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Bob McAdoo, Imperial Capital managing director, on airlines starting to make money, despite higher oil costs.
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Ops plus what you pay the fly joining me now airline analyst Bob -- -- managing director for imperial capital Bob.
Thank you for joining us listen you say airlines.
Mom have gotten smarter in the way they do business exactly how.
Well I think you know -- -- years ago they figured out that.
Continuing to try to.
I get large market share was was not the answer that the real solution is to.
Is to tailor the amount of capacity you have to the -- the amount of demand you have and and so as a result you had a and a lid on capacity for the last several years as a result even with hundred dollar oil you're now seeing airlines making money so it's it's a different world that it -- was.
There was -- Oscar -- USA today to -- be prepared for higher.
Have fares this year -- you say that's not true.
Well I think most people won't pay higher airfares what happens is.
That with a limited amount of new capacity are a lot of cases even less capacity first coming out of some of the airlines and with a little bit of growth in the economy little bit of increased demand.
What happens is that the the a computer systems -- that -- can determine what kind of fares are available on any day on any flight those computer systems we'll squeeze down the number of I guess you can -- surplus seats that would normally be sold at 597989.
Dollars was looked at a cheap seats that we find sometimes on.
Late Saturday night or or Tuesday afternoon some of those those those -- will.
Not be as as prevalent but if you travel on Fridays travel back on Sundays when it's always pretty busy anyhow yeah those -- probably -- be up that much.
But you know what airlines kind of have a -- over a barrel don't think Bob because this is big country and often flying is the only option.
But a -- point of people say enough of this enough of the nickel and dining on all of these fees.
It's not a particularly pleasant experience -- the security in the crowded planes.
A -- point to people stopped to perhaps look for alternatives I may be that may not be that many but.
Do airlines have to be careful and and cognizant of that.
Well I think I think there're there really aren't very many alternatives that -- them.
It would fares go up though there is really a problem of of killing demand if if they -- yeah 450 dollar fair and and that 10% -- -- if you can't kill the man but.
But you know there really aren't alternatives guess the alternative is really to kind of stay home and sit on the couch and it will that's true -- Let's talk about the the mileage out of US Airways and American -- happened a lot sooner than -- -- right.
Well I think the announcement -- becomes serious -- there'll even if they announce something in the next few weeks as was recently reported a possibility.
You know it's gonna take several months because you still have to go through government approvals -- -- trust -- things like that.
But I think who you know it's quite conceivable that in the next ten days to two weeks we get -- we can hear.
That you know what the structure of a deal might be or if there is not going to be a deal but I I clearly think there will be a deal.
Learn about the structure learn about you know.
Potentially what might be offered to to holders of US Airways shares.
-- we could we can learn that fairly quickly I think the stock moves when that happens.
Not necessarily.
Waiting until the end of the of all the reviews and whatever -- -- -- again could take six months is this the last statement do you think in the airline industry that's out there.
I I think it is outlook for the next there -- years maybe someday we.
We get the governments in the and the labor unions to all agree that that it's okay to merge.
A US airline with a foreign airline but that's that's going to be down the road -- ways I think.
This is really the last big when and it and it really kind of cleans up and and turned it more into holing up only so from a profitability point of view I think we're.
We're headed and -- in the right direction finally.
You know -- only been leery of that and line stops because of the they've always been losing proposition is that change -- -- about.
Well it it it seems to be and there's there's always the chance that that the geopolitical events can happen.
Several times we've had what seemed to be trend that was looking like things were gonna be okay oil prices stable or whatever and then you have Libya breaks out there or something like Adam.
And oil spikes and then people run -- run from the airlines but but on balance in spite of all that you know even with -- they say with hundred dollar oil for the last year -- -- -- airlines are making good money.
Very -- indeed all right Bob -- from imperial capital Bob thank you very much appreciate it.
The -- year.
