for June 9, 2008
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Hot Topic: The Perfect Storm: Avgas Prices and a Crippled Global Economy Fuel Fear of IFE Downturn
This
past week was witness to multiple events that led the staff at IFExpress to
query the impact of aviation fuel prices and the economic slowdown in the
USA on airlines and ultimately in-flight entertainment. This is our view and
frankly, it does not look good for airlines, aircraft manufacturers, or IFE
vendors.
The price rise for Jet Fuel over the past year has been dramatic. Last
week, spot Jet fuel prices for Los Angeles delivery closed at $3.85 per
gallon whereas the spot price airlines were paying one year earlier was
$2.15 per gallon. This 79+% fuel price increase has forced airline
management to re-think every aspect of their operations.
Both Continental and United Airlines made such announcements this past week.
Continental is grounding 67 aircraft and laying off 3,000 employees while
United Airlines announced it would discontinue their low-cost service TED,
ground all their B737s, reduce their mainline domestic capacity by 14%, and
lay-off 1,400 - 1,600 people. Furthermore, industry sources indicate that
over 200 other aircraft, everything from regional jets to B747s, have been
grounded since March and fare prices have risen by 16% since the start of
the year. Many carriers, Delta included, have implemented a fee ($25 in
Delta’s case) for a second checked bag and it is reported that one American
carrier is planning a $15 fee for the first bag for many passengers starting
this month. This in conjunction with the economy and the hassle of airline
travel has already led to a decrease in ticket sales for the nation’s
carriers. As a point of reference, the Air Transport Association is
predicting that approximately 2.7 million fewer travelers will take to the
skies this summer than in 2007 certainly validating the laws of supply and
demand - higher prices driving down demanded lift. Another feature of
the dour economic situation will be the reduction of total system-wide
passenger capacity. Fewer RPM's will also force less economic (read:
fuel efficient) aircraft from the system compounding the loss of available
service, in many cases in smaller markets.
This begs the question of what will the impact be on In-Flight
Entertainment? The last major fuel crisis the United States faced was in the
early 1970’s when IFE was in it’s infancy and very far from the complex,
expensive, heavy, imbedded aircraft systems of today. Therefore, the present
circumstances are perhaps better emulated by the impact 9/11 had on the
airlines. And, it is not a great stretch of the imagination to envision a
repeat of this negative event. In late 2001 and the following three or
so years, this industry saw a boom in transportation demands in Asia and
Europe while the US carriers faced consolidation, fleet retirement,
lay-offs, and few new aircraft purchases.
There will always be premier carriers who will opt for the status of
imbedded systems because it is part of their corporate culture and brand
identity. But many of the other legacy carriers, who are fighting tooth and
nail to survive and to avoid bankruptcy, will be seeking viable IFE options
and this is where the portable market will continue to come into play,
placing added pressure within the IFE industry for further consolidation or
wholesale rethinking of product strategy by the Big 3 IFE vendors.
In fact, the weakening of the global economy may already be taking a toll
within the IFE market niche. In the last ten days one of the major IFE
vendors has let go 25 – 50 employees...including engineers.
Read the full story at our website
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Emirates To Launch First
Commercial A380 Service to America
6/9/2008 9:15:56 PM
Singapore Crowned Best Airline
for 6th Time
6/9/2008 9:13:52 PM
Astronics Named One of
Washington’s Best 100 Companies to Work For
6/9/2008 9:06:35 PM
Emirates to Recieve Its First
A380 on 28th July From Hamburg
6/9/2008 9:05:45 PM
Boeing, Blue Air Reach
Agreement on Order for Three Boeing 737-900ERs
6/9/2008 9:02:29 PM
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Airbus
eclipses Boeing orders through May
AFP
Ryanair boss
admits entering talks with Boeing, Airbus to buy new planes
Independent
Boeing and
Airbus forecast above-average order year
Seattle P-I
New plane
orders on "knife edge"
Reuters
Thai Airways
to cancel direct flight to New York
Forbes
JetBlue
Airways Expands Free In-Flight Connectivity Services Onboard 'BetaBlue'
RedOrbit
GuestLogix
Announces Support for In-Flight Broadband Service With its Mobile Virtual
Store(TM) Solution
Yahoo Finance
IFExpress is sponsored in part
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WAEA
29th Annual Conference and Exhibition
9/8/2008 - 9/11/2008
Aircraft Interiors Expo - Americas
9/9/2008 - 9/11/2008
Aircraft Interiors Expo - Asia
9/22/2008 - 9/25/2008
NBAA
61st Annual Meeting & Convention
10/6/2008 - 10/8/2008
IFExpress is sponsored in part
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