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Another One Bites the Dust

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Another One Bites the Dust

Over the weekend 61-year-old Aloha Airlines ceased flying as a result of higher fuel costs and increased competition. Too much competition prevented them from raising ticket prices to cover the cost of fuel. On Thursday ATA Airlines, also a major carrier to Hawaii, closed its doors.

Passengers showing up for Thursday morning flights were told by state transportation representatives that the airline had ceased operations. Thousands of passengers were left stranded in Hawaii and on the West Coast on their way to the islands. The company filed for bankruptcy and laid off all of its 2200 employees. ATA carried 632,000 passengers to Hawaii in 2007.

Hawaiian Airlines stands to benefit from the halt in operations from both of these carriers. Hawaiian flies to nine cities on the mainland, more than any other airline and flies to all four major markets where ATA operated. Delta and Continental also competed with ATA directly. Hawaiian and Mesa have already said they would add capacity to pick up the slack from Aloha and ATA but you can bet the tickets are not going to be cheap.

This story is going to be repeated many times over the coming years as oil prices continue to rise. No carrier is immune regardless of size. I wrote a lengthy article on the airline crisis last week and the outlook was not pretty.

 

Northwest cuts capacity and raises rates.

On Thursday Northwest raised prices on international flights, plans to freeze hiring of new pilots and flight attendants and will cut its domestic schedule by 5% beginning in September. CEO Doug Steenland said in recent months "The price of oil has risen dramatically to all time highs and there is no reasonable basis to conclude that they will materially decline anytime soon. These increased costs are significant and require a strong response from us." Northwest said it wanted to move quickly to preserve cash which stood at $3 billion at the end of 2007. Fuel surcharges on international flights will move up to $115 to $160 depending on the destination.

Jim Brown

OptionInvestor.com

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