Airlines Take Many Measures To Remain Competitive

In the weeks following the Sept. 11 disaster, reactive measures from carriers—domestic and foreign, large and small—have come fast and furious. Despite $4.5 billion in cash from the federal government—already partially doled out to U.S. passenger carriers based on capacity—the industry's players announced schedule reductions, fleet downsizing, service sacrifices and many other immediate cost-cutting measures.

Meanwhile, monthly traffic reports issued last week showed just how hard September performance was hit.

However, the news is not all bad for business travelers. Led by United Airlines, several carriers last week reduced business fares and lifted some restrictions that normally go with them. More flexible frequent flyer award accrual and redemption options also began surfacing.

Many carriers who previously had announced schedule reductions around 20 percent began detailing the cuts, primarily focused on eliminating certain international routes and thinning out service in high-frequency domestic citypairs.

American Airlines last week ceased operations between Chicago and both Birmingham, England, and Stockholm, and between San Jose and both Paris and Taipei. On Nov. 1, flights from Chicago to both Milan and Rome will end. Frequencies also were cut from New York JFK-London Heathrow and between Dallas/Ft. Worth and both London Gatwick and Osaka. Stateside, all New York JFK operations at subsidiary TWA LLC ended a few months earlier than planned and later flight banks at hubs in DFW and Chicago were removed. All service was suspended at Dallas Love Field, as were certain routes from Los Angeles, Oakland and Phoenix.

United by Nov. 1 will widen the scope of its schedule reductions to 26 percent of capacity and 31 percent of all daily departures. It completely will discontinue all Shuttle by United flights by Oct. 31 and fold those services into mainline and United Express operations. United's shuttle flew 59 Boeing 737s on routes throughout the western U.S., but the carrier said it expects "less demand for high utilization, quick turnaround flights."

US Airways by December also will shut down its low-fare unit, MetroJet, less than four years after launch. MetroJet had served 19 cities, primarily from Baltimore/Washington International and Washington Dulles. In grounding MetroJet, US Airways by April will eliminate its entire fleet of 737-200s. It also will ground all MD-80s and Fokker-100s, for a total of 111 early retirements.

Delta Air Lines temporarily will ground flights from New York JFK to Brussels, Cairo, Dubai, Dublin, Munich, Shannon, Tel Aviv, Tokyo and Zurich. Flights to Stockholm have been canceled indefinitely. The carrier also will suspend 50 percent of Delta Express flying to Florida and trim other mainline flying from its Atlanta hub. Delta Connection carriers will adjust their schedules in line with mainline operations.

Meanwhile, Delta and US Airways last week still were running severely reduced shuttle operations from Dulles, as Reagan Washington National remained closed until last Thursday. Although a gradual re-opening of the airport began late last week, several other carriers already had shifted flights to Dulles, including Alaska Airlines, American Trans Air and Atlantic Coast Airlines.

Continental Airlines temporarily grounded Cleveland-London Gatwick flights and nonstop service between Newark and Rio de Janeiro. It also completely discontinued service to Dusseldorf, Germany; London Stansted; and seven smaller domestic destinations. In all, the carrier will fly 18 percent fewer daily flights with its Newark hub seeing the largest decline.

Smaller carriers also announced specific schedule alterations. Among those reducing flight frequencies were: Air Tran, Frontier, Hawaiian, JetBlue and Mesa, Mesaba, Midwest Express, National, Sun Country and Vanguard.

Routes and flight frequencies were not the only airline operations to be eliminated. America West Airlines temporarily ended meal service on all flights. Northwest made a similar move, discontinuing meal service in coach class on all domestic flights. American and its TWA LLC subsidiary by Nov. 1 will do the same in economy class on most domestic and transborder flights, as well as two-class services to Central and South America, but not on nonstop transcontinental flights. American's first class meal service also will be suspended on flights under two hours. The carrier said the move "will generate significant cost savings." US Airways also will scale back meal service on shorter flights throughout this month.

On the ground, United and American shut several airport lounges, while various carriers closed reservations centers. American shut all non-airport travel centers in 37 cities, keeping open only one each in New York, Washington, Miami, Ft. Lauderdale and Paramus, N.J.

Other customer service areas also are in jeopardy as carriers begin furloughing employees across all work groups. At press time, more than 100,000 employee layoffs were spread across the industry. Alaska Airlines and Southwest Airlines, each relatively quiet in terms of announcing radical operational changes, are the only majors currently maintaining existing staff levels.

In addition to widespread employee reductions, carriers took other steps to minimize payroll, including requests to employees to voluntarily accept pay cuts. Top executives at several carriers said they would not take paychecks for the remainder of the year and Continental, for the first time in seven years, will not pay employee profit sharing. It also shelved plans for an initial public offering for its Continental Express division. United indefinitely suspended the quarterly cash dividend on its common stock.

Regardless of all these measures, year-end losses are virtually guaranteed for almost every major U.S. carrier. Southwest is the only airline with a chance of turning a profit.

Monthly traffic reports last week began spelling out the ramifications of Sept. 11. All six of the nation's largest carriers experienced systemwide traffic erosion above 30 percent. Double-digit load factor declines at most majors meant planes generally were between 50 percent and 60 percent full for the entire month. Continental also estimated its unit revenues for the month dropped between 25 percent and 29 percent.

In an attempt to draw back business customers, United last week announced heavily discounted business fares representing 50 percent and 25 percent savings for 21-day and 10-day advance purchases, respectively, through the end of the year. The fares have a minimum stay requirement, but not the unpopular Saturday night stay requirement. American and Continental quickly matched. Northwest and Delta before Sept. 11 had made available similarly reduced business fares.