flyguppy,
This explains why I don't feel like I'm being taken advantage of right now. We are in the middle of a battle. Not a good time to be acting all pissy like you.
THE MIDDLE SEAT
By SCOTT MCCARTNEY
Airlines Retreat As Price Wars Take Their Toll
Pullbacks by Incumbents And Low-Cost Challengers Are Starting to Raise Fares
Wall Street Journal, December 7, 2004; Page D4
In some of the nation's most intense airline battles, huge losses finally are forcing retreat.
American Airlines will pull out of the Boston-Fort Lauderdale, Fla., market next month, giving up on a route where JetBlue Airways and other discounters have driven fares so low that American is losing money with mostly full flights.
American surrendered to low-cost carriers in the New York-Long Beach, Calif., and New York-Phoenix markets last month. UAL's United Airlines is taking lots of seats out of transcontinental markets, where $200 round trips have been a blessing for travelers and a curse for airlines. By the end of January, Delta Air Lines will have shut down one of its four domestic hubs.
The retreats aren't limited to the big higher-cost airlines. America West Airlines has scaled back its foray into nonstop flights between California and New York. Frontier Airlines will end its experiment to build a minihub in Los Angeles. Struggling Independence Air is canceling its service to Lansing, Mich., and Dayton, Ohio. AirTran Airways has pulled out of two cities where it couldn't roust enough traffic: Greensboro, N.C., and Tallahassee, Fla.
For travelers, the retreats will mean some fares will go up. Pricing between New York and Los Angeles, for example, has bumped up a bit. The lowest round-trip price for travel this week between New York's Kennedy Airport and Los Angeles International was $342 on American, United or Delta, according to Orbitz.com. That route was flooded with $200 round trips without Saturday-night stay requirements last summer.
Boston-San Francisco, one of the routes completely dropped by America West, has gotten a lot pricier. America West offered an unrestricted walk-up fare of $598 round trip, which was matched by American and United. But on Nov. 1, the day after America West dropped out, American and United jumped the unrestricted fare to $1,428.
"Airlines are less willing to invest in developmental flying," said J. Scott Kirby, executive vice president of sales and marketing at America West. "Given the financial condition of the airline industry, you really don't have any other choice right now."
Far more retreating may be necessary if airlines are to start earning money again, especially if oil prices stay above $40 a barrel. The nation's 10 major airlines suffered combined net losses of $1.3 billion in the third quarter. For the fourth quarter, despite robust holiday travel, only Southwest Airlines is expected to make a profit.
That has forced many to rethink some of their flights of fancy. Carriers are retreating back to where they are strong: their biggest hubs and strongest routes. American, for example, is moving more planes to its Dallas-Fort Worth hub, where Delta is dropping from 254 flights a day to 21. (American also is grounding 15 narrow-body jets.) Delta is retreating back to Atlanta and Cincinnati, its strongest hubs.
"In this environment, what we have concluded is we've got to take a hard, long-term look at our network and decide where we have a long-term future," Gerard Arpey, chairman and chief executive of American-parent AMR Corp., said during a conference call with analysts.
American has kept a robust schedule from New York to Los Angeles, for example, but trying to sit on top of JetBlue, which flies from New York to Long Beach, was hurting too much. The airline, Mr. Arpey said, will "basically draw a line in the sand around our strengths, and then from there, not retreat."
That doesn't mean higher-cost carriers are letting up at all on discounters, or discounters are slowing their attacks on incumbents, either. The bigger incumbents have slashed their costs and are better able to defend core markets, and the upstarts have lots of new airplanes coming that will go to battle. The fighting will continue to be fierce.
But with airline finances as tattered as an old ticket jacket, both sides are being careful about how bold they get.
America West tried to become a player in once-lucrative transcontinental markets, launching 24 flights a day last summer linking Boston, New York and Washington with San Francisco and Los Angeles. American, United and Delta added flights, and markets got flooded with too many seats.
That hurt, Mr. Kirby of America West said, but so did high oil prices. Even if the airline had hit its revenue targets, flights would have been unprofitable with oil at $50 a barrel.
Now, the carrier based in Phoenix is down to 10 flights, and considering further cuts. Planes have been switched to seasonally stronger markets, such as Mexican beach destinations and Florida.
Frontier, based in Denver, tried to become a bigger player in Los Angeles, adding nonstop flights to Minneapolis, Kansas City, St. Louis and Philadelphia last spring. Losses were expected while Frontier tried to make its name known to customers in those cities. But jet fuel prices made losses bigger than anticipated, a Frontier spokesman said.
The airline dropped Minneapolis and St. Louis nonstops from Los Angeles, and will discontinue Kansas City and Philadelphia on Feb. 23. Too bad for travelers: Department of Transportation data show the average fare on the Los Angeles-Minneapolis route fell 37% when Frontier was flying, to $224 round trip in the second quarter from $356 a year earlier.
Frontier still will offer connections through its Denver hub; planes that had been flying nonstops from Los Angeles will be used to build up Denver now.
AirTran said it used planes that had been flying to Greensboro and Tallahassee to boost service to bigger cities. "We tried everything we knew to make it work and it didn't work," AirTran spokesman Tad Hutcheson said.
For some carriers, fuel costs have depleted cash so quickly that retreat is a matter of absolute necessity. Independence Air has to sell four planes to raise cash, a spokesman said. That means the airline based in Washington had to drop Lansing and Dayton.
"For us, it's a matter of working through liquidity issues," said Independence Air spokesman Rick DeLisi.
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