The airline industry you’ve come to know and love is radically
changing and we’re not talking about commissions. Fundamental
changes are taking flight that could significantly alter the way
the majors operate.
In cascading fashion, here’s what’s happened over the last few
days:
" American Airlines is “de-peaking” Dallas/Fort Worth
International “to allow the airline to utilize people, gates and
aircraft more productively,” the carrier said in a statement. Some
of your clients may have to wait longer to connect.
At the same time, AA is retiring its 74-plane Fokker 100 fleet,
deferring delivery of new aircraft and canceling some future
aircraft. By November, AA’s capacity will have dropped by 9%
compared to this summer.
The upshot of all this: Far fewer seats and, perhaps, more
crowded airplanes. American is also axing first class on its
767-300 fleet. More changes could be on the way.
“We view these changes as an ongoing process,” said American
Chairman and CEO Don Carty.
" Continental is getting rid of 11 MD-80s. By August 2003,
domestic capacity will have been slashed by 17% compared to
pre-Sept. 11 levels. CO is also making it harder on cheap-seat
customers by laying on additional fees for services that low-fare
customers select, doing away with discounts on certain published
and unpublished low-fare categories, rigidly enforcing all fare
rules with an eye toward eliminating “waivers and favors,” and, as
if agents weren’t aware, further reducing distribution costs
through advanced technologies.
“These are challenging times, and we need to do something now,”
said Continental Chairman and CEO Gordon Bethune.
" Continental, Northwest and Delta have proposed a marketing
agreement that envisions code-sharing, reciprocal frequent flyer
programs, shared lounge privileges and schedule connections. The
government, of course, must bless the agreement an arrangement in
which the three carriers insist they’ll continue to compete against
each other.
" Chapter 11 carrier US Airways has slapped new restrictions on
nonrefundable tickets (see News, page 4). Effective immediately,
nonrefundable tickets must be used for the specifically ticketed
flight. They’ll be worthless once a flight has departed. Customers
used to be able to credit the unused ticket toward the purchase of
another US Airways seat, plus whatever change or reissue fees were
applicable.
The US Airways move is indicative of just how desperately the
airlines need to raise revenue. The economy, corporate cutbacks and
airport security mean too many seats have been chasing too few
fannies. And, the experts contend, this is not, at least near-term,
a transitory trend.
“Some portion of business travel will likely not return to the
network carriers for the next several years,” concluded a recent
analysis by the Business Travel Coalition.
Another study, by The Boyd Group, an Evergreen, Colo.-based
airline consultancy, predicts “there will be no quick snap-back”
anytime soon. Traffic should bottom out this year and not reach the
levels it enjoyed in 2000 until at least 2005, if then.
The BTC said there are fundamental changes at work within the
nation’s business community, which will make it hard to return to
the good old days. Fewer staffers are permitted to attend
conventions, video conferencing is catching on, and more companies
are chartering corporate jets or buying fractional shares of
them.
Agents may want to consider booking more clients on low-fare
competitors such as Southwest, JetBlue, Frontier or AirTran. The
BTC believes low-fare carriers are poised to capture a quarter of
the business “as major airlines flounder and cut back
services.”
The major airlines haven’t written off formerly high-yield
business passengers, but they seem, however reluctantly, to have
concluded that business flyers aren’t going to be able to subsidize
low-fare leisure travelers any longer. BTC predicts higher leisure
fares are certain.
“The family of four traveling for a skiing vacation from
Philadelphia to Aspen will likely pay 20% more for their tickets,”
the report said. “The backpacker who bought a $99 ticket to Denver
last winter will probably not find the fare available next
year.”
If you think dealing with the airlines was a hassle before,
buckle those seatbelts, the BTC advised: “There will likely be
considerable confusion and surprises for travelers as routes and
frequencies get rationalized.”
In the view of The Boyd Group, this rationalization means more
airlines will be substituting regional jets for larger craft, a
trend that’s already begun. Most troubling to agents who have
clients in rural America is this prediction by Boyd: Propjets, the
mainstay of many rural routes, are an endangered species.
“Any small airport that can’t support the much higher costs of a
regional jet and is within two hours of a larger airport may want
to plan on seeing local air service eliminated by 2006,” he
said.
Fewer seats, smaller airplanes, slashed routes, less service and
higher leisure fares. The bottom line for major airlines and those
who would fly them is inescapable: Things are bad, and not likely
to get better for quite a while.
