the high cost of ash

I have a confusion.

I keep reading in the news that the effects of the volcanic eruption in Iceland led to a massive financial loss for the airlines. For example, in this morning's Los Angeles Times:

Critics accused authorities of having bungled their response to the airborne grit by imposing an unnecessary near-total flight ban that cost the airline industry $1.7 billion. [Link]

I understand that flights had to be canceled and people were left stranded. But what did they do, decide to give up and buy real estate where they were stranded? I mean, aren't they eventually – as soon as possible – going to buy another ticket and go to where they won't be stranded?

If people already live in the area from which they intended to begin travel, and were stuck there – at home – they weren't stranded. They were unable to travel. And that's not what the news has been reporting. 

Unless the stranded people decided to live where they're stuck now (screw it, Honey, let's just buy a house here) the airlines have postponed sales, not lost them, right?

 

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4 thoughts on “the high cost of ash

  1. Oops, I almost forgot, yaktal reflects Google's ostensible commitment to business in central Asia. They seem to be making subtle linguistic overtures. Yaktal is a Mongolian word for Yak Tongue. Boiled in an omelet of crow's eggs, mmmm. Hey, I make stuff up. 🙂

  2. It's true, I hadn't thought about all the stuff they carry besides people. I always think of the luggage compartment as being full of luggage, but that's not right. I remember when I worked at Veeco Metrology, the really big microscopes they made were shipped in 747 luggage areas that had to be reconfigured to make them fit. It's amazing how much weight those things can lift.

  3. Two questions: First, shouldn't we subtract from the airlines' "losses" the increased revenue to adjacent hotels and restaurants (as to passengers who didn't camp in the terminal while waiting) and the increased sales of candy bars and CornNuts (as to passengers who did)? Second question: The "word verification" word that I'm being told to type in order to present this comment is "yaktal." Is there some guy in Silicon Valley who's making a hundred-fifty grand a year making up these "words" or do they just go down to the central park in Los Altos and ask the dude who's smoking the most pot to speak a few words.

  4. well, your hypothesis is partially true – those travelers who were stranded somewhere will need to get home eventually, and when they do, the airlines will get their money. but there are other costs that are not as easily recovered. very few airlines have a business model that only carry passengers – especially with transatlantic flights. a BritishAir 747 flying between Heathrow and SFO might carry several hundred people, but it is also carrying cargo and express mail. if BritishAir, in this example, promised to deliver in a certain amount of time and they don't, generally their contracts say that they'll reduce or eat their costs. there have been several news reports in the past week of fresh flower merchants in north Africa, who have had to throw away tons of fresh cut flowers because the cargo flights that were taking their flowers to overseas markets were canceled. in these cases, the airlines loose too. the flowers are gone.there are also costs involved in keeping flight and ground crews on standby, when no revenue is coming in. they can't just tell all those union mechanics and pilots to go home indefinitely, and "by the way, we're not going to pay you either". in order to keep them all on standby, the airlines are still paying their salaries. most carriers also have service or fuel contracts as well, which they pay in advance for, in anticipation of their future projected needs. when something like a volcano blows those projections up, they're out that money – at least in the short-term.in the long run though, the financially sound carriers will weather this fine, but i would bet you that we see some failures from the ones that were already on the edge. i'd also bet that we see less bargains this summer on airfares, as everyone struggles to recoup their losses.

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