The Oil Drum: Canada

8 comments on The Round-Up: May 21st 2008

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porsena on May 21, 2008 - 11:06pm

Air Canada warns fuel cost will hurt demand

“We continue to see strong bookings, but the cost increases we're expecting are fairly significant and they need to eventually make their way into the market place,” Montie Brewer, Air Canada's president and CEO, said after the company's annual meeting yesterday.

“The severity of it will impact customer demand. We'll see how much the customer can absorb and still plan on travelling.”

The airline is closely monitoring the market to see how consumers are reacting to the high cost of flying and it will “respond accordingly,” Mr. Brewer said.

It's hard to figure the Canadian travelling public. We haven't lost the will to travel. Maybe we just want to travel while we still can. In response to lower retail prices, sales of cars in Canada are up a whopping 11% through the first four months of the year; even light truck sales are up 1%.

And thanks, Khebab.

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Lexington on May 22, 2008 - 12:01am

In a big country with a mobile workforce people need to get around. Passenger rail in Canada is a joke, and because of the distances driving often isn't practical (or perhaps more accurately, airfares aren't yet high enough to make it seem like a viable alternative considering the inconvenience, including longer travel times and the cost of gas and lodging), so I'm not surprised that we have not yet seen more pronounced demand destruction for air travel.

You'll notice that even Air Canada's CEO is predicting that demand destruction will occur however, it's just a question of finding the price point at which the consumer will balk.

You also need to make some allowance for human psychology -humans are creatures of habit and tend to want to continue habituated behavior even if that behavior, judged on its own merits, appears increasingly irrational.