Airlines round the world have this week been releasing their second quarter 2019 results. The top lines contain nothing surprising. The back stories are informative.
After all, the first rule of negotiating has always been to understand the other side's challenges and parameters.
In Europe profits plunged for both Ryanair and Lufthansa with both blaming sluggish economies, rising costs and low-cost carrier fare wars. Air France KLM on the other hand reported a rise in profits. All face the same market conditions so time to drill further.
AF KLM may not be engaged in the same degree of competition for the short-haul leisure market but it is probably affected more by high-speed rail competition than any other European carrier. It is facing the same stuttering markets and higher fuel costs as others but it started a cost-cutting plan — and then experienced the inevitable industrial action — before its Continental rivals.
Whether AF KLM's measures will be effective and the trajectory of other European airlines' performance are unknowns, especially given trade tensions and business confidence at a low ebb. Ryanair and Lufthansa are not cutting capacity in the face of the business and market slowdown but fares — their source of revenue, in other words.
The elephant in the room for the American carriers (as well as the American President, government and economy) is the status of the Boeing Max situation.
Ryanair placed a large order for the unfortunate Max jets which remain grounded until Boeing carries out the required upgrades to the flight control software and regulators judge them 'fit to fly'. Without those planes Ryanair's 'pile 'em high, sell 'em cheap' business model cannot work. It is already mentioning the possibility of staff redundancies.
In the US American and Southwest both blamed Boeing's misfortunes for their respective shortfalls in second quarter profits. United and Delta, however, who are less exposed to the Max jet, both saw profits jump significantly ahead of projections.
American and Southwest have been hit hard by their inability to fly Boeing 737 Max jets. With the Max jets out of action American's operating costs remain unchanged but there are now fewer flights — and therefore miles and passengers — from which it can make money.
The grounding of the 737 Max may have created challenges for one of the US's largest companies and one of the world's two big aircraft manufacturers but there are also very real problems for the carriers which made commercial commitments to this aircraft.
The result is the affected carriers are under huge pressure to replace those lost revenues. Lufthansa and Ryanair might talk about exchange rate issues and excess capacity on some low-cost routes but the traditional, network carriers have always subsidised their economy class cabins with the margins from their premium class traffic.
The ability to find bargains in their premium cabins in the second half of 2019 is going to be challenging.