Air Canada cuts 2000 jobs

[bmc]

Just to give further perspective on the price of fuel and it's impact on the industry, for every dollar increase in the price of fuel, costs go up by US$1.6 billion. If oil stays at US$135 for the rest of the year, losses will be at US$6.1 billion. These numbers were presented at the IATA Annual General Meeting in Istanbul earlier this month.

According to the ATA, US carriers are forecast to lose $10 billion this year, and will spend an estimated $20 billion more on fuel this year than they did last year.

The reduction in capacity in the USA, according to OAG (Official Airline Guides, where all airlines file their schedules for distribution), is fairly significant. By January 2009, capacity will be down 5% from 2008. That is roughly 3.7 million fewer seats. And that's just USA as at today. It could change.

In terms of fleet reductions, the narrowbody's are the first to go, in favour of keeping widebodies which have lower seat costs.

But, as I said earlier, some airlines will weather this storm and actually do well. Reduction in available capacity means fewer seats to sell for peanuts. Yield will rise and consolodating flights will improve load factors. Congestion at airports will ease and planes will not sit waiting for takeoff slots as there will be few planes in the sky.

There might be a silver lining to this dark cloud. Sadly, there will be plenty of layoffs.

[Kelowna Pilot]

But, as I said earlier, some airlines will weather this storm and actually do well.

I don't see this as a temporary storm (I think that's a lot of wishful thinking from people in denial, kinda like the homeowners in the US who bought at the at the peak of the housing boom and then went into denial mode when housing prices started tanking... it'll be a "soft landing"... ), but rather a permanent overcast unless a viable alternative energy source is developed.

And we're just at the start of the storm now really.

The only way I could see airlines doing well in the era of non-cheap energy is if you cut capacity by 80 plus percent, and then charge a small fortune per seat.

So basically flying reverts to what it was in the beginning: something only for the very rich.


I think we'd better all get out our chemistry sets and starting working on the magic alternative energy source.

One will be found someday, which will be a boom for aviation if it's really cheap, but in the meantime it's gonna to be rough on everyone, airline workers and the traveling public.

[bmc]

It will be bad.

Efficiency gains in new airplanes will help and are helping. More direct routings have helped. In 2007, IATA optimised 395 routes with more direct routings which, while a small step, helps.

The pressures of emmissions trading is spurring development of alternate fuels. We're some time away from seeing it, but testing has already taken place.

People will continue to fly. They will. Bus fare cheap airfares will challenge airlines.

But you are correct. We are heading into a downward spiral. We won't see the effects of it until after the summer. The summer season has been sold. The flights are full and the money is coming in. Once low season is upon us, it will be cheaper to park airplanes and pay fixed costs than to run them at low load factors on low season pricing.

The timing for a new pilot contract at AC (from what I've read on this thread) couldn't be worse. I hope for all of the guys affected by it, that it comes out ok.


Here's an interesting perspective on what could be down the road:

http://www.msnbc.msn.com/id/25350088/

[Kelowna Pilot]

The other less talked about hit is global warming, and its effect on the airline industry.

Whether you think Global Warming is true or just baloney, people think it's real, which makes it effectively real, which makes politicians act.

Aviation is a big polluter, and don't be shocked if governments start adding extra taxes on top of an already hard-hit industry.

Even Branson, a guy who owns an airline, is in favor extra taxes for aviation.

http://ap.google.com/article/ALeqM5g1JS ... AD91GKUMOE

[bmc]

What do emmissions taxes do for the environment? Nothing. Where does the money go? It penalizes airlines at a time when the technology is either not in place to be effective, or the economic outlook and high oil prices and expected reduced passenger demand make it a challenge to go out and buy airplanes. It's a money grab.

Branson is more interested in seeing his competitors suffer financially than clean up the air. What are airlines to do? Pay more taxes or park airplanes and go out of business?

A more effective approach is to give tax credits to airlines to re-equip with newer airplanes and support research in alternative fuels.

According to the Intergovernmental Panel on Climate Change (IPCC), aviation contributes 2% of manmade CO2 - about 700 million tonnes annually.

[. .]

The only way I could see airlines doing well in the era of non-cheap energy is if you cut capacity by 80 plus percent, and then charge a small fortune per seat.

How bloody sensationalist is that bullshit? 80% cut in capacity? Give me a break, it makes everything else you type worthless.

[Four1oh]

it's funny no matter how you read it.

[Kelowna Pilot]

If the airlines can't make money because fuel costs and carbon taxes, etc., become so high that it isn't profitable to run anything but the most high density international routes at extreme premium fares, I don't see massive cuts in capacity as unrealistic.

Neither does SFU prof Anthony Perl...

Simon Fraser University professor Anthony Perl, author of the new book Transport Revolutions, predicts that in 2025, no more than 25 airports will be functional. Electric powered transportation and rail will be the standard transport options.

Of course his writings are just another forecast. And we should all know how useless most forecasts turn out to be.

But a lot of people say Rail is the future. Hope not because I hate the things, but it could be.

[Cat Driver]

But a lot of people say Rail is the future. Hope not because I hate the things, but it could be.

Have you been on the TGV in France?

[just curious]

Last Train for Tuktoyuktuk.... ALLLLL Aboard!

Sure, thanks perfesser

[joco]

But a lot of people say Rail is the future. Hope not because I hate the things, but it could be.

Have you been on the TGV in France?

If I may jump in this, I spent the first 28 years of my life in Europe. The rail system works there because it is a govmnt asset. Also the land favours such routes, and the distances are manageable.

The rail system in North America is held by couple of corporations which run for profit. Routes are developed or not, based on profitability. But to develop a route... who's gonna fork the cash? In an aircraft, more or less change the heading in the director and land to a different airport. Here's your new route.

In my opinion, without making the rail system a national priority and held by a quasi-govmnt corporation, it will not work. Why? because the rail privately held corporations will become the new public enemy #1 charging an arm and a leg for a 100km ride (because they can), replacing the current oil suppliers' practices seen today at the gas pump.

The train may work on short distances ie YYZ to YUL or similar. But where to go from YVR? the geography is against a TGV project... or how about the extreme temps in Alberta and SK?

My 2.12 cents (includes inflation charge).
joco

[Wacko]

But a lot of people say Rail is the future. Hope not because I hate the things, but it could be.

Have you been on the TGV in France?

No but I've been on the maglev in Shanghai... it's neat but still not a plane

Joco: I totally agree... at best the rail system might be developed for transportation in places like Calgary -> Edmonton... I can't imagine business people taking an "over nighter (or two) to get from Vancouver to Toronto...

[Flying Nutcracker]

Is it the airline's airplane that is the biggest polluter, or is it all the passengers utilising this fantastic device for their convenient ways of travel that is the biggest polluter??? Hypocritic anyone?!?!?

If this global warming continues... what will happen with the performance of these airplanes? Will we need more powerfull engines... more gas???

Seems to me that the green taxes (and price of oil) are paying dividend in the sense that by driving the transportation sector in to the ground, it is resulting in fewer businesses sustaining profitability, thus resulting in less transportation. The catch 22 is that todays world more or less revolves around being able to move quickly from a to b. So what's going to happen with the world economy when this ability becomes greatly depreciated? Can they develop alternate fuels fast enough to close the gap in time?

[North Shore]

The catch 22 is that todays world more or less revolves around being able to move quickly from a to b.

Actually, it's more like moving stuff quickly from a to b. People have other alternatives (video conferencing etc..) Stuff can be moved by rail or water a lot more fuel efficiently than by air.

Can they develop alternate fuels fast enough to close the gap in time?

The trillion-dollar question. My sense is (sadly) probably not. Say goodbye to weekends in Vegas, and Christmas sun vacations...Otoh, as long as there is enough fuel of some sort to run agriculture, and oil to lubricate machinery, then there needn't be a catastrophic upheaval.

[Legacy]

My question is that is cost increase by 1.6 billion for each increase in the dollar, why were companies making billions back in the day when oil was 30-40 bucks a barrel. If the above statistic is correct then the difference in company costs when the barrel of oil is 140 and 40 bucks a barrel is 160 billion dollars? But companies were losing money even when the price of oil was 40 bucks. None of this makes sense.

[scrambled_legs]

Seems to me that the green taxes (and price of oil) are paying dividend in the sense that by driving the transportation sector in to the ground, it is resulting in fewer businesses sustaining profitability, thus resulting in less transportation.

Uh, there's been a slightly noticeable decrease in the market in North America and Europe but China has 120million new cars on the way in the next 10 years or so. The auto makers have never had such a huge global market and there is no end in sight. For every km that we may no longer travel, there's someone in China driving another 50km for us. The same is true for aviation. As our market slumps, another one booms and we will continue to put out an exponential amount of green house gases into the environment annually, no matter how stringent our green policy becomes here in Canada.

I agree with Legacy, either the planes have been running on air for the last 20 years or these numbers are purposely skewed to help the airlines achieve support.

[Flaperons]

Um, what's all this "once again, only the very rich will be able to afford to fly..." and "80% capacity reductions..." stuff?

Seriously. Let's look back to 30 years ago. Deregulation hadn't happened, fares were high, and LOTS of people flew. Lots. Not only the very rich, but actual normal people too. They just didn't fly as much, but there was ample opportunity for the airlines to reap huge profits in the high times, and large losses in the bad. Under that environment, airlines grew exponentially. So higher costs/fares will not kill aviation; it'll just change the playing field a bit. Hopefully, companies that insist on charging insanely low rates will end up dying, which will eliminate much of the low-cost sector. That is a good thing. Low cost carriers started with the concept of less frills = lower prices. Not a terrible idea. That is NOT what it has turned into. For the last decade or so, it has turned into dumping huge numbers of underpriced (not low-priced) tickets on the market, forcing EVERYONE to slash their margins. And this is where it got us. However, we do NOT need, nor will we see 80% capacity reductions. That's just stupid. People still need to fly. Companies will fold, layoffs will continue, prices will go up, and a resettling will occur. Who knows exactly what it'll look like, but it certainly won't be only the playground of the rich.

If you have a job right now, be happy. If you don't lose it in the next 4 months, consider yourself lucky. But for those who do get axed, you have our condolences.

An afterthought: It is estimated that the US majors will lose between 13 and 20 billion dollars combined in 2008. Meanwhile, Iraq is costing the government something approaching $12 billion per month. Is there no room for a massive bailout there? It's coming.