Sunday, March 8, 2009

More on the Potential Impact of the FAA Reauthorization Act

A story from the Dow Jones Newswire on Rep. Oberstar's legislative proposal which could mark the end for international airline alliances sheds more light on what it could cost the airline industry.  According to the story, the oneworld alliance alone has generated $3 billion in revenue for its members over the last 10 years--revenue they would have never seen had the alliance not existed.  Also troubling is the Air Transport Association's estimate that 15,000 jobs could be lost if the alliances are forced to disband.  Add to that the elimination of consumer benefits the alliances bring and what you have is an outcome with no winners and a lot of losers.

The story also contains observations from executives at Delta and American, along with the important observation of Michael Whitaker, Senior Vice President of United Airlines, that "[w]hen planes are full, alliances aren't as important as they are now, since alliance partners can provide you with passengers from other airlines." 

The International Air Transport Association has already predicted $2.5 billion in losses for the worldwide air transport industry in 2009.  With the global economy still on a downward slide and the bottom not yet in view, international carriers are slashing capacity in hopes of filling every seat they make available.  But the capacity cuts already made won't be enough if these airlines are denied crucial feeder traffic from their alliances.  Consumers, who have been compelled by current economic conditions to limit air travel, will be forced to watch as their travel costs increase, route options dwindle, and benefits such as shared frequent flier programs disappear.

http://lawprofessors.typepad.com/aviation/2009/03/more-on-the-pot.html

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