Wed, Jul 15, 2009
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.
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