Already a member?
Sign in
| Version | User | Scope of changes |
|---|---|---|
| Apr 27 2008, 7:38 PM EDT (current) | jimglab | 450 words added |
| Apr 27 2008, 7:37 PM EDT | jimglab |
Changes
Key: Additions Deletions
Delta chief sees higher prices, fewer flights
Major airlines have already increased fares and fuel surcharges several times in the past six months as the price of oil climbed up to—and now well past -- $100 a barrel. And even though carriers have cut costs to the bone, achieved full planes and higher passenger revenues, that’s still not enough to make up for their spiraling fuel costs. Major airlines are turning in first quarter losses in the hundreds of millions, and Delta CEO Richard Anderson told reporters in Washington that he sees additional large fare increases as inevitable. According to wire reports, Anderson estimated that at current fuel prices, air fares would have to increase by 15 to 20 percent just for the airlines to break even, much less make a profit. As fares go up, he said, travelers are likely to cut back on demand, forcing carriers to trim their flight schedules even more than they have. Delta and its merger partner Northwest turned in combined first quarter losses of more than $10 billion -- $6.4 billion at Delta and $4.1 billion at Northwest – although most of that came from non-cash charges and special items. Without the special items, Delta’s first quarter net loss was $274 million and Northwest’s was $191 million.
The Atlanta Journal-Constitution, reporting on a $35 million first quarter loss at AirTran, said it was told by executives at that carrier that “conditions in the industry will soon resemble the aftermath of the September 11, 2001 terrorist attacks if record fuel prices persist.” The newspaper said CEO Robert Fornaro predicts that airlines will continue to reduce their capacity even more than they have already announced. The story cited one Wall Street analyst as saying that the airlines are likely to reduce their operations as much as 20 percent.
Air fares have already been on an upward track, even before the several fare hikes and fuel surcharge increases imposed thus far in 2008. The Bureau of Transportation Statistics reported last week that average air domestic fares in the fourth quarter of 2007 were 4 percent higher than the same period a year earlier. And American Express recently reported that the average international air fare paid by travelers rose 7.5 percent from 2006 to 2007. Besides their fare increases this year, airlines are trying to create new revenue streams by “unbundling” (i.e., charging extra for) various services that were traditionally included in air fares, like checked luggage (a $25 fee for a second checked bag kicks in May 1 at most major airlines), in-flight food, preferred economy-class seat assignments, and so on. Expect to see even more of this trend in the months ahead.
