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Show iH . I J AIRLINES SET FOR TAKEOFF After two years in the doldrums, the airlines of the U.S. may be approaching a turnaround in their fortunes. While most lines are not yet financially in the black, at least the red ink is flowing at a lesser rate. One of the factors which was to have been a boon to the air carriers but . which had some unpleasant side effects was airline deregulation late in 1978. The Act gave the airlines more freedom to establish competitive fares, and allowed them to eliminate unprofitable routes or add service to new areas. Deregulation spawned a rapid proliferation of new-entry airlines by entrepreneurs offering low-fare, fast-turnaround fast-turnaround service on high-traffic-density routes already served by the major lines. Expansion of new-entry lines, mostly domestic regionals, saw the number of scheduled carriers swell from 32 in service before deregulation to 66 operators today. The result has been airfare competition com-petition to the point where the higher-cost higher-cost trunk carriers do not even cover operating costs on certain flights, while the discount coupon mania has come and gone several times. Ticket bargains and discount fares are generally designed as promotional schemes to draw attention to service offered on given routes, or just to put pressure on the competition. One company, in initiating new service between two cities, offered a round trip with the return fare costing a penny. FUEL COSTS STABILIZING In 1979 jet fuel prices began to soar, assisted by OPEC members. In that year prices actually doubled, and rose 20 percent in each of the two following years. Earlier on, airlines were unable to quickly obtain permissive fare hikes to compensate, and so fuel costs became a major expense. The spring of this year, however, saw a leveling off in the upward price spiral, owing in part to the world oil glut and U.S. refining overcapacity. While the rest of the year will not likely seen a fuel price dip, a plateau seems to have been reached. LABOR AND EQUIPMENT Labor continues to be a problem for the airlines, particularly in terms of productivity because of restrictive union work rules. While this is difficult , to control, many air carriers have trimmed their labor forces through attrition and personnel layoffs, including in-cluding pilots. Another area of cost improvement is that of airline equipment. equip-ment. The trend is now toward planes such as the B-727 trijet and away from the wide-body jets and twin-jets DC-8s and B-707. The advantage is obvious: Fuel efficiency and lower maintenance and operating costs. The jets of the new generation also add to the edge that the newer airlines have over the trunk lines, especially on short hauls. Wherever possible the major carriers attempt to sell their older equipment, usually at a profit. This can represent a large part of results in companies reporting a yearly profit. It should also be noted that airlines reporting gains may be deriving earnings from non-airline non-airline activities such as hotel chains, business and food services, real estate, and other subsidiary enterprises. TRAFFIC With costs and other significant operational factors under better restraints, airlines can only wait for a pickup in passenger traffic expected to be generated by an improving economy. The full second quarter, however, may show the adverse impact of the threat of an air controllers' strike in June (which did not actually come until early August). This threat prompted a rash of "no shows" plus a good many canceled and deferred reservations. The pickup in air traffic may not mean a really marked improvement this year over 1980. Nevertheless, since a livelier economy is expected, in generally, during 1982, we would anticipate an-ticipate a return of business and discretionary travelers to the nation's airways. |