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01 August 2005

Everyone knows the flying public never had it so good. Or do they? Adam Pilarski of Avitas looks at the real price that the airline passengers are paying.

Tags: airline  |  Airlines  |  TSA  |  Aviation

US airlines have lost more than $30 billion since 2001. There are many factors for such colossal losses. The one universally blamed is the changed revenue environment.

While costs are generally coming down, except for out-of-control fuel prices, ticket prices have remained stubbornly low. Having dropped precipitously just before September 11, 2001 as a temporary cyclical response to the economic recession, yields have continued to fall.

Various explanations are offered for this price behaviour. They range from the structural change type (business travellers will never again splurge on expensive tickets) to the dominance of computer technology in buying tickets, from too much competition to the fear factor (many people are afraid to travel), from the spread of low-cost carriers to video conferencing making travel obsolete.

No matter the explanation, lower yields are universally accepted as the main culprit for the disastrous situation among US airlines. The percentage of GDP devoted...

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