Are Continental’s “crisis” cuts a harbinger of travel industry implosion?
Continental Airlines has announced deep capacity cuts and personnel cuts for its airline operations. It is slashing 3,000 jobs, 67 aircraft and reducing capacity in the fourth quarter by 11 percent in what it calls a “crisis.” This is serious.
This announcement is the third one by a major airline in the last two weeks of cutbacks after the summer season. American recently announced reductions of 11 to 12 percent and United Airlines outlined plans to take more than 70 aircraft out of operation and the dismantling of its Ted airline-within-an-airline.
Delta and Northwest, pursuing a merger, have been mum until now, still clinging to their mantra of “we are not going to cut any flights or lay off any personnel.” Somehow, that approach just won’t fly in this economic environment.
Expect them to retract those announcements and perhaps shift their merger onto a slower track in order to deal with immediate operational realities. Delta’s announcements last March of draconian cutbacks will probably be in the news soon.
Even foreign airlines once relatively insulated from the ravages of higher jet fuel prices are beginning to feel the pinch and are considering many of the kinds of fees being added to U.S. airline travel.
With the higher costs of gasoline and jet fuel, expectations of deep travel cuts are spreading. However, these expectations have always been couched together with more positive news.
These pending airline capacity cuts add a new structural component to a travel slowdown. Up until now, the changes in travel planning have been psychological and financial because of changes in behavior caused by higher gasoline prices.
The cuts in numbers of aircraft and frequency of flights will create a “you can’t get there from here” scenario. Those who can find flights to outposts such as Orlando, Las Vegas and Reno that depend on air traffic will find the prices dramatically higher. I just checked a September Boston-to-Reno flight with a lowest price around $500 — far more expensive than a year ago.
Just the higher airfares portend fewer tourists and now the cutback in flights will only add to the coming tourism woes. Delta, Northwest, US Airways, AirTran, JetBlue, Spirit and other airlines will more than likely join in the cutbacks as each makes additional announcements over the next few weeks.
Right now, these problems may appear to be on the horizon. However, autumn is only four months away. Hotel occupancies will go down, rental car companies will have more inventory, airport concession operations will suffer and closer-to-home vacations are predicted to be the norm for the coming fall, winter and spring travelers.
Destinations will have to gin up new marketing plans based on far fewer visitors arriving by air because there just won’t be the same numbers of seats serving their markets.
American, Continental and United are the first three dominoes to fall. The rest will follow with effects that will spread far beyond only the airline sphere. America is about to get a tough lesson in how much we depend on affordable fuel to power the economics of travel.
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