Red Ink in the Skies
Why the airline industry is losing money, filing for bankruptcy, and still not going out of business.
12:00 AM, Sep 21, 2004 • By IRWIN M. STELZER
And even more labor-shedding will not be enough to enable these carriers to fly through the financial storm that has weakened their balance sheets and profit-and-loss statements (well, loss statements). Nor will cuts in distribution costs achieved by by-passing travel agents, reductions in the quality of food service (hard to imagine), and charging for lunch ($10 for a salad in the "main cabin" of the flight on which this was written), bring costs in line with those of the low-fare airlines.
More radical steps, such as Delta's proposed elimination of its Dallas hub, and American's decision to increase interconnection times for passengers connecting in Chicago's O'Hare airport are required. Add to that a ground staff that is willing to check passengers in and also clean airplanes and handle baggage, pilots who recognize that the world has changed since the good old days of regulated monopolies, managements that know how to do more than file for bankruptcy, and governments that are willing to let bankrupt carriers exit the market, and the survivors might just possibly discover that ink also comes in black.
Irwin M. Stelzer is director of economic policy studies at the Hudson Institute, a columnist for the Sunday Times (London), a contributing editor to The Weekly Standard, and a contributing writer to The Daily Standard.