New York Air has dropped service between New York and Boston and now uses the planes to fly from Boston to Baltimore to Orlando and back.
People Express, which had December plans for 60 flights in and 60 flights out of Newark every day, now has 40 in each direction. The planes that would have taken people in and out of Newark more frequently are now being used to carry passengers between Baltimore and two Florida cities every day.
The changes are a direct result of the Aug. 3 strike of the air traffic controllers and their subsequent firings. The impact of the strike's ongoing effects is quite clear on airlines such as New York Air and People Express that have started up in the last year. Since their planned operations were concentrated in large part at some of the 22 major airports most affected by the strike, they have had to alter their game plans significantly, flying different routes than they had intended in an effort to keep their planes in the air. New York Air also instituted a 15 percent pay cut for management and cut back on its free on-board food and beverage service.
The strike also has had a dramatic impact on the prospective new airlines such as Columbia Air, Pacific Express and Air Chicago, which have not yet become household names. They are having trouble even getting off the ground, finding financing and airport-operating rights difficult to get in the new environment.
The strike is also affecting the older, established airlines, particularly those trying to restructure their route systems. But its impact on them is much harder to assess. They have been facing more serious, long-term problems, including trying to cope with the recession, which has caused declining passenger traffic in the industry as a whole. Also, the incumbent airlines have been grappling in different ways with route, pricing and labor changes in the industry that have resulted from enactment of the Airline Deregulation Act of 1978.
The sector of the airline industry that seems to be doing most poorly today are the airlines historically called the "trunk" or major carriers. As a group, they had been losing their share of the overall air-travel market before the strike, and that trend has continued. Passenger traffic for the trunks was down 5.6 percent in October and more than 8 percent in the first 10 months of the year.
The group's combined operating profits were $56.8 million during the third quarter of the year, and operating losses were $106.1 million during the first nine months. Half of the big 10 most likely will report operating and net losses in 1981; some of the others probably will report lower 1981 earnings than they had in 1980, or lower earnings than they had expected.
Within the group, however, the individual airlines have very different stories to tell. Braniff International, for instance, has been in financial straits for three years, paying the price for overexpanding its route system. Pan American World Airways, too, has been in financial trouble, partly the result of trying to absorb National Airlines into its system, and has contributed the heftiest operating losses to the trunk club figures this year.
The six so-called old "local" airlines--some of which now qualify for "trunk" status because of their size, such as Republic Airlines and USAir--are doing significantly better than the old trunks. As a group, these once-regional carriers have increased their market share, continue to report increasing traffic--up 7 percent in October and more than 9 percent for the first 10 months of 1981--and are generally profitable.
As a group--which includes Texas International and Ozark--the six had operating earnings of $180.3 million, and net income of $46.5 million, during the first three quarters of 1981. Frontier and Piedmont Airlines are doing especially well. Piedmont, for instance, reported a 36 percent boost in traffic for the first 10 months of this year, and a whopping 114 percent increase in earnings for the first nine months of 1981, compared with the same period of 1980.
The regional airlines--flying twin-engine planes that use less fuel and have two- instead of three-person cockpits--found they had cost advantages on some routes, compared with their larger competitors, that they hadn't fully understood prior to deregulation.
As a group, the former intrastate airlines such as Air Florida and Southwest Airlines, former commuters such as Empire and Air Wisconsin, and the fairly new Midway Airlines continue to grow and, for the most part, make money.
The differing flight cutbacks at 22 major airports instituted by the Federal Aviation Administration have had varying effects on different airlines. The cutbacks have reduced nationwide air traffic to about 80 percent of its prestrike capacity for commercial airlines and the private flying sector, according to FAA officials.
Airlines with large numbers of flights were obviously affected--but if an airline's traffic was declining anyway, and it had the ability to substitute larger planes for smaller ones on the remaining flights, the impact was mitigated. As of Dec. 17, for instance, United Airlines will be flying 85 percent of the flights it had planned before the strike--but with 95 percent of its planned seat capacity--since it was able on some routes to use larger planes, leaving smaller ones grounded.
Airlines that didn't have significant numbers of flights at the major airports or more than one flight each hour--such as Midway and Air Florida--weren't affected a great deal unless they had expansion plans. Carriers like Piedmont, which had been building up operations systematically at uncongested airports, were also less affected.
The undermanned air traffic control system has nipped in the bud major route changes planned by some airlines--by Pan Am, United, Continental and Texas International, for instance. "Not getting to do something new is very damaging if you're losing money and need to do something different," complains one airline official. Other airlines, like American, were luckier, having instituted extensive route changes before the strike by the Professional Air Traffic Controllers Organization.
"What PATCO is doing to carriers depends on who you are and where you are," the airline official explained. "The airlines that need flexibility are in pain, and those that need less flexibility are in less pain. The new airlines that have made their investment and are depending on a growth curve . . . and old airlines planning to restructure are in pain."
One effect of the economic situation and flight cutbacks has been an acceleration of a trend started before the current crisis: The major airlines have been taking a hard line with their unions, instituting layoffs, seeking pay freezes and productivity increases, and in some cases, pay cuts and other "givebacks."
American Airlines, planning additional furloughs of employes this month, has asked its workers to accept a 5 percent pay cut for the first three months of 1982 and a wage freeze for the rest of the year. Eastern Airlines has asked employes to accept a one-year wage freeze and a continuation of its variable earnings program, under which employes donate 3 1/2 percent of their wages to the company unless it meets certain profit goals. Pan Am and Braniff International already had laid off some employes and had won pay cuts from most of their unions.
Although airline officials are declining to say so publicly, some of them--from the big airlines only--indicate privately that forced cutbacks at some airports may be a "blessing in disguise." As the official of one major carrier put it, even with the decline in traffic, the major carriers, for competitive reasons, wouldn't have reduced flights and would have been wasting money flying excess capacity. Being able to lay off workers and put some planes on the ground saves operating expenses.
Many analysts had predicted that fares, and profits for the major airlines, would increase because of the forced cuts in capacity, but that hasn't come about. Part of the reason is the declining traffic. Except for May 1981, passenger traffic of federally certificated airlines has declined in every month, compared with the previous year, from March 1980 through August 198l, according to statistics collected by the Civil Aeronautics Board, and industry figures indicate continuing monthly declines since then. "This has been a goddamn depression," says an airline executive. "We are trying to make money in markets that are declining."
One way to do that is to attract passengers with lower fares. Also, as part of their restructuring, both Pan Am and Braniff instituted lower coach fares that some competing airlines have matched. In addition, competition from the new entrants continues to keep fares lower than they would be on some routes. When People Express started flying to West Palm Beach from several northeastern cities last week, for example, TWA countered by lowering its fares on those routes to bring them closer to People's.
The forced cutbacks at major airports have exacerbated a problem that began to grow as airlines sought to fly to new cities under deregulation, placing increasing pressure for operations at the busy--and profitable--airports. Not surprisingly, newer and older airlines competing for those valuable operating rights see the problem from very different perspectives.
The situation pits new lower-fare airlines with plans for significant expansion of service at those airports against existing airlines that feel that their historical patterns of service shouldn't be cut to benefit the new upstarts, regardless of the procompetitive mandate of the deregulation law.
The result is a lot of grumbling, acrimony and accusations that one side or the other is getting an unfair advantage. As one airline official put it: "What you've got here is five bones and 10 dogs."