Tectonic plates of the airline industry are shifting.
Airlines in the US are in a crisis situation, we are looking at two possible liquidations by the end of the year. If this happens it will make the Internet meltdown look like a Sunday picnic. Thousands of people with families, homes, mortgages will be out of jobs which then can turn into personal financial crisis sending a ripple effect through the economy.
Structural changes going on in the business world that adversely affects airline traffic. The hub-and-spoke system is probably obsolete and point-to-point maybe the future of air travel. Market segments may include the low-cost budget operations like Southwest and high end like the old Pan Am that served dinner on real China or nowadays fractional jets.
I have noticed at the local airport a lot of the 22-23 year old flight instructors who were on the airline track have disappeared. They probably realized that they we not going to be hired by a major airline anytime soon and did not want to be CFI’s forever and moved on. Becoming a CFI takes years of hard work and $30-40K of earned after tax money. Moving into a major airline slot for the $100k plus income is a strong motivator/sustainer, without those slots I can’t blame the kids for looking for other careers. A major US GA flying magazine recently stated that major airlines will not recall pilots for 5-7 years and may not have new hires for 7-10 years, and that may not include any liquidations factored in.
All of this cost costing is basically window dressing. I have worked a major company that went through Chapter 11 (non-airline) and the new ceo stated in a meeting that “we cannot cost cut our way to profitability.” With losses of 382 million a month 70 million in savings helps but it will not solve the problem.
A looming Gulf war will suppress airline traffic like it did in 1991 and will cause further losses. Many corporations have cut back on travel and rely on conference calls and Internet email rather than flying out for face-to-face meeting at full business fares.
Changing into a low cost carrier like Southwest is a possible solution, however, there is little time to do this and the major obstacle is changing the employees. The aircraft and facilities can be changed overnight. Changing people and corporate culture is one of the hardest things to do as people resist change. At major corporations there is an “institution think”, “we never done it that way before”, etc. is an example of what change agents are up against.
UAL needs a strategy, the ceo must articulate the strategy to the employees, and the employees must believe in the strategy and feel they are part of it.