US Air (LCC) became the latest airline to cut a lot of people and routes in the hope of cutting enough costs to stay afloat. It is a valiant move, but will probably not save the carrier.
The market is wise, and most airline stocks dropped 10% to 15% yesterday, hitting new lows. Taking out capacity and people is not nearly enough. The government numbers showed the volume of people flying in March dropped.
Each of the largest airlines is faced with fuel bills that may be close to $2 billion higher over the next year than they were for the year just ended. If every employee at every carrier worked for $1 a year, the gas bills might be offset.
The airlines have only one chance, and it is a long one, to keep out of Chapter 11. So far, they have been making only modest increases to ticket prices and baggage handling costs. That is not nearly radical enough.
Will the people who need to fly still fly if ticket prices rise 20%? Companies like AMR and Continental (CAL) may not have any other avenue out of their current set of problems. They may have to gamble that the remaining population of fliers is mostly made up of those who will get on a plane even if the ticket cost is substantially higher.
The chance that raising fares can save airlines is a 100 to 1 shot, but the odds that the airlines can stay out of Chapter 11 may not be any better.
Make the customer pay. He already hate the airlines. Why go out with a whimper when a bang is more fun?
Douglas A. McIntyre
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