Airline CEOs Paint Stark Picture for Industry

Leaders of two of the profitable U.S. airline companies painted a stark picture Wednesday of an industry that will have to live permanently with cost-cutting, fierce fare competition and slim profit margins.

"A lot of people believe that what's happening in the airline industry is temporary and that eventually we'll return to the good old days," said Joe Leonard, chairman and chief executive of Atlanta-based AirTran Airlines.

"These are the good old days," Leonard told an audience of close to 1,000 people at an aviation industry conference at the Gaylord Texan Resort & Convention Center on Lake Grapevine. "People who believe this is temporary are kidding themselves."

Leonard and Gary Kelly, president and chief executive of Southwest Airlines, spoke at the conference on aircraft maintenance hosted by Aviation Week magazine.

Southwest, which reported increased first-quarter profits last week, has been profitable every quarter since 1972. AirTran, which will report its first-quarter financial results next week, has been consistently profitable the last several years.

The Internet has given consumers unprecedented ability to search for low fares and permanently destroyed airlines' ability to control ticket pricing, Leonard and Kelly said.

Both executives said that consumer demand for value, in the form of low fares, will not abate and that means airlines must continually seek new ways to reduce costs. Any business that can help them reduce costs will be greeted warmly.

"We love our suppliers," Kelly said, "but we'll love you more if you lower your prices."

Leonard said aircraft maintenance and repair is one area ripe for cost-saving innovations. It took 30 days to completely overhaul a jet engine 30 years ago, he said, and it still takes about 30 days.

"If you could come into my office and guarantee me a 10-day turnaround, and I can get rid of several spare engines, you better believe you'll get my attention and my business," Leonard said.