Ceo Doug Parker Finds Causes For Optimism

TheNewLowFare

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Aug 31, 2005
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Airline exec finds causes for optimism
By Chris Walsh, Rocky Mountain News
October 25, 2005

LAS VEGAS - Nauseatingly high jet fuel prices, intense competition, huge financial losses, too many planes flying too many routes, bankruptcies . . . now hurricanes.

Is there anything positive about the airline industry?

Actually, yes.

Many of the nation's largest airlines have cut back on domestic flights, helping carriers regain some control over rock-bottom fares by taking capacity off the market.

Low-cost airlines, some of which remain profitable, are growing and forcing their larger rivals to cut expenses, leading to a leaner and meaner industry.

And, with the recently completed merger of America West and US Airways, industry consolidation has begun, which will further help lower capacity.

"I'm actually bullish on the industry," Doug Parker, chairman, president and chief executive officer of US Airways, said during a panel discussion Monday at the Las Vegas World Aviation Forum. "Where we are today is indeed in a restructuring period. The reason I'm bullish is because capacity is coming out. I think we're headed into further consolidation and less capacity."

Parker and other industry experts spoke on the first day of the three-day forum, an event that brings together airline industry executives, government officials, consultants and analysts.

Parker said the larger, older carriers - including United, the biggest airline in Denver - continue to scale back on domestic flights as they try to lower costs to compete against discount carriers such as Frontier, JetBlue and Southwest.

All the legacy airlines are essentially "going to be low-cost carriers before it's said and done," Parker said. "The legacy airlines will be smaller, with fewer hubs, and there will be consolidation."

One industry expert, though, disputed the commonly held assumption that the industry has too much capacity. Rather, he said there are too many higher-priced seats, which is why discount carriers offering cheap fares are able to lure more and more passengers.

"There's still too much high-priced capacity in the marketplace," said Hubert Horan of GCW Consulting.

Others said the airline industry suffers from bigger problems, such as variable demand, high labor costs and government intervention that props up failing carriers.

And airlines can't seem to stay out of bankruptcy.

Although US Airways recently emerged from bankruptcy through its merger with America West, two more large carriers - Delta and Northwest - entered Chapter 11 this year.

United has been in for nearly three years, although it expects to get out in February.

"Bankruptcy is just endemic in this industry," said Steve Martin, assistant director at the U.S. Government Accountability Office.
 
that cracks me up, as the expert plops down his $59 to cross the country he proclaims he cant understand why airlines cant stay out of bankruptcy.