We're going into recession.
Not the aviation industry, but the economy in general.
No, I'm not an economist. I'm simply taking a guess because Primera Air shut down.
What does it have to do with anything? Well, I remember the year 2008. I was quite excited because I found out about an ultra-low-cost airline flying people over the Atlantic. Some of the tickets went for about £100 (one-way, I guess). What would have happened if it had become the new norm? Not-that-rich Americans casually going for a weekend trip to some place in Europe without having to save for it?
But shortly later, Zoom Airlines (that was their name) went bankrupt.
Less than a month after Zoom ceased operations (a similar airline called Oasis Hong Kong was already dead) we got news about the bankruptcy of Lehman Brothers. And then all hell broke loose.
I know, that's not enough data to establish that bankruptcy of an ultra-low-cost transatlantic airline is a sign of impending economic recession. Oil prices went really high in 2008, higher than now. And maybe it's the emergence of such an airline (not its bankruptcy) that is a sign that financial institutions are too optimistic - or careless, and that an economic downturn is near. But I bet that's what's going to happen now.
Now, back to the subject. Primera Air, after at least 2-3 months of receiving horrendous reviews, shut down in early October, leaving passengers stranded at airports. It wasn't the only ultra-low-cost transantlantic airline in existence. There is also Wow Air, which continues to operate (for now), causing headache to traditional airlines. There's Norwegian (though they might not be "ultra-low-cost" on all routes).
But... it it possible to bring ticket prices even lower?
I did some calculations of the cost of fuel used, per passenger, on a non-stop route between New York and London.
Under $90, one-way. That was the result.
Yup. Airlines have been ripping us off for years.
And I didn't use some very modern airliners for calculations. Take Boeing 757, for example. Out of production since 2004. And the calculations I did were for the less fuel-efficient (per seat) variant, the 757-200. The result? Slightly under $90.
Or an Airbus A330-300, filled wil economy seats and just a few premium economy seats (343 seats in total). The result? About $82.
But a hidden assumption here is that the airplane is full: 100% of seats are occupied. Of course, airlines can fill an aircraft at 104%, selling more tickets that there are seats - it's called overbooking: they know that usually some passengers who paid for tickets won't make the flight. In rare cases when overbooking becomes a problem, they offer some passengers compensation or knock their teeth out, beat them unconscious and drag them out of the plane (customer experience may vary)*.
Still, you can't reasonably expect the airplane to be filled at 100% on average; realistic "load factor" is about 80-90% (let's assume 86%). And that means that fuel cost, though slightly lower, is split among fewer passengers - so, higher fuel cost per passenger.
But with more modern airliners, it is possible to achieve fuel cost per passenger of $80 in real life (that is, when "only" 86% of the seats are occupied). At least it seems possible with Boeing 787-8 using the same seat configuration as Norwegian. That may not be the best example, as Norwegian likes to squeeze 9 seats across where there should be only 8 - not really comfortable. But let's take a look at a re-engined version of Airbus A330-300 known as A330-900. As described before, $82 per seat was possible with the old version. Under $80 per passenger (and well below $80 per seat) is doable with the new version.
So, $80 per passenger for a New York-London flight. $160 for a round trip. But that's just the cost of fuel (not counting fuel reserves). The airplane itself also costs (not as much, of course, as Wikipedia says or as much as manufacturers' list prices show; Boeing gives rebates of 40% and more), whether you buy it or lease it. Additionally there are maintenance costs, landing & parking fees; air traffic control fees (no such thing in the US, but they exist in the UK; and years ago, Zoom's airplane was impounded for not paying them) and crew salaries.
So, how could some airline keep the cost of (the cheapest) round-trip tickets close to $160? Obviously, they could charge more depending on when you book your ticket (with a limited batch of tickets for each round-trip flight sold for $160), charge more for refundable tickets, charge extra for baggage, and of course charge more for business class seats (which don't take very much more space than economy class seats, and sometimes ARE economy class seats - instead of having 3 economy class seats in a row, the middle one is blocked and the two remaining seats as sold as a "business class seat" each). That's assuming the airline would stay reasonably honest (real airlines always find ways to charge some "gotcha" fees).
(I should mention that there's another way for an airline to earn more money: cargo. Passenger airplanes usually carry cargo, not just passengers' bags, in their belly. Air freight is expensive, and transporting a 180 lbs parcel from New York to London and back would bring several times more money than $160.).
Imagine what would happen if costs of traveling to Europe really went that low. Of course, we'd have much more cultural interchange.
More and more Americans have passports - 10 times more, actually, than in 1990 (that's not a typo: 4% in 1990, 42% in 2017). But the Atlantic is still a barrier, separating people of different mentalities.
What shocks Americans in Europe? That would be material for another article - or 10 or 20 of them - but let's list some random examples:
- Beer being served at McDonalds
- No ice in drinks
- You need to pay to use the bathroom
- Everything is closed on Sunday
- Waiters do not check on you through the course of your meal, they expect you to call them over.
And Europeans - what shocks them in the US? Maybe:
- No drinking until you're 21? What. The. F.
- Tipping for everything.
- Everything is built around cars. Drive-thru everything. And why are the roads so wide?
- Lawyer ads everywhere. Pharmaceutical ads everywhere, for prescription drugs.
- The price on the product does not include tax?!
It may take more time to realize some other things: that Europeans are overpaying 2 times for gasoline, but Americans are overpaying 5-10 times for medical care (and that super-expensive insurance doesn't cover all the costs? then what is it for?). That good university education in Europe can be cheap or actually free (student loans? you start your adult life with debt?).
And the more touchy the subject, the more striking the differences - for example, circumcision (Europeans: w-what?) or religion (there is no such thing as religion in Western Europe; okay, that was an exaggeration - there is, but in many countries being irreligious is the default choice).
Culture shock is the most valuable thing you can get from interacting with people of other nationalities. I wish people could experience it more often.
--bigtech
*As it later turned out, it wasn't a case of overbooking; the airline was kicking out passengers to make room for its own employees who were to travel in passenger seats.