Sometimes it’s useful to stop thinking abstractly, and to stop guessing on a future we can as of yet only faintly make the outlines of in our daily lives, and to just see what’s going on here, now, today.
I like Bloomberg.com as a news site, because it aims at capitalists, and the USA is a capitalist country, so news pointed at them tends to be more accurate than most standard corporate mass media. This doesn’t mean you can turn off your critical thinking, but the news there is often real, and points to larger trends, since such trends are exactly what businessmen need to have a solid understanding of in order to hope to make good decisions.
So it struck me when I read Airline Era Ends as Carriers Cull 50-Seat Jets ‘Nobody Wants’ .
The 50-seat jets once prized by carriers such as Delta Air Lines Inc. are being culled from U.S. fleets as higher fuel and maintenance bills make them too expensive to fly.
By 2015, U.S. airlines will have about 200 jets with 50 or fewer seats, down from about 1,200, said Michael Boyd, president of consultant Boyd Group International Inc. in Evergreen, Colorado. More than 80 have been scrapped in 2010, he said.
Got that? I don’t know if you followed the airline industry when oil went to $147 a barrel, in 2008, but one prominent airline CEO stated that the global airline industry becomes non-viable at oil prices over $100 per barrel. This is because of economies of scale certain pricing models enable. In other words, airlines have basically three fixed costs: 1. the physical airplane, 2. fuel, and 3. labor/corporate. Debt costs would mainly be centered around the cost of the aircraft.