No end to US air turbulence
Turbulence in the US airline biz boiled up this week with a CEO saying passengers will be seeing higher fares, announced layoffs at both Delta and United, and questions whether Southwest Airlines with its various troubles will continue to be No. 1 in the industry.
With oil selling at record highs above $100 a barrel and prices continuing to escalate, Doug Steenland, Northwest’s chief executive, predicted higher future fares.
“Airfares have to go up, and our passengers will need to pay more. Airlines simply cannot absorb these cost increases,” Mr Steenland told workers in a hotline message.
Higher prices will result in fewer passengers, Mr Steenland said, and the size of the airline will need to reflect that.
Both Delta and United announced a downsizing. Both carriers plan to ground 15 to 20 aircraft this year. Delta is also aiming to slash its workforce by approximately 2,000.
UA plans to reduce domestic capacity by an unspecified amount later this year as it grounds 15-20 737-500s, while DL said it will cut domestic capacity by 10% year-over-year in the second half of 2008.
Airline officials were cautious about the future, but an even greater question mark may be Southwest, the long-time No. 1 US carrier.
The airline so far has detected no effect on bookings from recent revelations that it flew some jets with small cracks in their bodies and failed to test other airplanes, according to Southwest spokeswoman Beth Harbin.
A search on the some of the Web’s biggest travel sites found Southwest’s troubles drew only moderate comment.
There were some indications that Southwest would weather the storm.
It has no history of major safety problems, for example. Also, none of the potentially cracked planes suffered any dramatic flight problems. And Southwest seems to have dedicated customers.
But on the other hand, consumers tend to suspect that low-cost service providers such as Southwest cut corners to keep prices down. Bad news reinforces that image, say airline analysts.
Southwest carried more domestic travelers than any other US airline last year, according to the Bureau of Transportation Statistics.
Report by David Wilkening
David
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