The Brancatelli File
TO SEE THE FUTURE
BY JOE BRANCATELLI
October 7, 2004 -- The rush of events in the business-travel world since 9/11 has been unprecedented. Every day brings another security crisis, another Big Six airline making another gigantic blunder, another low-fare carrier remaking the face of travel and another out-of-left-field development that no one saw coming.
So that's why, this week, I think it may be useful to look backward. I've churned out something like 140 Brancatelli File columns since JoeSentMe.com launched just after that horrifically dark day of 9/11. I've produced about as many Tactical Traveler briefings. Almost any one of them are worthy of excavation to see what we were thinking and what was happening at that particular snatch of time during these last three years of chaos, fear, anger and constant upheaval.
But I've taken the columnist's liberty of choosing three to re-examine today and update because they reflect important trends that continue to remake our lives on the road. These columns and the updates span three crucial areas of business travel now: the politics of airline security; the endless battle between the recalcitrant Big Six and the more nimble alternate carriers; and the stark financial condition of the major carriers.
THE CIVIL WAR OF THE AIRLINES
More than two years ago, a pair of events were showing exactly how the Big Six were trying to destroy any carrier that did not do business in the same old way with the same old Byzantine fare structure. My column, The Civil War of the Airlines, detailed the Big Six' reaction to America West's decision to simplify its fare structure and American Airlines' reaction to JetBlue's move to open a hub in Long Beach, California.
As you surely know by now, America West survived the vicious attacks unleashed on it by the Big Six. In fact, America West's simplified fare structure almost immediately returned the airline to profit, a development that seemed to infuriate the Big Six, who have refused to make the same changes and have consistently insisted that their convoluted pricing has nothing to do with their parlous financial situation. And while America West said this week that it is likely to lose money in the last six months of this year, the carrier is in much better shape now than before it fixed its fares and it is positioned to survive long after several of the Big Six disappear.
And another shoe dropped this week: American Airlines surrendered to JetBlue on routes out of Long Beach, an airport where takeoff and landing slots are controlled by local ordinance. After bullying Long Beach authorities to give it some of the slots that JetBlue had legally claimed two years ago, American launched its own flights from Long Beach, including nonstops to New York/Kennedy. For more than two years, American and JetBlue fought over the JFK-Long Beach route, which is one battleground in the increasingly bitter war over transcontinental service between the Big Six and the alternate carriers. American had never served New York-Long Beach in its 50 years of transcontinental flying until JetBlue launched its route. Effective November 1, American will drop the flights, bested again by JetBlue.
And here's an interesting sidenote: American Airlines launched Kennedy-Phoenix nonstops last year to harass America West, which had begun its own transcontinental flights from Kennedy. But JetBlue launched its own Kennedy-Phoenix flights last month and American has now surrendered in this market, too. American drops its Kennedy-Phoenix flights on November 1.
TWO WORDS ON SECURITY: TOM DELAY
Just 30 days after the 9/11 terrorist attacks, the nation had already bailed out the airlines to the tune of $5 billion in direct grants but had yet to take control of airport security. My column on October 11, 2001, explained why: Tom DeLay, the Republican whip in the House of Representatives. Even before 9/11, DeLay was a polarizing figure, but his actions immediately following 9/11 were unconscionable. He was also a disgrace to all honorable philosophical Conservatives: He engineered the raid on the nation's tax coffers to give grants to the nation's privately owned airlines, yet he refused to see the national security threat at the nation's airports. His fellow Republicans eventually abandoned DeLay and voted to federalize airport security.
All this is relevant because DeLay, now the House Majority Leader, has been publicly rebuked by the House Ethics Committee for the third time in 10 days. All three of the criticisms were unanimously endorsed by the committee, which has five Republican members and five Democratic members. His other lapses--linking political donations to legislative favors and trading a vote for a political endorsement--are thankfully not within the realm of this column. But all frequent flyers need to know about DeLay's third infraction: He sent the Federal Aviation Administration on a wild goose chase during a Texas political dispute.
According to a report from the Transportation Department's inspector general, DeLay's request to locate a plane carrying protesting Texas legislators out of state set off a search that spread over eight hours and involved at least 13 FAA employees. The ethics committee concluded DeLay's actions were an improper use of government resources for political reasons. Moreover, the committee said, the "invocation of federal executive branch resources [the FAA] in a partisan dispute before the state legislative body...raises serious concerns."
DeLay dismissed the Ethic Committee's three unanimous condemnations as partisan politics.
SURVIVING THE BIG SIX CHAOS TO COME
A column I posted in the dog days of this past August suggested some practical actions you could take to protect yourself against "the chaos that is finally beginning to completely overwhelm the Big Six."
I regret to tell you that the chaos is going to be even worse than I predicted in the summer. The revenue picture at the Big Six in August and September was much worse than anyone imagined and the endless spiral in oil prices is squeezing them further. And facing the usually weak fourth quarter and the routinely disastrous first quarter, the Big Six are now admitting to themselves that the financial string is about to run out.
And here is a scenario that no one, not even your humble columnist, could have imagined: It is possible that all six of the Big Six could be in bankruptcy by the end of the first quarter of 2005. With very little revenue coming in, oil prices running amok, the slow travel periods ahead and the inevitable national recession that has been the result of every oil-price shock in the last generation looming, the Big Six carriers are simply out of non-bankruptcy options.
I have a sound bite joke line about this particular all-fall-down scenario: The Big Six are on Route 66 to bankruptcy. But this isn't funny anymore for a few reasons: The Big Six refuse to do anything to correct their trouble other than whinge about the low-fare competitors and try to beat more concessions from their employees. They adamantly refuse to fix the fares and create a product that would justify their need to charge more. And then, as signaled by United Airlines last month, they are going to try to dump their employee pensions on us, the taxpayers who indirectly pay whenever a company defaults on its retirement obligations. In other words, whether we want it or not, whether we agree to it or not, the Big Six will probably become wards of the state and the American taxpayer.
We're certainly going to have to talk about that unhappy scenario in the weeks and months to come.
This column originally appeared at JoeSentMe.com.
Copyright © 1993-2004 by Joe Brancatelli. All rights reserved.