"Up, Up, and Away"

Monday, July 12, 2004

Up, Up, and Away
The Christian Science Monitor


Americans are flying again. More travelers are passing through Denver
International, for instance, than at any time since before Sept. 11, 2001,
when terrorist attacks sent the airline industry into a budget-busting
tailspin.    
 
Overall, the total number of passengers is back to pre-9/11 levels,
according to Bureau of Transportation Statistics, though it's not quite an
apples-to-apples comparison, because the number of airlines reporting
passengers is greater than before 2001.

With a recovered customer base, the federal government is right to recognize
that it should no longer be in the airline rescue business, as it
demonstrated recently by denying $1.1 billion in loan guarantees to United
Airlines.

The Air Transportation Stabilization Board was set up after Sept. 11 to help
companies devastated by the terrorist attacks. So far, it's provided $1.56
billion in loan guarantees to six airlines, the biggest being US Airways. By
denying United's request, the board appears to recognize it now needs to
monitor assistance already doled out, not offer new help.

Surely, the decision was a blow to the No. 2 airline, which is struggling to
emerge from bankruptcy. But with ridership back up, it makes sense for the
carrier to look to the private sector to solve its problems, and to greater
operating efficiencies.

And not just United, but the industry as a whole is due for a restructuring.
Traditional carriers face tremendous competition from newer, low-cost
airlines. At the same time, everyone in the industry faces higher jet fuel
costs.

Like United, several of the older airlines are looking to unions for
cutbacks - this after considerable concessions already. Yet cutting labor
costs alone won't solve their problems. Low-cost Southwest has managed to
turn consistent profits since 2001 - even though it's the most unionized of
the major airlines. This month it offered its flight attendants a pay raise.
Southwest proves there are business models that can work, and other airlines
might be advised to follow in their jet stream.


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