Friday, April 04, 2008

Requeim for four airlines

It's been a tough week for the airline industry, as rising fuel prices, a sluggish economy and competition from other carriers forced no fewer than four domestic carriers to cease operations. Although none of these airlines could be considered "major" domestic carriers, the fact that four of them closed their doors in the span of a single week might very well be a harbinger of distress for the nation's airline industry as a whole.

It all started last Monday, when Hawaii-based carrier Aloha abruptly shut down, ten days after filing for bankruptcy. Aloha, which began operations as Trans Pacific Airlines in June of 1946, was for most of its existence exclusively an inter-island carrier. Services from Hawaii to the mainland did not begin until 2000. Aloha, which throughout its existence had competed with older Hawaii-based carrier Hawaiian Air, was forced to declare bankruptcy for the first time in 2004. The airline emerged from bankruptcy in 2006, only to be faced by new competition from go!, a subsidiary of Arizona-based regional carrier Mesa Airlines which began inter-island operations that same year. When it filed for bankruptcy, in fact, Aloha decried what it felt were "predatory" practices by go! along with rising fuel costs.

Aloha will, rightly or wrongly, always be remembered for an April 1988 incident wherein a portion of the aluminum skin of one of its 737s tore away in mid-flight, killing one person and injuring 65. Miraculously, the plane landed safety in spite of the fact that a large chunk of its fuselage was missing.

The following day, all-charter carrier Champion Airlines decided to throw in the towel, citing high gas prices, an obsolete fleet and an inability to attract new investors as reasons for their closure. The airline, whose origins can be traced back to 1987 as luxury carrier MGM Grand Air, chartered flights for, among other entities, Minnesota-based MLT Vacations and the National Basketball Association. Both MLT and the NBA decided to phase out their contracts with Champion, and the airline, left with a fleet consisting of 16 Boeing 727s deemed to be "uneconomical and elderly planes that have three engines and require three pilots in the cockpit," decided to call it quits effective May 31st.

It's hard to believe that the venerable and ubiquitous 727, which was for decades the workhorse of the skies, is now considered an obsolete aircraft.

An even bigger bombshell exploded on Thursday, when Indianapolis-based ATA Airlines filed for bankruptcy and ceased operations. The airline was established in 1973 as American Trans Air and was originally exclusively a charter operation. The airline began scheduled services in the mid-1980s, and expanded rapidly to briefly become one of the nation's ten largest carriers in the early 2000s. This expansion could not be sustained, however, and in 2004 ATA entered bankruptcy protection. The airline vastly reduced its route network, began a codeshare agreement with Southwest Airlines, and emerged from bankruptcy in 2006. ATA's codeshare agreements with Southwest allowed them to focus on serving Hawaiian and Mexican destinations from the mainland, effectively allowing them to be come an international and overseas extension of Southwest's service network. However, charters, especially for military purposes, continued to be a key component of ATA's business model. The reason for ATA's abrupt shutdown, in fact, is attributed to the airline's loss of a military airlift contract headed by FedEx.

ATA briefly operated nonstop service from Hobby Airport here in Houston to LaGuardia Airport in New York. Their service was designed to feed into Southwest's services from Hobby as part of the two airlines' codeshare arrangement, and to give local travelers to New York the option of flying through an airport other than Bush Intercontinental. It seemed like a good idea at the time, but once JetBlue decided to offer service between Hobby and JFK, ATA was forced to pull out of the Houston market.

Until its shutdown, ATA transported more US military personnel than any other airline. ATA was also the last American carrier to fly one of the most photogenic airplanes of all time, the Lockheed L-1011 TriStar. Like the 727, however, the TriStar has sadly become obsolete.

Finally, earlier this evening it was announced that Columbus-based ultra-low-fare carrier Skybus has decided to call it quits. Skybus was operational for less than one year; like other airlines, Skybus blamed rising gas prices and a slowing economy as reasons for their shutdown.

As I stated last year, I was never a fan of the Skybus concept. I thought its bare-bones, no-frills business model represented a cynical "race to the bottom" for the nation's commercial aviation industry and I can't help but think that this "Wal-Mart of the Skies" business model contributed to the airline's demise. Although I feel sorry for those associated with this airline who have lost their jobs, I do feel vindicated regarding my initial misgivings about this airline and its "Greyhound of the Skies" business concept.

So, what do the closures of these airlines mean for the United States' passenger aviation industry? It's hard to say just yet. Clearly, the biggest losers of the past week are Hawaiian travelers: the closure of Aloha and ATA, both of which provided a significant amount of travel between Hawaii and California, means less capacity and higher prices on travel between the islands and the mainland as well as between the islands themselves. However, none of the four airlines that ceased operations this week were anything close to being considered "major" carriers, and aside from Hawaii-related travel their disappearances will not create much of a shockwave throughout the domestic aviation industry as a whole. On the other hand, the collapse of these four airlines - within a single week, no less - might constitute a "canary in the coal mine" warning to the rest of the nation's airlines as the economy slows and fuel costs soar. The little airlines might just be the first to go; the larger airlines could be next.

(Some of the information in this post was taken from Airlines Worldwide by B I Hengi. This book is updated every few years and, if you are a commercial aviation geek like me, is a very handy resource to own. And if you want to keep up with the latest bloodletting in the commercial aviation industry, there is no better source than Ben Mutzabaugh's Today in the Sky blog at

1 comment:

M1EK said...

My grandfather did a bunch of seminars for Aloha back in the day, leading to us having a booklet of their old tickets (from the days when you'd just show up with a blank ticket and hop on the next plane, usually not more than 30 minutes or so). We used most (I think all) of them 2 trips ago to take 4 of us to Kauai and the big island, thankfully.

Hawaiians are really freaking out - go! is likely to raise prices, as is everybody going to the mainland.

I saw all this and immediately booked our June trip to FLA even though it's on a completely unrelated airline, because I figure the mainlines are going to add a plane or two from the mainland to HI to make up for ATA, meaning less capacity everywhere else.

The nonsense that there's still a lot of spare capacity is really galling, too. The last 8 legs I've taken have been an average of 95% full. The spare capacity is on the protected rural routes - so no amount of mergers is possibly going to result in painless cost-savings from capacity reduction.