Fate of U.S. airlines gets more dire by the day
Filed under: Company News, Economy
The combination of the economy and high energy prices is threatening the U.S. airline industry in a way it has not been threatened since crude traded above $100 and pushed jet fuel prices to exorbitant levels.
Jet fuel fell as oil dropped below $40 in the early part of this year, but its price is up at least 50% since then. The economic slowdown has emptied planes of passengers and most of the large companies in the industry are cutting back routes and employees again. That may not be enough to save firms, including American Airlines (AMR) and United Airlines (UAUA), from large and unsustainable losses.
The second option is another round of consolidation with the weak carriers being bought by the strong ones. That has worked to a limited extent in the past, but wringing savings out of merged airlines can take months -- months that the industry may not have.
The last option is, of course, an appeal to the federal government for aid, not unlike the one Detroit made late last year. A deeply troubled airline industry could hurt the nation's transportation capacity and put tens of thousands of industry employees out of work. The Administration does not need that headache as it tries to reverse rising unemployment.
It may be that some of the TARP funds will make it to carriers that cannot survive on their own. The risk of huge lay-offs could force the government's hand.
Douglas A. McIntyre is an editor at 24/7 Wall St.
Reader Comments (Page 1 of 2)
7-13-2009 @ 10:21AM
Albert said...
I believe that if the need arises that the Federal Government should be more than willing to help the airlines just as they did the banks and automakers. After September 11, the Federal Government denied a loan to United Air Lines and their planes were used on 9/11 against the United States and should have been loaned the money asked for.
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7-13-2009 @ 10:42AM
bob said...
what do these jerks expect .They have beat the custormer for all they can . lausy service dirty planes nasty work force taking it out on the folks that pay the bill. they forced business to use tel confrences whic work and are much cheaper then the air fares which are nuts . they charge for bags , seats , food water ,higher drink prices and now they cry . the air lines wer run by wacos and the unions waited to long to see that they had to give back . ya some of the airlines should have been let to go out of business instead os letting them come out with no debt to compeate wit the south wesat and air trans that now have to work with the normal debt . some have to go leaner and cheaper then it wqill work
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7-13-2009 @ 11:33AM
rusty said...
what do you jerk expect????. Travelers go on the internet and look for the LOWEST possible price, not considering routes, stops, schedules, service, safety- JUST the rockbottom price. Then people like you expect quality service to be INCLUDED for ridiculously low prices. When you are expected to pay, YOU cry like a baby. I have tried to no-frills airlines where workers are treated like crap and since they have no vested interest in the success of the carrier (they know their jobs are ALWAYS precarious), they treat the travelers like crap as well. So stop whining, cupcake. WAHHHH WAHHHHH WAHHHHH
7-13-2009 @ 12:48PM
donald said...
If the labor is being over protected then their performance does not matter. I thought we believed in free enterprise?? Just try to compare services with world carriers, we maybe at the bottom performers. Then they cry slavery and racist and who knows what else. We are more creative in accusing then working these days.
7-13-2009 @ 1:25PM
Jonathan said...
Airfares are still much cheaper than driving, unless you have a high-mpg car and can fill at least two seats. You have to shop for the best departure and arrival cities, though. For example, a cross-country trip of about 5,000 miles (round trip) can still be had for about $230. That's less than 5 cents a mile. A car getting 20 mpg would use 250 gallons or cost $625 for the trip for one person (12.5 cents a mile). This does not include tolls either, which are common east of the Mississippi. I agree that teleconferences are useful, but sometimes actual personal travel is required.
7-13-2009 @ 10:59AM
Larry said...
Bob, You are an idiot! Tickets prices are the same as they were 25 years ago. Airline employees have taken huge pay cuts, lost pensions, lost benefits, so you can put your fat ass on a plane when the cost to have you there will hardly pay for the fuel. Airlines have lousy managements because talented people go to profitable industries. You want cheap fare, DON'T EXPECT PERKS YOU MORON. Also, learn to type and spell.
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7-13-2009 @ 11:29AM
Lucrezia said...
Perhaps you would like to share your knowledge as to where it would be possible to buy airfare tickets with prices from 25 years ago. I sure would like to know!
From the late 80's I have seen prices double, in some cases triple, so please let me know as I can't afford to go see my family abroad because of these crazy prices!!!!
7-13-2009 @ 11:32AM
Donna said...
Your comment to Bob is great. My husband works for American Airlines and is grateful that he still has a job. SInce Sept 11 the "sacrifices" employees have made are never considered by those that are always bashing the airline industry. The cut in salaries, benefits, and positions are never mentioned. We have seen anywhere from $20,000 and more from his yearly salary cut not to mentioned other concessions as vacation time, holidays, overtime etc. and yes getting "bumped" from higher postions. It gets to the point where airline employees "feel like they are walking on eggshells", not knowing if they will still have a job due to airlines having to "make cuts". These airline employees are trying to do the best job they can under ever changing conditions.
7-13-2009 @ 1:51PM
CAL10PILOT said...
Thank you Larry.... finally, someone who gets it. I started flying in 1974, got 10 years experience and 5000 hours before being hired by CO. College was not an option, but mandatory, as was the B-727 F/E ticket. Today, airlines are hiring 350 hour pilots with no experience. I retired 11 years early.... the skies are not safe, and getting worse every year. Just look at the accidents.
7-13-2009 @ 2:06PM
Marsha said...
I agree Larry. Low airfare in 1975 round trip to San Francisco was $250. I met a guy working in a grocery store that worked for United 10 years and was laid off during the first bankruptcy, and he lost his entire pension. I didn't think you could lose a pension already built up, but he did. Probably WISHED he belonged to a union. The way people are being treated by companies today is why unions were started in the first place.
7-13-2009 @ 11:19AM
roy said...
Maybe if American would stop sending us 2 solicitations a month to get one of their affinity credit cards, they'd have some more money to operate efficiently? Seriously, my having to open that damn envelope, and shred the part of the pre-prepared application so my identity won't be stolen if I just trash it is enough to make me AVOID even thinking of using them when I fly. A counter-productive effort for sure by AA.
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7-13-2009 @ 11:38AM
nick said...
You can bet Obama will keep Air Force One going and his other planes to send his wife around the world spending tax payer dollars.
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7-13-2009 @ 2:08PM
Marsha said...
Wah, wah, wah
7-13-2009 @ 11:47AM
Richard Fusilier said...
The train lines are missing the boat in this era of air turbulence, etc. Some additional windows, dining cars etc and the comfort and travel sense and view would pay off. Imagine traveling all over the USA and great scenic Canada in safety and comfort at as decent cost.
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7-13-2009 @ 2:14PM
Marsha said...
Maybe it's just the lines I've been on, but the long distance trains I've used are wonderful. Get to the platform 5 minutes before they leave, they have lazyboys with tons of legroom, white tablecloth dining cars, lounge cars, snack cars, movies and TV, observation decks and handicapped cars with large bathrooms. The porters even bring you your meals if you are disabled, it's luxurious and very inexpensive. They even have sleeper cars with optional showers, that's my favorite vacation when I was a child, going through mountains on the train in the sleeper car. I'm going 5 hours from my house soon and it's $35 to get there. Extremely unexpensive.
7-13-2009 @ 11:52AM
Bruce said...
I once read an article wherein the writer added up all the profits and losses since the airline industry was begun here in the USA and the net result was a loss!
Add to that the issue of significant US Government funding assistance in the form of grants through the years for airport capital and the donation of all the Government salaries at the Air Traffic Control Centers etal and we have already a big Federal subsidy of this industry.
Let's not add more taxpayer money to the airlines, as they already are heavily supported by the taxpayers and we cannot afford to donate more with the Federal deficit so large.
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7-13-2009 @ 1:56PM
CAL10PILOT said...
What do all those things have to do with airlines? Airlines are separate entities.... you need to read for comprehension.
7-13-2009 @ 11:58AM
Donna said...
Roy, there usually is an email address to reply to the BANK that is sending the AA credit card offers stopsending these annoying offers. Also the cost of fuel is a big reason the airline industry is hurting and cutting into profits.
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7-13-2009 @ 12:31PM
Dee said...
How bad have things in the industry become? Where else can you take on as much as $100,000 of personal debt training for a job that has a starting pay of about $20,000 per year, lots of time away from home, and little chance for improvement in the near future? That is the situation many regional airline pilots have found themselves in. Then, as the hearings for the Buffalo crash last February demonstrated, everyone is shocked to discover that the pilots are commuting long distances to work and sleeping in crew lounges on the couch since they can't afford a hotel room. Who is going to choose to pursue a career like that in the future?
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7-13-2009 @ 12:33PM
Patty said...
United Airlines contract with the mechanics is up this winter. They want to ask, again, for more concessions from the mechanics. That is why they are threatening Bankruptcy. United Airlines has beaten down their employees so much and now they are about to do it again. Poor management and low employee moral is what that airline's problem is. They just keep asking again, again and again for concessions. Pretty soon everyone will be working for $5.00 an hour.
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