LATAM Airlines files for bankruptcy

[Bob Scott 7,714]

LATAM--the merged former LAN Airlines (Chile) and TAM Airlines (Brazil) has joined the airline bankrupcy hit parade.

https://www.reuters.com/article/us-health-coronavirus-latam-airlines-ana/latin-america-grabs-world-spotlight-for-airline-bankruptcies-idUSKBN2341NV

[Alan_A 1,650]

A genuine question - are we allowed to discuss the cause?  I honestly wasn't clear from the final post on the other thread whether you were just shutting down that discussion, or whether all discussion of the novel coronvavirus is now forbidden.  If you could clarify, that would be very helpful. Thanks in advance.

[Chock 17,769]

I'm pretty sure the point was that if someone's not got to the point they wanted to discuss after 149 pages of a forum thread on particular subject, then it's not looking likely they're ever going to get there.

[Alan_A 1,650]

4 minutes ago, Chock said:

I'm pretty sure the point was that if someone's not got to the point they wanted to discuss after 149 pages of a forum thread on particular subject, then it's not looking likely they're ever going to get there.

That doesn't answer my question.

 

[G-RFRY 1,705]

Some of the big airlines will be bailed out ( subsidised ) by the tax payer then watch the trade wars start drive the competition out.    

[Chock 17,769]

What needs to happen is for airlines to stop with the fantasy that they can operate 737s and A320s on medium haul flights, yet constantly tell holidaymakers that they only need to charge 50 quid for a seat on the things and it still be a viable proposition for a business. This sort of thing has lead to a completely unrealistic level of expectation from people when they look to buy airline tickets and lead to such narrow margins that many airlines are a wafer-thin distance away from collapse.

[F737MAX 5,509]

27 minutes ago, Chock said:

What needs to happen is for airlines to stop with the fantasy that they can operate 737s and A320s on medium haul flights, yet constantly tell holidaymakers that they only need to charge 50 quid for a seat on the things and it still be a viable proposition for a business. This sort of thing has lead to a completely unrealistic level of expectation from people when they look to buy airline tickets and lead to such narrow margins that many airlines are a wafer-thin distance away from collapse.

LATAM are hardly renown for charging £50 for their seats.

It's boils down to simple economics.
There are currently too many airlines. The only two options available to an airline's management to make the firm profitable are: to wait until a number of their competitors disappear and raise prices, or to slash costs.

The industry was an oligopoly (where a small number of firms collude, either explicitly or tacitly, to restrict output and/or fix prices, in order to achieve above normal market returns), but it is now closer to that of monopolistic competition (firms have little power to set curtail supply or raise prices to increase profits. Firms in monopolistic competition typically try to differentiate their product in order to achieve in order to capture above market returns).

Evidence of this is for economy passengers. Much needed competition from the LCCs has lead to a situation where if one airline on a given route prices their seat even $/€/£10 more expensive than their competitors, they lose the passenger.
Hence the unbundling of 'extras' (hold baggage, boarding sequence, seat assignment, etc.) to keep the baseline fare as low as possible when the passenger is searching flight prices.

To cover the low fares, the operating costs are slashed: flights to cheaper secondary airports (if possible), outsourcing of ground handling, cabin crew hired on the cheapest salaries, flight crew hired as contractors rather than employees...

It's hard to feel too sorry for the airlines when the most successful made billions in profit and experienced double digit profit margins in 2019.
FR: 12%, BA: 15%, DL: 14%, SW: 13%

Then again, these aren't normal times. Every airline is going to suffer.
Only the ones that were sucessful since the last downturn are going to survive this crisis.
 

[Chock 17,769]

1 hour ago, F737NG said:

LATAM are hardly renown for charging £50 for their seats.

Never said they did. I was referring to the many low cost airlines who do indulge in this sort of thing, which creates an unrealistic expectation on the part of passengers as to how much an airline ticket actually costs on average. This puts pressure on every airline to trim every corner possible in order to try to remain in business, with the knock on effect to everything else.