Airbubba
23rd May 2001, 03:06
Not that there was a lot of service to begin with...
This article blames labor and fuel costs, predicts more "consolidation".
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LESS FRIENDLY SKIES: Airlines tighten seat belts
As profits plummet, perks for travelers lose their punch
Nancy Fonti - Staff
Atlanta Journal Constitution
Tuesday, May 22, 2001
At United Airlines, the grapefruit juice was the first thing to go.
No longer offered in United's cabins, the tangy citrus beverage is a casualty of a cost-cutting drive intended to save $200 million this year. Also getting the ax: linens in first class on some domestic flights, hot towels and one of the two movies shown on transcontinental U.S. flights.
"Higher labor costs, fuel costs and softening of the economy have forced us to take these actions to restore the financial health of the company and stability of the company" said United spokesman Chris Brathwaite.
Indeed, slackening demand for business travel and rising fuel and worker costs have big airlines searching for ways to nip and tuck expenses. In the first quarter, the four top U.S. airlines posted large losses, and in the second quarter Salomon Smith Barney expects labor costs to climb 8 percent and profits to fall by 50 percent for the industry.
Delta Air Lines, which reported its first quarterly loss in six years in March, is no exception.
If Delta pilots approve a tentative agreement next month, the related labor costs will shoot up $2.4 billion through the next four years. A new industry-leading mechanics contract at Northwest Airlines means Delta and others will likely raise pay rates for its mechanics this year.
At this point, most cuts in aircraft cabins would probably fly under the radar screens of all but the most seasoned fliers. After reviewing its first-class wine program, Delta found it could trim costs by using up all the wine in stock before launching a new collection. Delta recently also stopped serving Godiva chocolates in first class, in part to cut costs.
The company has delayed some technology rollouts, including its airport check-in kiosks. It has frozen hiring of nonessential employees and stopped paying for security guards in baggage areas to check passengers' bag tags as they leave. It's also stingier with advertising and promotions.
Delta also scrutinizes internal costs with a closer eye. The airline saved nearly $500,000 when it canceled a May leadership seminar for its top 1,000 executives, usually held at a downtown Atlanta hotel.
Department heads are charged with cutting back spending on outsourcing vendors, like printers and graphic designers, by 25 percent.
"Each of our divisions has burrowed down, identifying ways to improve our financial performance," said spokesman Tom Donahue. "That's something we practice continuously, but obviously in this economic climate, we are doing it in a more aggressive manner."
Northwest Airlines, which operates its main hub in Minneapolis, said it is retiring its aging DC-10-40 jets early, which allows the company to skip expensive heavy maintenance overhauls. The airline also is deferring its top executives' merit salary increases until next February.
The new attention to costs arrives as consumer groups and Congress scrutinize how carriers treat passengers.
Airlines, needing the blessings of regulators to merge and acquire each other, can't afford to appear to punish travelers.
"It's not a happy circumstance for the customer because service wasn't all that great anyhow," said Ed Perkins, former editor of Consumer Reports Travel Letter. "But it's understandable why the airlines are doing it, given their financial performance. They're in a real squeeze."
But there's not much left on the table to cut. Delta trimmed most of the fat off its service under Leadership 7.5, a cost-cutting program launched in the 1990s that gained the ill will of customers and employees alike.
"It's bare-bone service no matter what airline you're on," said Atlanta travel consultant Chris McGinnis. "They've become pretty good at keeping the fat trimmed off."
Further opportunities to trim are scarce because two largest costs, labor and fuel, are predetermined.
"There is really not much you can do," said Morgan Stanley Dean Witter analyst Kevin Murphy, who believes higher costs will spur more airline mergers.
"The only thing you can do to find meaningful economy of scale is to allow consolidation."
This article blames labor and fuel costs, predicts more "consolidation".
_____________________________________
LESS FRIENDLY SKIES: Airlines tighten seat belts
As profits plummet, perks for travelers lose their punch
Nancy Fonti - Staff
Atlanta Journal Constitution
Tuesday, May 22, 2001
At United Airlines, the grapefruit juice was the first thing to go.
No longer offered in United's cabins, the tangy citrus beverage is a casualty of a cost-cutting drive intended to save $200 million this year. Also getting the ax: linens in first class on some domestic flights, hot towels and one of the two movies shown on transcontinental U.S. flights.
"Higher labor costs, fuel costs and softening of the economy have forced us to take these actions to restore the financial health of the company and stability of the company" said United spokesman Chris Brathwaite.
Indeed, slackening demand for business travel and rising fuel and worker costs have big airlines searching for ways to nip and tuck expenses. In the first quarter, the four top U.S. airlines posted large losses, and in the second quarter Salomon Smith Barney expects labor costs to climb 8 percent and profits to fall by 50 percent for the industry.
Delta Air Lines, which reported its first quarterly loss in six years in March, is no exception.
If Delta pilots approve a tentative agreement next month, the related labor costs will shoot up $2.4 billion through the next four years. A new industry-leading mechanics contract at Northwest Airlines means Delta and others will likely raise pay rates for its mechanics this year.
At this point, most cuts in aircraft cabins would probably fly under the radar screens of all but the most seasoned fliers. After reviewing its first-class wine program, Delta found it could trim costs by using up all the wine in stock before launching a new collection. Delta recently also stopped serving Godiva chocolates in first class, in part to cut costs.
The company has delayed some technology rollouts, including its airport check-in kiosks. It has frozen hiring of nonessential employees and stopped paying for security guards in baggage areas to check passengers' bag tags as they leave. It's also stingier with advertising and promotions.
Delta also scrutinizes internal costs with a closer eye. The airline saved nearly $500,000 when it canceled a May leadership seminar for its top 1,000 executives, usually held at a downtown Atlanta hotel.
Department heads are charged with cutting back spending on outsourcing vendors, like printers and graphic designers, by 25 percent.
"Each of our divisions has burrowed down, identifying ways to improve our financial performance," said spokesman Tom Donahue. "That's something we practice continuously, but obviously in this economic climate, we are doing it in a more aggressive manner."
Northwest Airlines, which operates its main hub in Minneapolis, said it is retiring its aging DC-10-40 jets early, which allows the company to skip expensive heavy maintenance overhauls. The airline also is deferring its top executives' merit salary increases until next February.
The new attention to costs arrives as consumer groups and Congress scrutinize how carriers treat passengers.
Airlines, needing the blessings of regulators to merge and acquire each other, can't afford to appear to punish travelers.
"It's not a happy circumstance for the customer because service wasn't all that great anyhow," said Ed Perkins, former editor of Consumer Reports Travel Letter. "But it's understandable why the airlines are doing it, given their financial performance. They're in a real squeeze."
But there's not much left on the table to cut. Delta trimmed most of the fat off its service under Leadership 7.5, a cost-cutting program launched in the 1990s that gained the ill will of customers and employees alike.
"It's bare-bone service no matter what airline you're on," said Atlanta travel consultant Chris McGinnis. "They've become pretty good at keeping the fat trimmed off."
Further opportunities to trim are scarce because two largest costs, labor and fuel, are predetermined.
"There is really not much you can do," said Morgan Stanley Dean Witter analyst Kevin Murphy, who believes higher costs will spur more airline mergers.
"The only thing you can do to find meaningful economy of scale is to allow consolidation."