Airline Industry Losses and the Transcontinental’s Golden Anniversary

Locations in this article:  London, England Los Angeles, CA Seattle, WA

Plane in the cloudsThere was lots of stuff going on in travel news last week, and most of it was bad, namely that every airline has reported their quarterly earnings.

Continental Airlines took in a $179 million charge in the fourth quarter and $234 million in charges for the whole year.

And here’s another surprise: Southwest Airlines announced the second consecutive quarterly loss—their first time ever—even though they have a full year profit.

Southwest is in a better position than a lot of other airlines to weather the storm, but they have basically put their growth on hold. According to their CEO, they have suspended growth indefinitely, they are cutting back their orders on new planes, and cutting some routes. This is not a good thing, but it’s happening.

To give you an idea of the impact of this—not just of Southwest, but of all the airlines—the airlines of this country in the last five months, have parked, in the desert, more than 500 planes. That’s the equivalent of a single major airline going out of business.

Listen to the impact on this: Traffic at O’Hare airport is down to its lowest level in 15 years. Does that mean O’Hare is actually going to work? Is there a silver lining there? Maybe, maybe not, but they even have a new runway there so maybe it will work.

So here’s the good news: Yes, the economy is in the dumper, yes airlines are cutting back capacity and pulling flights and canceling routes, but do you want to travel to Seattle? Southwest Airlines is offering a 50 percent reduction in airfares. Princess Cruises has two-for-one deals on 200 European or Alaskan sailings. It’s their high season and they are offering two-for-one deals now. What does that tell you?

United AirlinesBottom line is there are so many different sales right now. I’ve seen one-way tickets being offered—although not by United, which is still hung up on that Saturday-night stay deal because they still haven’t gotten the memo. If every other airline is offering one-way tickets, what makes you think I’m going to buy a heavily restricted, round-trip ticket requiring me to stay over a Saturday night?

If you want to go to London from Boston, British Airways will give you round-trip airfare and two nights at a hotel for $515. Last time I looked at a hotel in London it was $515 a night. So things are changing.

It’s a buyer’s market and it will continue to be so through May. When you look at the deals offered even in the high season, you’re looking at airlines, hotels, cruise lines, resorts that are desperately trying to generate cash now, and figuring out that they’ll deal with it later. Norwegian Cruise Lines is offering you a $500 on-board credit that you can use until the year 2011 if you book now—I think Bernie Madoff might be on board because you’re basically giving them a loan. They are doing anything they can to generate cash right now.

One other thing I want to talk about, especially for people who travel between Los Angeles and New York as often as I do, is that this past weekend was the 50th anniversary of the first “transcon.”

On January 25, 1959, American Airlines flew the first transcontinental flight on a Boeing 707. And they are still doing it. You know what’s changed in 50 years? Frequency.

United, American and Delta (to a certain extent) have a lot more flights going, obviously. And you’re flying a little bit slower then you were 50 years ago because they’ve slowed planes down to save fuel, but it’s still the same premium, movie-star flight.

And lastly, if you are headed over to China, here’s a piece of good news: Believe it or not, they have been opening up hotels at the rate of two per week in China. You know what that means … room glut. Starting next month hotels are going to be on sale in the entire country of China. It will be a buyer’s market and now is the time to go, when all of the crowds have left.

The bad news is the factories have started producing again, the smoke will get in your eyes, and you better wear a hazmat suit. But at least the rooms won’t be expensive. Get ready for that because you will see deals you wouldn’t believe.

By Peter Greenberg for Peter Greenberg Worldwide Radio.

Read more from Peter’s Travel Detective Blog here.

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