The hope that United Airlines would declare solvency, leaving its long state of bankruptcy, depended on it getting federal loans designed to help airlines hurt by Sept. 11. It failed to do that last week, and, while applying again, goes to the front of the line of legacy carriers that may not survive the battle against their low-priced competition. This contest should make Congress keep careful watch on small airports to ensure that these vital economic links to the world are not severed in the market shake-out.
United, of course, is not alone. Net losses by legacy carriers – the traditional major airlines that travel a network of airports throughout the country – exceeded $23 billion from 2001 through 2003. Added to an additional $1.6 billion loss in the first quarter of 2004, the shortfall exceeds the profits earned in the six previous years.
There are several reasons for this, according to a recent General Accounting Office study on the issue, but the shorthand version is that Sept. 11, the fear of severe acute respiratory syndrome (SARS), the ability of passengers to shop for cheap tickets online and rising fuel costs combine with the higher operating costs of the legacy carriers to force them into the red. While low-cost carriers have been gaining market share, the much larger legacy fleets have been retreating, flying fewer planes over fewer miles.
If the price of your airline ticket can never be low enough, this may not seem like a bad deal – as long as a low-cost operator leaves from an airport nearby. Michael Boyd, an airline industry consultant was in Bangor not long ago, however, and was asked about the prospects of one of the inexpensive carriers coming here. Unlikely, he said, because Southwest Airline, for instance, requires a minimum of 350,000 passengers annually. Bangor International Airport sees only about 200,000.
That could change, of course, if a couple of the major carriers went out of business, but the short- or long-term difficulties a loss of service could cause rural airports nationwide should concern Congress. It is important to note that Mr. Boyd said BIA’s gains in bookings since 1999 and high marks for service standards meant airlines looked upon Bangor as a good place to do business. That is, the airport is doing its part to provide top-notch service.
Regional jets have helped small airports offer more routes than they otherwise could, but the unit cost of flying – for goods or people – from a low-population region generally is higher than flying from a major metropolitan area. Small regions can offset this disadvantage in other ways but they cannot offset a lack of service to key cities. Members of Congress, always interested in helping local airports attract improved service, should be prepared to step in if the financial health of the major carriers threatens to cut off their constituents.
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