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Troubled Airlines Face Reality: Those Cheap Fares Have a Price
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Already, hot meals are only a memory for many travelers in coach, along
with the library of magazines, free playing cards and other perks. After
eliminating as many of these items as they think leisure travelers will
trade for low fares =97 as they do every day on Southwest =97 airlines =
may
try to entice business travelers to pay a premium to get them back.
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"We're looking for ways to provide the amenities for the higher-paying
customers and provide less for those who don't care for that," said Mr.
Bethune of Continental. (Business class would remain a distinct, and
even more expensive, option.) His airline has already eliminated free
alcoholic beverages on international flights, and it is considering
measures like limiting the lowest-paying passengers to one free checked
bag.
"Right now, you just don't see the difference" between full-fare and
discount tickets, said Mr. Weeks, the Booz Allen travel manager. "If you
were able to say, `I paid three times the discount fare because I wanted
an aisle seat and frequent-flier miles,' then maybe it makes sense."
In an experiment that airlines in the United States are watching
closely, Lufthansa, the big German carrier, has taken the idea a step
further. It now flies between Newark and D=FCsseldorf using a plane with
only roomy, business-class seats.
Some airlines may have hoped that the government would rescue them from
the toughest aspects of fixing their broken businesses. Through hard
lobbying in the days after Sept. 11, they won $5 billion in cash to make
up for their losses while the attacks shut down air travel. As
important, Congress authorized $10 billion in loan guarantees.=20
Critics worried that the Air Transportation Stabilization Board, the
four-member panel created by Congress to dispense the guarantees, would
set overly lax terms. If so, the guarantees might postpone the
streamlining and even the consolidation needed to align airline capacity
with passenger demand, they warned. The critics also questioned the
wisdom of providing government assistance to companies that might be
headed to bankruptcy court.
"Is there a market failure that the government can correct?" asked
Steven Morrison, an economics professor at Northeastern University who
has written extensively about the airline industry. "No. The bailout was
a transfer rather than helping economic efficiency."
Still, Professor Morrison and other experts have generally praised the
board's work. Only one applicant, America West Airlines, has
successfully completed the process, winning $380 million in loan
guarantees in exchange for a government claim on a one-third stake in
the airline.
The board has denied applications from other carriers, including
Vanguard Airlines, which then shut down operations; Frontier Flying
Service; National Airlines; and Spirit.
US Airways got conditional approval for a $900 million loan guarantee
last month, but must complete its restructuring in bankruptcy court =97
shrinking its operations and sharply cutting labor costs =97 to win the
taxpayer backing. United has applied for a $1.8 billion guarantee, but
has been told to obtain "broader, deeper and longer concessions from all
stakeholders" if it expects to win approval, according to Jake Brace,
United's chief financial officer.
The biggest lift that the struggling airlines could receive is beyond
their control: the spread of some of their labor problems and high costs
to the discount carriers. As Southwest continues to grow, some analysts
say it will struggle to keep its average wages at their relatively low
levels, because a smaller portion of its work force will be
short-tenured and therefore inexpensive. Southwest executives deny this,
saying that more than 100 cities have asked them to begin serving their
airports.
Even if Southwest is wrong, its advantages will probably erode slowly.
That means fares are unlikely to rise quickly.=20
But many travelers are likely to gain a keen, if unwelcome,
understanding of the trade-offs that make those fares possible.
"While I adore Southwest, and think they're half my justification before
God," said Mr. Kahn, one of the architects of deregulation, "I hate
standing in those long lines."
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