http://www.tallahassee.com/mld/democrat/news/opinion/10674857.htm
When will airline industry learn its business plan won't fly?
By Tom Blackburn
Cox News Service
Aviation - the human ability to fly and, more important, land safely - celebrated its 100th birthday just over a year ago. You'd think someone could have figured out how to make money at it by now.
In 2003, the latest year for which we have figures, the airline industry suffered net operating losses of $3.6 billion. Every day brings reports of new troubles to the most venerable logos in the air. One of those venerables, Delta, has cut fares, which means it will lose money on every flight. Not to be outdone, other companies are doing the same.
The airline industry as a whole has flown in the red since 2002. It lost $2 billion in the last three months of 2004. The industry had profitable years from 1995 through 2001, but they followed five years of losses. Counting bad and good together, the industry has had net operating losses of more than $5 billion over its history. These are Department of Transportation numbers, which the Air Transport Association, the trade group, keeps on its Web site in convenient tabular form.
Forty-eight years ago last month, my bride and I flew off on our honeymoon in a Northwest Airlines Boeing Stratocruiser, from Chicago to New York. The plane was designed, according to Jane's Aircraft, from the B-29. But whereas the B-29 looked like a weapon, a bullet with wings, the Stratocruiser looked like a hotel. It had a lounge in the nose under the cockpit. We sat there and looked down at the Christmas lights of the small towns and big cities of Pennsylvania. Coming home, we were served Canadian bacon over Canada.
As you can imagine, that airplane has a place in my heart. In the early 1960s, while talking to a Northwest executive about another matter, I mentioned my fondness for his old four-prop Stratocruiser. Everybody loved it, he replied, but even when it took off full, the airline lost money on it.
The jets, which were just coming into service, would save the airlines by being cheaper to fly and carrying more passengers. Or so he said. Airlines did get through the 1960s in good shape, but they lost money in 1970, when oil prices rose.
The ''carry more passengers'' prediction, though, turned out right. Boardings more than doubled between 1961 and 1967, and then quadrupled again by 1995. Before about 1956, non-movie stars flew only on special occasions, like honeymoons. Otherwise, we took the train. The airlines were just starting to become what they are today, a common carrier for VIPs, sales reps, students and families.
Nobody has a lounge in the nose anymore. Despite talk of theoretical piano bars and hot tubs on the new generation of Airbus monsters, expect those spaces to be filled with seats for customers.
Whether they will make money for their owners is another question. We hear now that it's only the ''legacy airlines'' such as Delta and United that have problems. They spend as much time before the bar as at the gate, but that's because they have ''antiquated'' - which means high - salary structures and big pension-fund overhangs. We'll always have, we hear, the leaner, meaner new airlines with salary structures more like Wal-Mart's and no pensions.
But that's not new news. As Pan American and Eastern Airlines were going under, we heard there would always be People Express. Remember People Express? The fastest-growing - to that point - airline of 1983 was merged into Continental in 1987.
Taking everything into account, air fares are a lot cheaper than they were in 1956. But then, most airlines were profitable. Now, most aren't.
There are many things in the business that an airline can't control, among them the price of fuel, weather and delays for security inspections. But if the business is based on losing money, it's not a viable business. The old joke about the guy who was going to make up a loss on every sale with volume is a joke because it describes the expectation of the impossible.
If an airline tried, like any normal business, to make a profit by charging a bit more than it costs to fly someone from point A to point B, it probably would lose its lunch to money-losing competitors. If all of them tried it, fewer people would fly. The airlines wouldn't be the common carriers they are. The national transportation system would have to adjust, just as the passenger railroads did when the airlines started eating their lunch.
But would that be so bad? Nowhere is it written that everybody has to get from point A to point B at below cost.
When will airline industry learn its business plan won't fly?
By Tom Blackburn
Cox News Service
Aviation - the human ability to fly and, more important, land safely - celebrated its 100th birthday just over a year ago. You'd think someone could have figured out how to make money at it by now.
In 2003, the latest year for which we have figures, the airline industry suffered net operating losses of $3.6 billion. Every day brings reports of new troubles to the most venerable logos in the air. One of those venerables, Delta, has cut fares, which means it will lose money on every flight. Not to be outdone, other companies are doing the same.
The airline industry as a whole has flown in the red since 2002. It lost $2 billion in the last three months of 2004. The industry had profitable years from 1995 through 2001, but they followed five years of losses. Counting bad and good together, the industry has had net operating losses of more than $5 billion over its history. These are Department of Transportation numbers, which the Air Transport Association, the trade group, keeps on its Web site in convenient tabular form.
Forty-eight years ago last month, my bride and I flew off on our honeymoon in a Northwest Airlines Boeing Stratocruiser, from Chicago to New York. The plane was designed, according to Jane's Aircraft, from the B-29. But whereas the B-29 looked like a weapon, a bullet with wings, the Stratocruiser looked like a hotel. It had a lounge in the nose under the cockpit. We sat there and looked down at the Christmas lights of the small towns and big cities of Pennsylvania. Coming home, we were served Canadian bacon over Canada.
As you can imagine, that airplane has a place in my heart. In the early 1960s, while talking to a Northwest executive about another matter, I mentioned my fondness for his old four-prop Stratocruiser. Everybody loved it, he replied, but even when it took off full, the airline lost money on it.
The jets, which were just coming into service, would save the airlines by being cheaper to fly and carrying more passengers. Or so he said. Airlines did get through the 1960s in good shape, but they lost money in 1970, when oil prices rose.
The ''carry more passengers'' prediction, though, turned out right. Boardings more than doubled between 1961 and 1967, and then quadrupled again by 1995. Before about 1956, non-movie stars flew only on special occasions, like honeymoons. Otherwise, we took the train. The airlines were just starting to become what they are today, a common carrier for VIPs, sales reps, students and families.
Nobody has a lounge in the nose anymore. Despite talk of theoretical piano bars and hot tubs on the new generation of Airbus monsters, expect those spaces to be filled with seats for customers.
Whether they will make money for their owners is another question. We hear now that it's only the ''legacy airlines'' such as Delta and United that have problems. They spend as much time before the bar as at the gate, but that's because they have ''antiquated'' - which means high - salary structures and big pension-fund overhangs. We'll always have, we hear, the leaner, meaner new airlines with salary structures more like Wal-Mart's and no pensions.
But that's not new news. As Pan American and Eastern Airlines were going under, we heard there would always be People Express. Remember People Express? The fastest-growing - to that point - airline of 1983 was merged into Continental in 1987.
Taking everything into account, air fares are a lot cheaper than they were in 1956. But then, most airlines were profitable. Now, most aren't.
There are many things in the business that an airline can't control, among them the price of fuel, weather and delays for security inspections. But if the business is based on losing money, it's not a viable business. The old joke about the guy who was going to make up a loss on every sale with volume is a joke because it describes the expectation of the impossible.
If an airline tried, like any normal business, to make a profit by charging a bit more than it costs to fly someone from point A to point B, it probably would lose its lunch to money-losing competitors. If all of them tried it, fewer people would fly. The airlines wouldn't be the common carriers they are. The national transportation system would have to adjust, just as the passenger railroads did when the airlines started eating their lunch.
But would that be so bad? Nowhere is it written that everybody has to get from point A to point B at below cost.
