The Future Airline Landscape

The financial press has a slightly different take on the future of U.S. airlines than do the industry pundits. In a MarketWatch article yesterday, speculation varied from “there’s going to be just three global airlines and the low-cost carriers are going to become feeders,” to “domestic fliers on network routes...are going to find themselves on the equivalent of an airborne school bus,” and “people dependent on regional airports will likely see their fares jump, by up to three times what they've been used to paying.”

The article (oddly titled In 2010, U.S. Airlines Are Smaller, Maybe Smarter: Industry Could Stabilize for the Benefit of Passengers and Investors) speculates that Southwest, Air Tran, and JetBlue will thrive in a new domestic airline environment. As for legacy carriers, Credit Suisse upgraded its rating on Continental’s stock, while a CreditSights analyst put United at the bottom of the survivors list. Credit Suisse also noted that if the legacy carriers slash as much capacity as they’ve announced, they will wipe out the last 10 years of their domestic growth.

Lastly, to give a sense of the impact of fuel costs, the article notes that US Airways said that its average domestic roundtrip ticket will need to be priced at $299 just to cover its costs, up from $151 in 2007 and $70 in 2000.

Our take-away for consumers:

• Buy airfare early (to lock in lower prices), or...
• Wait until as long as possible to buy airfare (in case your carrier goes bust or flight schedules change)
• Spend those frequent flyer miles now
• Consider not even bothering with non-flight miles, and go for a cash-back credit card instead
• When flying a U.S. legacy carrier, consider crediting their miles to an international airline in the same alliance
• Drive instead of fly for shorter and/or last-minute trips
• Start building a flying relationship with a low-cost carrier that serves your market and preferred destinations
• Assume all the chatter, news, and advice will change on a yearly, monthly, weekly basis