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Turbulence in Travel Industry

Aired December 24, 2002 - 13:42   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


KYRA PHILLIPS, CNN ANCHOR: Turbulence in the travel industry. Airlines are expected to have the deepest losses in aviation history. So what are air carriers facing in 2003, and how will those problems affect your ticket prices and your travel future? Airline analyst Tom Nulty of Navigate International joins us from Anaheim, California. Hi, Tom.
C. THOMAS NULTY, AIRLINE ANALYST: Great to be with you.

PHILLIPS: Well, 2002 was a rough year for all of us, and we saw two bankruptcies -- United, U.S. Airways. What do you think, could next year be worse?

NULTY: Next year is going to be pretty turbulent for those airlines. They're going to have a very difficult time. You know, it's going to be pretty good for travelers, however, because as a result of United and U.S. Airways going through this Chapter 11 process, the result is going to be that they're going to have lower operating costs, if they do this thing right. And then they're probably going to use those lower operating costs to re-attract customers and to attract new customers, and they'll probably do some of that with price and even some added services. You might even see some perks coming back in, as a result of this process.

PHILLIPS: All right, well, that's good. We'll get perks, we'll get some advantages. But, boy, looking at the industry, as a whole, I mean, does this stem back from 1978, when the deregulation of the industry started? I mean, could there have been any expectation we'd be where we are now?

NULTY: Well, you know, there are two things that really impacted this, one was, clearly, deregulation that allowed new competitors to come into the markets. And these traditional carriers use all their resources to try and, basically, squash those new competitors. And over time, that has taken its toll on those big airlines. The other major issue is, you know, 60 years of labor unions at the airlines have really caused their operating costs and their productivity to not be where it probably should be in the long run. And that's in these newer airlines aren't really faced with those same issues, so they can do it a little cheaper and, subsequently, they're attracting more customers.

PHILLIPS: Well, so when talking about organized labor, does this mean now that airline management, they're going to have to totally re- evaluate their strategy and develop a new model?

NULTY: Well, I think they are and labor is going to have to be a part of that model and they're going to have to participate in this. The courts are going to force the United Airlines labor unions to negotiate a new contract. But I think, in general, the whole industry has to take a look at what do we have to do to be competitive and it's going to mean lower costs, and that may not mean lower salaries for people, but it might mean higher productivity. There may have to be some changes in work rules and other things that allow for greater productivity, which equate to lower costs.

PHILLIPS: And then as the war with Iraq that's looming and also American Airlines might go bankrupt also. Well, Tom Nulty, thank you. We'll be checking in with you again.

NULTY: My pleasure.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com







Aired December 24, 2002 - 13:42   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
KYRA PHILLIPS, CNN ANCHOR: Turbulence in the travel industry. Airlines are expected to have the deepest losses in aviation history. So what are air carriers facing in 2003, and how will those problems affect your ticket prices and your travel future? Airline analyst Tom Nulty of Navigate International joins us from Anaheim, California. Hi, Tom.
C. THOMAS NULTY, AIRLINE ANALYST: Great to be with you.

PHILLIPS: Well, 2002 was a rough year for all of us, and we saw two bankruptcies -- United, U.S. Airways. What do you think, could next year be worse?

NULTY: Next year is going to be pretty turbulent for those airlines. They're going to have a very difficult time. You know, it's going to be pretty good for travelers, however, because as a result of United and U.S. Airways going through this Chapter 11 process, the result is going to be that they're going to have lower operating costs, if they do this thing right. And then they're probably going to use those lower operating costs to re-attract customers and to attract new customers, and they'll probably do some of that with price and even some added services. You might even see some perks coming back in, as a result of this process.

PHILLIPS: All right, well, that's good. We'll get perks, we'll get some advantages. But, boy, looking at the industry, as a whole, I mean, does this stem back from 1978, when the deregulation of the industry started? I mean, could there have been any expectation we'd be where we are now?

NULTY: Well, you know, there are two things that really impacted this, one was, clearly, deregulation that allowed new competitors to come into the markets. And these traditional carriers use all their resources to try and, basically, squash those new competitors. And over time, that has taken its toll on those big airlines. The other major issue is, you know, 60 years of labor unions at the airlines have really caused their operating costs and their productivity to not be where it probably should be in the long run. And that's in these newer airlines aren't really faced with those same issues, so they can do it a little cheaper and, subsequently, they're attracting more customers.

PHILLIPS: Well, so when talking about organized labor, does this mean now that airline management, they're going to have to totally re- evaluate their strategy and develop a new model?

NULTY: Well, I think they are and labor is going to have to be a part of that model and they're going to have to participate in this. The courts are going to force the United Airlines labor unions to negotiate a new contract. But I think, in general, the whole industry has to take a look at what do we have to do to be competitive and it's going to mean lower costs, and that may not mean lower salaries for people, but it might mean higher productivity. There may have to be some changes in work rules and other things that allow for greater productivity, which equate to lower costs.

PHILLIPS: And then as the war with Iraq that's looming and also American Airlines might go bankrupt also. Well, Tom Nulty, thank you. We'll be checking in with you again.

NULTY: My pleasure.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com