“Airlines are notoriously cyclical because revenue is very sensitive to changes in demand. Profits are greatest when strong demand results in full planes (‘‘load’’) and high prices (‘‘yield’’), but they can disappear quickly when demand falls because costs are relatively fixed and flights can’t easily be cancelled.”
I’m currently working on the very edges of the airline industry (via IT outsourcing). I can relate to the ‘aeroholic’ tag. It’s a very compelling industry and while I don’t invest money in it I certainly invest time in it.
So, somebody important let me under his umbrella this morning. I spoke briefly to him and it got me thinking about Boston Consulting Group (from where he had worked as an adviser to Qantas for 10 years).
I think the airline industry’s highs and lows have been managed through sophisticated financial devices (fuel hedging, for example, or deferred losses). This is by necessity, but I think this process might have had it’s own unintended consequences.
I’m currently focusing on what those unintended consequences might have been… because that is where I will be able to have the greatest impact. There are some non-optimal behaviors and outcomes I have noticed. I think if I understand them in terms of the necessities above things will make sense …