Cheap airline ticket prices even in airline crisis"AIRLINE TICKET PRICES" Can't find what you need? Try a Google Web Search in the box below!
8/30/2002
"DETROIT _ U.S. airlines, the nation's industry most directly hurt after the Sept. 11 attacks, continue to suffer through the worst financial crisis in their modern history". The shock of the four jetliners crashing in the coordinated attack is expected to reverberate airline ticket prices across the $110-billion-a-year industry until 2005 or 2006. The biggest network carriers, like No. 1 American Airlines, are reporting their worst financial losses and highest airline ticket prices since the end of World War II, the dawn of modern commercial aviation, said David Swierenga, chief economist at the Air Transport Association of America, the Washington, D.C.-based trade association that represents the nation's biggest carriers. Last year, industry airline ticket prices losses totaled $7.7 billion despite emergency federal cash infusions of $5 billion paid mostly during 2001, he said. This year, airlines expect to lose $6 billion. The staggering losses forced US Airways to declare bankruptcy Aug. 11 in an effort to reorganize under Chapter 11. No. 2 United Airlines has been cut off from capital markets and could be next to declare bankruptcy, industry analysts and airline executives said. Still, analysts expect airline ticket prices and the airlines to weather the downturn. "It's rough right now," said Terry Trippler, an air travel expert and president of www.terrytrippler.com in Minneapolis. "It's tough on them. But, in a year from now, they're going to come out of it. "The six will be standing," he said of the major U.S. airline companies. "It will be a stronger system, a more efficient system and, I think, we will be back to a more full-service system." Airlines constitute a smaller industry compared to giants like the automakers. The carriers' combined annual revenues of $110 billion last year were less than Ford Motor Co.'s 2001 revenues of $162 billion. But the industry attracts a lot of attention because airline ticket prices travel has become common, with 622.1 million passengers flying the nation's airlines last year. That is down from 666.2 million passengers in 2000. Can't find what you need? Try a Google Web Search in the box below!
"It is central to American lifestyles," Swierenga said. The attacks were catastrophic for an industry already weakened before Sept. 11 by the economic recession, declining business travel and too many empty airplane seats affected airline ticket prices. During the economic boom of the 1990s, airlines had fought to increase market share and revenues by matching airline ticket prices, competitors' routes and numbers of flights, Trippler said. In the days following the attacks, the number of passengers on the nation's airlines plummeted 34 percent, according to ATA statistics. The airlines responded by cutting costs and airline ticket prices. They slashed flight schedules, eliminated or reduced services and laid off tens of thousands of employees. (EDITORS: BEGIN OPTIONAL TRIM) Northwest Airlines, which carries 78 percent of the passengers at Detroit Metro Airport, cut its flight schedule 20 percent and furloughed 9,000 employees, airline President Doug Steenland said. The airline, the nation's No. 4 carrier, already had begun cutting costs in March 2001 amid the first signs of a recession and a decline in business travel, he said. (END OPTIONAL TRIM) In the months that followed, the airlines were able to reclaim most of the lost passengers, largely by continuing to discount ticket prices to levels not seen since 1988, Swierenga said. Average airline ticket prices for a 1,000-mile trip dropped to $109.68 in July from $149.20 in February 2001, when airlines started cutting airline ticket prices in response to the recession. But the industry recovery stalled in March and the number of passengers is still down 10 percent from pre-Sept. 11 levels, a trend that continued into August. The highly profitable business-travel segment has proven especially resistant. Short-haul travel of less than 500 miles is down, suggesting that travelers are opting to drive shorter distances instead of fly. Experts blame some of that decline on the so-called hassle factor _ the additional time and trouble of going through airport security since Sept. 11. "This combination of traffic decline and airline ticket prices decline means airline revenues are off pretty dramatically _ 20 percent," Swierenga said. "This is the issue that carriers are struggling with. How do they get their costs down to live with this kind of revenue figure?" The crisis hasn't had the same disastrous effect on low-fare, point-to-point carriers like Southwest Airlines and Spirit Airlines, Metro's second-largest carrier. They remained profitable after Sept. 11 because they enjoy lower costs than carriers operating hubs and serve only larger markets with more airline customers, Swierenga said. The point-to-point carriers control about 15 to 18 percent of the airline market and are expected to grow, he said. The industry's recovery could hinge on a rise in corporate earnings, the stock market and consumer confidence. "The issue is how quickly does the economy recover and how fast does the business traveler return even with current airline ticket prices," Steenland said. "Does the business traveler return to the same frequency as during the 1999-2000 time frame?" David Stempler, president of the Air Travelers Association, a passenger advocacy group in Washington, D.C., predicts airlines will raise leisure airline ticket prices early next year while lowering business airline ticket prices. Can't find what you need? Try a Google Web Search in the box below!
Passengers in small _ and medium-sized cities, meanwhile, will suffer as hub carriers cut the number of flights to those cities and use commuter aircraft for more of the remaining flights, he said. Network carriers such as American are rethinking the hub system and need to reduce capacity by 5 to 10 percent, said Darryl Jenkins, executive director of the Aviation Institute at George Washington University in Washington, D.C. Flight arrivals and departures could be spaced more evenly instead of concentrated during so-called banks. That would allow ground crews to service more flights, reducing labor costs, he said. Passengers "will not have a choice of flights every half hour," Trippler said. "But they will have a choice of cheap flights every hour or hour and a half. It will be a more relaxed approach." (EDITORS: BEGIN OPTIONAL TRIM) But Northwest plans to remain a pure network carrier operating flights only to and from the airline's hubs in Detroit, Minneapolis and Memphis, Steenland said. "That's really where our niche is, and we intend to remain there," he said. The airlines also are buying and operating more regional jets _ a trend already evident at Northwest's biggest hub at Metro's midfield terminal. That's because the smaller 35- to 70-seat jets are cheaper to operate than 120-to 130-seat Boeing 737s, said Jon Ash of Global Aviation Associates, an aviation-consulting firm in Washington, D.C. (END OPTIONAL TRIM) Airline ticket prices are expected to rise to reflect the cost of doing business, experts agree. Northwest, for example, expects to collect the same revenues in 2002 as it did during fiscal 1996-97 while operating the same size airline, Steenland said. To attract investment capital, the industry must return to profitability, he said. The industry as a whole has a chance to turn a profit in 2004, but much of that money will be used to repay the debt from funding 2001 and 2002 losses, Swierenga said. That means the industry will not have money to reinvest in new aircraft until 2005 or 2006, at the earliest. "I think that is probably the first time we'll see an uptick in aircraft orders," Swierenga said. "The industry is going to be limping along for several years"...... Compare airline ticket prices here /cheap airfares home |