S Airways declares Chapter 11.
American cuts capacity and eliminates 7,000 jobs. United's stock
drops to below $3 a share, with many analysts predicting bankruptcy
by year's end.
Eleven months after Sept. 11, Northwest, Continental and Delta
continue to search in vain for the tourniquet that will stem their
In contrast, low-cost airlines Southwest, JetBlue and AirTran
all reported second-quarter profits (in the cases of Southwest and
AirTran, significantly lower profits, but profits nonetheless).
Many observers, myself included, have criticized the major
airlines for failing to fix their broken pricing structures,
correct operational inefficiencies or significantly differentiate
themselves from competitors in the minds of consumers, and have
pointed to specific actions their lower-cost competitors have taken
that seem to give them an advantage.
The majors, of course, also have noticed what the low-cost
airlines are doing. In fact, Delta reported that it is reviewing
proposals from a consultant it hired in order to compete more
effectively against these airlines.
All that said, I hope the swirl of positive hype around the
low-cost airlines doesn't cloud the major airlines' thinking as
they evaluate what further changes they may want to institute.
Overall, there are plenty of benefits for those who fly the Big
Five over their low-cost rivals. And while I'm a frequent critic of
the major airlines' operations and policies, I'm going to, this
week, assume the role of their defender.
What would the world be like if the low-cost airlines' tactics
and strategies were adopted by all airlines? It can't happen, of
course, because much of the positioning of budget airlines requires
that they be an "alternative" to an existing structure (i.e., if
all airlines flew out of second-tier airports, second-tier airports
would then become major airports, with all their attendant
Still, the majors are in trouble, and in their time of need, let
us take a moment to count the blessings that they bestow upon
• Interline agreements. Low-cost carriers are, for the most
part, lone rangers, operating without many cooperative agreements
with other carriers. This has several repercussions for travelers.
If a flight is canceled or delayed, a traveler has limited (or in
the case of Southwest, no) options for being put on another
carrier. And because the low-cost airlines often operate out of
second-tier airports, even when they do have agreements with other
carriers, the number of carriers travelers can contact is limited.
Which brings us to ...
• Use of major airports. Sometimes you really want to fly from
San Francisco to Miami, and not from Oakland to Fort Lauderdale.
You'd rather get on a plane in Los Angeles and get off in
Washington rather than boarding in Long Beach and deplaning in
Baltimore. There's the time factor, and you might prefer taking a
taxi to an appointment rather than renting a car. Simply put, there
often are fewer hassles when you fly a major carrier. And if you
want to use a low-cost airline as the first leg to connect to an
international flight, well, maybe you can, and maybe you can't.
• The hub system. Don't laugh. While the disadvantages of hubs
are all too familiar, they also have a significant upside for
travelers. If a plane has a malfunction, spare parts and trained
mechanics are close by. If a plane is taken out of service, there's
another ready to take its place. Miss a flight? Just look at the
video monitors -- there'll likely be another flight to your
destination before too long (or another route to get where you're
going.) Many smaller markets receive service from the majors,
thanks to the hubs. And people who live in a hub city may be
subjected to high pricing on one hand, but they have a wide
selection of direct flights on the other.
• Scheduling. On select, very popular routes, the low-fare
airlines may offer frequent service, but as a rule, they don't.
Miss a connection or flight, and you may have a very long wait
indeed (exacerbated by the lack of interline agreements).
• Meaningful extras for the most frequent flyers. Boarding a
plane early, upgrades to first class, shorter check-in and security
lines, the waiving of certain fees -- these make a big difference
to road warriors. If the field were suddenly leveled and none of
these existed, the airline that introduced them would be seen as
caring for their best customers and gain a tremendous
All the blessings above add up to convenience over
inconvenience. Who, in the long run, wouldn't prefer convenience
over inconvenience? Well, in the short run, apparently a lot of
people are willing to put up with inconvenience because the cost
differential is often so great between the low-costs and the
majors. Given the convenience advantages, I suspect the majors
don't need to match the prices of the upstarts -- but they do need
to narrow the gap.
The worst-case outcome for the majors is that the low-cost
carriers will come to be regarded, essentially, as mass transit,
and the other airlines as the domain of the wealthier traveler who
is willing to pay extra for "perks." If that proves to be the case,
it is the airlines we now call majors that will become niche
And as a very frequent flyer addicted to convenience, I hope
that proves not to be the case.