said in a research note. "We do not expect much in the way of optimism around future earnings prospects either." Once again, low-cost carriers will likely remain profitable, though low ticket prices may squeeze their margins as well, according to information in the Dow report.
During the second quarter, oil prices reached record highs, rising above $40 a barrel, and over capacity estimates reached 15 to 25 percent. "The supply-demand imbalance persists and yields remain under pressure. Capacity growth is beginning to take its toll outside the domestic realm as well, and international strength will likely no longer be able to compensate for weakness domestically," Lehman said.
Fares on transcontinental routes are under the most pressure, as several low-cost airlines have added service on those routes, and network carriers have also added service or offered discounted fares to protect their markets.
Respectfully,
USA320Pilot
ARLINGTON (theHub.com) - Excess capacity and high oil prices were among the challenges faced by U.S. airlines during the second quarter 2004. Although demand is up, airlines have added so much capacity to the market in anticipation of the recovery in demand, that fares remain low - in some cases, too low to turn a profit. And even though many airlines have cut costs in recent months, oil prices remain high, offsetting many of those cost cuts, according to a Dow Jones News report.
"Another bleak earnings season approaches. Expect continued red ink for the majors and profitability for the low-fare carriers," investment banking finance corporation Lehman Brothers Inc., said in a research note. "We do not expect much in the way of optimism around future earnings prospects either." Once again, low-cost carriers will likely remain profitable, though low ticket prices may squeeze their margins as well, according to information in the Dow report.
During the second quarter, oil prices reached record highs, rising above $40 a barrel, and over capacity estimates reached 15 to 25 percent. "The supply-demand imbalance persists and yields remain under pressure. Capacity growth is beginning to take its toll outside the domestic realm as well, and international strength will likely no longer be able to compensate for weakness domestically," Lehman said.
Fares on transcontinental routes are under the most pressure, as several low-cost airlines have added service on those routes, and network carriers have also added service or offered discounted fares to protect their markets.
Respectfully,
USA320Pilot
