Average Ticket Prices...
The average price of an airline ticket purchased from our agency has not risen in the first four months of 2012:
2011 Average Price: $570
2012 Average Price: $562
These numbers tell us that all of the competition here in Denver is keeping fares in check. And with the price of oil falling below $100 per barrel in recent weeks, the upward pressure on fares may not be as severe as we thought earlier in the year. I do not think we are out of the woods in terms of fare increases for the rest of the year, but the outlook is certainly better today than it was a month ago. We promise to keep you posted.
United Fleet/Capacity...
Zane Rowe, United's CFO, says having one airplane manufacturer saves money. You might remember that Continental only flew Boeing airplanes and United was all Boeing with the exception of the Airbus A320 series. United will announce an order for at least 100 narrow-body planes any day now. The betting money says United will purchase all Boeing 737s and will not order any more A320s.
This leads to the question of what will United do with its A320s? Will they attempt to sell them? Will they park the A320s?
Mr. Rowe went on to say in the same interview that the capacity airlines have cut has helped carriers keep their heads above water the last several years. He added, "What I think everyone is starting to accept is, no, capacity is not going to be added back, because we realize how volatile fuel can be."
Mr. Rowe's comments are in keeping with predictions for summer travel. The airlines are not adding capacity and demand will be strong this summer. Starting on Memorial Day you can expect to see very full planes until after Labor Day. We suggest packing a large dose of patience. The TSA will not make you empty your extra dose of patience and the airlines are not yet charging for patience. But, please do not lose your patience because it will cost you!
Delta Enters Oil Business...
Several weeks ago we told you that Delta was thinking about purchasing a refinery. Well Delta did indeed purchase an idled Pennsylvania refinery. The purchase price was said to be $180 million. Delta says they will save $300 million per year by owning this refinery.
If indeed both numbers are correct, it would appear Delta made a great purchase. My guess is that in less than five years a new Delta board will sell the refinery saying they have no idea on how to run a refinery. We promise to keep you posted.
AA Bankruptcy Saga...
Over at American the bankruptcy saga continues. To be fair to American, all of the remaining major carriers were in bankruptcy at one point in their history and their time in bankruptcy was a saga as well. Having said that, American's unions and unsecured creditors have pressured their board of directors into talking merger before exiting bankruptcy.
American's management and board had previously said with great conviction that it would reorganize and then talk merger. This move makes it clear that an American and U.S. Airways merger could very well happen soon. This is another item in a long list of items on which we promise to keep you posted.
Robert Polk is CEO of Polk Majestic Travel Group in Denver. These insights are excerpted from Robert's weekly newsletter, From the Desk of Robert A. Polk.