With Delta and Northwest joining the ranks of bankrupt airlines in September, about 40 percent of available seats on domestic flights are with carriers that are in Chapter 11, according to the Air Transport Association, Washington, D.C. For meeting planners and attendees, the fallout of airline bankruptcy is route cutbacks, reduced services, and higher rates.
“You've got to roll with the punches in terms of schedule changes,” says John Heimlich, chief economist at ATA. “Bankrupt airlines tend to shrink, change their fleets, and trim some routes or the frequency of some routes, so you may see the flights get a little fuller,” he says. If new low-cost carriers don't fill the void in a given market, “then fares might go up a bit.”
In 2005, the U.S. airline industry is expected to lose between $9 billion and $10 billion, largely because of rising jet fuel prices, states Heimlich. Over the past five years, the industry has lost more than $40 billion.
In that period, 17 U.S. airlines have filed for bankruptcy, according to ATA, including major carriers such as United, Delta, Northwest, Independence, ATA Airlines, and US Airways, which recently merged with America West.
Shaky airlines pose problems for planners and passengers, experts say. “It's not so much a question of whether they [the bankrupt airlines] are going to be around a year from now. The question is: Are they going to be flying to that destination and are they going to have enough flights?” says Terry Trippler, a Minneapolis-based airline expert at Trippler & Associates. Both Northwest and Delta have been more aggressive with cutbacks than either United or US Airways were when they entered Chapter 11.
To avoid cancellation trouble, Trippler offers some simple advice: Seek out the airlines that are growing. “Eleven months out, there's a good chance that growing airlines such as Southwest, JetBlue, Frontier, and AirTran are going to have more flights, while there's a good chance that Delta, Northwest, and United will not.”
A trend that could affect group bookings is a de-emphasis on domestic routes by the legacy carriers, says Robert Mann, an airline consultant at R.W. Mann and Co., Port Washington, N.Y. Because it's tougher to compete with the low-cost domestic carriers, airlines such as Delta are focusing on the more lucrative — and less competitive — international business. As a result, they will use their larger aircraft for international routes, leaving the smaller planes for domestic flights. “The issue is, will the number of seats or the size of the airplane change such that it creates an issue for large groups?” he says. “Will enough seats have exited the market so it forces the rebooking of folks who were thought to be on a larger aircraft?”
Connecting flights will be affected the most by the domestic pullback, Mann says. “You'll see far less connecting service via some of the hubs, with a focus more on origin and destination business in and out of the hubs,” he predicts. Planners say this may affect their decision to book second- and third-tier cities.
Another meeting concern is ticket prices. After reaching historic lows in 2004, airfares are up about 15 percent in 2005, according to a survey by WorldTravel BTI, Atlanta. Trippler expects fares to jump another 15 percent in 2006, as fuel prices are expected to remain high.