Tough Times for the Travel Industry
Submitted by
CalculatedRisk on Tue, 11/10/2009 - 6:59am (64 comments)
User login
Who's online
There are currently 48 members and 132 guests online.
Currently online
- Comrade Dazed and Amused
- patientrenter
- EconomicDisconnect
- amiramr0
- REBear
- CitizenPither
- Anonymous Bosch
- Sippn
- pavel.chichikov
- sidd
- sm_landlord
- rosethorn
- barfly
- The Middling Lebowski
- Comrade Kristina
- greenchutes
- Bad Dawg Bobby
- adornosghost
- curious
- bearly
- Paradigm Lost
- Danny
- wafdof
- alambka
- chemgod
- Rajesh
- Jonathan
- lubecpat
- Sandy_Ego
- steelhead
- JP
- NiceCriticalThinker
- Black Star Ranch
- rickrolled
- embdddsgnr
- Rob Dawg
- HomeGnome
- yagij
- mhdoc
- Kilah
- feralpig
- Anton Chigurh
- Byzantine_Ruins
- Yalt
- t r orwell
- Y.T.
- Hoopajoops LTD
- Chicago Dude
Charlie Gasparino: Job Losses Could Trigger Round 2 of Banking Crisis
comment in previous thread
* If unemployment ticks higher, more consumer loans are likely to go into default and banks may have problems covering the additional loan losses. For now, banks are thriving from a low interest rate environment that allows them to borrow for nearly nothing and invest in safe Treasuries at 3.5%. That could all change if they need to boost reserves.
* Banks may find it difficult to raise more capital after already taking billions from the government. Are you willing to lend to zombie banks like Citigroup and Bank of America? Even relatively healthy banks like JP Morgan Chase and Wells Fargo might find it difficult.
* Toxic assets still infect the banking industry. Gasparino says $7 trillion in derivatives isn't a problem that goes away overnight, especially if the economy gets worse and their value falls once again. "It took 30 years to build this toxic assets, they [banks] haven't sold a lot of it, they haven’t written it down to zero," he warns.
from
IMO, sounds like a perfect time to get on a plane. Less cattle.
let's nopt Forget - To catch a Thief
Capri anyone?
Time to relearn the ancient art of walking?
Spunkmeyer wrote:
As mentioned in CRs post: Airlines have cut back. Fewer flights mean only small price drops and equal amounts of cattle.
"Carriers have cut back their schedules in response to economic pressures, with 2009 capacity reductions the deepest since 1942."
Yeah, but they were cutting capacity back then to turn plow shares into swords....
Comrade Misean is Dope wrote:
Not to mention that was near the height of U-boat warfare; a lot of "capacity" had sunk to the bottom of the ocean.
Please CR think of the Children.....WE ARE IN A RECOVERY!!!!..../snark/
Comrade Misean is Dope wrote:
And now we are turning them into banker bonuses.
Lloyds Banking Will Cut 5,000 Jobs in Operations, Insurance, Retail Units
More
?
My memory isn't what it used to be. A greenshoot is what you have in the morning after eating too much broccoli, right?
If any of that is news to you, Cinqo, you need to read the comments more carefully.
Gasparino worried about $7 trillion? Is that a sick joke? He wishes it was a measly 7 TT.
So Wall Street managed to buy off Mishkin, huh?
ac:
Huh?
Imagine how hurting the cruise industry is?
The double whammy of the economy and swine flu.
Words to the wise:
My mom likes to do family cruises, and i'd never pay for one, but we get to spend cloistered time together, which is her scheme, i'm fairly certain.
So like 5 years ago, 9 of us get on a boat heading down under, down Mexico Riviera way, and my wife gets the worst flu you can imagine on day 1, me on day 2 and by day 3... 5 of 9 of us are stricken. The cruise ship more closely resembles a Hospital Ship, all it needs is some red paint fashioned into crosses on the side. Half the ship is confined to their rooms and nobody has an appetite. I lost 8 pounds.
We decided to invest in cold medicine, and bought a few packages in the ship's store, and by day 4 of a 7 day cruise, the store had run out of all otc medicines, although you could still buy 47 different kinds of perfume and cologne, oh!
Spunkmeyer wrote:
Not the case - just got back from a visit to the oldest son in Tampa - every leg was FULL.
I think it is pretty clear that biz travel hasn't stepped up much after the Summer lulls. Maybe it will all be happy happy after New Years.
Buffett’s NetJets May Profit on ‘Less Piggish’ Flyers (Update2) - Bloomberg.com
Bargain hunting for fares in banker class? Think how much they could save flying Southwest?
A quick post before I head off to read some rule text/legalese.
Local fishwrap has an article about traditional lines of credit not being available to small business and said business turning to cash-advances as an alternative. The cash advance is obtained from the credit card processing company the business uses.
In this case he borrowed $100,000 to expand his diner 100 sq ft (DOH!). The terms? 1 year loan at 20% interest...
From the credit card processing company , "Typical advances are $50,000 to $75,000, Rosenblatt added; the maximum in about $250,000. Most businesses pay on the advance daily, as the processing company collects credit card receipts."
Terry you out there? How widespread is this or is this a different end of the business from what you are familar with?
A Note of Caution, Carry Traders
A Note of Caution, Carry Traders - MarketBeat - WSJ
LOL.....I LOVE the lingo........
.......it expects a 4 percent year-over-year decrease.......despite deep discounting = (we really think it will be MUCH higher!)
.......the economic head winds......are anything but behind us = (this holiday season will be a disaster!)
.......Carriers have cut back their schedules in response to economic pressures, with 2009 capacity reductions the deepest since 1942. = things are TOTALLY in the toilet - flights haven't been this empty since the Wright Bros.
...........The fun is in making the prune sound like a plum.
Ya know, if Untied and Americant and Northworst didnt charge ONE HUNDRED AND TWENTY FIVE DOLLARS extra for a bag weighing 51 pounds (versus 50 lbs), I'd have a little sympathy for these f#ckers. But the greedy bastards have nickle and dimed themselves into such a hated, dispicable industry. Good riddance.
Mike in Long Island wrote:
Buisnesses usually just use the card for purchases, only in rare cases, where the vendor does not accept credit cards (or they need cash to meet payroll), will they use a cash advance, given the fees involved. Not aware of cash advances of these amounts in the U.S.
Mike in Long Island wrote:
My kind have been using credit cards [or CC forwards] forever - but that no one w/ an ounce of sense would lend to people like me with out firstborn as collateral. The question they have to ask is how badly do they really need the loan - most times that answer comes back as - not that necessary. I think that lesson needs to be relearned by another generation of small biz types.
Southwest has that as their adv gimmick now: "Your Bag Flies For Free"
ac:
Huh?
This:
FT.com / Comment / Opinion - Not all bubbles present a risk to the economy
We're witnessing an exact repeat of the Yen carry trade. Does he really think the quadrillions of cheap dollar leverage flooding places like Brazil doesn't pose a threat? Or the real estate bubbles and hot money flooding into Asia?
This is pretty much in line with Bernanke's "sub prime doesn't pose a threat" comment.
I think these guys are all bought and paid for by Wall Street. They can't possibly be that dumb.
We don't hear much about Agent Orange these days, is he hiding out in a tan parlor?
Regardless of the recession, large segments of the Business travel industry face a secular decline due to the rise in (a) globalization and (b) internet videoconferencing / computer interfacing. Globalization leads to international operations, but especially after 9/11, it costs too much time/productivity to travel internationally, making alternatives more attractive, more often, on the margins. Internet videoconferencing provides a reasonable alternative for some travel, and again makes travel alternatives more attractive, more often.
Err, would that were the case. Actually, load factors have rarely been higher, thanks to airlines cutting flights and parking planes in the desert:
Aerospace stocks rise as airlines tighten capacity - MarketWatch
From the article: However, industry capacity cuts more than offset the fewer number of people flying, lifting the average load factor -- the industry benchmark for tracking the percentage of an airplane filled with passengers -- by 1.2 percentage points to 80.9%, IATA said.
From an industry perspective, 81% is within shouting distance of what they'd consider "full capacity". (And what you and I would consider "tighter'n a can of sardines".)
And why cut flights when planes are this full? Because too many short-hop flights become uneconomical at
-induced $80-a-barrel oil. Thank you, Easter Squid!
Mike in Long Island wrote:
Reread your post- merchants "factor" credit card receivables all the time -
Terry,
I took it to mean that the "Cash Advance" was really like a payday loan where the business borrowed against its future stream of credit card transactions. So in addition to the x% fee the card company charges to the business - tack on another x% until the principal is repaid sort of thing.
The card processor is EVO Merchant Services if that helps at all. They said traditionally about 80% of the cash-advance business was restaurants but now its split 50-50 with other small business.
ac:
Thanks, I'll check it out.
later, folks.
Doofus wrote:
Kind of like bank fees. That's what happens when you let the MBAs run the show. They will run your brand into the ground, for short term returns. I guess it can work if everyone else is doing it too, but when you have a competitor out there, looking to the business instead of the bonus, it is suicidal.
ac wrote:
It's different this time
Mike - a number of companies will factor the merchant's credit card receivables, as you described. It is not unusual for a small merchant to do this.
Terry wrote:
Ah factoring. What's old is new again.
Priceline just reported a boffo quarter
Walmart of online travel.
Terry wrote:
Wasn't (isn't) CIT one of the biggies in this particular market?
Anecdotal re: travel:
Was on a 5-day business trip last week to a major airport hub city in the eastern half of the country. Large Hotel was nearly deserted at all hours, so far as I could tell.
Taxi driver -- hardworking immigrant -- had taken up his cab recently after losing a convenience store in the recession. Said the cab business was terrible. Also, had to pay huge license fee to the city each month just to operate. He had many days where his net after that license fee and the operating costs was negative, or, if positive, less than minimum wage...
Managers indicate that business travel will be restricted this year; choose your ventures carefully...
Is it any wonder that newspapers are losing readership given Flyod Norris's comment about the unemployment number. The seasonal pattern to unemployment has a lot to do with the holiday season. Unless somebody forgot to tell me thanksgiving is still in November and Xmas still in December. I contrast that to questions regarding the seasonal adjustments for housing. While it too is heavily linked to the calendar government subsidies which never existed in previous years can also play a very big role and could exceed the impact of the calendar. Norris talks of changing economy but doesn't offer one effect that could account for the seasonal's being out of whack. Don't believe he raised that issue when it came to housing- Wall Street Stooge- another person to put on the ignore list.
Mook wrote:
When me and the missus went away last month, our planes were only 50-75% full for all flights. I guess I've been lulled into thinking it was only going to get better. Definitely less flights/longer layovers this year.
# Temperature Highlights - October
The average October temperature of 50.8°F was 4.0°F below the 20th Century average and ranked as the 3rd coolest based on preliminary data.
For the nation as a whole, it was the third coolest October on record. The month was marked by an active weather pattern that reinforced unseasonably cold air behind a series of cold fronts. Temperatures were below normal in eight of the nation's nine climate regions, and of the nine, five were much below normal. Only the Southeast climate region had near normal temperatures for October.
Statewide temperatures coincided with the regional values as all but six states had below normal temperatures. Oklahoma had its coolest October on record and ten other states had their top five coolest such months.
Florida was the only state to have an above normal temperature average in October. It was the sixth consecutive month that the Florida's temperature was above normal, resulting in the third warmest such period (May-October).
The three-month period (August-October) was the coolest on record for three states: Nebraska, Kansas, and Oklahoma. Five other states had top five cool periods: Missouri (2nd), Iowa (3rd) , Arkansas (5th) , Illinois (5th) and South Dakota (5th) . Every climate division in Kansas (nine) and Nebraska (eight) recorded a record cool such period.
For the year-to-date (January - October) period, the contiguous U.S. temperature ranked 43rd warmest. No state had a top or bottom ten temperature value for this period.
Black Star Ranch wrote:
Smart move, considering that other carriers are trying to match SW's advertised prices, and making the profit on the fees.
Wisdom Speaker wrote:
Only half true. I do a lot of both V conference & travel... folks still have to travel to walk the factory & meet & greet [or meat and grate as we say]... it really is as necessary as it always was. Just can't afford it.
One of the results of this is companies are increasingly looking for partners closer to home - within a days drive so it doesn't get counted as 'travel' & not fall under the ban - just an off site visit. That 'days travel' might be wake up at 3AM drive from Minneapolis to Chicago - do business in the afternoon - drive home and get to bed at 1AM... be cheaper to do the shuttle BUT that wouldn't be allowed due to 'travel ban restrictions'. I was part of a biz whirlwind late last week like that. Crazy.
Southwest has that as their adv gimmick now: "Your Bag Flies For Free"
Yep. They're no dummies.
I'm not a CFO, mind you ... but a good rule of thumb would seem to be that when one of your chief competitors makes your fee structure the centerpiece of their multi-million-dollar advertising campaign, it miiiiight be time for you to rethink it.
Terry wrote:
Thanks Terry. I was being dense when I read the article this morning. More coffee needed.
1 year at 20% interest. Hmmn. I guess the risk is the borrower goes Tango Uncle before the term is up.
We will be serving you a complimentary beverage, before we serve dinner...
http://mysite.verizon.net/vze6l53f/sitebuildercontent/sitebuilderpictures/.pond/stewardesses.jpg.w300h368.jpg
Obama's Afghan Plan: About 40K More Troops
CBS Exclusive: Sources Say Force Will Grow to 100,000 with Long-Term Stay Planned; White House Denies Report
Can't vouch for the veracity of this MSM source
Juvenal Delinquent wrote:
And folks piss-and-moan about the '60s-
ac wrote:
What if they are ?
However, I think his description was inelegant but he is right all bubbles are not the same. What he should have said is how much leverage direct and indirect is associated with the bubble is what counts. The dot com bubble had little impact on the economy for two reasons- firstly most of the brokerage firms (since it was their money) were pretty tough o how much margin they would extend against those securities (b) because the run up and bust was so swift those gains didn't result in substantial indirect leverage . In contrast the real estate bubble went on for a long time and resulted in both substantial direct and indirect leverage.
Cinco-X wrote:
There are 4-5 companies that specialize in card receivables lending - CIT may do this as part of their overall factoring, but I never came across them in my deals.
Ouch!
Black Star Ranch wrote:
just add a slurry of bullshit
Mike in Long Island wrote:
Or the cardholder charges back the transaction
They can't possibly be that dumb
Mike in Long Island wrote:
In this market? 20% isn't enough to cover the risk IMHO. CC cos ought to be tightening credit further - lots further.
The dot com bubble had little impact on the economy...
Uh... really?
Really?
Then why did we have to throw tons of cheap money at it and create a gigantic real estate bubble just to get some job growth?
OT but ran across an interesting treatise on software projects / productivity:
Computer Productivity: Why it is Important that Software Projects Fail
Best quote:
Yeah. WTF? Whatever happened to that 'leisure lifestyle'?
Cinco-X wrote:
Excerpts from "in the Graveyard of Empires" by Seth Jones a Rand Political Scientist
"Babrak Kamal's Soviet backed government desperately tried to increase is power and legitimacy.... it declared allegiance to Islam... proposed amnesty fo those misguided citizens it deemed "deceived patriots""
"the Soviets attempted to clear and hold a few strategic areas of the countryside and tried without success to to seal the borders with Iran and Pakistan"
"throughout the war the Afghan army was weak, divided and frequently unreliable"
Sounds familiar? But it is different this time because we are Americans unlike those evil Soviets.
dryfly wrote:
dryfly - the business owner wasn't taking a cash advance from his personal or corporate card. Rather he was borrowing against "inventory" in the form of credit card receivables from customers who paid by credit card. The credit card processing company lent against that stream of receivables - or as Terry succinctly put it - another form of factoring.
Not disagreeing that unsecured lending needs to get smart or die...
........good one........
Yes, it is tough time for the travel industry. (Excuse me, I needed to get a tissue.) In today's USA Today there was a front page story about how the low-cost carriers are gaining ground (or air space) on the legacy carriers. Too bad except if the legacy carriers are bleeding money and the industry is essential to our economy (really???), the airlines might be the next big taxpayer bailout. I love American capitalism!
These airlines have such stupid marketing strategies and ticket pricing. Take US Airways. (No really don't take it.) They stick in the seat pocket a magazine that someone barely writes which they use it to market bad advertisements. So they spend all this money on paper and fuel to fly around a few hundred thousand copies of a magazine while at the same time charging passengers for extra bags. What nonsense.
How about a simple mileage-priced ticket that gets me from point A to point B?
JP wrote:
I'm based in Europe and fly every week on at least one trip around most countries. Flights are being consolidated with carriers and lots of code sharing visible on routes now. Hotel prices and availability are definately showing a slowdown in business, although its nothing like post Sept 11.
Quit flying years ago. Got tired of the Great Unwashed. Whoever came up with the idea of Frequent Flyer Points should be tarred and feathered, worst thing that ever happen to air travel, it turned the industry into a giant day-care center.