US carriers face major challenges ahead

If the current US economic slowdown develops into a full-blown recession and if oil prices remain high, airlines based at American airports will soon find themselves with little choice but to restructure, cut capacity and staff, as well as increase fares and surcharges. Industry experts point out that all carriers are feeling the combined squeeze of oil prices that jumped by around 75 percent in recent months, as well as a major credit crisis in the US, which is convincing many Americans to scale back their travel plans. Additionally, the weak US dollar is also causing airlines major headaches, especially those that also operate in continental Europe and the United Kingdom. According to the Salt Lake Tribune, the majority of economists now believe that the US has already entered a recession and the only question remaining is just how long it may last, and how severe it is likely to become.

Major carriers are scrambling to adjust to these new, unfavourable conditions. We reported last week, for example, how Delta Air Lines is hoping to trim down its staff of around 55,000 by at least 2,000 employees. The carrier has already started cutting routes, including 10 from the Salt Lake City Airport alone.

Despite these measures, Merrill Lynch now believes that US-based airlines will post a total loss of around $1.5 billion by the end of the year and passenger traffic is also expected to dip significantly during the second half of the year. Most carriers, however, still stand by public statements noting that they will turn modest profits over the next several months. Some airlines are not only experimenting with fare hikes and cut backs, but will also likely try to replace 50-seater regional jets with planes that are more fuel efficient.

www.delta.com