At dinner last night one of the “money guys” at the airport explained why U.S. airfares have been so high recently and planes so full. “In 2000 when the airlines couldn’t pay their leases, the owners of the planes said ‘There isn’t anybody else we can lease these big jets to, so we’ll renegotiate the terms to whatever you can afford.’ Since 2005, when a U.S. airline stumbles and can’t make its lease payments, G.E. Capital yanks the plane and sends it to China or India.”
We’ve been sending all of our money overseas, presumably in the expectation that folks over there will come back and buy Treasury Bills and other U.S. financial instruments. Last year we were upset because the Chinese came over and wanted to buy stock in our companies and sometimes the whole company. Next year, maybe the big story will be how they came and bought anything that wasn’t nailed down, especially airliners.
The one thing those foreigners almost surely won’t want to buy is a $1 million wood-framed house in an ugly exurban golf course development. So the jet market should get tighter even as real estate continues its slide.
Phil,
If one substituted “Japan” for “China” and “India” in your post, you’d have nearly the exact same scenario for our nation circa 1985.
Remember how that turned out for Japan? Not so good.
Regards,
Mark
Did we have all the same fears about the Japanese? Didn’t they get a lot of money and buy all our companies and take our car market and all that?
Sa far as I can tell, it just made me more comfortable and able to drive a better car for less money.
If in five years I can buy a six seater Chinese jet for two million I will be perfectly happy. Even if I have to phone a call center in China for my prescription as a result of us outsourcing everything.
….. leading to the inexorable slide in quality and customer service for US domestic routes while foreign carriers continue to provide exemplary service to compete with one another. The housing market of course, if it continues to slide will only make the American consumer seek the absolute lowest fare, furthering the downward slide until US carriers are either consumed whole for their foreign routes or they outright declare bankruptcy…. That *would* be a pessimistic view.
BW,
There is one word that neatly sums up the cause for most of the problems you mention: Unions.
Regards,
Mark
Japan in the 1980s? Excellent point. I think we are currently running a trade deficit of about $800 billion/year. Our trade deficit in the 1980s averaged closer to $100 billion/year (not quite $200 billion in today’s dollars).
The Japanese did manage to buy Rockefeller Center! And I think they did take our car market.
I don’t think that the Japanese takeover of the car market is related to their purchase (and eventual divestment) of various US-based assets (the movie ‘Gung Ho’ notwithstanding).
Phil, what do you think of Eclipse Aviation’s long-term vision of a more ‘packetized’ air-travel system?
Michael: True on the Japanese car market takeover; presumably most of it is due to the fact that American companies decided it wasn’t worth making cars anymore (since everyone would be running errands in 7,000 lb. SUVs) and due to the fact that they didn’t want to spend heavily to recruit our ablest young minds into engineering (none of the U.S. companies would have any trouble selling cars if they had a design that was as good as the Honda Accord).
What about Eclipse? The plane itself doesn’t seem very suited to air taxi since the back seats are so cramped and there is virtually no space for luggage. If the plane had more range, it would be a great owner/pilot+friend+dog+bags or a great four-person weekend trip airplane. As for doing air taxi for people of average means, I don’t think it is viable. Without a schedule it is too hard to organize. As soon as you have a schedule, I think you end up needing to buy into a fantastic array of FAA regulations for scheduled airlines. Even worse, every airport that you visit needs to have TSA security, which I think has to be paid for by the “airline”.
As oil prices rise, I am a believer that rich people and companies may want to stop using 8-seat airplanes to fly an average of 1.7 or 1.9 people around in the back seat. That means a strong market for charter of airplanes with comfortable seating in the back for 4 people (club seating for 4; fairly comfy for 4 and very comfy for 2). I would say the minimum size airplane for this is the Cessna Mustang. The Phenom 100 from Embraer may be even better.
There is one word that neatly sums up the cause for most of the problems you mention: Unions.
How tragically naive. Excessive CEO salaries coupled with unprecedented poor management far outweigh the demands on any union. Unions don’t set a companies’ public policy. Unions don’t make poor investment decisions. Union membership is hovering somewhere below 15% of the workforce. Republican leadership has stacked the deck against unions to the point that labor laws now contradict each other.
I’ve sat at management’s table and have witnessed countless wasted resources all in an idiotic effort to monitor how long someone spends in the bathroom while on the job.
Stu,
In my reply to BW Jones, I was mainly addressing his assertions regarding the decline in domestic airlines’ customer service when I stated that unions are to blame for most of the issues.
Having a relative explain to me that one of the “benefits” of being a card-carrying union member of a major domestic airline is that it enables her to jump ahead of fair-paying customers at the gate irregardless of the fact that the flight’s already over-booked or that she’d practically have to call in a bomb threat to get terminated made me wonder how many of these folks simply show up for a paycheck and could actually care less about real customer service. And if my experiences on these major carriers is any indication, that sure seems to be the case.
I’m not sure how one can blame a CEO’s salary and poor high level management on causing the average flight attendant or counter rep to act as if I had just kicked their dog before I boarded their airline’s flight.
No one is forcing them to work for an airline.
Regards,
Mark