Grounded? Airlines threaten to cancel flights due to oil prices
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Facing record fuel prices, United Airlines and others are considering flight cancellations and grounding large parts of their fleet. Apparently, it’s necessary to resort to threats like this when low-cost carriers make price hikes difficult.
United’s CFO Jack Brace offers this wisdom:
“Either the industry passes on the higher fuel prices or we’re going to have to lower capacity, but you have to make the equation work,” he said in comments to a Goldman Sachs conference in New York.Brace said United has a little more than 100 aircraft unencumbered by debt, including 50 Boeing 737s, “that we could ground whenever we needed to if the demand environment were such that it didn’t make sense to fly those planes.”
But hold on: Airlines have already been raising prices, and the price hikes have been sticky. So grounding planes in an environment where prices are rising and planes are already packed to the gills is a curious move.
It strikes me as an effort to spur the industry to really sock it to consumers. I know it’s not a perfect analogy, but I’m reminded of Enron’s actions during the California energy crisis. Energy supply low? Turn off another power plant to drive prices up further! Bring on the gouging!
But is the threat to ground planes credible? It seems highly unlikely that any airline would unilaterally ground a fifth of its fleet, as United is suggesting (and others are supposedly considering, according to the linked article above). Competitors would fill the vacuum, step up with more flights — albeit at higher prices.
Bottom line: United can talk and talk about grounding flights. But will they do it? I doubt it.








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