Gimmicks Airlines Might Try to Save Money

May 21, 2008 — -- 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).

Wait, what's that? Pop! Another balloon down, at least in the opinion of some: I just saw a report from Merrill Lynch that mentions "domestic anti-trust immunity" in one breath, and "wishful thinking" in the next.

However, we still have the foreign ownership balloon up there somewhere. This got some attention last week during U.S.-European Union talks, when a State Department official proposed a deal to sweep away the so-called "global spider's web" of airline ownership rules. That this proposal took the Europeans by surprise is an understatement; thunderstruck might be nearer the mark.

I only wish I could have seen Sir Richard Branson's face when this matter was broached; you will recall he was put through a two-year-long "wringer" just to get his Virgin America into the air (but of course, as always, he will survive and thrive).

Still, what to make of this? I met with Deptatment of Transportation and FAA officials last week (at a unique invitation-only press conference for air travel bloggers only); I was told the matter of foreign ownership was a very sensitive subject, and there were a lot of concerns about it in some quarters because of a potential for job losses. Hardly a ringing endorsement for this particular balloon, but it seems to be still bobbing along -- for the moment, anyway.

So, the ideas are out there, and I am sure we'll see more launched in the summer days ahead, but I'm more skeptical about meaningful change, at least in the short term. I'm afraid all we'll see in the coming weeks are more and more price hikes and fuel surcharges -- at least until the public says "enough," and decides to stay home -- and, maybe just go to the movies, instead (and since we all need a laugh these days, you might want to skip "There Will Be Blood" in favor of "Airplane!").

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.