Leisure Travel Still Lagging. Routes And Jobs Cut

Unless people start to fly again, airlines worldwide could face one of their worst winters ever, according to an analysis in the New York Times.

While international and business travel shored up the major carriers for a while, that business fell sharply as the economy worsened. Airlines have also struggled with fuel costs which were sky-high last summer and now continue to be volatile. The credit market has also become very tight, which has made financing new aircraft very difficult.

All of this we've been hearing for months. But analysts told the Times that fee increases, job, and route cuts can get most of the major carriers beyond this slump. Seats on domestic flights are expected to be cut by nearly 18 million in September, which will put them at their lowest for September since 1984. And while analysts expect the industry will weather this perfect storm, they say some airlines may not survive. "There are too many airlines and too much capacity and really no pricing power. This is as bad a crisis as the industry’s ever seen,” Hunter Keay, an airline analyst at Stifel Nicolaus in Baltimore told the paper.

While passengers are enjoying low fares to get them on the planes, they are also paying fees to make up the difference in revenue. The Bureau of Transportation Statistics says baggage fees alone have accounted for an additional $566.3 million for airlines since they were instituted largely last year.

But the bottom line, according to the experts, is that more people need to be in the seats paying closer to full fares. An increase in demand coupled with more scarce supply is the ultimate answer. “If there’s going to be a recovery, it will most likely take the form of fewer discounts,” said Gary Chase, an airline analyst at Barclays Capital in New York.

FMI: www.nata.aero