Bankruptcy may change way airlines do business

By Caroline E. Mayer
Washington Post

With one major airline in bankruptcy, another talking about it and a third significantly trimming its flights and work force, the future may seem bleak for air travelers. Then again, maybe not.

Analysts say a variety of things could happen:

• Less air traffic. Fewer flights means less congestion in the skies, making it more likely travelers will arrive on time. American Airlines, which last week announced a 9 percent reduction in capacity, has acknowledged its restructuring will mean longer layovers for connecting flights. But industry experts say the extended wait is not expected to be onerously long. It also means passengers are less likely to miss connecting flights and more likely to arrive at the same time as their checked baggage.

• Less food service. Longer waits at airports will give passengers more time to eat there, a good thing if, as expected by some experts, airlines eliminate what's left of their food service. "If you thought you weren't getting food service before, you definitely won't be getting it in the future," said Tom Parsons, head of Bestfares.com.

• Airfares. While the changes are certain to lead to fewer flights — perhaps on smaller planes — and reduced services, it's uncertain what the impact will be on airfares. Many industry experts predict low fares will continue. Their reasons: Both leisure and business travelers will be reluctant to fly if fares rise too much. Additionally, competition from smaller, low-fare carriers such as Southwest Air Lines, JetBlue Airways and AirTran Airways will make it hard for the larger airlines to raise fares.

"Consumers will see some good, good deals," said Parsons, whose Web site tracks fares and travel promotions. "Airlines have to get us back on planes to make money. If John Q. Public remains worried about the stock market, the airlines are going to have to hang carrots out there" to draw people in.

Other industry officials say the airlines' dire need to boost revenue will force them to raise fares. Yet these experts say, the increases won't be substantial. "Tickets will not be as cheap as they have been, but they won't be real expensive," said Henry Harteveldt, senior analyst for Forrester Research. Harteveldt predicted round-trip fares would go up $5 to $20 — "maybe in increments."

• Fewer flights. For some consumers, the restructuring may be painful as flights are dropped or rescheduled. "There will be fewer options as far as late flights and early flights," said Jonathan Schrader, an analyst with the independent research firm Morningstar Inc. "There will be fewer options to get to outlying cities," he added.

Large jets will be replaced with regional jets and regional jets replaced with turboprops. "A 200-seat airplane will now be replaced with a 130-seat plane," said Michael Boyd, an aviation analyst with the Boyd Group, a Colorado consulting firm.

• The end of first class? Carriers may decide to reduce — and perhaps eliminate — the more expensive seats in their aircraft. American has said it plans to eliminate first class on some trans-Atlantic and Latin American routes.

"First class is dead," said aviation consultant Clark Onstad, a former airline executive. "There's going to be some form of business class" that has more leg room and more food service than coach, he said.

• Frequent-flier changes. Airlines are expected to continue to offer frequent-flier miles because they are an effective way of building and maintaining customer loyalty. Some carriers may try to tighten the programs, Harteveldt added, tying miles to the price of the ticket — so the higher the fare, the more miles granted. And as capacity shrinks, cash-strapped airlines might reduce availability of free seats.

• More competition. And competition may expand. "You're going to see more new low-fare carriers," Onstad said. "There are a lot of people flirting with the idea right now and what's going to bring them in is access to cheap airplanes," which will occur as major airlines restructure routes and sell off planes. Layoffs by major carriers could create a ready work force for competitors.