Major Airlines Struggle in a Jet Stream of Change
Three years after terrorists used jetliners as weapons and sent commercial aviation into its worst slump ever, the airline industry remains mired in red ink and is facing dramatic change.
With few exceptions, the major carriers are in critical shape. Most of the largest -- American, United, Delta, Northwest and US Airways -- are still losing money even though the summer is the airlines' busiest season.
They have been pummeled by several jarring events since 2001, including the 9/11 terrorist attacks and this year's surge in fuel prices. But beyond these shocks, many analysts and industry executives say, something even more fundamental is going on: The airlines' traditional way of doing business is failing.
Since the attacks, the carriers have lost a collective $27 billion.
The growth of smaller, discount airlines such as Southwest, JetBlue and AirTran is one big factor. Their rise has cut into the larger airlines' share of the market and has helped drive fares lower overall.
That has been good news for the nearly 650 million travelers who board domestic flights each year. But it has robbed the major carriers of their ability to raise prices to offset their enormous costs and stop the bleeding.
The result: The $77-billion airline industry -- a linchpin of the U.S. economy -- could be flying straight into its biggest shakeout in a decade, analysts say. It might start this fall and winter when passenger traffic declines and the airlines burn through what cash they have left.
The changes could mean a new round of bankruptcy filings, one or more airlines going out of business and further cost cutting. Additional job losses among the 570,000 people who still work for the domestic airlines -- 52,200 in California -- are widely expected.
For the public, the turmoil promises a reshuffling of which airlines serve which cities and how often. Flights to some smaller airports could be reduced or lost, at least for a time.
"Somebody is going to disappear, although at this point it's hard to say who," said Ron Kulhmann, an analyst at Unisys R2A Transportation Management Consultants in Oakland.
Delta Chief Executive Gerald Grinstein, announcing a huge overhaul of the Atlanta-based airline Wednesday, sounded even more downbeat: "What we're now seeing is something that is so fundamentally different, there is no comparison to the past.
"This marketplace is at a very rapid state of change," he added, and entering "a new era."
