Thanks to a big chunk of business travelers and a smooth-running hub airport, Charlotte will see only a few flight cuts this fall as US Airways slashes service nationwide to offset high fuel costs, the airline's top executive said Thursday.
“Charlotte has been one of the real jewels of the US Airways system,” said Doug Parker, the company's chairman and chief executive, during a meeting with editors at the Observer. “In good times, we do well. In bad times like this, we do less badly than other places.”
Surging oil prices this year have forced smaller airlines to file for bankruptcy and larger ones to reinvent themselves.
Along with cutting flights and amenities, airlines are charging fees for services that used to be free. For instance, after eliminating free pretzels and pay movies on planes in recent weeks, US Airways will start charging for soft drinks and coffee today.
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While Charlotte travelers will pay the same fees as anyone else, the lack of flight cuts could ease concerns in a region where US Airways dominates traffic, with nearly 90 percent of passenger flights at Charlotte/Douglas International Airport. Of the airport's roughly 670 daily departures, US Airways has more than 580, and local business leaders often tout the hub as key to attracting and retaining companies.
Nationwide, US Airways plans to reduce seats for sale by about 8percent this fall and make similar cuts in 2009.
The biggest cuts will come in markets with heavy leisure traffic and typically lower fares, such as Phoenix and Las Vegas. The latter is expected to lose a fourth of its flights.
“Our Charlotte hub doesn't have that type of customer,” Parker said. “It's a much stronger type of customer in terms of business traffic. … You have more ability to cover the cost of fuel.”
So far this year, he said, the only routes dropped were recent additions with little business, such as Sacramento, Calif., and Panama City, Fla. The airline says it plans to cut 1 percent to 2 percent of Charlotte flights this fall, but has not said which those will be.
It's hard to project future flight cuts beyond the next few months, Parker said.
“If oil prices keep rising, who knows?” Parker said. “But as of right now, Charlotte is holding up nicely.”
Fuel prices take toll
Despite a dip from more than $147 a barrel in June to about $124 Thursday, oil prices are almost double what they were a year ago, when many airlines had healthy cash reserves and were expanding.
Since then, carriers such as Skybus, ATA and Aloha have filed for bankruptcy protection and stopped flying. Other airlines have scaled back service, with Midwest Airlines pulling out of Charlotte and AirTran dropping routes. Several major airlines also plan to reduce service in Charlotte this fall.
US Airways expects to pay $2 billion more for fuel this year than in 2007, Parker said, and analysts have said that US Airways could lose $1 billion this year. The carrier's profit last year was $427 million.
But US Airways has enough cash and has made enough changes that it can keep flying well into next year, Parker said, when the industry could be profitable overall after the sweeping flight cuts take effect.
Those cuts are necessary, Parker said, because competition among carriers prevents them from immediately passing on higher fuel costs to customers. Eventually, though, airfares will rise, he said.
“The very low fares that people are used to using to get around the country are probably going to be going away,” Parker said.
Union criticizes new fees
Then there are fees for services once covered by fares, such as bag check, selection of certain prime seats and non-alcoholic beverages on flights.
Parker defended the “a la carte pricing” as reasonable, since it gives customers the option of paying for services instead of folding costs into ticket prices charged to everyone.
“The rules of our game have changed so much, we have to change the plays,” he said. “You'd be hard-pressed to find another business where somebody gives you a free Coke as part of the product.”
Not all US Airways employees agree. In a statement titled “US Airways Aircraft Turn Into Flying Vending Machines,” the airline's flight attendants union said Thursday that it opposes the decision to charge $2 for soft drinks and $1 for coffee and hot tea, citing a “lack of proper planning and poor notification to passengers.”
“This model resorts to a nickel and dime approach to the airlines' most valuable asset – the passengers,” said Mike Flores, president of the US Airways chapter of the Association of Flight Attendants, in the statement. “Flight attendants are trained and certified safety professionals, not cashiers to be used in management's futile attempt to bolster US Airways' bottom line.”
The airline has nearly 36,000 employees, including nearly 6,000 based in Charlotte.
Travelers also have slammed US Airways on the fees, which, Parker said, are intended to stem losses from fuel costs. “We are fighting for nickels and dimes,” he said, “because we're losing so much money. We're all struggling for survival at this point.”