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Airlines getting into banking? I understand that they've been facing cash-flow problems for years. But this seems like way too much diversification. Why would a
by jarrett 15y ago
Airlines getting into banking? I understand that they've been facing cash-flow problems for years. But this seems like way too much diversification. Why would an airline expect to do well in the banking market, when banks are already struggling? Shifting focus from your core competency (running airplanes) to a struggling industry where you lack expertise or a competitive advantage (banking) makes little sense to me.
I've never understood all the gloom and doom surrounding the airline industry, anyway. There is still ample demand for air travel. Especially considering the lack of viable alternatives in the US, I can't imagine we'll reach a point any time soon when air travel isn't commercially viable.
- nitid_name 15y agoThe largest factor for Airline profitability, at least historically, is the cost of fuel. Airlines that sign a 1/2/5/10 year futures agreement at exactly the right moment can save an extraordinary amount of money compared to their competition. Jet Blue, for example, has been doing quite well in the last few years. The biggest reason for this isn't their (quite wonderful) service or (relatively new) air fleet; it's because their fuel contracts were signed at a damn near perfect moment. Airlines run razor thin margins. A few percent savings in fuel can easily double their margin, which can be then spent on marketing, fleet improvements, sniping experienced pilots by offering higher wages, or any other form of capital investment.