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Thin profit margins, high cost of capital suggests why airlines are not profitable investments for us

Record profits forecast for airline industry

AFP - Wednesday, December 15

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Record profits forecast for airline industry

GENEVA (AFP) - – Industry association IATA on Tuesday raised its forecast for airline earnings in 2010 to a record 15.1 billion dollars from 8.9 billion dollars as economic conditions improved.
Despite the better than expected performance this year, the International Air Transport Association predicted that airlines would face more turbulence in 2011 with profits dropping back to 9.1 billion dollars (6.8 billion euros).
"The recovery cycle will pause in 2011," said IATA Director General Giovanni Bisignani.
"Although the 9.1 billion dollars profit projection for 2011 is better than we had previously forecast, next year the industry will face tougher conditions than what we are experiencing today," he told reporters.
Fuel prices are expected to average 84 dollars per barrel next year, up from 79 dollars in 2010.
In addition, an ongoing debt crisis in Europe is expected to stifle growth in industrialised markets.
"A number of European economies are in very serious problems," said Brian Pearce, chief economist at IATA.
"We think there will be further (spending) cuts by governments which will further depress economic growth," he said.
"We're going to see slower economic growth in Europe. Clearly that's going to make it a more challenging environment to grow revenues."
Profits for the region's carriers are estimated at just 100 million dollars in 2011.
Growth is largely going to come from fast-growing Asia, which is to post more than half of 2010's airlines profit at 7.7 billion dollars.

What happens when the world turn against you

Many would comment on the title of this blog post. Am I still blogging about personal finance, and how is this related? This post, I agree, somehow be different from what I usually blog about. Therefore, if it interest you no further from here, I humbly recommend that you read no further.

Some background
I was on my way back to Atlanta, after visiting my friend in Montreal for a week or so. On my way to catch the flight back to Atlanta, I followed Google Maps direction to the airport. Altogether there are 8 waypoints, and to the 7th waypoint it mistakenly route me to a place in which I couldn't get to the airport. Practicing conservatism, I was determine to reach the airport an hour early, knowing that customs will take long to clear. However, due to the 7th waypoint error, I was stranded and only have an hour to catch the plane. I reached the airport eventually 10 mins before the plane departure, knowing that I have yet to check in, the staff at the ticket counter said that the plane would have departed by then.

The feelings that is going through my mind
Yes, as usual, I started thinking of alternative solutions that could get me out of this predicament. I know that changing the flight will definitely cost some money to change the plane ticket, but the problem is that I am almost cashless and without a credit card to pay for the fees. Being almost cashless also means that I am unable to take the taxi back to my friend's apartment and get him to house me one more night. The feeling ain't pleasant. Along the way, there are many kind souls whom took pity on me and help me in one way or another.

The kind employee
I met her in the bus and heard her communicating in english. I approached her and told her my situation, and she is very friendly. I dashed off in a hurry without having an opportunity to thank her. But if she does read this, I hope that she can drop me an email.

The kind taxi driver
With a lack of a better word, he is simply amazing. It is really rare to meet people who are like him. As he knew of my situation, he told me that he will try to make it in the airport on time for me. I felt bad by telling him a time earlier than the actual flight, and so he took another route that might avoid the rush hour. Yes, I must say that things started going for the worse when I am smacked right in the rush hour. For eg. a 15min journey would take at least 30mins and when I took the direction of the mistaken waypoint, I know that my chances of catching the airplane is really low. He said that he is reluctant to take me because he will be stuck in the jam on the way back. Indeed I felt bad when on one hand, he is doing his best to help me, but it is to his detriment. I know I wouldn't meet him again, probably ever in my life... I gave him a generous tip and hope he have a safe journey back home.

Last of all, the kind airline staff
This is one big obstacle. I had to change my flight timing, but I am without cash or credit card. She eventually changed my flight and no charge. I appreciate that.


Things I should have done better
Time management

I should have allocated more time and not procrastinate especially for important events. The more critical the event, the more time should be allocated to prepare for the event. Do not ever procrastinate knowing that you had things under control

Contingencies

Especially for mission critical events, at least one contingency should be planned for. What if the planned route fails, any backup that you can rely on? Contingencies should not be neglected. Many times, contingencies are haphazard and badly planned. I think if I had a proper plan, such as checking to see how make it here when I first arrive at this airport, this may not have happen

Credit Cards
An essential I must say, after this episode and long trip away from home, credit cards are the most flexible financial instrument to be inside one's personal finance.




Budgets are meant to take contingencies in mind
I have a planned budget on what I would spend on in Montreal. However, I have never thought of leaving the city with any money left on me. That said, budgets should have a buffer range, I would say at least enough to cover the basics, i.e. for my own finances, I think a buffer of 20% (arbitrary set) of my expenses for a month is good.

Why gold is a bad investment Weekend Investor - MarketWatch

I like to share an article about gold. It is an interesting read summarizing all the factors that affect the precious metal... It is a good read... and an investment class which I have yet to know much about...

Why gold is a bad investment Weekend Investor - MarketWatch: "- Sent using Google Toolbar"

Book review Dale Carnegie: How to win friends and influence people

I have recently completed this book. It was touted as one of the best books by Warren Buffett himself. So I decide to do a review of the lessons taught within the book. To summarize the essence of the book, I realized that even though the book gives you ten or twenty steps and guides to follow to ensure good human relations and communications, but the mere fact that the author advocates that it is the way of thinking that most influence the success in the lessons taught. For example, one has to constantly keep in mind the other person opinions and viewpoints; and also to offer endless praise to others. As I repeat what I have mentioned above again, this book, though it has given readers some guides to achieve better communication with others, the central theme lies in to always put others before yourself, thereby humbling yourself and praising others.

Let’s just share a little discovery I made at the end of book. Currently I am on a stopover in Milwaukie on my way back to Atlanta. Dale had also spent some time in Omaha, Nebraska. He had no money then, I had not much money with me either as I am waiting to build my personal wealth. I am definitely not old, but I am not that young either…. Anyway, back to my point, I feel that Dale and Warren do not need to live in the city to succeed. They are able to do as well as their counterparts in the city. Why is that? It is not my incentive to argue that the country side or suburban areas are better than others, for the chances of another Dale or Warren is so minimal; we (those who lives in the city) are merely increasing our chances of probability of success. However, that similarity struck me and I would certainly like to find the reason why… Additionally, I realize that I do not have much drive to do things like reblogging again and to finish this book when I am back in my normal routine of life. I realize that this is also similar to the city and suburban analogy. Living in the city (in our daily normal routine) will seek to increase our chances of success but going on a retreat to Omaha (living in the country side) give us a fresh perspective on our current situation and life. 

Reviving this blog

A fresh coat of paint, a new template. I am going to make it a point to blog about my personal journey in my own finance. I was inspired to continue this while spending some time now in the United States, I have the time to not get caught up in all the little to-dos and deadlines due just because I wasn't there to receive any additional new assignment. I do feel a little guilty for letting others to take on my job momentarily but however I guess everyone really needs this break, this pilgrimage to some place else... So that one can think and reflect.

Anyway, currently I am in the land of the best investors of all.. Warren Buffett. Omaha Nebraska... I use to read books on him describing the companies that he purchased, see's candies, Mrs B. furniture mart etc..

Okay.. Shall look forward to posting another post soon.