Airlines Think Cutbacks Could Bring Back Profits
Posted on: Wednesday, 23 July 2008, 03:00 CDT
By Chris Kahn
The Associated Press
PHOENIX - New travel fees mean hundreds of millions of dollars a year for beleaguered airlines, and executives say they need them more than ever as fuel costs continue to suck profits out of the industry. Plane tickets, it seems, now come with only the bare bones promise of getting from Point A to Point B.
United Airlines, US Airways, and JetBlue all posted big losses Tuesday, though all three beat Wall Street estimates. Airline stocks, which have been at historic lows for many carriers, shot up as oil prices dropped more than $4 a barrel at one point in Nymex trading.
"We'll manage through this," US Airways Chairman and CEO Doug Parker said of the ongoing pressure to cope with fuel costs. "It's not outrageous to suggest that what's already been done is enough to get the industry profitable in 2009."
Last week, Atlanta-based Delta Air Lines Inc. reported a $1.04 billion loss for the quarter and Fort Worth, Texas-based AMR Corp., the parent of American, posted a $1.45 billion loss for the same period. Continental Airlines swung to a $3 million loss.
Amid the dismal profit numbers, airline officials told Wall Street analysts that the silver lining is that a la carte fees may eventually stem the bleeding.
US Airways Group Inc., for example, expects to raise an additional $400 million to $500 million annually, up $100million from earlier estimates.
The Tempe, Ariz.-based carrier has been more creative than others when it comes to fees. Besides bag charges, it has added charges for sodas and choice seats in coach.
The airline also announced previously that it would remove movie systems from many domestic flights to save on fuel.
Meanwhile, JetBlue hopes to bring in about $40 million from customers buying seats with extra leg room this year. Its $15 fee for a second checked bag is expected to translate into about $20 million in additional revenue. A ticket change fee, which doubled to $100 in the second quarter, is part of a "basket of fee changes" expected to produce about $50million in extra revenue in 2008.
United, which expects a $3.5billion fuel bill this year, said it could see $275 million in new money from checked luggage fees as well as other baggage charges.
"We're doing all we can to control our costs and to improve our revenue to offset fuel," Chairman, President and Chief Executive Glenn Tilton said.
Minneapolis airline expert Terry Trippler said the new travel fees are here to stay. If anything, Trippler said, airlines probably will look to include more fees like charges for carry-ons.
"Whatever is going to cost them money is going to cost you money," he said.
(c) 2008 San Gabriel Valley Tribune. Provided by ProQuest Information and Learning. All rights Reserved.
Source: San Gabriel Valley Tribune
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