As the entire airline industry faces desperate times due to to sky-rocketing jet fuel prices, desperate measures are taken to avert a financial catastrophe. Cutting capacities, retiring non fuel-efficient old aircraft, cutting jobs and service are part of the significant reorganization of the aviation market.
United Airlines announced to retire 100 jets – among all of its Boeing 737 and six 747 jumbo jets – and to cut more than 1,100 additional jobs. Besides, United will cease the operations of its low-cost carrier Ted and the more modern and efficient A320 mid-range aircraft will be integrated into United’s fleet. These measures lead to a total cut in U.S. capacities of 17%. Yet, as almost all major U.S. carriers are cutting their seat capacities, the marketshare relations will remain like they are until major shakeouts change the game.
Especially smaller airports could lose service entirely as airlines consider regional operations as not economical in today’s environment. And even popular tourist destinations like Honolulu, Orlando and Las Vegas feel the significant cuts in service and passengers will have to pay more for the remaining seats. However, demand is actually falling. United says that its passenger traffic is off by 4.1 % in May which makes it almost impossible to increase fares in addition to a fallen passenger load factor.
That most airlines are to be blamed for not having hedged fuel costs shows the case of Southwest Airlines that is the only remaining major U.S. carrier which is profitable due to sensible fuel hedging. Just having underestimated the development of the oil price is no excuse. Those airlines which considered hedging as unnecessary additional costs are now struggling to survive with jet fuel becoming even more unafordable for the loss-making carriers.