Kevin Mitchell, chairman of the Business Travel Coalition, weighs in on the troubled
& Incentives: Is the industry in crisis?
Mitchell: Look at the statistics. Last year [U.S] airlines carried 769 million passengers, and that's projected to increase to a billion by 2015. And we're already gridlocked. Look at what happened to those passengers when the American Airlines flights were canceled. [In April, American was forced to cancel thousands of flights because of safety inspections.] There were no extra aircraft, no extra seats with the competition, so there was no wiggle room to handle these people. What happens when we hit 800 million or 900 million passengers? Throw in the overall financial situation of the industry and the fact that it doesn't look like we are going to go below $100 a barrel [for oil] anytime soon, and prices are going to go way up.
Also, when airlines recover from a downturn, they usually take advantage of the sweet spot in the cycle to repair their balance sheets. But they didn't have the opportunity in this cycle. A lot of airlines only turned the corner last year, so there was no time to make their balance sheets healthy. So, I think the answer to your question is clearly yes.
CMI: What are the implications of the recent failures of airlines such as Aloha, ATA, and Airbus?
Mitchell: Depending on the length and depth of this downturn or recession, there could be a failure [of one of the major U.S. airlines]. There's probably a good bet some of the majors will end up back in bankruptcy. That brings us back to the issue of consolidation. [This interview was conducted several days before the proposed Delta/Northwest merger was announced.] It's not really a panacea. The integration process costs billions and only provides short-term relief. But there aren't a lot of options left.
CMI: Speaking of aircraft maintenance, what do you want to see come out of the current controversy?
Mitchell: We're trying to get a single Homeland Security standard for maintenance and harmonized FAA oversight. All Homeland Security repair facilities should have the same safeguards regarding personnel background checks and access to aircraft and parts, whether they are in the United States, Indonesia, or some other overseas facility. And FAA oversight needs to be increased. If inspectors are visiting facilities in the U.S. 12 times a year, they should visit overseas facilities just as frequently.
CMI: With a faltering economy, do you see corporations radically changing their travel practices?
Mitchell: What I'm seeing now at companies is unbelievable control being put into place. Travel managers who used to report to division presidents monthly are now reporting weekly. A corporate traveler who had the discretion to arrange travel on his own now has to get approval. This has all come together in the past six weeks, and it appears it is resulting from a confluence of factors, including corporate financial data, airline price increases, and so on. When you look at the corporate travel environment as a whole, you see a larger movement afoot. Look at the U.K. and Europe and you'll see corporations that, over time, are committed to reducing business travel substantially.
CMI: Whether it's lost luggage or late flights, service issues continue to pose a problem for air travelers. What can airlines do?
Mitchell: There has been some progress here. Kiosks, for example, save time and provide a service. So when the money is available, and there's a will on the part of the airlines, there has been progress.
You really have to take a step back and look at the airline systems. They were designed 30 or 40 years ago for a totally different environment, and from a customer-service standpoint, they're antiquated. To fix it will take a lot of time and a lot of money. If we're talking about the U.S., the money is just not there.