Once again, a major airline has reported dismal earnings. American Airlines posted a loss of $390 million for the second quarter of 2009.
And other airlines are already talking about layoffs for the fall. I get it. The fall is a slow travel period, and this is a rough economy. But I haven’t been on a plane lately that wasn’t packed to the gills with a standby list (OK, one flight from Vancouver to Kamloops had some empty seats). And my clients report oversold flights all the time.
Moreover, getting a seat assignment, let alone a good seat, in advance has become a major challenge.
So the question has to arise: How are airlines losing money?
I understand that fares are low and thus probably not covering costs, but if the planes are full, maybe the fares are too low? It seems as if it would least be worth trying higher fares during peak season.
In some markets — for example, San Francisco to Dulles — United Airlines has been competing with start-up carrier Virgin America. Virgin America has been losing money, and has been the subject of viability rumors, yet United has regularly matched their fares, sometimes even to under $300 roundtrip.
The super-competitive JFK to Los Angeles market is another case-in-point. Even in the summer, major carriers have been offering roundtrip fares under $300.
And to what end? At those prices, they absolutely are not making money, even with food and baggage charges.
If the airlines raised the fares $100 or even $200 more each way, and bookings went down, presumably a last-minute sale would fill the planes. Since the discount carriers are flying full too, there is only so much capacity they could absorb.
Besides, gas prices may not be as high as last year, but they are still high enough to make the driving alternative expensive.
In fact, for many travelers, it’s about perceived value. Raising basic airfares, besides helping the airlines’ bottom line, might reduce the need to raise every little additional ticket fee they can think of.
But in the meantime, the airline industry, during the busiest time of the year, is starting to remind me of the frothiest moments of the Internet bubble, when companies were losing money on every transation, but “making it up on volume.”
Janice Hough is a California-based travel agent a travel blogger and a part-time comedy writer. A frequent flier herself, she’s been doing battle with airlines, hotels, and other travel companies for over three decades. Besides writing for Travelers United, Janice has a humor blog at Leftcoastsportsbabe.com (Warning, the political and sports humor therein does not represent the views of anyone but herself.)
