Would you work for free?
That's what British Airways is asking its employees to do. Work for free. To be precise, the airline has requested that all its workers -- from pilots to management to mechanics -- do their jobs for up to four weeks without a paycheck. The CEO of British Airways says they need to do this because the airline is in "a fight for survival."
BA's employees are not happy. Understandable, but what a perfect example of what's happening throughout the airline industry. It's in trouble -- try $9 billion worth of trouble. That's the latest estimate of worldwide losses for the industry during this year alone. And that figure could go higher.
So it's not surprising that some people are saying, time for a bailout. With our tax money, of course. Well, is it time?
It kind of goes back to the ol' "too big to fail" argument. We recently heard that often enough during the travails of the Big Three automakers. And, yes, the airline industry is big. Not quite as big as the auto companies, which employ more than 1 million workers. But U.S. passenger airlines employed about 408,000 last year, down from more than 523,000 in the year 2000.
And, yes, the airlines are hurting. Internationally, the lucrative first- and business-class passengers -- the foundation of legacy airline profits -- plunged almost 20 percent in March, while profitable domestic business travelers had their wings clipped by recessionary budget cutbacks. Even worse is the number of airlines that have disappeared in the past 18 months: the New York Times puts that figure at an even 30. Goodbye, Aloha, goodbye, Eos, goodbye, ATA …
For the most part, the oil crisis killed them. But if you think that's over, done, kaput, think again. Notice those prices creeping back up? Oil futures have been hovering above the $70 a barrel mark, double the price from early February of this year, despite the fact that some analysts say it's unjustified. (The funniest thing I've read on the subject comes from analyst Tom Kloza, quoted in the Los Angeles Times: "This rally [of oil prices] is like that stuff on Donald Trump's head. It's all froth. It's just not real." Now that's what I call a visual.)
Anyway, maybe the airlines do need a bailout. Some of the signs: More capacity cuts are coming as soon as the kids head back to school; airlines are shoring up their cash positions in preparation for the worst; and even some airline CEOs are complaining that there are too many bargain seats.
Bargains? You bet. Over the weekend, some airlines were offering tickets to Asia at roughly 50 percent off or more. And as I write this, I see deals on summer flights from Los Angeles to Tokyo for $590 round trip (includes all taxes and fees), plus flights from Chicago to Shannon for $448, New York to Zurich for $483, and Seattle to London for $500. Again, these figures are round trip with everything included.
So, sure, maybe the airlines want and need a bailout, but heck, who doesn't? Well, let's stick with the travel industry. should we bail out hotels? Some are having immense difficulties filling their rooms, especially the luxury palaces. Just look at the swanky St. Regis in Dana Point, Calif. All 400 rooms of it are now facing foreclosure.