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Airline Cutbacks Mean No Service for Some Cities

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Airline Cutbacks Mean No Service for Some Cities

Business

Airline Cutbacks Mean No Service for Some Cities

Airline Cutbacks Mean No Service for Some Cities

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  • Transcript

With soaring fuel costs, airlines are raising fees and cutting flights, which will leave some cities without service. Robert Smith talks to airline industry analyst David Field, U.S. editor for Airline Business Magazine, about how high fuel prices are slamming the airlines.

ROBERT SMITH, Host:

You may be enjoying your Memorial Day holiday, but it's never too soon to start planning that summer vacation. Got your airline tickets yet? Brace yourself. Travelers are paying more, and in some cases finding no tickets at all. Last week, American Airlines announced it's grounding planes and cutting service because of high fuel costs.

To find out what this means for flyers, we turn to David Field. He's U.S. editor for Airline Business Magazine and a frequent guest on this program.

Good morning, David.

DAVID FIELD: Good morning.

SMITH: So these American Airline cuts, how significant are they and how are they going to affect our pocketbook this summer?

FIELD: They are really significant. A lot of people focused on the fact that American wanted to charge $15 for your first checked bag. And that's fascinating, but that's not the real story here.

The real story is they are parking 80 to 90 airplanes. That's about 10 percent of their fleet. And that means some cities will simply not be getting service, and other cities will be getting far less service.

Oakland, California, for instance, will lose all American Airlines service as of this autumn. Little places like - just to take an example - Flint, Michigan will probably lose some service. Towns like Springfield, Illinois will lose some service.

We don't know yet where the route cuts will be. But A) they will be there, and B) others are going to be doing the same and already are doing the same.

SMITH: Now, according to the laws of supply and demand, there's certainly the demand for travel in the summer months, why not simply increase the price of these flights and charge accordingly and get these planes back in the air?

FIELD: To charge accordingly you'd be talking about a 15 to 25 percent fare increase and people just won't take that. They will stop flying. You see everyday the way in which people look at fares. And they don't buy until there's a special - they don't buy until there's a sale.

And remember, if you're American or Delta or Northwest, you're always on sale because of people like JetBlue, AirTran, and above all, people like Southwest. You can only raise your fares up to a certain point and then people book away or go away.

SMITH: Now, it's no secret that these big planes use a lot of fuel and that fuel costs were increasing. Wasn't there a way these airlines could take this into account and reduce the damage of high oil prices?

FIELD: Not when they're this high and not when they've become this high this quickly. When United Airlines came out of bankruptcy three years ago, they said we have a great plan. We have so much flexibility in our plan. And, you know, we can handle oil at $50 a barrel. Right now, the airlines are paying $139 a barrel.

In February, when I interviewed the president of Delta, he said we can make money at almost $100 a barrel. They can't make money at $150 a barrel. There is just no way to do it.

SMITH: So what long-term changes will we see to the industry? Are some of these names you've mentioned - these airlines - going to just disappear, won't be around in ten years?

FIELD: I think in 10 years you will certainly see A) fewer airlines and B) fewer big brand name airlines. I'm not going to name names, but someone will be gone. Someone will have merged. And between now and then you're going to see fewer flights, fewer seats, higher fares and a repeat of what we had last summer with congestion in the airports and delays on the tarmac.

SMITH: So how are we going to get to the beach this summer? Any advice?

FIELD: A lot of us aren't. Some of us are going to be buying DVDs of the beach and watching them at home. You're looking at a general contraction of the economy and a much more advanced contraction of the traveling economy.

SMITH: David Field is U.S. editor for Airline Business Magazine.

Thanks for joining us.

FIELD: Thank you.

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