Huck

It is supply and demand. Pure and simple.

There is less capacity on the cargo side. Therefore, there is no race to the bottom as far as revenue.

There have been too many pax airplanes chasing too few full-fare passengers since deregulation. Like survivors in a liferaft, they've got enough rations to maintain life, but they're all skeletons to look at.

I deadheaded from Singapore to Penang last week - a ~1 hour trip. Triple seven service on Singapore was $440 - a walk-up fare. And the plane was 60% full. And they make money. Why? Because every one of the ~200 people on board was probably paying at least $300. Can you operate a 777 for $60,000 an hour? I think so.....

If it had been a U.S. carrier, there would have been 40 people on board paying full fare, and the rest paying $60. Business would have been full with FF upgrades. Revenue would have been a third of Singapore's, and the carrier would be going out of business.

The US suffers from classic oversupply. QED.

jonnyjetprop

And a choice between only 3 carriers. Brown, purple and yellow.

brownie

soon to be only 2 carriers.

FlyByCable

That was a very insensitive remark regarding our brothers in yellow.

sensesfail4049

thanks I thought it was something along those lines, just wanted to make sure I was not missing any other big picture stuff with the airlines, thanks for the answers!

RXS676

Economic supply isn't just the QUANTITY of suppliers, it's also about the WILLINGNESS of suppliers, in this case, airlines, to provide their product or service at a given price.

There are a dozen charter outfits that would sell me service on a Lear 31 from Los Angeles to San Francisco--a greater number, greater "supply" than scheduled airlines that would do so. But the cost would still be more than $100 r/t, because in spite of the abundance of charter outfits, none of them would sell the service that cheaply.

The real mystery to me is why so many airlines are willing to sell service at a loss. There are many factors, I believe, including years of easy credit that made it easy for airlines to continue operations in spite of losing money, as well as the moral hazard of decision makers whose survival is disconnected from that of the airline they run.

There is a demand-side difference in cargo vs. passenger as well. Most cargo customers are businesses (few individuals ship overnight express) which are less price sensitive. It would be like an airliner filled with passengers paying full-fare.

SomedayRJ

I think you solved it.

timeless

Kitty Hawk, ATA, Champion? Cargo and Charter isn't doing that much better than scheduled pax airlines.

sqwkvfr

Uh, I haven't seen even one post with the REAL reason:

With the internet available to check ticket prices, no airline can compete with the low cost structure of heavily-fuel-hedged Southwest Airlines.

The cargo carriers don't have this problem.

Busboy

I think it's because we don't wear hats at FDX.

And, our trimming techniques at cruise are much better than the pax carriers.