U.S. Airlines Experiencing Turbulence: Major Carriers

American Airlines The second-largest carrier in the U.S. has also had some of the largest problems and changes this year. Fort Worth-based parent company AMR saw losses of $1.8 …

American Airlines

The second-largest carrier in the U.S. has also had some of the largest problems and changes this year. Fort Worth-based parent company AMR saw losses of $1.8 billion in the first six months of the year. The company posted a net loss of $360 million dollars in Q3 2008 compared to a net profit of $175 million in Q3 2007. Considering that fuel expenses were $1.1 billion higher than a year ago, this loss is relatively modest. Some of the costs were offset by layoffs: more than 400 notices were issued in September.

This is just a small portion of a projected 7,000 full-time jobs—roughly 8 percent of the airline’s workforce—to be cut by the end of the year, according to an announcement made in July. This number includes 200 pilot positions, which naturally means fewer flights.

The carrier will also retire 40 to 45 older aircraft to be replaced in part by more fuel-efficient planes. In April, AA was forced to cancel almost 3,300 flights, affecting roughly 250,000 passengers when 300 MD-80 jets were grounded by an FAA mandate regarding wiring issues. Most of the retired craft will be problematic MD-80s.

The airline has also tried to offset fuel costs by raising fuel surcharges. American Airlines was the first to raise the charge from $130 to $150 over the base fare for domestic flights, but other carriers soon followed. Of the legacy carriers, only Continental rolled back the $20 increase to pressure other airlines to follow suit.

Additional fees: AA charges for all checked luggage. The fee is $15 for one checked bag and $40 total for two. A fee of $100 is applied for each additional bag, up to five. Oversized luggage carries a hefty fee of $150.

American Airlines has also aggressively increased the costs associated with their AAdvantage frequent flier plans. Booking fees carry a $5 charge and, as of Oct. 1, upgrades for one-way flights within North America and to Central America now cost $50 plus 15,000 frequent flier miles. Flights to parts of Asia, Europe and South America carry a $350 fee.

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Continental Airlines

Continental Airlines experienced two bankruptcies in the ’80s and ’90s, but saw strong growth in the ’00s, eventually becoming the fourth-largest U.S. carrier in the first half of 2006. However, like all major U.S. airlines, Continental hit the skids in 2008. There was even talk of a merger with United Airlines in the early part of the year, but Continental pulled out.

By August, Continental had eliminated 2,500 jobs in 2008, a majority of which were voluntarily relinquished by workers offered compensation packages. The airline still plans to furlough around 150 pilots by the end of the year and reduce U.S. capacity by 11 percent.

As another attempt to increase revenue without relying solely on additional fees and surcharges, Continental is one of several airlines, including Delta and Northwest, to start printing advertisements on boarding passes. Some will feature coupons to local attractions, hotels and restaurants. Travelers can opt to print an ad-free pass for now.

Additional fees: As with AA, Continental began charging $15 for the first checked bag on domestic flights Oct. 7. Two checked bags carry a $40 fee. It gets more confusing after that: On non-stop flights, additional bags each carry a fee of $75, but connecting flights carry a $100 fee. Oversized luggage carries an additional $100 fee.

Continental’s OnePass program has no processing fee, but the fee for redeposits and changes has jumped to $150 for travelers not on the Platinum OnePass plan.

Delta Air Lines

Delta officially became the largest airline carrier in the world Oct. 29 when its merger with Northwest Airlines was completed. Northwest was a former “Big Six” legacy carrier and is now a subsidiary of Delta, whose main hub is Hartsfield-Jackson Atlanta International Airport. Read more about Northwest on page 2.

Delta seems to be recovering rather well from a protracted bankruptcy filing that began in 2005, when the company faced a $20 billion debt. The filing concluded last year and the company has since expanded dramatically. In Q3 2008, Delta saw a net loss of only $26 million despite the hundreds of millions of dollars spent over budget on fuel.

Though Delta announced in July that it would reduce domestic capacity by 13 percent, it has added flights between some cities. And as Delta expands its network, it is also expanding some of the perks that it offers travelers. Wi-Fi is available on some of their aircraft for a fee. The company projects that by next summer, more than 300 of their aircraft will have Wi-Fi available for domestic flights.

Additional fees: Yesterday, Delta made quite a few changes to its awards program. Effective Nov. 5, Delta removed all fuel surcharges for SkyMiles and WorldPerks award tickets. These surcharges were instituted earlier this year to recover costs from fuel. Given the financials listed above, the strategy appears to have worked in some measure.

Effective today, Delta has lowered the charges for booking tickets or redeeming award points by phone from $25 to $20 to be consistent with NWA’s fees. Booking online with Delta or NWA is still free online.

Checked baggage fees are a little more confusing for now: For tickets booked on or after Nov. 5 for flights on or after Dec. 5, one checked bag is $15 and two bags are $40 total. However, for all other tickets, Delta’s previous policy still stands: The first checked bag is free, but a second bag is $50.

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