Kokomo Tribune; Kokomo, Indiana

Bonus content

April 16, 2014

Why high oil prices are actually good for airlines

(Continued)

"It's an equalizer," Kirby said.

Skybus Airlines launched in May 2007 promising to sell at least 10 seats on each of its flights for $10. By the following April, a spike in fuel prices proved fatal and the airline shut down operations overnight.

Without that competition, legacy carriers have avoided fare wars and kept ticket prices high.

"This represents the longest post-deregulation stretch that nobody has started a new airline in the United States," Baker says.

Virgin America was the last major new U.S. carrier. But since it started flying in August 2007, the San Francisco-based airline has lost hundreds of millions of dollars. It didn't post its first annual profit until last year and that was only after it stopped its rapid expansion.

Jeff Knittel, president of transportation and international finance at CIT, which leases planes to airlines, says the high fuel costs has created a financial discipline among carriers that has made them look closely at every expense — in the air and on the ground.

As part of their quest to reduce fuel consumption, airlines have replaced drink carts with new, lighter ones. Planes now taxi with only one engine running. And wingtips have been redesigned to reduce drag.

"It has forced efficiency throughout the entire organization," Knittel says.

High oil prices have also caused lenders to take a closer look at business models. In the past, they just considered the collateral — the airplane — that they were lending against.

"It makes the merits of the airlines matter more than they have in the past," says Hunter Keay, an airline analyst with Wolfe Research.

Airlines are only expanding to cities where they know they can make money, limiting competition and keeping everybody's flights profitable. Instead of fighting to become the largest airline in a city, airlines are now making rational decisions based on profitability.

"The only universal disciplinarian across the entire global airline industry is high oil prices," Keay says. "It makes even the bad actors make hard choices."

----

Scott Mayerowitz can be reached at http://twitter.com/GlobeTrotScott.

Text Only | Photo Reprints
Bonus content
  • Britain Talking Statues-6 [Duplicate] Ring, ring: London statues want to talk to you LONDON (AP) — Calling all London tourists: Peter Pan, Sherlock Holmes and Queen Victoria want to have a word with you. A new interactive arts project is giving a voice to dozens of statues of historical and fictional characters in London, allowing t

    August 20, 2014 5 Photos

  • Kids Killed Driver Shot-9 [Duplicate] Prosecutor: Father shooting driver was 'execution' ANGLETON, Texas (AP) — A drunken driver did not deserve "execution" by a Texas father accused of taking the law into his own hands in a fit of rage over the killing of his two sons in a wreck, a prosecutor told jurors on Tuesday. David Barajas is ac

    August 19, 2014 6 Photos

  • Police Shooting Missouri-15 [Duplicate] Ferguson pledges outreach efforts after shooting FERGUSON, Mo. (AP) — Ferguson's leaders urged residents Tuesday to stay home after dark to "allow peace to settle in" and pledged several actions to reconnect with the predominantly black community in the St. Louis suburb where the fatal shooting of

    August 19, 2014 10 Photos

  • Mug Shot T-Shirt [Duplicate] Man shows up for jail in T-shirt with his mug shot MADISON, Maine (AP) — A Maine man who served a 48-hour sentence for drunken driving wore something special for his jail booking photo: a T-shirt featuring his mug shot. Nineteen-year-old Bobby Burt, of Pittsfield, had the mug shot from his June arre

    August 19, 2014 1 Photo

  • Still Working at 101-9 [Duplicate] His 101st birthday present? Another day at work EAST HANOVER, N.J. (AP) — Herman "Hy" Goldman turned 101 this weekend and won't quit after 73 years working at the same New Jersey job. Goldman still shows up four days a week at light fixtures company Capitol Lighting in East Hanover. His co-worker

    August 19, 2014 5 Photos

  • US Perry-3 [Duplicate] No arrest for Gov. Perry but mug shot to be taken AUSTIN, Texas (AP) — A Texas judge opted Monday not to issue an arrest warrant against Gov. Rick Perry, but the Republican still faces the unflattering prospect of being booked, fingerprinted and having his mug shot taken — and has assembled a team o

    August 19, 2014 3 Photos

  • New US 31 route near South Bend opening this week SOUTH BEND, Ind. (AP) — State highway officials say the new stretch of U.S. 31 between South Bend and Plymouth in northern Indiana will open to traffic this week. The Indiana Department of Transportation says drivers will be able to start using the

    August 18, 2014

  • EMS company to end most Indiana services MARTINSVILLE, Ind. (AP) — An Arizona-based emergency medical services company has announced it will end ambulance service to most of its Indiana locations. Rural/Metro Corporation is going to stop serving more than 30 communities, WTHR-TV reported.

    August 18, 2014

  • Indiana's 1st female chief justice assumes office INDIANAPOLIS (AP) — Loretta Rush was formally sworn in Monday as Indiana's first female chief justice, but her gender hardly was mentioned during the ceremony. "Quite simply, she was the best choice," Gov. Mike Pence told a crowd of onlookers and me

    August 18, 2014

  • Immigration Overload Militia [Duplicate] Militias complicate situation on Texas border MISSION, Texas (AP) — On a recent moonlit night, Border Patrol agents began rounding up eight immigrants hiding in and around a canal near the Rio Grande. A state trooper soon arrived to help. Then out of the darkness emerged seven more armed men in

    August 18, 2014 2 Photos

Latest news
Featured Ads
Only on our website
AP Video
Raw: IDF Footage Said to Show Airstrikes Police: Ferguson More Peaceful Raw: Aftermath of Airstrike in Gaza Raw: Thousands March on Pakistani Parliament Raw: World's Oldest Man Lives in Japan Fire Crews Tame Yosemite Fire Raw: Police Weapon Drawn Near Protesters, Media Raw: Deadly Landslides in Japan Raw: Explosions in Gaza As Airstrikes Resume Arrests Witnessed in Ferguson Charter Schools Alter Post-Katrina Landscape Texas Gov. Perry: Indictment 'a Political Act' US Officials: Video Shows American's Beheading Video Shows Ferguson Cop Months Before Shooting Heavy Rains Flood Arizona Roads US Trying to Verify Video of American's Killing FBI Director Addresses Ferguson Shooting in Utah Raw: Police at Scene of St. Louis Shooting Police: 2 Calif. Boys Planned School Shooting NOLA Police Chief Retires Amid Violent Crimes
Parade
Magazine

Click HERE to read all your Parade favorites including Hollywood Wire, Celebrity interviews and photo galleries, Food recipes and cooking tips, Games and lots more.
Obituaries
Poll
Kelly Lafferty's video on Tom Miller