Many stock market investors are also airline customers. Gleaming aircraft, the professional care of cabin crew, powerful brand building through advertising, and the modern convenience of crossing continents in hours, have all contributed to a glamorous image for all commercial airline companies. Frequent travel by business executives and vacation travel for families have become distinct segments of profit and seemingly assured growth.
9/11 changed many segments of the stock market, but some of the effects have been below the radar of public opinion. We accepted the sacrifices of privileges such as last-minute check-in and intrusive security without much demur because everyone was united against the scourge of terrorism. The airlines were able to wing over reductions in values of air travel as results of new measures, without any turbulence in capacity utilization: we continued to fly.
The stock market community may justifiably blame commercial airlines for incorrect management responses to the fuel price issue. It is true that a segment of budget-conscious travelers have responded with enthusiasm to the emergence of ‘no-frills’ airlines, but cutting back on superlative service is not an adequate response to the numerical effects of aviation fuel inflation. Manufacturers have made handsome contributions to fuel economy, but airlines have structured their own financial decline by shying away from essential increases in ticket prices.
Similarly, the stock market cannot ignore the poor track records of the airlines with respect to industrial relations. Pilots take the cake with strong arm tactics which belie their extravagant lifestyles on duty. Most other categories of personnel have weakly structured jobs, and outrageous prequisites, leaving airline companies in a morass of low productivity.
The August 2006 incident at Heathrow in which a band planned to attack a large number of trans-Atlantic flights, followed by a series of incidents involving commercial flights all over the world, may take away most of the stock market charm of this business. We must still travel to exotic spots on vacation, but teleconferencing and private jets will take revenues away, leaving costs stranded-in the near term. Perhaps it is time for capital to fly away!