Thursday, October 09, 2008

At United Airlines, With 4th Quarter Capacity Already Down 16 %, More 'Adjustments' May Be Coming

As I said the other day, don't buy the airline PR palaver about the size of capacity cuts ahead in the domestic airlines. They're going to reduce the air-transport system even more than they've been saying.

United Airlines is already down 16 percent domestically for the last three months of this year, its vice president for industrial relations, Kathy Mikels, said at a Calyon Securities conference in September.

In Sao Paulo yesterday, United chief executive officer Glenn Tilton told ATWOnline that "more adjustments could be needed" as United lays off workers (7,000 in the current round) and assimilates the benefits of lower oil prices to shrink its operations and wheedle federal approval for antitrust immunity on select code-share markets with Lufthansa, Air Canada and Continental.

"Adjustments," of course, is corporate Goodspeak for "cuts."

Antitrust approval in select code-share markets means "OK to fix prices and undertake quasi-mergers on lucrative routes without all the costs and legalities of an actual merger."

Across the board, airlines are seizing the current economic crisis as a reason to slash as much capacity from the system as possible.

There is an analogy here, by the way, to the U.S. regional newspaper business. Gannett Newspapers, for example, are famous for slashing costs and jobs and allowing circulation to fall to the level where, readers be damned, the highest sustainable advertising revenue can be squeezed at the least possible cost in a monopoly market. The result was newspapers that had no news in them, but enough advertising to ensure short-term high profit margins. In a monopoly market.

That's one thing, if we're talking about the Bumbutt Bugle-Journal.

It's quite another when we're talking about the dismantling of a big chunk of a vital national transportation system.

And we should be talking about that, soon.


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