Airlines Increase Layoffs to Adjust to Shifting Demand

Airlines Increase Layoffs to Adjust to Shifting Demand

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As we have commented on in the past, it appears that more and more Americans are taking "staycations" rather than traveling in these uncertain economic times.  Eventually, that shift in consumer behavior was bound to squeeze the profits of airlines everywhere.  It now that this preference to relax close to home is extending to customers outside of the United States and that, coupled with fuel prices, is having adverse effects on the airline business model.

The industry was put in the spotlight again Wednesday when Air France announced that it plans to cut five thousand jobs in order to reduce costs and create a more sustainable business.  This comes after German airline giant Lufthansa reduced their payroll by 3,500 last month on the back of continued economic turmoil in Europe.  While American competitors who fly internationally will surely be affected by economic upheaval in Greece, Spain, and elsewhere across the European Union, what remains to be seen is if the bad news faced by the aforementioned companies will translate into similar results at domestic operators.

If one was to believe that the malaise might expand across the pond, the obvious factor to point to is the price of fuel.  While its true that fuel prices have taken a dip in recent weeks it does not appear that this trend will continue much longer.  Beyond that, the price of powering commercial jets has become a much larger factor on airlines’ expense sheets, now accounting for about thirty-five percent of all costs.   Additionally, large, multinational airlines now face competition from more regional rivals than ever before.

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Do the recent actions by foreign competitors portend a troubling trend for American firms? Considering the large competition from up and coming regional companies and the possible increase in fuel prices, it appears that troubled times may be looming for major airlines.  Listed below are the three largest major airlines in the United States by market cap, followed by the largest regional airlines.


1. Delta Air Lines Inc. (DAL, Earnings, Analysts, Financials): Provides scheduled air transportation for passengers and cargo in the United States and internationally. Market cap at $8.81B, most recent closing price at $10.45.


2. United Continental Holdings, Inc. (CNK, Earnings, Analysts, Financials): Engages in the provision of passenger and cargo air transportation services. Market cap at $7.58B, most recent closing price at $22.83.


3. US Airways Group, Inc. (LCC, Earnings, Analysts, Financials): Provides air transportation for passengers and cargo. Market cap at $2.03B, most recent closing price at $12.48.



4. Southwest Airlines Co. (LUV, Earnings, Analysts, Financials): Operates as a passenger airline that provides scheduled air transportation in the United States. Market cap at $7.06B, most recent closing price at $9.20.


5. Alaska Air Group, Inc. (ALK, Earnings, Analysts, Financials): Operates as an airline company serving destinations in the western United States, Canada, and Mexico. Market cap at $2.5B, most recent closing price at $35.21.


6. JetBlue Airways Corporation (JBLU, Earnings, Analysts, Financials): Provides passenger air transportation services in the United States. Market cap at $1.45B, most recent closing price at $5.11.



Written by Dan Connelly


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