Monday, March 17, 2008


If the latest round of fare hikes stick, the price of long haul domestic tickets will have increase by $120 since December 18, 2007. The concern of the market is that the higher ticket prices will cause travels to stay home. Of course, current oil prices have forced the airlines to act. One of the actions taken by some airlines has been to reduce the number of flights. CAL has been the exception. CAL has added to capacity while filling a high number of seats and while increasing the yield per seat.

The continued expansion of the "business" economy, means that demand remains firm in the airline business. This is obviously so or the $120 of fare increases could not have been pushed through. While the opening of the discount window by the FOMC has no direct effect on the airlines, the opening implies that the economy will be stronger in the near future. The airlines should benefit greatly because high usage rates implies that ticket prices will remain firm no matter what happens to the price of fuel. BUY, BUY, BUY!