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Airline Industry

Airlines' quest for a silver bullet - higher fares, fewer flights, or both?

Aug 02, 2009

As the recession drags on with little sign of abating anytime soon, airlines worldwide are grappling with huge losses and dwindling demand for their services. In the latest quarter period from April to June airline financial results showed desperation as airlines attempted to raise revenues by any means possible, including fare and fee increases.

However, what little could be added from these and other areas don't even come close to covering expenses, so now the airlines with the traditionally slower fall travel season upcoming have to find new ways to slash expenses and/or raise fares.

The general consensus is that in the coming months airline passengers will have fewer non-stop flights to choose from, less convenient travel options and connections, and if possible, some higher fares on the most popular routes. Additionally, higher baggage fees, beverage prices and most anything else that comes a-la-carte will be costing more.

Six of the nine major U.S. airlines reported a quarterly profit, but not at the levels needed to get through the fall without making major adjustments. Sales were down and so were fares. Overall yield, or the cost a passenger pays to fly a mile, was down by nearly 19 percent from last year.

Even Southwest Airlines Executive Vice President of Strategy and Planning, Bob Jordan said, "I think you're really going to see overall less service, but you'll still have service." And the service reductions are being felt nationwide, but most heavily in the Midwest and the leisure destinations in Florida and Nevada, as fewer people are vacationing. Parts of Europe and Asia are also expecting major cutbacks in service levels.

Travelers will still be able to get to their final destination, but it may require a connection where in the past there was non-stop service, or a higher price for a non-stop flight option. Even Southwest, the healthiest of all U.S.airlines is eliminating Columbus to Philadelphia as well as Nashville to Oakland flights.

From St. Louis, American Eagle who flies for American Airlines will be ceasing non-stop service to Charlotte, Philadelphia, Tulsa, Cedar Rapids and Branson. American is cutting out flights from St. Louis to Las Vegas and San Diego. Over at US Airways the route cuts include Pittsburgh to San Francisco and Los Angeles which were strong contributors when the carrier previously operated a major hub from the city. Other daily service being scrapped includes Philadelphia to Milan, Italy; Brussels, Belgium; and Zurich, Switzerland. Zurich is expected to return in the spring of 2010.

Delta Airlines will be suspending service from Atlanta to Seoul, South Korea and Shanghai in China. Cincinnati to Frankfurt, Germany and London have also gone off the radar screen.

In addition to service cuts, airlines are flying fewer daily flights with smaller aircraft. Southwest has chosen another tact by eliminating many flights before 7 a.m. and after 7 p.m. On the brighter side of things, Southwest will be adding new service to Milwaukee and Boston and just this week began flying to New York's La Guardia Airport. AirTran is another healthy and profitable carrier who is adding service in Milwaukee and has established their first northern hub there, too.

Irregardless of the adjustments the airline industry has and will be making the general agreement from industry experts is that fare sales will continue to be plentiful and attractive for many months to come.

Airlines' quest for a silver bullet - higher fares, fewer flights, or both?
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