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Mon, Jun 25, 2007

Airlines' Increasing Profitability Is A Double-Edged Sword

Cost-Cutting Measures Paying off, But At What Price?

As US airlines repair damage from years of losses that have arisen from increasing low-fare competition and climbing fuel costs-- not to mention terror concerns -- carriers say they have been forced take actions that improve their bottom lines, but could repel the customers who make that bottom line possible in the first place. 

Or maybe not.

Air Transport Association spokesman David Castelveter says flights will be more than 80 percent full on average this summer as a record 209 million people will travel by air, according to Reuters.

"The carriers' actions are paying off," he said. "They are starting to make money. Their airplanes are full."

Translation: crowded.

Indeed, US carriers made $2 billion to $3 billion in 2006, the industry's first annual profit since 2000, according to the ATA. To do this, carriers have had to fill as many seats as possible and cut costs wherever possible, including sacrifices in customer service. This has translated into such inconveniences as fewer seats to accommodate those grounded by canceled flights. As a result, people can be stranded for days.

"In the old days, when flights were half empty, delays were less stressful," said DePaul University airline expert Joe Schwieterman. "Nowadays delays mean almost intolerable crowding both in airports and on airplanes."

"I faced a five-hour delay at Reagan (National Airport, Washington, DC) last week. It was terrible," he said.

"On one hand, it's good because it puts airlines closer to profitability," said airline consultant Michael Boyd. "On the other hand, it's bad because there is no excess slack in the system."

But, even though travelers face frustration at overcrowded planes and the hassle of delayed flights, afterwards they ultimately care more about price, according to Boyd.  

"It doesn't change the fact that consumers have the attention span of a monkey," Boyd said. "The next time they go to Fort Lauderdale, they are going to book whatever seat is the cheapest."

According to Reuters, experts say carriers' financial health will be best protected by running lean, even if it means incidents of such customer service horrors as hundreds of passengers being stranded because of computer hiccups or bad weather and they are unlikely to lose much business as a result.

According to the ATA, more than half of all delays last year were caused by things out of the airlines' control -- such as weather, and is compounded by the aging, woefully inadequate air traffic system.

But, the air traveling public may, indeed care more about bare-bones ticket prices than any customer service meat. New no-frills airlines, like the Columbus, OH-based Skybus, offer seats as low as $10 and don't have so much as a customer service phone number, as ANN has reported.

So far, Skybus CEO Bill Diffenderffer says, "A couple hundred thousand" tickets have been sold since they became available -- online only, no ticket agents -- on April 24 and more than 80% of the seats on its current 14-plane fleet of leased Airbus A319s were booked through the first month.

You do get what you pay for, though. Ten dollars for airfare means you check your own baggage and have to pay for things like meals and pillows separately -- cash only, please.

FMI: www.airlines.org, www.aviationplanning.com

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