Turbulence for airlines growing

The nation's major carriers are facing a do-or-die proposition that may change air travel in the United States forever.

The large traditional airlines are now so beset by debt, rising fuel costs, expensive labor, and tough competition from low-cost carriers that they're facing stark choices once unthinkable, even after the terrorist attacks shook the industry in 2001. Add to that the disruptions from multiple hurricanes this summer, and it's now downsize, economize, and streamline - as Delta Air Lines did last week - or face certain bankruptcy. If US Airways can't reach a deal with its unions soon, it could face its second bankruptcy in two years.

For the traveling public, this shakeout may mean that visiting a grandparent in one of the nation's smaller cities will be harder to do. Frequent-flier miles built up during years of loyalty to one carrier may disappear with the stroke of a bankruptcy court's pen. And once-familiar brand names like United Airlines and US Airways may be shelved in history books like other now-vanquished aviation giants Pan Am and TWA.

"This is the first time we've seen such an industrywide depression that really threatens the future of the larger carriers," says George Novak, an aviation expert at the Aviation Institute at George Washington University in Washington.

Delta signaled the beginning of the latest round of downsizing last week when it announced it would cut its Dallas hub and as many 7,000 jobs. US Airways says it needs to win $800 million in wage concessions from employees, or it's back to court this week - perhaps as early as Sunday. But analysts say the real changes, including possible liquidations, may not begin in earnest until next January, after the peak holiday travel season.

Still, with several lean and hungry low-cost carriers like JetBlue anxious to pick up routes and expand, the disruptions to daily service may only be minor. After Delta leaves Dallas, for example, travel agent Dan Sondhelm says he doesn't think customers will be inconvenienced.

"I expect the competition to come in and take on additional flights in Dallas," says Mr. Sondhelm, an independent travel agent with Global Travel International.

Yet aviation analysts say it's prudent for air travelers to be proactive. That's because the major network carriers remain in deep trouble. After two years, United has been unable to emerge from bankruptcy. Even Delta says that despite its cutbacks, it is still on the brink of bankruptcy.

"One of my colleagues just sent me an e-mail asking, 'Which should I burn first, my 300,000 Delta miles or my 100,000 USAir miles?' " says Clint Oster, an aviation expert at Indiana University in Bloomington. "I didn't have an answer for him, I just said, 'This is not the time to postpone that trip to Europe if you're thinking of using frequent-flier miles.' "

The traditional carriers' biggest fiscal challenges come in the form of fixed costs, such as unionized labor, which make it difficult to compete with their lower-cost nonunion rivals. [Editor's note: The original version of this story misidentified Southwest as a nonunionized airline.] Then there's the big carrier's network system, called the hub and spoke, which grew up after deregulation in 1978. The low-cost carriers are far more efficient because they fly point to point. Some majors are now trying to emulate that.

Page: 1 | 2