More Capacity Cuts and United’s Big Loss

Locations in this article:  London, England New Orleans, LA Paris, France

Canal St. New OrleansI spent last weekend in New Orleans at Harrah’s New Orleans Casino Hotel. I travel to New Orleans at least once a year.

I was there in 2005 after Hurricane Katrina. Back then, Harrah’s closed on August 28 when the whole city evacuated, and didn’t reopen until February of the next year.

It is really interesting to see how the city is coming back: the French Quarter is back, Bourbon Street is back, the waterfront is back.

The Aquarium is hopping now and the zoo is doing well. But you can still get involved in helping this city get back on its feet.

The Lower Ninth Ward and the St. Bernard Parish continue to need help. They dodged a bullet with Hurricane Gustav, but they are still in trouble.


So the economic meltdown is not trickling anymore—it’s falling hard. As early as this summer, the airlines were talking about how they were going to have to cut capacity as much as 16 percent across the board and they have, but now they are cutting even more.

Airlines are cutting even more service and they are cutting new routes. With the Open Skies treaty between the European Union and the U.S., British Airways launched its Open Skies flight between the U.S. and Europe. Then Air France began a discounted flight from Paris to New York and other major cities. But they recently cut their London – L.A. route.


Hotel signI have been on flights to L.A. that have been packed to the gills, but in the last 10 days or so they haven’t. That means it is a buyers’ market for people who really can travel before the Thanksgiving and Christmas holidays.

You are going to see not only airline discounts, but also huge hotel deals. No one wants to say that they are discounting in the hotel world, but we are seeing huge discounts left and right.

Be careful though because some of those discounts are just stunts. For example, The Boston Colonnade Hotel says they give guests a discount on room rate of 10-20 percent based on the Dow at the closing bell.

Well, lately, I bet you should be able to stay there for free. Besides that you are seeing lots of two-for-one deals or “stay three nights and get the fourth one free” deals.


Speaking of stocks, I never suggest investing in airlines.

As Robert Crandall the CEO of American Airlines once said, no airline has made a profit since the Wright brothers.

But listen to these numbers: Going back a year ago American Airlines stock has fallen 71 percent, Delta 74 percent, Northwest 67 percent, Southwest 71 percent, and United Airlines 91 percent.

United Airlines Old-School LogoThen United did some fuel hedge buying based on the theory that oil prices were going to surge again, but—as we’ve all seen—oil prices have plummeted and United took a $500 million hit.

If you want to buy low and sell high, you might start to look at some airlines that are going to weather the storm. Remember, we don’t look at airlines depending on how much money they make, we define a successful airline by who can lose money longer.

I worry that United Airlines, which has already wrung everything they could out of bankruptcy, will fail in the fourth and the first quarters—which are the toughest to get through. It’s not a coincidence that most airlines go under in March, because they just can’t get enough money to make it to summer.

I am not sure what other cuts United can make. So, if you have any miles accumulated on airlines like United, I suggest you figure out a way to redeem those miles on their partner airlines.

You can do that or you can go to an art supply store, get a picture frame, and hang your miles on the wall.

They are being devalued by the hour and if the airline goes out of business, so do the miles. So either use them or give them to friends.

Because I don’t trust the airlines as airlines, so why would I trust them as banks? Get your points out of there and do it soon.

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