June 17, 2009 -- 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.
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.)
Would Airline Bailout Lead to Other Bailouts?
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.
But why stop with lodging? It hasn't been easy getting behinds in seats nor on barstools of many restaurants, either, but deals are doing some good. Waiter: "Care to order, sir?" You: "Yes, I'll have the dinner-and-a-movie special." Waiter: "Very good, sir."
And why stop at hotels and restaurants? Sure, Disney theme parks are hanging in there, but not even the new "Terminator: Salvation" ride could save Six Flags from filing for Chapter 11 bankruptcy protection.
To be fair, though, bankruptcy can be a good thing. Why, just a few years ago, we saw a number of airlines go through the process, including Delta and United, only to emerge better and stronger.
OK, then. What about Uncle Joe's sea shell souvenir shop in St. Pete? It hasn't been doing so hot, and, well, you see what I mean. 'Tis a buttery slope, that a travel bailout must follow.
Good News for Airlines
Hey, here's an idea. Maybe the airlines don't really need that bailout (although I'm sure many wouldn't turn one down).
There are a couple of interesting things going on, outside the fact that many airlines are cutting routes. Several dozen new routes were launched worldwide in the last week alone.
Why, a week ago United Airlines put out to bid 150 new aircraft (an estimated $10 billion) they want delivered in the next two decades. Plus, Virgin America added five new flights a day from Orange County, Calif., while Allegiant Air added 13 routes. And don't forget that Southwest begins service to LaGuardia later this month, while it and JetBlue will be offering more flights in and out of Boston in September. Good signs.
For fliers, a good sign is the continuing bargains. But scoop up these deals while you can; once the airlines get their acts together, they'll disappear.
And maybe more airlines will disappear too, because of mergers. Some say the only future for U.S.-based airlines is to merge, merge, merge. I'm not so sure about that. Suppose we wind up with just two airlines. Not much of a choice, is it?
You tell me. If we do go merger crazy, which of the airlines would you vote off the island? But let's not ask the employees at British Airways. I'm pretty sure they're not in the mood for games right now.
This work is the opinion of the columnist and in no way reflects the opinion of ABC News.
Rick Seaney is one of the country's leading experts on airfare, giving interviews and analysis to news organizations, including ABC News, The New York Times, The Wall Street Journal, Reuters, The Associated Press and Bloomberg. His Web site FareCompare.com offers consumers free, new-generation software, combined with expert insider tips to find the best airline ticket deal.