Saturday, April 26, 2008

Everybody's On Board With New Fare Hike

Sealing the deal on the latest round of fare increases, Northwest Airlines matched the across the board increases of 3 to 5 percent initiated by United Airlines and followed by Delta, American, Continental and US Airways.

And showing that some airlines simply cannot issue a statement without obfuscation, Northwest said: "The fare increase comes on the heels of this weeks [sic] 1Q earnings report, showing Northwest Airlines lost $4.1 billion."

In fact, Northwest "lost" $191 million in the first quarter, if by "lost" you mean "no longer actually has this specific sum of money in its wallet."

The rest of the alleged dough, adding up to that $4.1 billion, comes from an airy accounting adjustment that reflects what Northwest says is a decline in its perceived value. The $191 million is real money on anybody's block. But the rest of the $3.9 billion-and-change is basically Monopoly money, a red-ink herring to make the plight of the airline -- certainly bad enough -- look even worse.

Delta Air Lines, Northwest's soon-to-be acquirer, used the same tactic -- and in fact the identical language about a "non-cash goodwill-impairment" charge -- in its first-quarter earnings report this week, claiming a "loss" of $6.4 billion on an actual operating loss of $274 million.

I'm happy to see the serious media have not let this accounting ploy settle into the record, and are using the operating losses as the appropriate figure.

As I keep saying, we all need to look hard at the real numbers as the airline industry wails and moans and falls to its knees begging and pleading for relief in Washington. Yes, they are having a very rough time of it. But let's keep the math in perspective as the industry consolidates, as it is rapidly doing.

Meanwhile, I see in the Times today that Continental -- which in my opinion is the best of the lot among the major airlines -- is using its Web site to prepare its customers for a merger announcement with United that is expected within a week. I like the fact that Continental isn't being coy. I don't like the fact that my meager but valued and long-held elite-status toehold in OnePass is about to be subsumed into a mega-airline. This cannot be good, I think.


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