What Makes Cents?
First Aloha Airlines (1,900 employees) and now two days later, the announcement that Champion Air Charter (550 employees) are both ceasing operations. The graveyard of travel companies is sure to increase substantially in the near future.
A harsh assessment of the travel industry indeed. But consider that cost-push inflation and the accompanying recession are combining to make the term "stagflation" once again a relevant description of the USÂ economy.
Stagflation is the worst of all evils for the travel business. The profit margins are razor thin in every sector of the travel industry. The Internet has stripped all excess profits in the process of making travel products commodities. Orbitz, Kayak, Expedia and the rest are all nothing but electronic commodity exchanges where there is only one way to get the top listing is to have the lowest price. Good for the consumer, bad for stability of the industry.
The combination of increasing costs and reduced demand are forcing businesses to make tough decisions. What makes "cents" providing a service with a certain cost structure, now provides substantial losses with the effects of Stagflation.
Unfortunately, stagflation will cause many more travel companies to disappear along with the jobs they create.
George
