ECONOMICS REPORT - Changes in the Airline Industry

ECONOMICS REPORT - Changes in the Airline Industry
By Mario Ritter

Broadcast: Friday, October 01, 2004

This is Gwen Outen with the VOA Special English Economics Report.

Many airline companies are finding it difficult to make a profit. The International Air Transport Association says it expects the industry to lose up to four thousand million dollars this year. Yet air travel continues to increase. So what is the problem?

Fuel prices are high. But many airlines are finding that their way of doing business is also too costly 1.

U.S. Airways 2, for example, wants a Bankruptcy 3 Court judge to order temporary pay reductions for many of its workers. The company also plans to cut pay for its managers by a reported twenty percent.

U.S. Airways is under protection from its creditors 4 for the second time in two years. It says it could go out of business in February. U.S. Airways is the seventh largest airline in the United States.

The third largest, Delta 5, is trying to avoid bankruptcy. Delta Airlines announced a ten percent pay cut for its top officials and some other workers.

This week, Delta reached an agreement with the labor 6 union for its pilots. A lot of them have taken early retirements 8. To avoid a shortage, the deal permits newly retired 9 pilots to return to work. In return, Delta agreed not to take any immediate 10 steps to cancel the retirement 7 plan for its pilots.

United Airlines, the second largest carrier, is under bankruptcy protection. It wants to end its pension programs and replace them to save money. But the existing plans are owed thousands of millions of dollars which United wants the government to pay. How much the plans are owed is in dispute.

Not all airlines are in trouble. Low-cost airlines like Southwest and JetBlue remain profitable. These smaller airlines provide limited services and usually do not serve meals on their flights.

Some major airlines have tried to raise their prices in recent months. American Airlines, the world's largest carrier, started such an effort last week. But the low-price competition has made it difficult for traditional airlines to charge more.

Airlines in the United States are not the only ones facing such competition. The Italian airline Alitalia is close to seeking protection from its creditors. Alitalia has lost market share to companies like Ryanair of Ireland which offer low-cost travel in Italy.

Some people believe that airlines should combine their businesses to cut costs. But some costs cannot be controlled, like oil prices which reached fifty dollars a barrel this week.

This VOA Special English Economics Report was written by Mario Ritter. This is Gwen Outen.