2008's top 10 aviation stories
10:06 PM CST on Tuesday, December 30, 2008
By TERRY MAXON tmaxon@dallasnews.com
A year ago, airlines were warning that 2008 was shaping up to be a challenging year.
Little did they know.
The continuing rise in jet fuel prices turned the year into a fight for survival. Airlines scrambled to cut capacity, raise cash, hike fares and impose new fees to offset their much higher fuel bills.
Those issues of fuel prices and industry restructuring dominate our Top 10 list for the airline industry in 2008.
"2008, I can't wait until it's over," AirTran Airways chairman and chief executive Robert Fornaro said in December.
Here's our look at a year that most airlines would just like to forget:
10. Colleen Barrett and Herb Kelleher step down as president and chairman of Southwest Airlines Co.
Ms. Barrett and Mr. Kelleher gave Southwest its soul and direction for many, many years.
It's now Gary Kelly's show, and that of a new group of younger leaders. Colleen and Herb can hang around the offices as regular employees, leave early and sleep late on weekends.
9. Fees, bundling and à la carte pricing.
It took an economic crisis, but airlines discovered that they could charge passengers for services that once were free.
Despite grumbling, there does not appear to be a backlash against the fees. And Southwest, which has made its no-fees stance a major advertising campaign, is still waiting for a big payoff from its policy.
8. Open skies pact brings new competition into U.S.-European markets.
After years of haggling and foot-dragging, the European Union and the United States finally opened up the skies between Europe and the U.S. to all comers.
The biggest change has been at London Heathrow Airport, where any airline can now fly – if it owns takeoff and landing slots there or has tens of millions of dollars to obtain the slots.
7. American Airlines applies for antitrust immunity with Oneworld alliance partners.
In August, American, British Airways, Iberia, Royal Jordanian Airlines and Finnair Oyj jointly applied for antitrust immunity, and American, British Airways and Iberia proposed a "joint business agreement" for the trans-Atlantic portion.
If the application is approved by U.S. and European regulators, American, British Airways and the other Oneworld partners would finally have the same rights as their competitors in the Star Alliance and SkyTeam groups.
The decision will come next year. If the U.S. Department of Transportation approves the requests, look for this item to rank a lot higher in our year-end review in 2009.
6. Southwest struggles to find a new path.
Southwest is in a transition into an uncertain future. Its pay rates are no longer among the industry's lowest, there aren't many new, good markets to enter, and its advantage on fuel hedges has largely disappeared.
However, Southwest's leadership realizes the challenges and is investing heavily in technology and innovation to keep it in the game. With longtime leaders Mr. Kelleher and Ms. Barrett now on the sidelines, a big part of the executive team's job will be to keep the loyal employees inspired and believing.
5. Economic problems force a number of airlines out of business.
You'd have to go back to the early 1990s to find so many airlines filing for bankruptcy and, in many cases, ending their operations.
Among the casualties: Aloha Airlines Inc., Silverjet PLC, Eos Airlines Inc., ATA Airlines, Skybus Airlines Inc., Big Sky Airlines and Air Midwest Inc.
Frontier Airlines Inc. and Sun Country Airlines Inc. didn't quit flying, but they did file for bankruptcy. Champion Air simply decided to get out of flying. Midwest Airlines Inc. restructured its finances without going to bankruptcy court but grew much smaller and weaker.
4. Airlines restructure by cutting capacity and employees.
Faced with fuel bills that were out of control, airlines decided to slash capacity by parking airplanes, eliminating flights and shedding people.
Most major network carriers are going into 2009 with capacity down at least 10 percent on domestic routes. Even fast-growing carriers such as Southwest, JetBlue Airways and AirTran are shrinking.
3. Delta Air Lines and Northwest Airlines merge.
The success of the merger will be determined over time. But this we know – the new Delta is the largest airline in the world by a comfortable margin and is beginning to throw its weight around.
Already, Delta is moving airplanes around and restructuring the combined route system.
Will this merger lead to more? It probably depends on how successful this merger proves to be and whether the new Delta starts taking away too many good customers from its rivals.
2. Safety issues embarrass Southwest, American and the Federal Aviation Administration.
Whistleblowers had been complaining for years that FAA safety officials often were too cozy with the airlines they were supposed to be overseeing.
But when a House committee began investigating, the FAA got going and cracked down on Southwest with a proposed $10.2 billion fine. American Airlines had to cancel more than 3,000 flights to inspect its MD-80 fleet.
The debacle shook the public's confidence, cost the airlines millions and brought the FAA's credibility into question.
1. Fuel prices go crazy.
So many actions in 2008 were directly related to this: Shrinkage of most carriers. Layoffs of employees. Bankruptcies and failures. Unhappy employees.
If you're spending billions more for fuel in 2008 than in previous years, that's billions that will not go to new airplanes, debt retirement, pay raises, pension contributions, new service or the countless other better ways to spend the money.
In addition, the volatility of fuel prices meant that airlines never knew what to plan for from month to month. A business plan that works at $100 for a barrel of oil is too conservative for $50 oil and can put an airline out of business at $140 oil.
So airline executives and employees will enter 2009 with two major wishes: one, that oil prices will remain constant; and two, that the constant price is very low.
