NYTimes.com Article: Airlines' Woes May Be Worse in Coming Year

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Airlines' Woes May Be Worse in Coming Year

December 27, 2004
 By MICHELINE MAYNARD





Passengers who got caught up in the airlines' troubles over
Christmas received a glimpse of what may await them in the
coming year.

The winter storms and computer malfunctions, which snarled
airport traffic from Philadelphia to Atlanta, may have been
unavoidable, experts say. But the signs of labor unrest
that cropped up over the weekend could be a harbinger of
things to come in an industry already buffeted by
bankruptcies and structural change.

With the six big airlines expected to lose another $5.5
billion this year, every one of them - American, United,
Delta, Continental, Northwest and US Airways - has
announced plans for deeper cuts in 2005. All told, they
will reach $7.5 billion in spending and at least 20,000
jobs.

"We really have the tough part ahead of us," said Gerald A.
Grinstein, the chief executive at Delta Air Lines, which
avoided a bankruptcy filing this fall by persuading pilots
to cut their pay by a third.

For passengers, the irreversible retrenchment by the
airline industry, which has shrunk by a quarter since the
start of the decade, has meant the loss of food service, a
reduction in routes, flight delays, lost baggage and other
headaches.

But if employees' reactions to these kinds of changes are
anything like what US Airways experienced over the weekend,
consumers are in for more serious disruptions.

Yesterday, US Airways, which is operating in bankruptcy,
canceled 29 flights, on top of 300 cancellations on Friday
and Saturday, when unusually high numbers of baggage
handlers in Philadelphia and flight attendants elsewhere
called in sick. Union officials said the sick calls were
not organized.

Comair, a regional carrier for Delta Air Lines, also
canceled flights for a second day. The airline canceled all
1,100 of its flights on Saturday after a computer
malfunctioned, stranding passengers in cities like
Cincinnati and Atlanta. The airline planned to operate just
172 flights yesterday and to return to normal by noon on
Wednesday, according to the Air Line Pilots Association.

The situation at US Airways came on top of problems it had
experienced for months in the Philadelphia baggage system.
It led the airline to make unscheduled flights filled with
suitcases from Philadelphia to Charlotte, N.C., for
processing before being returned to passengers.

Amy Kudwa, an airline spokeswoman, said yesterday that as
part of their compensation, some passengers who were
stranded were put up in hotels, while those who did not
have their bags would receive at least $50 for the first
day and $25 for each day after that.

US Airways is by far the sickest of the major airlines. It
filed for its second bankruptcy in two years on Sept. 12.
It is demanding deep pay cuts from employees, who have
already given two rounds of wage and benefit concessions.

In a memorandum on Dec. 15, US Airways told flight
attendants based at airports in Boston, Charlotte, New York
and Washington that they would have to fly an additional
five hours a month starting in February to make up for
staffing shortages. The memo came on the same day that
flight attendants reached tentative agreement on a new
contract that would cut their pay 9 percent and reduce
benefits, including sick and vacation time. Before that
agreement, flight attendants threatened to strike the
airline if a bankruptcy court set aside their contract and
replaced it with more spartan terms. Flight attendants at
United Airlines, which also wants to set aside union
contracts, have made the same threat.

Officials at the Transportation Department spoke with US
Airways management over the weekend and were monitoring the
situation yesterday, said Robert Johnson, a department
spokesman. "We're in a fact-finding mode," he said, adding
that transportation officials would be "deliberate and
careful."

The chief executive at US Airways, Bruce R. Lakefield,
angrily blamed the "operational meltdown" on the
"irresponsible actions of a few."

In a message to employees yesterday, Mr. Lakefield said:
"Let us not forget who pays our salaries - our customers -
and this weekend did nothing to earn their confidence and
their future business."

Don Logan Jr., a US Airways maintenance worker in
Philadelphia who took scheduled vacation during the holiday
rush, said yesterday that management should have
anticipated problems. "Back at Thanksgiving, we were
short," he said. "Did they think it was going to go away
come Christmas?"

"I don't blame any employee who wants to spend the holiday
with their family after what they have been put through
this year," Mr. Logan said.

Some US Airways workers are angry that Mr. Lakefield has
not taken a pay cut, even though a bankruptcy court judge
ordered emergency 21 percent pay cuts for union members.
"The extra presents under the tree that my kids didn't get
this year, I'll tell him thank you for that," Mr. Logan
said.

For some consumers, whose family reunions and hopes for a
holiday break were foiled by the problems, this weekend may
be the last straw. "I don't think there's a tremendous
amount of sympathy," said Gary Chaison, professor of
industrial relations at Clark University in Worcester,
Mass. "Consumers are always ready at a moment's notice to
jump from one airline to another airline."

Charlton Tarrant, 38, who flew home to Detroit last week on
US Airways, agreed. "It's like any industry: survival of
the fittest. The strong survive and the weak will get
devoured," Mr. Tarrant said. He will have to choose another
airline next year if US Airways cannot survive. But, said
Mr. Tarrant, "If they're not fit, then they will fold like
others before them."

The airlines' unending spiral brings to mind what happened
to American auto companies, steel makers and coal miners,
whose decline had an indelible effect on parts of the
country that still echoes in shuttered plants and vacant
mills.

In the case of airlines, though, the situation is
different.

Unless they lived in the Rust Belt, or a few other places
where Detroit put its plants, most people in the country
never met an autoworker or witnessed the industry's decline
first hand.

But virtually everyone who flies and every city with an
airport feels the airlines' predicament. "It's like the
chain on a bicycle. If one link is broken, we aren't going
anywhere," said Robert Roach, vice president for
transportation at the International Association of
Machinists and Aerospace Workers.

"The airline industry really is an infrastructure
industry," added Alfred E. Kahn, the former head of the
Civil Aeronautics Board, who oversaw the industry's
deregulation under President Carter.

In places like Evansville, Ind., the industry's problems
have meant the loss of entire airlines. On Dec. 17, US
Airways dropped its daily flights to Charlotte, the
airport's only service to the East Coast. Now, passengers
headed east must fly on other airlines to Detroit, Memphis
or Atlanta, and connect from there.

"It's sad," said Robert Working, 57, manager of the
Evansville Regional Airport, speaking by telephone last
week as a storm dumped 19 inches of snow on the airport's
three runways, complicating an already busy holiday week.

And in the last year, a range of cities, from Boston to St.
Louis to Minneapolis and Dallas, have seen airlines cut
service, while in the last four years, others have pulled
out completely.

Since 2000, the big airlines have eliminated more than 100
cities from their schedules as they sort out where they can
afford to fly on the fares consumers will pay, according to
an estimate by Back Aviation Solutions, an industry
consulting firm.

At least people in Evansville have other options. One-third
of the nation's 609 airports offering daily flights are
served by just one airline, said Michael Allen, the chief
operating officer at Back Aviation.

If one company pulls out and another does not pick up its
flights, a chain reaction begins: jobs will be lost,
communities will have trouble attracting new companies,
employers will not be able to easily send employees where
they need to go and real estate prices will fall because
the cities and towns have become remote.

"If you don't have a connection to the outside world, you
become less valuable," Mr. Allen said.

"It's fine to say, 'Let market forces prevail,' but you
can't do that without examining what the consequences are,"
said Patricia Friend, president of the Association of
Flight Attendants, which has 50,000 members.

Because of wage and benefit cuts, some new flight
attendants earn just $12,000, less than they might make at
Wal-Mart or as a bank teller. "The flight attendants will
always sympathize with the passenger. But they won't always
sympathize with the company," said John McCorkle, a US
Airways flight attendant who writes an industry newsletter.


Airlines are hoping for a reprieve in the form of lower
prices for jet fuel, which rose 74 percent this year, to
more than $1.50 a gallon. That could give them an
opportunity to be profitable again after losing $30 billion
in the last five years.

Even so, profits will not restore the jobs the companies
are eliminating; bring back the traditional pension plans
that are being dropped; or do away with the cost-cutting
that has been announced.

And as JetBlue, Southwest and other low-fare airlines keep
a lid on prices, the big airlines cannot raise fares
substantially to give themselves a cushion as they once
might have done.

Mr. Grinstein of Delta said, "If we are waiting for some
miracle to occur, we are wasting our time and we'd be
better off saving our breath."

In Evansville, Mr. Working said he thought the big airlines
were "finally learning how to compete" - a step he thought
was long overdue. Yet, he admits he wishes things were
different.

"To be honest, I wonder if deregulation was good. You used
to dress up and everyone acted real nice to you and it was
fun to fly," Mr. Working said. "Now it isn't nice, you only
get pretzels and all the other service is gone."

Eric L. Dash contributed reporting from New York for this
article, and Jeremy W. Peters from Detroit.

http://www.nytimes.com/2004/12/27/business/27air.html?ex=1105162926&ei=1&en=5912c7701367d644


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