The recent slump in the airline industry has led to many changes within the major airlines, causing some to cancel flights, sell aircraft and raise fares. Many restructuring changes could also prove beneficial to air travelers, however.
US Airways The crisis deepened on Aug. 11, when US Airways announced its filing for Chapter 11 bankruptcy. Citing high security costs, the economic recession and decreased travel along the east coast, the airline claimed it was the hardest hit in the aftermath of Sept. 11.
As part of its restructuring plan, the airline entered a marketing agreement with United Airlines, allowing more destinations and the use of both frequent flier programs. In a press release, US Airways CEO David Siegel said he expects this venture to bring in $200 million more in revenue per year. Despite several calls, spokesmen from US Airways refused to comment on the situation.
“The industry trend has been to broaden competition to include not just airline-versus-airline competition, but broader alliance-versus-alliance competition as well,” Siegel said. “In the past, US Airways lost business to competitors because we lacked domestic and international scope and marketing partners who can feed traffic onto our network.”
US Airways also implemented a new pricing policy, refusing to allow any changes to non-refundable tickets. This action was designed to reward customers willing to pay higher prices for tickets, according to B. Ben Baldanza, US Airways’ senior vice president of marketing.
“This change makes purchasing airline tickets like many other products that people buy for a specific date and time such as Broadway shows and sporting events,” Baldanza said. “If you miss the event, your ticket isn’t good for the next day.”
“Since most people travel as originally ticketed, most customers will not be impacted by this change. This policy does not change our commitment to provide a high level of service to all US Airways passengers,” he said.
The airline will also charge a $25 fee for travelers requesting a paper ticket instead of an e-ticket.
United Airlines On the verge of also declaring Chapter 11 bankruptcy, United Airlines said it is doing everything possible to avoid the action, according to United spokesman Joe Hopkins.
“We have to plan for the possibility of a bankruptcy, but our great hope of course is to avoid it,” Hopkins said.
United has implemented many cost-cutting strategies in the past year, having reduced its schedule, laid off employees, retired aircraft fleets and made dramatic cuts in capital spending. In addition, pilots took a 10 percent wage cut, and other employees took a five percent cut. As part of this restructuring plan, the company said it is working to increase efficiency, ensure consumer satisfaction and improve air traffic.
United’s board of directors unanimously chose Glenn F. Tilton, former chairman of Texaco, as its new chief executive officer on Sept. 2, with the hopes he could further assist in turning the airline around.
American Airlines American, also hit hard by the slow industry, announced it will cut 7,000 jobs by March 2003, due to decreases in capacity and the retirement of a 74-jet fleet.
“As the company goes through fundamental and structural change, one unpleasant reality, as we have said many times, is that we simply will need fewer people to operate the airline,” said American’s CEO Donald J. Carty in a press release.
Northwest Airlines, Delta Airlines and Continental Airlines also announced a marketing agreement on Aug. 24 to sell tickets on each other’s flights. If approved by the federal government, this alliance would increase travelers’ options for each trip and allow for the accrual of frequent flyer miles on different airlines. It would also give the three airlines a competitive advantage.
Many airlines have sent emails to their frequent flier customers in attempts to restore confidence in the company and plead for their continued loyalty and support.
“Whatever course we take, we have one message for customers: our recovery efforts are about long term health,” former United CEO Jack Creighton said in a press release. “We will do whatever it takes to continue to meet the needs of our customers for many years to come.”