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CNN Live Today
Bumpy Week For Commercial Airlines
Aired August 13, 2002 - 13:49 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
CAROL LIN, CNN ANCHOR: It's been a bumpy week for commercial airlines, and today we have heard about layoffs at American Airlines and Sunday's bankruptcy filing of USAirways show the turbulent time of commercial carriers enduring.
Elizabeth, you might want it stick around for this, because I know you do a lot of traveling.
ELIZABETH COHEN, CNN CORRESPONDENT: Absolutely.
LIN: We're going to be talking with C. Thomas Nulty, joining us from Denver. His company handles more than $6 billion in travel arrangements each year.
Hi, Tom.
C. THOMAS NULTY, PRESIDENT & COO, NAVIGANT INTERNATIONAL: Hello.
LIN: So was it a surprise that when you heard that American Airlines is laying off 7,000 people.
NULTY: You know, it really wasn't a surprise. I think you're going to find that all the airlines are going to will try to adjust their cost structure to what the economy is actually producing in the way of passengers. It's really not an airline problem; it's actually an economic problem. There's just not enough travelers out there, specifically business travelers in the fall, and the airlines are adjusting their costs accordingly.
LIN: I'm just wondering, because didn't American furlough a bunch of workers after 9/11 to try to avoid exactly this, laying off people permanently?
NULTY: They did do that, and then they brought a lot of those people back. I think all of us in the travel industry have anticipated in the second or third quarter, we would start to see rebound not only in the economy, but in passengers as well, and that really hasn't happened.
I think what they are doing now, is they are just making a move that is going to allow home to adjust their costs to match the revenues, and they're doing it in kind of a humane way, I think. I believe they have a new retirement program in place, announcing it well in advance. I think most of those people will be caught up by attrition, rather than actually getting laid off. LIN: Another sign of trouble in the airline industry. Analysts are also issuing an all-out sell recommendation for United Airlines. For analyst to come out with a sell recommendation, it's like a sign of the apocalypse, it just never happens. What does this mean overall health of the airline industry?
NULTY: The airline industry is having a lot of trouble, once again, related to the economy. And United Airline and American Airlines have both been telling us that they're losing up to $5 million a day.
LIN: Why is it so hard it believe, Tom, because every time I go to the airport, which is pretty frequently, the planes are packed. They always seem fully booked.
NULTY: Well, that shows you how expensive it is to operate an airlines. Labor costs are very, very high, fuel costs are high. Those beautiful big terminals we go through are expensive to operate. Running an airline is an expensive business, one that most people don't understand exactly how expensive it is to do.
LIN: As we see, the industry, at least of these three major airlines, seems to be shrinking. What does that mean for ticket prices then?
NULTY: Well, ticket prices will probably remain competitive, specifically for leisure travelers. Almost every September, when summer is over, we see some fair sales. I would expect this September will be nothing different. We may see prices a little higher at Christmas time, but once again, they'll probably be pretty competitive, as these airlines scramble for the available passengers out there.
Business travelers are going to see fares staying about the same, and really what it will take to get this airline -- industry healthy again is really a rebound in the economy that actually puts the business travelers back out on the road trying to make their own businesses better by attracting new customers, and that's actually one of the first signs we see that things are actually improving.
LIN: All right, let's hope things improve. At least for the consumer, good news for now. But for the airlines and airline employees, tough times.
Thank you very much, C. Thomas Nulty. President of Navigant International.
NULTY: My pleasure.
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