- The Washington Times - Thursday, December 30, 2004

ASSOCIATED PRESS

The busy holiday travel period is supposed to put a smile on the face of the airline industry. Instead, it got a black eye as payback for a few severe customer-service blunders.

The computer meltdown that forced a Delta Air Lines-owned regional carrier to cancel all its flights on Christmas and the US Airways Group Inc. holiday staffing problems that resulted in a 10,000-bag pileup in Philadelphia compounded the financial bruising that large carriers suffered all year at the hands of their small but growing lower-cost rivals.

For starters, the delays — whether caused by computer, labor or weather problems — add to the cost of doing business. That is something US Airways, Delta Air Lines Inc. and other major carriers can ill afford at a time when jet fuel prices are soaring and fare levels are too low to cover their operating expenses on a good day. Stranded passengers often are given lodging, meals or seats on other airlines, while employees must be paid overtime.

Perhaps more troublesome for the hobbled industry going forward, analysts said, is the public relations damage caused by the holiday-travel snafus — the latest being a Northwest Airlines flight from Amsterdam to Seattle that lasted 28 hours, in which food and water ran short and the toilets stopped working. The delay was caused by fog, mechanical glitches and regulations that limit the number of consecutive hours that crews can work.

“We’re finally seeing the big guys getting closer to cost parity with the low-cost carriers, and so we’re entering a phase where the battleground now is going to be on customer service,” said Kevin Mitchell, who runs the Business Travel Coalition, a Radnor, Pa., advocacy group.

To the extent consumers see financially distressed carriers as staffed by workers who are grumpy about wage and benefits reductions, carriers such as US Airways, Delta and UAL Corp.’s United Airlines face another disadvantage to fiscally fit carriers such as Southwest Airlines Co. and JetBlue Airways Corp., Mr. Mitchell said.

He said the baggage fiasco at US Airways was by far the worst incident of the past week and that it will damage the image and future bookings of the bankrupt Arlington carrier, which has said it could liquidate early next year without more concessions from employees.

But there also could be ramifications for the rest of the U.S. carriers, which lost more than $5 billion over the first nine months of 2004 and, with a few exceptions, are not expected to turn a profit in 2005.

“It just adds to this perception that travel is just not what it used to be and is, in fact, getting worse,” Mr. Mitchell said.

US Airways hopes to counter that perception this weekend with help from managers who have agreed to volunteer at the carrier’s hub in Philadelphia, where an unusually large number of baggage handlers and flight attendants failed to show up for work, the airline said, crippling operations already hampered by days of bad weather.

For its part, Delta’s regional subsidiary Comair said it will replace the scheduling system that malfunctioned with one that can handle more transactions.

U.S. Transportation Secretary Norman Y. Mineta on Monday asked the agency’s inspector general to investigate the problems that caused Comair and US Airways to cancel thousands of holiday flights.

Meanwhile, discount carriers are trying to leverage the misfortunes of their larger competitors to their own advantage.

AirTran Holdings Inc. issued a press release Monday titled “AirTran Airways holiday performance sparkles,” in which the Orlando, Fla., carrier’s chief executive, Joe Leonard, thumbed his nose at US Airways by boasting that “our baggage handling performance was exceptional” and that “our crew members went above and beyond the call of duty.”

Southwest and JetBlue took a different approach, but the message to US Airways — we’re coming after you — was equally clear. Both Southwest and JetBlue slashed round-trip fares in markets where they compete with US Airways.

Robert W. Mann, an industry consultant in Port Washington, N.Y., said tension between labor and management was not the only industrywide strain that has been exposed in the past week.

By dangling low fares, carriers have helped revive passenger traffic to levels not seen in several years. But with the surge in fliers, delays on runways and in the skies are increasing and likely to get worse. The bad weather that hit the Midwest just before Christmas — and the labor and technological mishaps that made matters worse — only highlighted the underlying stress in the system, Mr. Mann said.

Even if airlines manage to make it through this New Year’s holiday weekend without the kinds of foul-ups they faced on Christmas, “the delays in the summer of ‘05 and beyond are likely to be just as bad as the late 1990s and 2000,” he said.

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