Airlines shake-out

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Truly fascinating times in the airline industry. Recession brought on by escalating fuel prices coinciding with downturns in consumer spending in both Europe and the US raises the competitive intensity in what was already one of the toughest industries around.

Most airlines, of course, plan to pass on fuel-cost rises in higher fares. Even Ryanair – perhaps the most aggressive competitor in the industry – seemed about to do the same. Then, Michael O’Leary announces the opposite, planning to cut fares by around 5%. At its simplest, it looks like a desperate effort to keep his planes full, but in reality the move is about as hard-ball as rivalry gets – his aim is to drive weaker rivals out of business and pick up their best routes when they fail. … and with €2.2bn in the bank, I’d not bet against him succeeding.

Meanwhile, I see estimates that up to 50 other airlines may not survive the down-turn [at least if Governments don’t throw public money at them yet again!]. Let’s hope that at least some of them had a strategy professional in place preparing them for this wp_ of worlds 2-3 years ago.

Kim

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