WASHINGTON – Although business travel by air is projected to increase 10 to 15 percent in the next year,it will not be enough to salvage an industry going bankrupt,according to a report released Wednesday.
The Business Travel Coalition said that low-cost carriers such as Southwest,AirTran and JetBlue are attracting increasing numbers of business travelers from older “legacy” carriers such as Delta,Continental and United.
“We may travel much more,but we're not paying the fares we used to pay because we can't afford it,” said Peter Buchheit,director of travel and marketing for Black & Decker,of Towson,Md. Buchheit said that,while Black & Decker employees formerly traveled on Delta Airlines,nearly 80 percent of their flights are now booked on AirTran.
Once ridiculed by major airlines as “cattle cars,” low-cost carriers have been a significant threat to the industry's Big Six legacy airlines since the mid-1990s. Often,the Big Six are forced to match prices with low-cost carriers in markets that were once monopolies.
Additional factors,such as oil prices,pilot pension costs and technological alternatives to travel have undermined commercial airlines,said coalition Chairman Kevin Mitchell.
“Virtually every forecast since 2000 or 2001 by analysts has been too rosy,” he said. “Often by billions of dollars.”
Mitchell called for a “deeper airline restructuring” if legacy airlines are expected to last,even through 2005. He asked Congress to provide aid to the industry,citing a deeper economic impact to all sectors of travel and business,including hotels and rental cars,if airlines fail.
“Virtually everybody missed the drop in yields,and there's too much capacity in the system,” said Vaughn Cordle,chief analyst for Airline Forecasts,a Washington-based research organization. He said congressional action was “highly unlikely” for political reasons.
Cordle also said that business customers,who used to make up 60 to 70 percent of air travel,account for only 30 percent of tickets today.
“I believe that the best place for the industry workouts is in the bankruptcy courts. If the fuel prices stay above $50 per barrel,you're going to see all of the legacy aircraft carriers file for bankruptcy within the next 12 months,” he said.
“I would anticipate Delta filing for bankruptcy between now and November 18,” said Cordle. “I would give it an 80 percent chance” of failing.
He predicted that American Airlines,which has the greatest amount of cash,might hold out until 2006.
United and USAirways are both operating in bankruptcy.