If you think there is a risk of hard times sending Qantas and Virgin Blue broke, think again.
It is their employees who risk going broke instead. The two major carriers will sit on as much of their cash reserves as possible and put however much of their fleets they need to ‘up against the fence’. The plans to do just that were well rehearsed and aired in the early stages of the SARS crisis of 2003, when no-one knew how serious or far reaching that contagion would prove.
The airlines recovered as quickly as the SARS threat went away. These financial troubles look like lasting much longer. It is easy to imagine half the customer base of the carriers shrugging their shoulders and stopping flying, especially in the big traffic generating global services companies and at the ultra cheap part of the mass market, where household expenditure pressures would make a $29 flight to Surfer’s Paradise look unusable along side the cost of driving to the airports, parking and meeting holiday expenses.
The real market will be in ‘the middle’, looking for good value flexible fares, while the top and bottom layers respectively trade down, or up, or give up.
A number of things will then happen around the world. Older less fuel efficient jets will be withdrawn from service for good, and the demand for new lower cost jets will only persist among very well funded airlines with low cost structures. The ones that can hold their breath, and conserve their cash .
And the corporate jet sector will grow strongly, because those enterprises that have to fly to support their customers or businesses will find the scope and frequency of scheduled carriers too limited for their needs.