The airline industry was severely wounded on September 11, but its restructuring is long overdue, according to Michael Miller, President of Miller Air Group.
This statement is an expression that has resonated through every airline company in the world, since terrorists changed the face of the airline industry, resulting in an overwhelming response by them to regroup and restructure their services.
“Airlines are facing the same predicament that the United States auto industry encountered in the 1970’s. Then, fuel efficient Japanese cars forced U.S. manufacturers to restructure. Today, lower-cost airlines are forcing major airlines to abandon their high-cost, Lamborghini-style approach to running an airline,” said Mr. Miller.
Not only are flight fares being restructured in response to the devastating blow suffered exactly one year ago, but tens of thousands of airline staff were laid off, and millions of dollars spent on revamping security measures.
Overall, no airline contacted by the Bahama Journal said flight bookings were up. They are all still operating below expectations.
There has been some deterioration in demand and some airlines have fared worse. Some airlines have fared a lot worse. We are down about 15 – 20 percent in terms of load factor,” said Paul Major, Managing Director of Bahamasair.
International flight bookings were mostly affected, he said, with domestic sales declining by about 10 percent or less.
Continental Airlines has downsized flights by at least 10%, from the 260 flights operating before September 11th, 2001, according to Jerry Smith, Vice President in charge of customer service, Continental Connection for the Bahamas.
“We have downsized staff to a certain degree from September 2001 to now, but most of them were part-timers or they were flight crew. We are not just talking about Nassau, but across the whole system. We operate out of the Bahamas with a minimal staff of about 50 persons,” said Mr. Smith.
The restructuring of airfare rates has been an important part of airlines’ tactic for remaining afloat. Fares can be found on-line at the lowest possible rate, especially during the month of September, which is normally considered a slow month for sales.
“My guess is that this is nowhere near as radical a set of changes as is going to be required to change their cost structure to compete in the domestic market,” said Donald Schenk, President of Airline Capital Associates, a New York consulting firm.
American Airlines implemented a number of changes since last year. They include:
– de-peaking its Chicago hub
– simplifying its fleet
– launching several automation initiatives that improve customer service and enhance productivity
– changing distribution methods
– modifying its in-flight product, and
– initiating a broad range of cost savings programs.
“These are a combination of fundamental structural changes and tactical moves to reposition and re-size the airline in light of a continued sluggish economy and changes in consumer flying behaviours,” said American Airlines and CEO Donald J. Carty in a press release.
Given recent economic and consumer confidence reports, American will reduce capacity by 9 percent by November, versus summer 2002. As a part of the capacity reduction, American will accelerate the retirement of its nine TWA 767-300 aircraft to November 2002, said the statement.
Meanwhile, new international security measures implemented after the attacks meant additional training and workload for airlines.
Mr. major said Bahamasair is “pretty well-baked in”, complying with the new measures.
“Everybody had to adapt, and we have adapted. So all the new procedures, that came into effect immediately after 9/11are just a routine now. Of course for this September 11 there will be extra vigilance, but there wouldn’t be any new procedures,” he said. The National flag carrier is expected to release a press statement today.
The Bahamasair board is still deliberating on their strategy for the way forward. At the appropriate time, Mr. Major said that the chairman would have a comment on their conclusion.
The airline is operating with both jets, and four of their five Dash-8’s. The last of the five dash 8’s is expected to return home by next week Monday or Tuesday, said Mr. Major.
“It has been a hard adjustment (the new security measures). You have to search every bag and everybody that goes through between bags and passenger and observations and such. It is now simmering down to where we (Continental) are getting adjusted to what we now have to do every day,” said Mr. Smith.
“The aviation industry has not done enough to batten down the hatches. You can write off the rest of this year and the next for the major U.S. airlines from an earnings standpoint,” commented airline analyst at Avmark International, Daniel Solon.
