Rough Skies for Big Airlines

[FN FAL]

According to this article, by 2015 Delta will be half as big as it is now...but the bright side, at least we will have regional jobs to look up to.

Rough skies for big airlines

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By Alexander Coolidge
Post staff reporter

The air travel rebound that the industry has been praying for is on its way, but it will leave traditional airlines behind with diminished market share as healthier, low-cost rivals take off, a new government report predicts.
Airline passenger demand will return to pre-Sept. 11 levels in 2005, but regional carriers such as Cincinnati-based Comair Inc. and low-cost carriers such as Southwest Airlines, JetBlue and AirTran will be the beneficiaries, the Federal Aviation Administration report says.

Major carriers like Greater Cincinnati's dominant airline, Delta, have seen their collective market share slip from 83 percent of traffic to less than 77 percent, said the report. The agency predicts old-line "legacy" carriers such as Delta will see that share shrink to less than half the total domestic market by 2015.

"That's hardly a surprise," said Glenn Engel, an analyst with Goldman Sachs & Co. in New York. "It's still a very tough business."

Traffic at Cincinnati/Northern Kentucky International Airport, which is dominated by Delta and its subsidiary Comair, should continue to benefit from Delta's shifting more flights to Comair, said Ted Bushelman, airport spokesman. Delta reported earlier this year that, while its overall traffic shrank 3.3 percent in 2003, Comair saw a 40 percent increase in the same period.

"Delta does very well in Cincinnati with Comair," he said.

Bushelman said traffic at the airport was growing and that local officials were pursuing plans for eventual expansion.

Engel said major carriers have trapped themselves in a vicious cycle of flying fewer planes to save money. Cutting capacity brings in less money and spreads more costs over fewer active planes. It also invites low-cost competitors to expand into the majors' markets.

"Nobody's ever shrunk their way to profitability," he said.

The report came out as Southwest Airlines said it was stepping up its expansion into Philadelphia -- a highly aggressive move against US Airways, which maintains a hub there. The move prompted US Airways chief executive David Siegel to tell employees the discount carrier was "coming to kill us."

Since the end of 2000, legacy carriers have seen traffic drop nearly 15 percent, while low-cost carriers have seen traffic rise by more than 28 percent

Publication Date: 03-30-2004

 

[Mogus]

That's a pretty pessimistic and unrealistic view of what the future holds. I think it's highly unlikely that Delta will continue to let its market share slip. Its management will employ new tactics or be kicked out and replaced by more aggresive executives. This isn't a static industry. Delta and other carriers will adapt.

 

[bart]

They will adapt. Eastern and Braniff and TWA all adapted just fine...

Delta has a long way to go. Never underestimate bureaucratic inertia. It has killed more formerly successful organizations than I can count. Even if they got the perfect set of executives in tomorrow, with the perfect plan, how long do you think it would take all the interests (middle managers protecting their turf, redundant managers protecting their jobs, unions, etc.) within Delta to wear them down?

My answer is: not long. The individuals in the organization that feel threatened would work hard to see change fail. Their entire way of thinking and approaching the market needs overhaul. I do not think they are up to it. I would love to see them succeed, but it is a tough order and I don't see the ship starting to turn...

 

[merikeyegro]

The FAA uses the rear-view mirror to forecast. Look at their data. The simply just extrapolate average growth rates into the future. The graph shows a jumping growth rate over time while the future shows a nice, smooth line of growth into the distant future. I don't buy it.

 

[Timebuilder]

Just look at the recent trends in aviation.

Discount carriers. Regional LLC's. Bankrupt majors. Fuel costs on the rise, which makes older, larger equipment less competitive than smaller, newer equipment.

I fully expect the majors of 2004 to be coast to coast and overseas-only carriers in 10 years. The domestic carriers will be discounters and RJ's.

I wish that wasn't so, but that's how it looks.

 

[FN FAL]

Terrorism isn't a thing of the past either. There may never ever be another attack using airlines...but if them extremist create another large scale act of terrorism, the economy will take another nose dive and airlines will suffer as a result.

 

[pilotman2105]

I agree with Timebuilder. The only way that the majors will be able to earn a buck with their outdated and more inefficient equipment is by taking the longer routes. The regionals (which are doing awesome and hiring like mad) are going to be responsible for the short to medium haul market.

The trend now is for the majors to pull out of "shorter" markets and put their regional affiliates on those routes. The regionals have more efficient, smaller aircraft which will operate at a greater load factor than will the majors, thus they don't hemmorage money.

Sucks for aspiring pilots who want to work for the majors. They're gonna get stuck with the lower paying regional jobs.

 

[CFI'er]

The short haul market has been there all along. The RJ equipment is what the market change is all about. Pax did not like flying in a small noisy tube. With the introduction of RJ's, being new, almost as roomy, and just as if not quieter, the market is exploding for new routes. The down side to all of this is the skyways are getting more crowded and airports are busting at the seams. I can't wait for the new mini jets to hit the market. Air Taxi Airlines are on the way to your neighborhood airport. Porta Terminals anyone!

 

[vasi]

Too bad the crj is such a poor airliner. The door is not designed to accomodate a jetway; it is often landing weight restricted; it is underpowered and therefore takes a long time to get to altitude; it has a high approach speed; the lav is way to small; the isle is too narrow; and the seats are too small.

And at about 28 mil per airplane, a 717 can be purchased for less.

The potential is there, I agree, now all we need is an airplane to fill the demand; and higher pay and better work rules.