Sunday, October 30, 2011

A Weekend Note - Come Fly with Me

Qantas grounded? I cannot imagine that a once great airline that others emulated would end up near bankruptcy. I cannot until I realize that Qantas is not the first one and probably will not be the last. At one time, Qantas was the airline to fly to the South Pacific islands of Fiji, New Zealand, then continue to Australia. They owned a building on San Francisco's Union Square and they one of the best airlines to fly for service.

What happened to service? Well, speaking domestically, it was one of the first things cut after deregulation, as competition heated up with lower and lower airfares. With no guaranteed fare structure and the need to keep in the air despite of rising fuel and parts prices as well as rising union packages for pilots and mechanics and ground crew. Internationally,  grand airlines subsidized by governments are no more. National airlines used to be the pride of nations and were used to attract tourists to their homelands: Swiss Air, Singapore Air, Pan Am, Qantas chief among them but alas, nations can no longer support themselves let alone subsidize airlines. Those airlines experienced competition for the first time, as nations allowed more international airlines to fly to their lands.

Deregulation was going to  bring needed competition for lower airfares and better routes, and of course it was going to take care of air service to less traveled routes. All of which was theory and now we can also argue  perhaps a failure. Airfares competed but service paid a dear price. Oil prices were not expected to rise to levels they are today and of course the contracts signed in the days of bounty have become a major burden. Hence aircraft are not as well maintained and of course service suffered and then got clobbered when security became the most important aspect of going anywhere.

Under regulation airfares were the same, nationally and internationally,  to destinations no matter who you flew. Therefore the only way to compete was .. well ... service. Airlines emphasized service as a way to attract customers, and tried to outdo each other with comfort, lounges, food and entertainment and it was not a cheap prospect.  Flying was expensive or shall we say more expensive than it is today when adjusting for inflation. Still, those who flew then and fly today miss it although well aware of the current selection of airlines competing for our dollar with service. Still, those who remember how it was before deregulation, feel it more keenly and nostalgia, for what it's worth, kicks in once again.

Come to think of it, the markets did a nice job of taking flight last week, see review and outlook below.

Happy Trading, Living and Flying

The Daily Pick -  DJIA

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