Three Dominos?

Apr 04 2008 Three Dominos? BY admin TAGS Airlines

 

domino.jpgSo far this week two U.S. airlines have filed for bankruptcy: ATA and Aloha. Both are (were) small, low-cost niche carriers. You've probably never heard of them, but their collapse won't go unnoticed in the industry. Consider the fact that ATA was a code-sharing partner with Southwest Airlines. Southwest now has to scramble and deal with the aftermath. But wait, there's another: Champion Air says it's closing shop on May 31. The small charter company is based in Minnesota.

 

For the past several years low-cost carriers have presumably had an advantage over the legacy airlines: low business cost and cheap fares. But the high cost of jet fuel is putting the pressure on ALL the airlines. This week's bad news could foreshadow things to come.

 

Meanwhile, Reuters reports that, "Northwest Airlines Corp will park aircraft and cut domestic capacity by an estimated 5 percent later this year and take other steps to counter sky-rocketing fuel costs..." And late last week Allegiant Air announced service cuts in several of its origination cities.

 

If there's any good news to report (from the customers point-of-view), it's probably a story from Reuters that says, "The rapid pace of air fare hikes this year may be slowing as airlines brace for weaker demand." But wait, there's a flip side: "...their need [the airlines] to pass on fuel costs to travelers through new fees remains greater than ever." This flip side may be in play in the bankruptcies.

 

Against this backdrop Josiah wants to know if I have any thoughts on yesterday's announcement by John Q. Hammons that he plans to build a hotel at the airport being built south of Branson...

 

Well, as I've written several times before, we wish that airport best wishes and good luck. In the current aviation economy it's going to need an abundance of both. Short of subsidizing an airline to fly there, it's hard to imagine how an airline could be persuaded to fly into an unproven market. If subsidies are paid the question them becomes, how long can they be paid? Keep in mind, though, that Mr. Hammons doesn't do anything without a plan, so perhaps some private business plans are in the works that could tip the scales in the airport's and Hammon's favor.

 

Josiah also want to know if there are any plans to build hotels on West Chestnut, near the entrance road to the new terminal? I haven't heard of any, but I'm not a good person to ask about that.

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