But First the Bad News…

OK, today is all bad news:

—ATW reports that US airlines lost, get this, $9.2 billion in 2004.  And that doesn’t count ATA which lost money but has not yet reported its financials for the year.  You can blame it on fuel, you can blame in on overcapacity, you can blame it on bad distribution strategy, but, frankly, $9.2 billion means there is an underlying problem with the industry.  If the economy is booming, the airlines survive because business travelers will pay just about anything to fly; if the economy is weak, look out.  And just a quick word I’ve been meaning to add here:  don’t pay attention to any article that suggests having an airline go out of business will solve the financial problems of this industry.  Perhaps overcapacity is an issue, but having an airline go out of business assumes that no other airline will enter.  Some airline will always fill a void left by a defunct carrier.  Always.  Hell, carriers have already filled the void left by US Airways’ reduced schedules in Pittsburgh and Philadelphia.  If they close down, there will be next-to-no effect on prices.  If anything, prices will go down as the stronger lowfare carriers enter the market (that’s already happened in Philly).  That doesn’t benefit legacy carriers at all.

–And secondly, Continental says that it will lose $10-12 million per month because of Delta’s revamping of the fare structure.  Will they make that up in additional passengers?  Um, unlikely.

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