Airline crisis deepens<< Going Green | Main | Lamenting Air Canada's "new era" >> Diane Clarkson | May 02, 2008, 05:09 PM This is no doubt that the US airline industry is in crisis caused in large part to the current record-breaking fuel prices. This crisis isn’t something that $25 second bag fee and slowing flight speed a few km/hr will resolve. Airline execs know this. Extreme fare increases and dramatic cutbacks in flights will be required. This will, as outlined very well in a USA Today article, reshape air travel across the USA. The fallout could be enormous: decreased flights will affect accommodation, attractions, car rentals. The USA Today article quotes Tom Horton, American Airline’s chief financial officer, saying “Air travel has been one of the incredible bargains for U.S. consumers.” The challenge is that consumers have become accustomed – perhaps even feeling entitled – to lower airfares. Airlines have raised fares ten times in the last six months, and more increases will follow. Extreme increases need to follow. The critical question is, after the initial shock causes a dip in demand, what price will the market bear? |
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