photo from airlines-uk.com
Will 2006 be a good year for the airlines?
It depends on the airline you are talking about.
American Airlines announced today that they will be parking 27 MD-80s permanently. Now they had already had 24 of them grounded and the other 3 were pulled from service last month. But American is hoping that by not adding seats to the domestic market they can keep the number of seats that are empty low, thus increasing income. Even though American is struggling to make money right now, they did avoid bankruptcy this go around. American do have the ability, the structure, the means to survive without many difficulties. American Airlines is definitely not going anywhere; they may even turn a marginal profit this year.
The new US Air, which is the product of American West's purchase of the old US Air last year, could be profitable this year, but look for losses in the first and second quarters. But the problem is that US Air faces incredible competition from JetBlue Southwest and AirTran. In most cities that US Air flies to now, Southwest and JetBlue have sizable fleet numbers there. If US Air can figure a way out to set itself apart from those carriers it can be profitable.
Continental Airlines came out with some bad news a few days ago regarding losses for last year and profit loss forecasts for the first quarter this year. Continental claims that it has not has a fair go around this time because of not being able to spend time in bankruptcy protection. This has left them vulnerable to the low cost carriers, especially at their Newark Hub. JetBlue has a sizable fleet there and Continental has said that JetBlue has cut seriously into their numbers and profits there. However, Continental spent most of the mid and late 90's in bankruptcy protection and have a slimmed down company. They had many years to get their labor costs and fleet expenditures under control.
Northwest Airlines is worrisome. News today from bankruptcy court tells the entire story. NWA executives said today that a strike by pilots could kill the airline. The pilots are fighting for their careers and livelihood after taking a 15 percent pay cut last year. In 1998, the pilots went on strike for 15 days costing the airline over US$1 billion. The airline has the highest labor costs out of any of the US carriers and this is costing the airline to suffer significantly. Rumors were flying last week and this week after the U.S. Transportation Secretary Norman Mineta made an off beat comment about the possibility of the merger of Northwest and Delta.
Even though US Air and America West successfully gained government approval for a merger, major airline mergers of this size will not be seen. The government has already told United back in 2001 that they could not purchase US Air because it would not benefit the consumer. With US Air and America West they were mostly an east coast and west coast operation. So the combination of the two systems will "hopefully" benefit the passenger.
Northwest Airlines will probably survive but a major overhaul of the company is definitely needed. But what is really needed, a nice round of firing on the executive level.
USA Today
Star Tribune
» The Future of Airlines in the US, Part Two from TheAirlineHub
Continuing from part one....Delta Airlines is a tricky one. The airline lost more money than Northwest last year and has a higher debt load, yet some how they seem to be in better shape. The airline has slashed their smaller... [Read More]
Tracked on: January 21, 2006 12:49 AM | Permalink to Trackback