Why do airlines seem to go out of business suddenly?
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FlyBMI are currently in the news for failing and stranding passengers abroad. This is not the first time an airline has halted operations seemingly overnight and left passengers without a way to get home.
Why is it that airlines stop operating so suddenly, compared to other businesses which seem to go through a more protracted period of profit warnings, administration... and generally more orderly windup?
airline-operations
asked 2 hours ago
jl6jl6
1161
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add a comment |
$begingroup$
FlyBMI are currently in the news for failing and stranding passengers abroad. This is not the first time an airline has halted operations seemingly overnight and left passengers without a way to get home.
Why is it that airlines stop operating so suddenly, compared to other businesses which seem to go through a more protracted period of profit warnings, administration... and generally more orderly windup?
airline-operations
asked 2 hours ago
jl6jl6
1161
New contributor
jl6 is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
$endgroup$
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Not really on topic, but when businesses are ran at really low gross profit, all costing assumptions need to materialize, else the profit is gone. Some of these assumptions are related to fuel costs, cabin filling rates, and competition prices. If one change, the ticket pricing doesn't float anymore. Only strong and large businesses can take care of passengers whatever happens, including losses.
$endgroup$
– mins
2 hours ago
add a comment |
$begingroup$
FlyBMI are currently in the news for failing and stranding passengers abroad. This is not the first time an airline has halted operations seemingly overnight and left passengers without a way to get home.
Why is it that airlines stop operating so suddenly, compared to other businesses which seem to go through a more protracted period of profit warnings, administration... and generally more orderly windup?
airline-operations
asked 2 hours ago
jl6jl6
1161
New contributor
jl6 is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
$endgroup$
FlyBMI are currently in the news for failing and stranding passengers abroad. This is not the first time an airline has halted operations seemingly overnight and left passengers without a way to get home.
Why is it that airlines stop operating so suddenly, compared to other businesses which seem to go through a more protracted period of profit warnings, administration... and generally more orderly windup?
airline-operations
airline-operations
asked 2 hours ago
jl6jl6
1161
New contributor
jl6 is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
asked 2 hours ago
jl6jl6
1161
New contributor
jl6 is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
asked 2 hours ago
jl6jl6
1161
New contributor
jl6 is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
asked 2 hours ago
jl6jl6
1161
asked 2 hours ago
jl6jl6
1161
1161
New contributor
jl6 is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
New contributor
jl6 is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
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Check out our Code of Conduct.
$begingroup$
Not really on topic, but when businesses are ran at really low gross profit, all costing assumptions need to materialize, else the profit is gone. Some of these assumptions are related to fuel costs, cabin filling rates, and competition prices. If one change, the ticket pricing doesn't float anymore. Only strong and large businesses can take care of passengers whatever happens, including losses.
$endgroup$
– mins
2 hours ago
add a comment |
$begingroup$
Not really on topic, but when businesses are ran at really low gross profit, all costing assumptions need to materialize, else the profit is gone. Some of these assumptions are related to fuel costs, cabin filling rates, and competition prices. If one change, the ticket pricing doesn't float anymore. Only strong and large businesses can take care of passengers whatever happens, including losses.
$endgroup$
– mins
2 hours ago
$begingroup$
Not really on topic, but when businesses are ran at really low gross profit, all costing assumptions need to materialize, else the profit is gone. Some of these assumptions are related to fuel costs, cabin filling rates, and competition prices. If one change, the ticket pricing doesn't float anymore. Only strong and large businesses can take care of passengers whatever happens, including losses.
$endgroup$
– mins
2 hours ago
$begingroup$
Not really on topic, but when businesses are ran at really low gross profit, all costing assumptions need to materialize, else the profit is gone. Some of these assumptions are related to fuel costs, cabin filling rates, and competition prices. If one change, the ticket pricing doesn't float anymore. Only strong and large businesses can take care of passengers whatever happens, including losses.
$endgroup$
– mins
2 hours ago
add a comment |
1 Answer
1
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$begingroup$
Mainly because winding down airline business will turn it into a sudden and from there on increasing loss. Airline operation nowadays id calculated in most cases toward a rather high plane utilization. Even more so on low cost enterprises. Sometimes even 10% less passengers may turn a profitable flight into a loss.
Airlines depend on filling up flights - until the last seat and last moment (last minut bookings being, depending on the business plan, even being more profitable). As soon as an airline would announce the intention to close down, new bookings will dry up quick, making next to every flight after this unprofitable.
This all is due the fact that, unlike a brick and mortar store, most cost of an airline are operational cost. There is no valuable inventory to be sold of over time, or much existing machinery to be run until the last moment to convert existing materials in (somewhat) higher valuable products, to turn it into cash. For Airlines there is none (No, collector value of in flight magazines don't realy count), so shuting down the flights removes next to all further expenses, stoping any further increase of debt.
Not to mention, that flying after such an announcement would become almost impossible as each and every supplier would demand cash payment from that moment on - with airport fees and fuel prices most prominent - something a money straped airline hardly can provide. Airlines that tried to go that way usually postponed the shutdown just by days - and often with planes stuck in all corners of th world, unable to return, not able to sell them, but instead adding more debt in airport parking fees.
answered 2 hours ago
RaffzahnRaffzahn
3299
$endgroup$
$begingroup$
It might be worth adding to your last paragraph that with many businesses, it's better to go on selling/manufacturing even at a loss, because it might be the most cash you can get from inventory you've already paid for.
$endgroup$
– Dan Hulme
1 hour ago
add a comment |
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1 Answer
1
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1 Answer
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active
oldest
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active
oldest
votes
$begingroup$
Mainly because winding down airline business will turn it into a sudden and from there on increasing loss. Airline operation nowadays id calculated in most cases toward a rather high plane utilization. Even more so on low cost enterprises. Sometimes even 10% less passengers may turn a profitable flight into a loss.
Airlines depend on filling up flights - until the last seat and last moment (last minut bookings being, depending on the business plan, even being more profitable). As soon as an airline would announce the intention to close down, new bookings will dry up quick, making next to every flight after this unprofitable.
This all is due the fact that, unlike a brick and mortar store, most cost of an airline are operational cost. There is no valuable inventory to be sold of over time, or much existing machinery to be run until the last moment to convert existing materials in (somewhat) higher valuable products, to turn it into cash. For Airlines there is none (No, collector value of in flight magazines don't realy count), so shuting down the flights removes next to all further expenses, stoping any further increase of debt.
Not to mention, that flying after such an announcement would become almost impossible as each and every supplier would demand cash payment from that moment on - with airport fees and fuel prices most prominent - something a money straped airline hardly can provide. Airlines that tried to go that way usually postponed the shutdown just by days - and often with planes stuck in all corners of th world, unable to return, not able to sell them, but instead adding more debt in airport parking fees.
answered 2 hours ago
RaffzahnRaffzahn
3299
$endgroup$
$begingroup$
It might be worth adding to your last paragraph that with many businesses, it's better to go on selling/manufacturing even at a loss, because it might be the most cash you can get from inventory you've already paid for.
$endgroup$
– Dan Hulme
1 hour ago
add a comment |
$begingroup$
Mainly because winding down airline business will turn it into a sudden and from there on increasing loss. Airline operation nowadays id calculated in most cases toward a rather high plane utilization. Even more so on low cost enterprises. Sometimes even 10% less passengers may turn a profitable flight into a loss.
Airlines depend on filling up flights - until the last seat and last moment (last minut bookings being, depending on the business plan, even being more profitable). As soon as an airline would announce the intention to close down, new bookings will dry up quick, making next to every flight after this unprofitable.
This all is due the fact that, unlike a brick and mortar store, most cost of an airline are operational cost. There is no valuable inventory to be sold of over time, or much existing machinery to be run until the last moment to convert existing materials in (somewhat) higher valuable products, to turn it into cash. For Airlines there is none (No, collector value of in flight magazines don't realy count), so shuting down the flights removes next to all further expenses, stoping any further increase of debt.
Not to mention, that flying after such an announcement would become almost impossible as each and every supplier would demand cash payment from that moment on - with airport fees and fuel prices most prominent - something a money straped airline hardly can provide. Airlines that tried to go that way usually postponed the shutdown just by days - and often with planes stuck in all corners of th world, unable to return, not able to sell them, but instead adding more debt in airport parking fees.
answered 2 hours ago
RaffzahnRaffzahn
3299
$endgroup$
$begingroup$
It might be worth adding to your last paragraph that with many businesses, it's better to go on selling/manufacturing even at a loss, because it might be the most cash you can get from inventory you've already paid for.
$endgroup$
– Dan Hulme
1 hour ago
add a comment |
$begingroup$
Mainly because winding down airline business will turn it into a sudden and from there on increasing loss. Airline operation nowadays id calculated in most cases toward a rather high plane utilization. Even more so on low cost enterprises. Sometimes even 10% less passengers may turn a profitable flight into a loss.
Airlines depend on filling up flights - until the last seat and last moment (last minut bookings being, depending on the business plan, even being more profitable). As soon as an airline would announce the intention to close down, new bookings will dry up quick, making next to every flight after this unprofitable.
This all is due the fact that, unlike a brick and mortar store, most cost of an airline are operational cost. There is no valuable inventory to be sold of over time, or much existing machinery to be run until the last moment to convert existing materials in (somewhat) higher valuable products, to turn it into cash. For Airlines there is none (No, collector value of in flight magazines don't realy count), so shuting down the flights removes next to all further expenses, stoping any further increase of debt.
Not to mention, that flying after such an announcement would become almost impossible as each and every supplier would demand cash payment from that moment on - with airport fees and fuel prices most prominent - something a money straped airline hardly can provide. Airlines that tried to go that way usually postponed the shutdown just by days - and often with planes stuck in all corners of th world, unable to return, not able to sell them, but instead adding more debt in airport parking fees.
answered 2 hours ago
RaffzahnRaffzahn
3299
$endgroup$
Mainly because winding down airline business will turn it into a sudden and from there on increasing loss. Airline operation nowadays id calculated in most cases toward a rather high plane utilization. Even more so on low cost enterprises. Sometimes even 10% less passengers may turn a profitable flight into a loss.
Airlines depend on filling up flights - until the last seat and last moment (last minut bookings being, depending on the business plan, even being more profitable). As soon as an airline would announce the intention to close down, new bookings will dry up quick, making next to every flight after this unprofitable.
This all is due the fact that, unlike a brick and mortar store, most cost of an airline are operational cost. There is no valuable inventory to be sold of over time, or much existing machinery to be run until the last moment to convert existing materials in (somewhat) higher valuable products, to turn it into cash. For Airlines there is none (No, collector value of in flight magazines don't realy count), so shuting down the flights removes next to all further expenses, stoping any further increase of debt.
Not to mention, that flying after such an announcement would become almost impossible as each and every supplier would demand cash payment from that moment on - with airport fees and fuel prices most prominent - something a money straped airline hardly can provide. Airlines that tried to go that way usually postponed the shutdown just by days - and often with planes stuck in all corners of th world, unable to return, not able to sell them, but instead adding more debt in airport parking fees.
answered 2 hours ago
RaffzahnRaffzahn
3299
edited 1 hour ago
answered 2 hours ago
RaffzahnRaffzahn
3299
answered 2 hours ago
RaffzahnRaffzahn
3299
answered 2 hours ago
RaffzahnRaffzahn
3299
3299
$begingroup$
It might be worth adding to your last paragraph that with many businesses, it's better to go on selling/manufacturing even at a loss, because it might be the most cash you can get from inventory you've already paid for.
$endgroup$
– Dan Hulme
1 hour ago
add a comment |
$begingroup$
It might be worth adding to your last paragraph that with many businesses, it's better to go on selling/manufacturing even at a loss, because it might be the most cash you can get from inventory you've already paid for.
$endgroup$
– Dan Hulme
1 hour ago
$begingroup$
It might be worth adding to your last paragraph that with many businesses, it's better to go on selling/manufacturing even at a loss, because it might be the most cash you can get from inventory you've already paid for.
$endgroup$
– Dan Hulme
1 hour ago
$begingroup$
It might be worth adding to your last paragraph that with many businesses, it's better to go on selling/manufacturing even at a loss, because it might be the most cash you can get from inventory you've already paid for.
$endgroup$
– Dan Hulme
1 hour ago
add a comment |
jl6 is a new contributor. Be nice, and check out our Code of Conduct.
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$begingroup$
Not really on topic, but when businesses are ran at really low gross profit, all costing assumptions need to materialize, else the profit is gone. Some of these assumptions are related to fuel costs, cabin filling rates, and competition prices. If one change, the ticket pricing doesn't float anymore. Only strong and large businesses can take care of passengers whatever happens, including losses.
$endgroup$
– mins
2 hours ago