That wheezing noise you hear -- followed by the pop-pop-pop of tiny explosions -- is the sound of trial balloons being launched by the airline industry, only to be quickly shot down. Wait -- do I hear more wheezing? Look out below!
It's the same old story: fuel prices are insane.
Even more insane are the anticipated airline industry losses for this year; analysts at J.P. Morgan expect oceans of red ink, perhaps as much as $7.2 billion. In the meantime, the airlines (with the occasional assistance of the government, aviation entities and investors) are busy throwing up any ideas they can come up with to try to escape the horror show they're currently starring in -- call it "Indiana Jones and the Temple of Skyrocketing Jet Fuel" or "Raiders of the Lost Profits." The analysts at J.P. Morgan invoke an even grimmer movie title: they began their recent airline industry report with the words "There will be blood."
There have been gestures -- mostly symbolic -- which is another way of saying, "mostly worthless." You know the kind of gestures I mean: politicians saying, let's drop fuel taxes for the summer, or Congress voting for a temporary halt to depositing oil in a national reserve (talk about a drop in the bucket). After the reserve vote, one congressman suggested it would have as much effect as if all the legislators decided to "clap our hands three times and say, 'down prices, down prices!'"
So, how are the airlines handling the high costs of fuel? The old-fashioned way: a series of price hikes here, a sprinkle of fuel surcharges there -- but it's not enough to cover their losses. At the same time, there's a very real fear that if there are too many price hikes, airline passengers will stay home this summer (unless they were one of the folks lucky enough to take advantage of last week's "clerical error" by United -- which resulted in tickets priced at up to $130 off).
OK, so the airlines need new ideas -- and that's where the balloons come in.
One of the most left-field balloons we've seen recently is "domestic airline anti-trust immunity" under the guise of an "alliance." It's pretty much what it sounds like: a pair of allied airlines could collude on prices and flight schedules without penalty.
Now, such alliances between a U.S. carrier and a European airline have been around for a couple decades -- Northwest and KLM is one example -- but for two domestic airlines to have such an arrangement on domestic routes and pricing is unprecedented. And yet, that's the sort of thing media reports suggest United and Continental would like to try (in addition to merging with someone else): you might call it, getting the benefits of a merger, without the mess.
Mess? Well, there are all those heavy integration costs, not to mention personnel and labor problems, and on and on. It's good for the airlines, but not so great for the passengers; that's because, whether you call it a merger or legal collusion, it still means less competition, and that's never good for airline ticket prices or the flying public.
You also have to wonder what goes through the minds of executives at British Airways, when they hear about anti-trust immunity; last year the airline was fined a whopping $546 million for colluding on fuel surcharges with Virgin Atlantic (Virgin escaped fines since the airline came clean with authorities).