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They Still Don't Get It
Cheap Charlie · April 22, 2002

It is time for one of my regular columns about the miserable financial state of the major airlines. Again, major airline CEOs and other executives have proven what incompetent managers they are.

I just don't understand why their shareholders don't throw the dim rascals out.

Someone in the financial world must have figured out what seems to be obvious - the major airlines do not have a moneymaking business plan. It is the Wall Street mavens and the most powerful bankers who should be shutting down the airlines, or at least forcing them to change with the times.

American Airlines lost $548 million dollars in the first quarter of 2002
Delta Airlines lost $354 million dollars in the first quarter of 2002
Continental Airlines lost $166 million dollars in the first quarter of 2002
Northwest Airlines lost $171 million dollars in the first quarter of 2002
United Airlines lost $487 million dollars in the first quarter of 2002
US Airways lost $269 million dollars in the first quarter of 2002

Do you see a pattern? Here is another pattern:

Southwest Airlines made $21.4 million dollars in the first quarter of 2002
Jet Blue made $630,000 dollars according to IPO filings
Airtran Airways announces earnings this week
Frontier Airlines made $900,000 in their 3rd quarter (Oct-Nov 2001)

Whenever I speak with PR folk and executives at major airlines, then all say, "You can't compare us to Southwest or JetBlue."

Obviously.

One group of airlines "get it," - the one making money. These airlines have understandable airfares and predominately one type of aircraft. Most have one class of service. Most have limited in-flight meals. Most pay travel agents base commissions.

The other group - the money-losing group - shares airfare structures so complex that a computer is needed to quote fares. Their airline fleets incorporate, in some cases more than half-dozen different models of aircraft, requiring additional spare part inventory, additional crew training and parallel systems of maintenance. They all have renounced travel agents by eliminating base commissions. They have First Class and Tourist Class service (and Business Class on some flights). They still serve meals (however far less than pre-9/11).

One of the executives at Delta Airlines while discussing the elimination of base commissions said, "This is the elimination of one of the last vestiges of the pre-deregulation airline world."

Not so. These major airlines noted above are the last vestiges of pre-deregulation. These airlines have managed to survive by buying out their competition, creating fortress hubs, gouging business travelers and conducting a relentless campaign of predatory pricing whenever upstarts threaten their pre-deregulation world.

The money-losing major airlines have excellent examples that know how to make money. Rather than spending millions of taxpayer dollars trying to crush these new airlines, the majors should emulate them.

First Class and Tourist Class is a leftover from the days of transatlantic steamship travel. The sumptuous meals hark back to those same roots.

Today we should demand on-time service, fair and understandable airfares, fair commissions for travel agents, and fewer frills. The traveling public will be happier and the major airlines may figure out how to make a profit.

Charlie Leocha is the Boston-based author of Travel Rights: Know the Rules of the Road and the Air Before You Go. Cheap Charlie appears every Monday on this site. E-mail him at leocha@aol.com or access his Web site.