Sunday, July 26, 2009

Green Shoots of Recovery?

After housing and automobile manufacturing, travel has been hit about as hard as any industry in America by the Great Recession. Airlines in particular are hurting, hammered by weak consumer demand, volatile oil prices and fears of a surge of swine flu come fall.

The most recent financial results, taken from the second quarter of 2009, show what might be - in the current phrase - the green shoots of recovery. That is to say some airlines actually made money in the generally dismal second quarter; not many, and they didn't make much, but any profit is cause for cautious optimism at this point.

Two of the six U.S. majors made money: US Airways, with a modest $58 million profit, and discount leader Southwest Airlines, with just a nudge more: $59 million. There were also money-makers among the smaller U.S. carriers: Alaska Airlines made $29.1 million, JetBlue Airways recorded a profit of $76 million and AirTran eked out a $78.4 million profit.

True, these gains were more than outweighed by losses at four of the six U.S. majors: Minus $213 million at Continental Airways, $257 million in losses at Delta Air Lines, a whopping $323 million shortfall at chronically ill United Airlines and an even more whopping $390 million loss at American Airlines, which announced nearly simultaneously that it will raise fees for checking bags for most economy class fliers on domestic routes.

Starting Aug. 14, travelers on American will pay $20 for the first checked bag, up from $15, and $30 for their second checked bag, up from $25. First-class, business-class, full-fare economy and frequent flier club members won't be charged. This fee rise is no coincidence, as loss-making airlines are finding adds-ons like these to be reliable revenue streams at a time when carriers can't raise fares as much as they'd like to for fear of further alienating customers.

What to make of this decidedly mixed-bag of financial results? Just this: Airlines have a long way to go to return to solid profits, but a start, however tentative, has been made. Air travelers have got to hope a recovery sets in and quickly accelerates, so airlines have money to restore slashed frequencies and routes, buy new aircraft and go back to bigger planes. Until they do, fewer, more crowded planes, fewer non-stop flights and ever-tinier aircraft with worrisome safety records will continue to be the new normal, with all the discomfort that implies for travelers.

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