2014's biggest story? Air, of course

By Arnie Weissmann

Arnie WeissmannAirlines, simultaneously a part of and apart from the travel industry, will in 2014 again have the biggest impact on the way people travel, how much they spend and why travel professionals get headaches.

Going into the new year, it's important to remind ourselves of a few things about airlines. First, they do not, as most Travel Weekly readers do, regard themselves as being primarily part of the travel and tourism industry. In a Venn diagram, they would overlap with tourism but also, among other industry verticals, shipping and cargo, aerospace, retailing, food service and even commercial real estate (when they control airport terminal concessions).

And the look of those diagrams is becoming increasingly dissimilar from one airline to the next. After its purchase of a refinery, for instance, Delta's overlap with the energy industry would appear disproportionately large compared to, say, its bigger competitor, United.

Viewed in all their complexity, it's easier to understand why airlines appear to be the travel industry's least loyal component. Although other industry segments -- cruise, tour, car rental, retail -- view their challenges and opportunities as unique, no one else has quite as many moving parts.

Airline behavior might top a travel industry executive's list of "circumstances beyond my control," but talk to an airline industry executive, and he (yes, always he, never she) will rattle off a long list of factors, from the price of oil to government regulation to weather, whose impact they hope to mitigate but ultimately cannot fully predict or control.

Of course, no one's throwing a pity party for U.S. airline executives. They have certainly benefited from consolidation, which has, ironically, both simplified their lives and enabled them to diversify their businesses in ways that have added profitability.

Having demonstrated their ability to maintain capacity discipline, they are concurrently maintaining their obsession with cost control and focusing on adding new revenue streams and creative ways to package them. At long last, they have an opportunity to break from commoditization and concentrate on differentiating service.

So how will all this affect passengers and industry professionals in 2014? I spoke with a few people over the holidays who had some opinions, and I have a few of my own.

Peter Vlitas, senior vice president of airline sales and marketing for Protravel International, is keeping his eye on two developments. In the U.S., he's watching the American-US Airways merger and its likely impact on the domestic market. On the international front, he's following what he's characterizing as the "stealth" growth of Etihad, Abu Dhabi's state carrier.

To Vlitas and others, Etihad represents the next evolutionary step following alliances: carriers taking equity stakes in other carriers. Etihad calls it an "equity alliance," and owns, or has announced its intention to buy (pending regulatory approval), pieces of Virgin Australia, Jet Airways, AirBerlin, Aer Lingus, Air Serbia, Air Seychelles and Darwin Airline.

Significantly, Darwin, a Swiss carrier, is being renamed "Etihad Regional," a brand ripe for expansion.

Similarly, Delta has taken equity stakes in Virgin Atlantic, Aeromexico and Gol.

How might the AA-US Airways merger impact travelers? Peter Greenberg, CBS News travel editor and host of PBS' "The Travel Detective," has some very specific thoughts.

"The biggest travel story of 2014 will be the reduction or outright disappearance of air service to many small and midsize U.S. cities and former airline hubs, as well as a rise in airfares across the board in the U.S.," he said.

The trend started in Cincinnati and St. Louis in 2012, he noted, followed by Memphis losing a substantial number of flights in 2013. This year, he believes it will spread to Milwaukee, Phoenix and Pittsburgh as well as smaller cities like Jackson, Miss., and Albany, N.Y.

But he also sees a fast-rising alternative: intercity bus lines. "On trips under 400 miles, it's a logistically and economically viable alternative," he said. "And if this airline trend continues, in some cities it might be the only alternative."

I'm watching another aspect of consolidation that could come into play and provide headaches for consumers and travel professionals alike: integration snafus resulting from the AA-US Air merger. Doug Parker, until recently the CEO of the fifth-largest airline in the U.S., is now overseeing the creation of what will be the largest airline in the world.

His approach, however, gives me hope that he will avoid missteps he took when integrating America West and US Airways as well as what has become a publicly painful process over at United following its marriage to Continental. United's strategy seemed logical: review operations at both carriers, and adopt "best practices," to create a carrier superior to either.

The unintended consequence, however, was a culture of shared pain, with large numbers of employees resenting change that often seemed arbitrary.

Parker has decided to simply maintain the American way. Yes, former US Airways employees may feel that's unfair, but for a significant majority of his employees, there will be no impact on morale.

And, as many United flyers will tell you, customers tend to notice unhappy airline employees.

Email Arnie Weissmann at aweissmann@travelweekly.com and follow him on Twitter.

Correction: Delta has a stake in Virgin Atlantic. A previous version erroneously said Delta has a stake in Virgin America.

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