"The Incredible Shrinking Airlines"

Tuesday, June 17, 2008

The Incredible Shrinking Airlines
They're cutting back flights, routes, and services. How business travelers
can be prepared for the upheaval.
By Joe Brancatelli
The Washington (DC) Post


Airlines are getting smaller -- fast -- and that is going to have a profound
and immediate effect on how you travel. 

After guessing wrong on the direction of oil prices and generally reducing
their hedging positions this year, the big airlines now face a world where
jet fuel costs twice as much as it did a year ago. The major U.S. carriers
have announced they will shrink by around 10 percent in 2008, and they will
attempt to stem the red ink by slashing at their route networks and flight
schedules. The longer oil stays above $100 a barrel -- doesn't that sound
like a blast from a much happier energy past? -- the more the airlines will
cut. 

That could mean some nasty surprises for travelers. Here's what you need to
know to help you understand the new airscape and plan for the coming weeks
and months. 

What You Don't Know ...

Some airlines have publicly trumpeted their cutbacks, all the better to
underscore their parlous finances. But not everything is announced. Delta
Air Lines, for example, is making sizable schedule reductions at its
Atlanta, Salt Lake City, Los Angeles, and New York hubs. The carrier has
been mum on details, however, because it wants to merge with Northwest
Airlines and promised various government agencies that the combination
wouldn't affect capacity. The lesson: Assume nothing. The flight you thought
was there yesterday may not be on the schedule tomorrow. 

Long and Short Are Most Vulnerable

You're at greatest risk of having a trip disrupted if it includes very long
intercontinental flights or very short domestic commuter flights. The long
hauls are going because they burn fuel simply to carry enough fuel to make
the long runs. In fact, one European airline executive told me that his
nonstop flights to the West Coast use about 30 percent more fuel per hour
than his nonstops to the East Coast. So it's not surprising that Thai
Airways is dropping its New York-Bangkok route (it stops at the end of the
month) or Aer Lingus is cutting its Los Angeles-Dublin run (it ends in
October). Meanwhile, the short commuter hops are going because the 37- and
50-seat regional jets aren't fuel-efficient either. It just doesn't make
sense anymore to operate planes that carry so few passengers per flight. 

Nonstops Are Being Stopped

Airlines are also eliminating routes that overfly their big hubs. One
example: American Airlines has dropped most of its nonstop flights to
Austin; most travelers now must connect through American's mega-complex in
Dallas/Forth Worth. As airlines retreat, the larger hubs will fare better
than the smaller ones. Last week, for example, Continental Airlines
announced it would reduce flights at its Cleveland hub by 13 percent. The
airline's much-larger connecting complex in Newark, New Jersey, however, is
only losing 3 percent of its service. And the nation's most important hub,
Chicago's O'Hare Airport, will see virtually no flight reductions. The
federal government has capped the number of flights at O'Hare, and neither
American nor United, the carriers that dominate the airport, want to risk
losing any of their takeoff and landing slots. 

Fewer Flights, Fewer Seats, Fewer Cities

Sharp-eyed travelers will notice three other startling trends: Fewer flights
on once-popular routes, fewer seats on the remaining flights, and many
cities disappearing from the route map. One example: US Airways announced
last week that it would halve its operations at Las Vegas, from 141 daily
departures to 74. As American Airlines contracts both its Miami and San
Juan, Puerto Rico, hubs, the number of available seats between these
Caribbean and Latin American flight centers is falling precipitously. This
spring, American's seven daily flights offered a total of more than 1,700
seats. The fall schedule still shows seven flights, but smaller aircraft
will be used, cutting the daily inventory to just 1,300 seats. Continental
is dropping service to 15 cities entirely in September, dumping locales both
mundane (Oakland, California, and Toledo, Ohio) and exotic (Bali, Indonesia,
and Cali, Colombia). 

Light Flights May Get Canned

As airlines obsess over oil -- fuel now accounts for about 40 percent of a
carrier's costs -- a disreputable old practice called "flight consolidation"
is returning. Despite what frequent flyers occasionally thought, network
carriers in the past almost never canceled a scheduled flight because there
were too few passengers; the airline needed the aircraft to get to its next
destination to operate a subsequent flight. But with fuel costs what they
are now, airlines may sometimes cancel a flight if too few passengers turn
up at the gate. You'll probably be automatically re-booked on the airline's
next flight. There's not much you can do if an airline abruptly cancels your
flight; in fact, there's no way you can even be sure they "consolidated"
your flight. All you can do is be prepared: Before you head off to the
airport, get a list of other flights and connections that can get you where
you need to go. 

Panic Now, Book Later

If these cutbacks create a mild sensation of panic, it's understandable. But
don't rush out to book flights now for trips six or eight months in the
future. The airlines have raised published fares more than a dozen times
this year and added a slew of new fees and restrictions. But many of the
price increases are mitigated by the industry's reflexive, short-term
discounting. You'd be better off waiting for the fuel-induced fare spikes to
settle down. Besides, as it gets closer to departure, airlines will add
discounts to help sell the remaining unsold seats. One more factor:
Southwest Airlines, which is still profitable and still growing, hasn't even
loaded its flight schedules and prices for travel beyond October 30.
Southwest's competitors on its domestic routes will be forced to match
whatever prices the new King of Skies eventually sets. 

The Fine Print . . .

American Airlines began charging most coach customers for checked bags on
Sunday, June 15. United Airlines and US Airways have matched American's move
to charge $15 for the first bag and $25 for the second, but their fees go
into effect later in the summer. 

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