Monday, September 19, 2005 - conflux: The Economist: America’s airlines, flying on empty - conflux: The Economist: America’s airlines, flying on empty

The blog sites that report on low fares are enjoying the long process of rationalizing the industry. The problem they may not appreciate is that the process is nearing the end. The process started in 1979 when airlines were deregulated. It has been a long process including over 100 bankruptcies. The last two, DAL and NWAC will cut capacity on the margins and the days of super low fares will end.

Don't get me wrong, the technology of finding the best price through the internet has forever changed the way the business works. However, the legacy carriers have finally reduced their costs to the point that they can compete toe to toe with the LUV's of the world. Suddenly, the hub systems will have value again.

Carriers are increasing seat sizes and expanding first class capacity. The low cost seats are going to be harder to find. After massive losses, CAL and AMR will lead the way with higher revenues and much improved margins.

Todays, move in the oil market was pretty amazing. An increase of $4 a barrel for a storm that is far from land. The market is jittery and tight. Just remember, the law of supply and demand works. Higher prices will lead to more supply.

I see major trends taking shape. The majority of Americans will support the development of off shore oil, Alaskan oil, Rocky Mountain oil and natural gas. The majority of Americans will support the buidling of LNG terminals and Nuclear Power Plants. Electrical power will continue to grow as the source of more and more of our energy supply. The hybid car is not a trend but is the transition to a clean burning hydrogen electric car. Travel to far off places will continue to grow as people see the beauty of the earth on high deffinition screens. International commerce will expand as emerging world economies continue to grow. International flights will be very common.