Saturday, July 29, 2017

The marginal players will get wacked the first and the worst.

Airlines have always been canaries in the economic coal mine and airlines have had a great run since the bottom of the 2009 collapse.  But now I think their run is over.  Not only is competition beginning to increase, but fuel prices are probably near a major bottom as well.  As if that weren't enough I am starting to see government begin to side against them and government is nothing more than an echo of the will of the people.  Not because its supposed to be like that but simply because government agencies know that when the people wake up and become vocal in their unhappiness then its time to stop pissing on them and time instead to position themselves as friends of the people against all adversaries.

Everyone knows that airline profits are up because of not only falling oil prices but also the debt induced economic stimulus of Bernanke.  During this time, cocky airlines pressed their advantage by adding seats, removing legroom, charging extra for bags and generally abusing the passengers whenever the passengers got in the way of immediate profit.  But I am now seeing the early warning signs that say the game is about to reverse.  My models indicate oil will begin moving up into 2018.  And I reported on the expansion of Frontier airlines stepping out with super cheap rates to popular destinations.  But now we also see a federal judge telling the FAA to "revisit" (i.e. do something about) small airline seats.

Well that's it folks.  That's the straw that will break the airline's backs.  Once government begins asking its corporate capos that are lower on the pyramid to "take one for the gipper" it is like the top mob boss telling his subordinates that profits are down at the top so they will have to up their tribute unless they want to have problems from above.  That is exactly what this is.  First it comes in the form of a small request or a suggestion but either the minion opens up his wallet and lets the money flow out or there is a big stinky public battle where the capo says he is already giving too much and the "Don" says there is no such thing as too much when it comes to The Family.

There is no way into the future that I see being good for the airlines.  There is simply bad and worse.

No comments:

Twitter Delicious Facebook Digg Stumbleupon Favorites More