Parkson8888, I think Tony will hv tis worry more than u. Do u think he will just sit on it? All the airlines & many other trades r also facing the same oil problem.
AAX lost when Brent USD 70 because the ticket sold when oil is below USD 70. Now if AA sell ticket when price is USD 80 then if drop u make more profit if up more maintenance and cost. This is call forward booking :p
“About 53 per cent travellers are now travelling in low cost in Asia Pacific region. Our strategy is to increase frequencies – adding more (flights and seats) that means price will be reduced,” he said.
He said AirAsia will be adding about 267 flights over the next festive period and confident of achieving full capacity.
“To deal with higher oil prices, we have to increase our efficiency and turnaround time. We continue to add about 20 planes every year for AirAsia.
“We see no reason to slow down. We expect to increase up to 10 per cent additional capacity per year,” he said, noting that the demand was very strong and looking forward to better fourth-quarter passenger growth.
Why price will be reduced good? Oil price increase while ticket price reduce means double AA loss?
“About 53 per cent travellers are now travelling in low cost in Asia Pacific region. Our strategy is to increase frequencies – adding more (flights and seats) that means price will be reduced,” he said.
Example 5 trips sold for $500 and earns $75 at 15% profit margin. With the same fleet and increase more flight frequency to 8 trips sold for $720 (10% ticket discount) earns total $108 at 15% profit margin. That translates into a whopping +44% increase in overall profit based on the concept of "SAME FLEET WITH INCREASED FLIGHT FREQUENCY & REDUCED TICKET PRICES". Does that makes sense to u? That is why with high oil price, AA will will counter it by increasing capacities (MORE FLIGHT FREQUENCY + MORE SEATS PER FLIGHT).
I guess that is why Tony keeps adding CAPACITIES for LONG TERM GROWTH. Airasia has done even better than other low cost airlines Ryanair and Southwest. Watch the presentation uploaded a week ago by AA at https://www.youtube.com/watch?v=jvbZS_iL99Q and fast forward to 2:57 to view the comparison.
Most people don't get it and when they see high oil price, they freaked out. AA has a lot of tools in its arsenal to counter rising oil price. Hope that helps to understand a bit of AA.
People who do not see prospects or values in AA but whine about it during rising oil price are big part of the amusement. If high oil price is the only deciding factor why u consider pulling your $ out of AA then it means that u are being too simplistic in your investing thoughts.
I agree...good argument against all the naysayers and doomsday prophets shouting oil price! oil price! Its how companies perform during times of adversity that show the quality of their management
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Posted by PKRPACA > 2018-09-26 01:56 | Report Abuse
This insect is tricky