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81 comments on A Tale of Profit and Loss - The Future of Air Travel – Part 2
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81 comments on A Tale of Profit and Loss - The Future of Air Travel – Part 2
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I've cropped the image sizes now - hopefully they display corectly for everyone now - click on them to enlarge to full size.
Clearly you don't have as wide a screen as I do :-)
Wide screen? Plasma????
(First the news that Euan Mearns flies off to go skiing twice a year, and now this!) ;-)
Its just a Mac - nothing too out of the ordinary.
It is a fair bit wider than my PC screen at work though, hence my occasional lapse using large images - they look good to me.
I did once see a reader (in SiteMeter) with a screen that was 6000 by 5000 pixels - would love to see how we look on that :-)
Remember this doozy?
http://flickr.com/photos/jamesdale10/2318945658/
http://flickr.com/photos/markdmartin/2475770658/
Concorde interior:
http://flickr.com/photos/jamesdale10/2151405293/
http://flickr.com/photos/78215847@N00/2590523710/
Big Gav,
Airline travel is also public transportation!
The conclusion that Qantas is going to become insolvent is assuming that it won't continue to increase air-fares. At 3-4L/100km, most trips use less fuel than driving. Trains and cruise ship travel is more expensive at present, buses very uncomfortable. 30 years ago we paid much more for air travel, and most will still travel by air because it saves time and money relative to alternatives. The biggest impact would be on retired tourists, who are not paid for lost travel time.
The last 5% of oil availability will probably be used on aircraft fuel because there is not other ways of traveling overseas at 700km/h.
All other uses for oil can be replaced by various alternatives.
Neil:
You're assuming that citizens of the world are going to have the money to spend on air travel. I suspect the first segment of society to stop flying will be vacationers who simply won't be able to afford it. Business travel will continue for some time but with declining global trade, that too will enter decline.
Peak Oil is going to decimate the tourist industry. A huge number of people carve out a living in that business & it's going to have dire effects for some countries that need that infusion of capital. There comes a time when you think...I can fly there in 3 hours or drive in 2 days in a small car & I'll save 50%. You start asking yourself..what's more important, the 2 days you spend driving of the 500 bucks you save. If you're a family that's cash strapped, it's the 500 dollars.
I figure the first airlines to collapse will be the economy carriers. They don't have alot of wiggle room & raising flight costs is out of the question for many. It's much easier to increase costs to a well paid businessman in first class.
Has there been any work on Hydrogen planes ?
Hi Anti_Elvis,
You are not including all the costs of driving;1) uses more fuel for one person than flying 2) accommodation costs 3) loss of wages for 2 days or 2 days less vacation time. I would agree that for retired people time and even accommodation may not matter(sometimes the best part of the trip is the travel).
Yes, if there is a complete economic collapse the airlines will go down with everything else, thats self evident. The question is surely will people fly even if they spend twice or even ten times the real cost of airfares?. We know form 40 years ago, they will, at least to travel overseas. As a student my first trip overseas in 1972 cost 6 months salary for the airfare. Today it would be 1 months of a graduate students salary. Similarly, if we still have business people, they will travel by air rather than drive 1 or 2 days.
In the USA people are already shifting to driving instead of flying. Yesterday my cousin and his wife from North Carolina stopped by St. Louis, Missouri while driving to Wyoming. They decided on short notice to visit some reletives there and considered air fare (about $2000) versus two and a half days each way in the car. In comparing the gas cost to flying over half the $$$ is saved by taking their 28mpg car (3800 miles total / 28mpg) x $4 per gallon = $543. My cousin has a good paying job and lots of vacation time, so the time factor was not so important. Many middle and lower income people simply will not make the trip instead of taking the time off work to drive or pay the much higher air fare.
The bottom line is that flying in ten years will be done largely by the wealthy people and business travelers, just like 45 years ago. Others will take a train or bus or, if gas is not rationed, take the car. Many trips will be foregone. I forecast air travel to fall by 30% or more in the next ten years.
On the topic of using trains, I did read recently in the NY Times that Amtrak was booked right up. I was most shocked that Amtrak only has around 700 rail cars for the entire nation. Is Amtrak a private company or is it controlled by the US government? I'm Canadian, we have Via Rail, which was national for years, but that ended in the 80's. I don't think things are much better up here.
IINM, Amtrak is a private company, but recieves annual funding from various levels of Government. The lower down the totem pole you go, the more generous elected officials are willing to be towards Amtrak.
Amtrak itself came about as a result of pretty much every railroad in the US withdrawing their passenger trains. Moving people was never profitable (or perhaps marginally so), even in the heyday of the passenger fleet. Rather, it was the extra revenue generated by the mail that allowed the vast numbers of passenger trains to flourish. As air and road took larger and larger pieces of the Mail traffic away, the trains became unprofitable.
In it's own way, Peak Oil will force mail back to the rails (as trucking and air companies go bust), and help with a rebirth of long-distance rail passenger travel. :)
A few points:
The lack of any fuel taxation on air travel is exactly why 'The Airlines' are said to be the canary in the coal mine wrt. PO -as they are so highly leveraged to fuel costs and an incremental cost in the underlying wholesale aviation fuel price would have a much smaller effect. If they where heavily taxed and still in existance then they would have built a business model that works with higher fuel costs. Since their business model barely works in a cheap energy regime they will be absolutley hammered in the coming decade/PPO (Post Peak Oil).
Nick.
carbonsink,
Its great that you have one of the most efficient cars, and you travel with 3 passengers. How many cars on the major roads between cities will have no passengers and will use >10L/100km? Also fuel is just the beginning of the costs of driving, extra Kms depreciate car, require additional servicing( not cheap under warranty) wear out tires. Also on many trips will require over-night accommodation.
Good point about fuel tax, this is why we know that oil can go up to >$300 a barrel, Europeans have been paying this for years when you include taxes, and while $8-9 a gallon seems ridiculously expensive to US drivers they will adapt in time and the suburbs will not be abandoned. Wouldn't be surprised if most SUV's stay on the roads even if only used occasionally as the second car(insurance and depreciation still more than fuel for modest driving).
European prices are not comparable with oil at $300/barrel since most of the money is tax - so it is just redistributes in the same economy, and in a sense is not a 'real' cost to the overall economy.
Money paid out to the oil exporters is in a different league, and represents a real cost to the importer.
Put simply, it has to be paid for.
In a perfect world that would just mean that folk in oil importers had a lower standard of living, and produced more stuff for export to the oil exporters.
In practise great swathes of invested capital are made worthless, for instance the aircraft industry to take an obvious example, and the car fleet running at 20mpg to take another, so massive losses are incurred over and above the nominal price of the oil.
Tourists buy package deals, composed of airtransport and accomodation + food. That is the reason why long distance destinations are getting priced out of the market. Bad for Brits visiting the Aussies.
On a more serious note, Air Berlin for instance is slashing it´s chinese destinations, and also Mauritius.
That's a link:
Soaring fuel prices clip Air Berlin's wings
From November, the second-biggest German airline behind Lufthansa will trim its fleet by 10 percent, cut long-distance services by nearly one-third and return 14 leased planes to their owners.
http://www.breitbart.com/article.php?id=080622041117.dffzzj70&show_artic...
German airline Air Berlin is reviewing whether it still makes sense to buy charter carrier Condor from Thomas Cook, Chief Executive Joachim Hunold told the carrier's annual shareholder meeting.
http://news.airwise.com/story/view/1214314142.html
There is still an awful lot of discretionary air travel that really is mostly unecessary but is done becasue it's cheap. I live in a regional NSW city and we get a steady stream of business day trippers that fly in from Sydney or Melbourne in the morning and then depart that afternoon. It has become so routine that they call it catching the "bus".
I have been sent to Sydney for 20 minute meetings that could have easily been acomplaished via teleconference, which is what I now insist on with clients.
We have Qantaslink, Virgin and Rex all servicing the route from to Sydney and the council run airport is now being expanded to accomodate three carriers. I suspect by the time the renos are finished, there will be at least one and maybe even two less carriers than there are now.
I've recently booked some vacation tickets with Air NZ at a very good rate. Yes. discretionary, unnecessary; but here's why...
Locking in a deal is highly advantageous to the passenger at the moment; the fare rules say that when you book ahead you innoculate yourself from all forthcoming rises in the fare and taxes. (But make sure you don't book so far ahead that the airline collapses before you fly!)
Over the next year or so, while they've still got some cash left, the airlines will start to panic and throw lossmaking discounts into the markets in order to try and shore up their economies of scale. (This won't work of course, because the fuel price will keep tracking up, and right when the airlines think it's as bad as it can get, carbon pricing will come in!)
However, for the next year or so my advice to everyone is that you may as well take advantage of the upcoming deals, and at least see those places that you've always wanted to see ...before the "final call" for affordable global transport!
- I suspect this will literally prove to be a "once in a lifetime" opportunity.
(The onrushing Peak Oil disaster for airlines makes the current wrangling of Qantas and its Engineers over a 2% pay differential seem pretty rediculous.)
Oh, and it's probably a good idea to think about burning up your Frequent Flyer points pretty soon, too...