Jaunted

Fueling Paranoia

4/13/2006 at 2:18 PM
Tags: Airline Analysis (all tags)

The news is grim this week from the world of airlines. From the struggle of low-cost carriers to compete with rejuvenated legacy airlines, to possible strikes at others, it's hard to say when the outlook will ever be rosy for the industry. So what else is there to do other than keep on expanding and focus on branding, right?

Well, that's what JetBlue is doing. Everyone is hurting from increased fuel costs--even Southwest, who heavily hedged  their purchases of fuel back when oil was about $30 a barrel--since hedges eventually run out. JetBlue announced this week that they will begin flights from JFK to Charlotte and Raleigh. Both are huge hubs; Charlotte for US Airways, Raleigh for American. JetBlue may not be ready for that kind of competition, but they're diving in headfirst nonetheless.

Many of the low-cost carriers are moving into tough markets because they are desperate to find additional revenue. Southwest is looking for gates in Dulles and Philadelphia, which is a serious turnaround from an operator whose only presence in the New York City area is at Islip airport. Still, the LCC's are likely to start reevaluating where excess capacity can be trimmed very, very soon if this new strategy doesn't work.

Delta, meanwhile, is facing serious pilot problems; they are negotiating with their pilots, asking them to take an 18 percent pay cut, which amounts to $305 million. If they don't agree, the pilots could strike as early as Tuesday. Where do we stand in this labor dispute? Let's just say that a lot of that money could come from executive pay, and that the pilots took a 32 percent pay cut, or $1 billion, in 2004. Delta needs to look elsewhere for that money. Maybe getting rid of Song wasn't such a good ideal after all.

[Image via yuzu/Flickr]

Related Stories:
·   Delta Stays Quietly Hopeful [WaPo]
·   Cost Advantage of LCCs Eroding [Reuters]
·   Carolina Blue? [Today in the Sky]
·   Previous Airline Analysis [Jaunted]