U.S. Airlines Experiencing Turbulence: Carriers Page Two

United Airlines United has experienced some turbulence this year. The airline’s fuel costs in Q3 2008 were just shy of $1 billion dollars more than in Q3 2007, resulting in a …

United Airlines

United has experienced some turbulence this year. The airline’s fuel costs in Q3 2008 were just shy of $1 billion dollars more than in Q3 2007, resulting in a net loss of $779 million—a sizeable portion of the company’s assets. In July, the carrier was forced to cancel 329 flights, losing roughly $12 million in combined revenue and operation profit. On September 2008, United’s stocks plummeted 99 percent. Why? Because an employee at an investment advisory firm read a 6-year old article about United’s past bankruptcy and believed that it was current because Google had labeled it with the current date. The stock righted itself, but not before many panicked investors had bailed out their stocks.

United has discussed mergers with both Continental and US Airways this year, both of which fell through initially. However, in June 2008 United and Continental formed an alliance to share their international networks and passenger perks and lay out a commitment to merge pending the the Delta/Northwest merger completed last week. In terms of customer service, this marriage may be an improvement for United passengers: The company has often had one of the lowest customer satisfaction scores in the industry, even lower than US Airways in Q2 of 2008.

Additional fees: United now charges for food and snacks on domestic flights, thought non-alcoholic beverages are still complimentary. Currently, passengers pay a $15 fee for one checked bag and $40 for two, but as of November 10 the fee for two bags will jump to $65 dollars. Additional bags and oversized bags each carry a fee of $125 dollars. United also charges for prefered seat selections.

United charges no processing fee for their MileagePlus frequent flier program. Booking by phone is $25 dollars, but booking online is free. Participants can change flight numbers and travel dates without carge three weeks or more before the flight date. Changing one week to twenty days before the flight incurs a $75 fee. Within less than a week prior the fee is $100. Redeposits and reroutes for domestic flights are $150.

US Airways

Mayday, Mayday! If there’s one carrier on this list at serious risk, it’s US Airways—the smallest of the “Big Five” and the hardest hit by recent fuel price surges.

Ironically, it was US Airways that attempted a hostile takeover of Delta in 2007 as the larger carrier struggled at the tail-end of its bankruptcy filing. Now, after a $1.1 billion dollar fuel bill in Q3, Airways is faced with the biggest quarterly net loss of all major carriers: a staggering $865 million, including $488 million lost through fuel-hedge contracts as prices spiked, then dove.

The company has been liquidating assets to maintain flexibility as it tries to adapt to the current financial situation. New fees are raising much needed revenue, but are likely a main factor in the carrier’s sinking customer satisfaction scores and noticeably fewer bookings.

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The airline is also cutting costs as much as possible. It has removed many in-flight entertainment systems to lighten craft and thus save fuel. US Airways also plans to reduce its fleet and cut hundreds of jobs this year.

Additional fees: It’s BYOB on US Airways. Soft drinks and snacks are no longer complimentary on domestic flights. They have also begun to charge for preferred seats. One checked bag is $15 and two are $40 dollars. Additional bags up to 9 are $100, as are oversized and very overweight bags.

Frequent fliers on US Airways Dividend Miles plan face some serious fees. The standard processing fee is $25 to $40 dollars and redeposits and changes cost $150 for domestic and $250 for international flights.

Smaller carriers crashing and burning

Smaller airlines have been more immediatey devastated by the volatile fuel market. Several of these carriers have already filed for bankruptcy and ceased operations in 2008, including luxury carrier Eos Airlines, a la cate discount carrier Skybus Airlines and 60-year old Aloha Airlines, which had hoped to emerge from a bankruptcy filing with operations intact. ATA Airlines shut down in early April, stranding thousands of passengers without direct compensation. As an exception, budget carrier Frontier Airlines also declared bankruptcy in the first half of 2008, but has continued operations without interruption.

However, there are a few smaller carriers that have held up better than these in 2008. Here are four of them.

Alaska Airlines/Horizon Air

Seattle-based Alaska Airgoup reported a net loss of $86.5 million including special items in Q3 2008. The company saw a $110 million increase in fuel spending from the year before, but it has still manged to expand its services and maintain relatively low fees. Passengers get one complimentary checked bag. A second bag is $25 dollars and a third bag is $50. Oversized and overweight bags carry an additional $50 fee.

The Alaska Mileage plan also has relatively low fees. There is no standard processing fee unless the flight is through a partner airline. There is also no change or redeposit fee if cancelled within three days of booking. Otherwise, a $100 fee is applied. Lastly, there is no fee for booking close to the departure date—a rare policy among frequent flier plans.

Hawaiian Airlines

With the demise of Aloha and ATA, Hawaiian Airlines has become the pimary U.S. carrier serving the Hawaiian islands. In Q3, the carrier reported a slim net income of $6 million. However, HAL is in a tricky position. In a softening economy, a slump in tourism may lead to less operational revenue, and the long flights to the mainland and abroad demand a high fuel budget. The company expanded short haul flights by a much wider margin than its long haul flights in Q3.

Hawaiian charges $15 for one checked bag and $40 total for flights between Hawaii and the U.S. For interisland flights, there is a $17 fee for a second bag each way. For excess baggage, see the company’s website as the fees change according to destination: Hawaiian Airlines Checked Baggage Fees.

In July, Hawaiian Airlines adjusted its HawaiianMiles program for the first time in 14 years. The adjustments were relatively modest, however. Coach flights roundtrip to and from the mainland now require an additional 5000 miles to redeem.

Northwest Airlines

A former member of the “Big 5” and now interim subsidiary of Delta, Northwest has ranked consistently low in customer satisfaction. Most of its fees are now fairly standard: $15 for one checked bag, $40 for two, $50 for overweight bags and $100 for excess and oversized luggage. NWA also charges for preferred seat selection.

Processing fees for the WorldPerks frequent flier program are some of the priciest in the business: $25 for domestic, $100 for transpacific and $50 for other international flights. NWA’s redeposit and chane fees for WorldPerks flights are more forgiving: a flat $50 for either.

Southwest Airlines

Perhaps we have saved the best for last: Southwest Airlines has consistently been the highest rated U.S. carrier for customer satisfaction year after year according to the American Consumer Satisfaction Index and received its highest score yet in 2008. Though SWA posted a net loss in Q3, the carrier has been positioned better than many others during the fuel price surges. Southwest has saved over $3 billion since 1999 through effective fuel hedging. It is worth noting, however, that Southwest’s best hedges will expire by 2012, so the long-term future of the company remains uncertain.

For now, passengers enjoy paying no fees for their first and second checked bag and only $25 for a third. Excess bags up to 9 total and oversized luggage carry a $50 fee. As for their Southwest RapidRewards program, there are no processing fees because rewards are sent to participants automatically. The only drawback to all of this is that Southwest serves shy of 70 locations, so it isn’t always convenient—or even possible—to fly with them.

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