The Future Of The Airline Industry

ALEX COHEN, host:

From the studios of NPR West, this is Day to Day. I'm Alex Cohen.

ALEX CHADWICK, host:

And I'm Alex Chadwick. On the show today, a very hard ride for the airline industry. In a few moments, a pilot's perspective. But first, this summer jet fuel costs are up 71 percent compared to last year. That means fares are going up as well. Airlines are cutting back on flights, and when you do travel plan to pay for what used to be free.

COHEN: For example, Delta added as 25 dollar charge for a second checked bag back in March. This week they doubled that price. U.S. Airways announced they'll charge two bucks for a soda in coach. To find out what the future of travel might look like we turn now to David Castelveter. He's with the Air Transport Association. It's a trade organization that represents the airline industry. Mr. Castelveter, thank you for joining us, and some of the things that I've been hearing, is that the current situation is worse now than what they faced after 9/11. How bad is it?

Mr. DAVID CASTELVETER (Spokesman, Air Transport Association): It's very bad. We are in an economic crisis. The airline industry is experiencing its worst financial woes since the year 2002, when we lost 11 billion dollars. We are on course for a loss of anywhere between seven and 13 billion dollars this year, 2008, solely driven by the high price of fuel.

COHEN: So how might this affect the consumer in terms of choices?

Mr. CASTELVETER: It's already affecting the consumer. They are seeing a la carte type pricing, no different than if you go to the movie or the football game, today you're buying transportation from one destination to the next. You're paying for your meal, you're paying for your beverage, you're paying for the right to check a bag, you're paying for the best seat on the airplane. This is an effort by carriers to find ancillary revenue streams that will help them cope and hopefully offset some of these enormous price increases.

COHEN: I know from looking for flights, it seems like there are a lot fewer flights out there to take. Is that actually the case across the board?

Mr. CASTELVETER: Not for the summer, but again the summer is almost over and most passengers have made their reservations, have their tickets and their plans are firm. But as we look into the fourth quarter of 2008, we're seeing capacity reductions of anywhere between eight and 10 percent across the U.S. industry. We've already seen the announcement of 100 airports that will have no commercial aviation service by the end of the year. They're mostly small airports and even the larger airports are seeing reductions in capacity. Los Angeles, Las Vegas, Cleveland, Chicago O'Hare airport, it's affecting consumers and airlines all the way across the United States.

COHEN: Besides cutting flights, what are the airlines doing to try to bring down some of these costs?

Mr. CASTELVETER: Well, they are trying to reduce their fuel burn. They taxi out to the runway on one engine. They fly higher, they fly slower. They're doing everything they can to reduce their fuel burn, their fuel consumption. We've seen nine airlines close their doors since Christmas. No service whatsoever. Out of business. Two additional in bankruptcy through the reorganization process. So, we're focused on survival. We're focused on allowing growth in the industry again, but we first have to bring these prices of fuel down to acceptable and affordable levels.

COHEN: Looking ahead, do we just resign ourselves to the fact that the days of traveling relatively inexpensively are over or is there something that can be done?

Mr. CASTELVETER: Well we think there is. We think if you curb this excessive speculation you can bring the price of a ticket back down to something more affordable. Remember, it was just 10 months ago we were buying fuel at between 60, 70 dollars a barrel. Now we're buying it between 120 and 140 dollars a barrel. So we will stay focused on trying to convince Congress that it needs to do something, and it needs to put its partisan politics aside and do what's in the best interest of the people of the United States, but in the short time and until that happens, customers will have to get used to this new reality. Higher ticket prices. Paying for the services that they otherwise were used to as part of their ticket and less choices in flying as carriers reduce their capacity.

COHEN: David Castelveter of the Air Transport Association, thank you.

Mr. CASTELVETER: It's my pleasure. Transcript provided by NPR, Copyright National Public Radio.