10:01 PM

Domestic Airlines
Now Officially in
Survival Mode


It seems the $15 charge that American is charging for that first checked bag really got the attention of the traveling public, and was just one tiny example of how bad Big Oil has made life for the airlines. Of course, everyone knows that fifteen bucks here and there can't make up for $127 a barrel crude, and as everyone suspected, the balance sheets for the airlines are bleeding red ink by the boat load.

Today, two of the majors announced that cutting back on stale pretzels and generating revenue from your Samsonite won't change the fact that they are literally tanking right before our eyes. After both United and Continental slashed jobs and jets as reported by AP here and here, it really makes you wonder if the carriers will survive this fiscal brutalization:

"United Airlines said Wednesday that it's cutting up to 1,100 more jobs, removing an additional 70 fuel-guzzling airplanes from its fleet and slashing domestic capacity as it tries to cope with spiraling fuel prices. The combined reductions mean the airline is cutting nearly 3 percent of its 55,000 workers worldwide."
Sure, this is just three percent of a very large workforce. That is not the story here, because obviously with 55,000 bodies, maybe they won't miss a few gate agents and ramp workers. But what ought to scare all of us is this:
"United said it plans to ground its entire fleet of 94 Boeing B737s as well as six of the company's 747s — its oldest and least fuel-efficient planes. It is also scrapping its coach-only "Ted" service and reconfiguring those planes to include first-class seats. The Chicago-based carrier will cut mainline domestic capacity by 17 to 18 percent in 2009, while also scaling back international capacity by 4 to 5 percent."
The bigger picture guy at United – Glenn Tilton, their chairman, president and CEO – basically said in a company press release that United is not going down without a fight, and he's preparing to squeeze passengers for all they can take:
“Today we are taking additional, aggressive steps that demonstrate our commitment to size our business appropriately to reflect the current market reality, leverage capacity discipline to pass commodity costs on to customers, develop new revenue streams and continue to reduce non-fuel costs and capital expenditures.”
The sad story is about the same over at Continental, where fuel costs have doubled resulting in a $2.3 billion larger Jet A bill. As a result of this victor airway robbery by Big Oil, Continental is slashing anything they can find:
"Continental on Thursday became the latest airline to announce cutbacks, saying it will shed 3,000 jobs — more than 6 percent of its work force — and reduce capacity by 11 percent this fall."
While that sounds like the same cuts as United, there is one twist to the Continental story that I have to say is quite admirable, and oh so rare:
"Continental Chief Executive Lawrence Kellner and President Jeffrey Smisek said they will not take salaries or incentive pay the rest of the year. In a regulatory filing, the company said Kellner, who was paid a salary of $712,500 last year, would get $296,875 this year, and Smisek's salary would be cut to $240,000 from $363,300."
You have to hand it to these two guys, having the guts to cut their salaries while they send soccer moms and working-poor dads to the unemployment lines. Even if it is symbolic, and even though anyone should be able to live on three hundred large a year, it still says volumes about their management style. How many times lately have we seen major corporations cut jobs only to have their CEOs spend huge seven-figure salaries on lavish lifestyles and expensive perks?

Each day that the airlines fly, they dig theirselves a deeper hole. As fares rise and our economy sours, less and less people will be able to take the big pressurized tube to Grandma's house, and that only compounds a possibly fatal financial situation for the Big Airlines.

And one last question is this: If Southwest had the brilliance and forethought to lock their fuel prices in months ago at a decent price by buying fuel contracts, why didn't United, Continental and all the others? What AM I missing here? If Southwest can game the fuel price system, maybe the other Bigs ought to be in that market as well.

It's that, or they may all go away. Then what do we have? A third world country, that's what.

Gee, maybe that's what the Middle East really wants. Not that they'd have ANY reason to be pissed at America, oh no. Not when our leader made up a bunch of lies to invade one of their countries and try to steal their oil. Oh, and BTW Bushie, howz that whole war for oil thing going anyway?

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