Jim Mone/AP
Northwest Airlines skycap Lori Barnett, left, checks in passenger Scott Jennings for a flight
at Minneapolis-St. Paul International Airport.

How Low Will the Airline Industry Go?

July 11, 2008 09:06 AM
by Devin Felter
Northwest plans to cut staff and increase fees and US Airways will cut in-flight entertainment. Analysts wonder how much worse things can get.

30-Second Summary

“The airline industry has finally hit the proverbial wall,” said David Stamey, a director at the International Airline Passengers Association in Dallas. “In trying to minimize their losses, they’re throwing the baby out with the bathwater.”

Northwest Airlines announced July 9 that it plans on cutting roughly eight percent of its workforce and introducing fee hikes on passengers. Customers can expect to be charged $15 for a first checked bag and as much as $100 when redeeming frequent-flier miles. In the midst of financial woes induced by inflated oil prices, many airlines have outlined similar plans to cut their losses.

The same day as Northwest's announcement, US Airways informed travelers that it plans to remove in-flight entertainment systems on domestic flights. The media systems weigh about 500 pounds each, said US Airways spokesman Phil Gee, and lightening the planes will save fuel.

Analysts have pointed out that rising costs will be incurred primarily by business travelers as discretionary travel declines. And with a lack seat of availability and the implementation of frequent-flier surcharges, business customers may not be willing to use their miles for leisure travel.

Not all in the industry view the current financial climate as the beginning of the end, however: “Virgin [Airlines] can succeed where discount and traditional carriers have failed, by offering something different," Virgin CEO Sir Richard Branson contends. “A hybrid that delivers good service at a reasonable price and eliminates the hub-and-spoke approach that creates mayhem whenever the weather sours.”

“We’re going to shake up the market,” he says.

Headline Links: Airlines slash jobs, in-flight entertainment

Opinion & Analysis: The plight of passengers

Background: Airline mergers and fare increases

Reference: Budget travel


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