Does The Sun Shine More Brightly?

Are things finally looking up for the airline industry? Delta—though operating in bankruptcy—actually made a profit in a recent month, airplanes are flying with more seats full at higher fares, capacity is down, and even the legacy airlines are looking better for the future. Dare we hope? Interestingly, The Economist, one of the world's most respected magazines, predicted several months ago that this would happen. In fact, it predicted that the airline industry was on the edge of a long and prosperous period. I was floored, but have learned to pay attention to that magazine, so did not snort derisively. Glad I didn't. Basically, The Economist then, and others now, seem convinced that the industry has, finally, made some real changes. For one big thing, they have finally started cutting capacity.   According to the Air Transport Association (ATA), "All of the traditional network carriers have simplified and shrunk their fleets. Preliminary year-end 2005 figures show that American, Continental, Delta, Northwest, United, and U.S. Airways had a combined mainline operating fleet that is 22 percent (759 airplanes) smaller than on June 30, 1." Furthermore, ATA reports, "for now, airlines are simply following the money. That is smart business, as long as they are putting the right number of seats in the right markets." Not only that, but "labor productivity has surged 30 percent. As of January 2006, network carriers alone had shed 165,000 jobs, a 37 percent reduction. Carriers also have reduced costs by improving fuel efficiency. Fuel efficiency has risen 18 percent since 2000. The airlines also have reduced distribution costs, closed facilities, and automated a number of customer-service functions." Those are the "real" changes that impressed The Economist. They impress me, too. It’s probably a bit early to be shouting "let the good times roll," but, hey, it surely is good to have a bit of good news to report! We would love to post your comments. Just check the comment box at the top of this column.