Major Trouble: Is there still a place in today's airline industry for major carriers?.
Sundays New York Times ran a front-page article warning of the
possible need for a taxpayer bailout of airline pension funds. As
United struggles to emerge from bankruptcy protection, it needs to
address its $13 billion in pension obligations, and right now it is
apparently short by nearly half that amount. A
United default, the article claims, could set off a domino effect
within the airline industry.
This comes after United has already been forced to negotiate
concessions from its workers, and after it was denied federal loan
guarantees. It also comes as Delta is trying convince its pilots to
accept $1 billion in wage and benefits cuts, as that airline struggles
with its own cost-structure problems and pension obligations.
Meanwhile, discount airlines continue to rewrite the rules of the
industry. Carriers like Southwest, JetBlue and AirTran increasingly
dictate the price of an airline ticket, and the majors, despite being
saddled with much higher overhead, have no choice but to match these
fares. The smaller airlines benefit from efficiencies such as lower
labor costs, streamlined routes, reduced fees from use of secondary
metropolitan airports, and maintenance savings brought about by flying
fewer types of aircraft.
Chuck Salter's recent article on JetBlue
examines the challenges facing that airline as it tries to grow from a
regional carrier to a national one. JetBlue and other discount airlines
continue to succeed financially and grow organically through the
addition of new, profitable routes.
Looking ahead a few years, if the discount carriers keep growing and
making money, can any of the major airlines survive? Or are they just
stuck with the wrong business model, a relic of the days of regulation
that will doom them to follow in the footsteps of other once-great
carriers like Eastern, Pan Am, and TWA? And in the meantime, how much
should taxpayers and the government be expected to lend a hand? [Fast Company Now]