Airlines Cut Unprofitable Flights as Fuel Prices Rise

It's been a difficult time for the airline industry. The soaring price of jet fuel forced United to announce flight cutbacks. Delta also eliminated flights and plans to slash 2,000 jobs. Other carriers increased ticket prices, and that still won't be enough to offset what's expected to be another year of multibillion-dollar losses for the industry.

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Airlines also blamed the shrinking economy for the current downturn in their industry. Just this week, two of the largest airlines announced cutbacks. United plans to ground some of its planes. Delta is trying to trim costs by cutting thousands of jobs.

From Atlanta, NPR's Kathy Lohr reports.

KATHY LOHR: United and Delta airlines announced this week that escalating fuel prices have forced them to reduce the number of unprofitable flights they're running. That's nothing new in Atlanta, where Delta has been cutting domestic routes since it came out of bankruptcy last spring.

(Soundbite of airport)

LOHR: In Delta's baggage claim area at Hartsfield-Jackson International Airport, six carousels spin in unison and dozens wait to claim their luggage. Among them, Daren Johnston, a frequent flyer who tells me his latest travel horror story.

Mr. DAREN JOHNSTON: I was in Chicago yesterday and finished up with business and tried to get home yesterday and there were no flights. So I ended up having to stay an extra day for nothing, just because I couldn't get a flight home. So that's what's happening.

LOHR: Another regular flyer, Pat Norris, says business travelers like her have no choice but to deal with higher costs, longer lines, and the inconvenience of fewer flights to choose from.

Ms. PAT NORRIS: I don't have an alternative. You know, I have to drive to the airport, and of course the airlines have to fill up their large tanks in order to get me to where I need to go. The cost of fuel - I mean, what is it, $100 today and we're happy?

(Soundbite of laughter)

LOHR: Many airline analysts, including Robert Mann, say the cuts were inevitable.

Mr. ROBERT MANN (Airline Analyst): The objective is to stop instances of flying where they fly at a cash loss. And this is exactly what Delta has done. It's what United has also announced, and it's what I suspect Northwest will shortly announce.

LOHR: When United announced its intention to cut capacity by about 4 percent, CEO Glenn Tilton said the price of fuel at historically high levels has put significant pressure on all U.S. carries.

In a memo to employees this week, Delta said it expects its fuel bill to increase by more than $2 billion over what it spent in 2007. Delta executives said on top of cutting domestic routes by an additional 5 percent this year, the airline will eliminate 2000 jobs through voluntary buyouts.

Mr. RAY NEIDL (Calyon Securities): It's the right step. It's probably the first step.

LOHR: Ray Neidl with Calyon Securities in New York says the next step may be consolidation, even though Delta and Northwest pilots who met for weeks to talk about the issue were not able to agree on seniority. Just this week Delta pilots turned down an offer by Northwest to send the matter to binding arbitration. Neidl says the economy may force the issue.

Mr. NEIDL: As oil prices continue to go up, and especially if we're going into a slow economy and airlines begin to lose a lot of money, it'll put greater pressure on everybody - employees, investors, management, and the government - to look at consolidation.

LOHR: In an effort to recover extra fuel costs, some carriers, including Delta, continue to expand their more profitable international routes and dump some of their airplanes that are older, smaller and more costly to operate. Airlines are also increasing fares and adding on fees. And that's not likely to change anytime soon.

Kathy Lohr, NPR News, Atlanta.

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