If you’re still listening to the folks over at US Airways, you’d actually believe that fares are expected to double in the next few months. Doug Parker, the CEO, suggested in comments about the carrier’s $567MM loss last quarter that airfares are going to increase to an average of $600-700 from the current $328 (Q1 ’08). Parker is also convinced that there is not a chance of a big 6 legacy airline going out of business:
We’re not going to have a cataclysmic liquidation of a big-six carrier, as some suggest. The industry will work it out, and there will still be six of us, but six smaller airlines.
I’m not exactly sure what he’s smoking, but I want some. If he really sees a chance for his company to pull out of their free-fall as they continue to cut service and routes then he’s definitely looking at a rosier version of the industry than I can find.
The over-capacity in the market will continue to shore up, but most carriers are basically making small cuts around the edges, hoping to survive just a bit longer than the others, and then to swoop in and actually start turning profits again. Put another way, you don’t have to swim faster than the shark, just faster than your dive buddy. I can’t help but see US Air as the slowpoke in the water, despite Doug’s comments. They’ve basically conceded the west coast market to other carriers and are working to defend their Philadelphia hub, which makes a bit of sense based on going for the higher fare markets, but also will hurt them since some folks in Philly do have other options, and many of them are starting to find those options.
Oh, and I do expect fares to stay relatively high – $350-400 isn’t all that ridiculous a price really, but I don’t expect them to be in the $600-700 range at all.
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