REPORT – ITB 2006, BERLIN: The US airline industry has been the most affected since 2001. Traffic collapsed to unprecedented low levels after 9/11, as security and fuel costs soared. According to the…
REPORT – ITB 2006, BERLIN: The US airline industry has been the most affected since 2001. Traffic collapsed to unprecedented low levels after 9/11, as security and fuel costs soared. According to the Air Transport Association of America (ATA), 19 carriers have filed for bankruptcy court protection or have been liquidated since 2000. Low-cost airlines have also been affected: Independence Air and Song recently stopped operating. Traditional network carriers have simplified and shrunk their fleets.
Preliminary year-end 2005 figures show that the six ‘big six legacy carriers – American Airlines, Continental, Delta, Northwest, United Airlines and US Air – have an operating fleet today, which is 20% smaller than in 2001. Salary cuts, a 37% reduction of the workforce to 160,000 people, and he closure of unprofitable domestic routes, have helped these airlines to become fitter. If fuel prices had not increased so sharply, some of those legacy carriers would already have returned to profitability.
After US Airways in 2005, United Airlines emerged from Chapter 11 bankruptcy protection early this year and Northwest has similar plans for 2007. As competition remains very tough on the domestic front – the ATA estimates that fares are today at 1988 levels – US legacy carriers have increasingly turned to the long-haul sector. Continental Airlines has been a pioneer in opening routes to secondary destinations from New York. In 2005, the airline started flights to Belfast, Berlin and Hamburg.
This year, Continental will add flights to Barcelona, Cologne and Copenhagen. Delta Airlines will also serve more secondary European points from Atlanta this spring with flights to Athens, Copenhagen, Dusseldorf, Edinburgh, Nice and Venice. The carrier also plans to fly to Kiev from New York. If fuel prices soften and yield increases domestically, 2006 should see net losses reducing to US$1-$2 billion for the whole industry, instead of US$5 billion in 2005. And 2007 could finally become the year of a return to profitability.
Theodore is the Co-Founder and Managing Editor of TravelDailyNews Media Network; his responsibilities include business development and planning for TravelDailyNews long-term opportunities.
