Thanks to Fuel Crisis, Airlines Weather Storm

WASHINGTON, Dec. 7, 2008— -- When travelers find themselves on packed planes this holiday season, it could lead them to believe that business is booming for the airlines.

But holiday travel is actually off 10 percent this year, a sign not only of the troubled economy but also that there could be more turbulence ahead.

Overall, U.S. airlines predict they may lose between $4 billion and $6 billion this year.

"We are starting to hear some reports of advanced bookings being off significantly, and that of course, is a very ominous sign for what we could be looking at in 2009," John Meenan of the Air Transport Association said.

Despite the troubled economy, the airlines are actually in better shape than some other industries, though.

Last summer, when fuel prices soared to record highs, airline carriers were forced to lay off workers, keep planes grounded and slash flights to save money. All the trimming actually helped them, when the economy suddenly went south and they had already made extreme adjustments.

"They traded a fuel crisis for an economic crisis, and if they hadn't cut seats out of the system, they'd be scrambling to do so right now," said Rick Seaney, the CEO of FareCompare.com.

So in this ailing economy, the airlines won't be following in the steps of other businesses reaching bankruptcy.

Travelers can rest assured the airlines won't emulate the automakers and at this point don't seem to be at risk of more bankruptcies. They won't parade up to Capitol Hill to ask for a federal handout.

"The cost of oil removed their strongest argument for asking for aid. They can't go up and say, Mr. Chairman, my costs have gone up 87,000 percent, because their costs have come down," said David Field, U.S. editor of Airline Business Magazine.

However, airlines didn't just make cuts, they added things passengers weren't accustomed to. They added fees for everything from checked bags, to a can of Coke -- all to help cover the rising fuel bills.

Now fuel prices are down, but the fees haven't been eliminated.

Airline Fees 'Are Forever'

"Fees are like diamonds, they are forever. I don't think fees will go away," Field said.

The fees are bringing in hundreds of millions of dollars and airlines say it's money they can't afford to give up.

Airlines are watching lucrative business travel drop as companies are cutting back on travel expenses. Leisure customers flying to vacation destinations are also staying home.

"I think the airlines are terrified of softening demand. I think it's the one thing they didn't count on," Seaney said.

For passengers, the tough economic times can mean good deals, since airlines are now slashing ticket prices to try to entice more business.