Airlines may price their way out of recession

Before you go, we thought you'd like these...
Before you go close icon

Airlines are facing higher fuel costs. And, they are facing lower demand for each seat. This has lead industry group International Air Transport Association (IATA) to predict that the global airline industry will lose $9 billion this year.

One theory, espoused by some analysts is that the best way out of the mess is to cut capacity and raise prices. One is relatively easy. The other, probably not.

According toReuters, sharply cutting routes and flights should stabilize prices. If wishes were horses all the beggars would ride.

Consumer demand for flying could remain low for another year or more. Higher oil prices won't just hurt airlines; they will cut into consumer spending capacity and the profits at many businesses. The number of people flying could actually dive further.

Airlines are back to the place where they were a year ago, but demand is falling faster than it was then. The only two solutions that may be available if the trouble drags on are bankruptcies and mergers. Fortunately, the industry has plenty of experience with both.

Douglas A. McIntyre is an editor at 24/7 Wall St.

Read Full Story

Markets

S&P 500 2,368.06 6.93 0.29%
DJIA 20,728.49 69.17 0.33%
NASDAQ 5,914.34 16.80 0.28%
DAX 12,256.43 53.43 0.44%
NIKKEI 225 19,063.22 -154.26 -0.80%
HANG SENG 24,301.09 -90.96 -0.37%
USD (per EUR) 1.07 -0.01 -0.68%
USD (per CHF) 1.00 0.00 0.39%
JPY (per USD) 111.77 0.62 0.55%
GBP (per USD) 1.25 0.00 0.31%

Want more news like this?

Sign up for Finance Report by AOL and get everything from business news to personal finance tips delivered directly to your inbox daily!

Subscribe to our other newsletters

Emails may offer personalized content or ads. Learn more. You may unsubscribe any time.

From Our Partners

Man Built This Contraption In His Backyard - And Even He Was Surprised How Well It Worked Man Built This Contraption In His Backyard - And Even He Was Surprised How Well It Worked
This Elephant Was Separated From Her Mother As A Baby - But She's About To Get A Huge This Elephant Was Separated From Her Mother As A Baby - But She's About To Get A Huge
19 of the Creepiest, Most Inexplicable Things People Ever Experienced 19 of the Creepiest, Most Inexplicable Things People Ever Experienced