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Pilarski says: What can airlines do to prosper or at least survive in today’s environment?
30 June 2009
Despite what some airlines might think, higher oil prices are better than recession for airlines writes, Adam Pilarski, senior vice-president, Avitas in his monthly column.
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[Pilarski]
[Avitas]
[Oil]
During the last FAA
forecasting conference I sat on a panel with a couple of high level airline
planning executives. The moderator asked us which is a preferred situation:
high oil prices, a la summer of 2008, with a decent economy? Or a recession
with low oil prices? To my utter surprise both airline executives chose
the latter. I do not even remember their arguments because in my mind the
former situation is infinitely better.
High oil prices necessitate
changed behavior: better pricing, more vigilante fuel conservation, etc.
The good news here is that people still want to fly under such a
scenario. Higher oil prices will bring about higher ticket prices, reducing the
total number of passengers and moving up on the demand curve. This may actually
lead to a profitable situation where airlines retire the least efficient
aircraft, raise fares and continue to sell business class tickets.
Even...
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