I was a bit surprised to read the Financial Times report that the prices of smaller, used business jets have “plunged to new lows.” FT.com explains that a one-year-old Learjet can be had for a 40% discount from the purchase price of a new jet. New jets are down 25-35% over the past 2-3 years as deliveries between 2008-2010 have dropped 57%.
Larger jets have fared much better due to a more well-off clientele like celebrities, billionaires, and governments.
In “As Cotton Prices Rise, So May the Cost of Hotel Rooms“, CNBC cites the soaring costs of linens and towels as a potential contributor to higher hotel prices. I was most fascinated with the incredible price hikes since last summer.
Prices are from 2010 to 2011 as paid by hotels.
- Queen-sized sheets: $72/dozen to $116/dozen (+61%)
- Pillows: $8.80 to $9.56 (+9%)
- Bath towels: $41/dozen to $64/dozen (+56%)
Cotton prices have been the main driver for skyrocketing costs.
It looks like American flyers are not the only ones paying higher fares. Across the Atlantic, air passengers in the United Kingdom paid 16.1% more to fly in August than in July, a record seasonal increase. This dour news was part of the U.K.’s latest inflation report that showed consumer price inflation above the government’s 3% limit for a sixth month in a row. The core rate of inflation was up 2.8%, higher than the 2.5% consensus forecast. Maybe we can export some of our deflationary fears to help out the cause.
See “U.K. Inflation Unexpectedly Exceeds 3% on Air Fares, Food” for more details.
Airlines are making money again thanks to the pricing power that has come from an economic recovery and reductions in overall capacity. The improved pricing has allowed airlines to charge for an array of services that were once free. In addition, domestic leisure airfares have increased 20% year-over-year from the second quarter, international fares are up 30%, and business travelers are paying 12% more. Another metric, the price paid per passenger per mile, is only 3.9% off the 15.56 cents from July, 2008 which was the highest for the past 10 years.
All these price increases have translated into seven straight months of revenue growth and major airlines are generating impressive profits. For example, Delta made $467M last quarter; its best quarterly showing in a decade. These results mark a sharp rebound from the decade-low prices at the depths of the recession and from the extremely high oil prices that squeezed airlines before that.
For more details see “After Bargains of Recession, Air Fares Soar” in the New York Times (September 5, 2010).
Atlanta’s Hartsfield-Jackson airport will fill a large budget gap by raising fees across a variety of services and cutting jobs. The airport needs to act to maintain its credit rating for refinancing existing debt and generating additional capital.
“The new fees—including increases in short-term and daily parking and new surcharges on hotel airport shuttles and some additional property leases—will generate $20.9 million in new revenues…The new fees are not likely to be popular with the city’s hospitality community. Last year, the hospitality community convinced city leaders not to increase fees for operators of shuttles for each time they drive to the airport.”