By Marc Sellouk, Founder and CEO of Flewber
If you’re anything like me, you’ll know exactly what I mean when I say it’s funny how some random things stick in your mind while others don’t. Just as some people remember numbers and others remember names. These little pieces of information are usually low on the priority scale, but for some reason they stick in your head. One of those little tidbits for me happened in September, when I read that FedEx issued a profit warning that spooked the market and investors.
Since that day in September and in the context of a lukewarm global market, several other companies have followed suit and issued their own earnings warnings for the 4th quarter and some until 2023. Several other companies, i.e. that is, with the exception of three major commercial airlines whose forecasts appear to predict resilience in demand, which will drive continued revenue growth through 2023. As CEO of an airline technology company , this piqued my interest, as I feel I have a pretty firm finger on the pulse of the airline industry, and the numbers just didn’t seem to add up.
As Covid fears and the number of serious illnesses began to diminish, it only made sense for the general public to have a YOLO (You Only Live Once) moment, for those of you who aren’t parents of teenagers ). But when you look at the numbers themselves, it was head-scratching. How on earth, with inflation at 8.3% and fuel prices up 18.2%, can three major airlines predict continued growth through 2023? Then came the “aha” moment or, as I would compare it, the feeling you get when you catch the dealer’s sleight of hand in a three-card rising game. Whether intentionally or not, these commercial airlines have set up a perfect supply and demand scenario for themselves.
Think about it, at the height of the pandemic, headlines were everywhere telling us how many cities airlines were canceling service on mostly regional routes across the country. And even as Covid fears began to fade, even more roads and towns continued to be closed. There is your shortage of supply. Now enter a mainstream audience that has been in various states of confinement for the better part of two years and as such longs to see family and friends again and there is your request. Airlines have created a kind of perfect market; a thriving market for themselves with general inflation at 8.3%, fuel prices up 18.2% and load factors down. A supply chain problem they created themselves has allowed them to raise airfares by 42.9% year over year and it barely makes the evening news.
But there’s a reason greed is one of the seven deadly sins and it’s what I like to call the backfire, or as some might refer to it – karma. Now, I’m not suggesting that this was part of a collusive scheme, concocted by airline executives, that took place in the middle of the night in an abandoned hangar. But I suggest that those noxious winds in which they fly at the expense of their passengers’ wallets might come back to harm them. But unfortunately, if the past is prologue, the boomerang effect for commercial airlines usually means that layoffs and furloughs will begin right after the distribution of company bonuses.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.