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Airline Delays Over Christmas Weekend

December 27, 2004 at 12:00 AM EDT
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TRANSCRIPT

TERENCE SMITH: For hordes of holiday travelers trying to get home for Christmas, the closest they came was, as the old song says, only in their dreams.

YOUNG GIRL: I just want to get home.

TERENCE SMITH: A perfect storm of airline computer malfunctions, baggage handler and flight attendant no-shows, and a fierce shock of winter weather made Christmas weekend a nightmare for travelers across the country, particularly east of the Mississippi. A record-setting snowfall on Thursday blanketed the nation’s midsection, and shuttered airports, leading to cancelled flights, missed connections and frayed nerves.

WOMAN: It’s Christmas. What else can you say? It’s just very disheartening and very discouraging.

TERENCE SMITH: Friday brought new problems. That’s when hundreds of U.S. Airways’ baggage handlers and flight attendants called in sick.

CHRISTOPHER CHIAMES, U.S. Airways Spokesman: We started in the hole on Friday, which was a busy travel day. We experienced abnormal levels of sick calls from flight attendants and baggage handlers, and we could just never dig out of the hole, unfortunately.

TERENCE SMITH: That left many travelers stranded. But there was another problem: Most travelers arrived without baggage. Tons of suitcases lay unclaimed in airports throughout the U.S. Airways system. The airline is now running special baggage flights between its two main East Coast hubs, Philadelphia and Charlotte, to alleviate the backlog. The baggage handlers’ union says there was no organized sick-out by its members.

Nevertheless, the secretary of transportation has called for an investigation. Saturday brought yet another headache: Comair, a Delta subsidiary, cancelled its 1,100 flights, stranding 30,000 passengers. The glitch that stole Christmas: A computerized pilot-scheduling system that crashed, taking with it the hopes of thousands of travelers.

WOMAN: It’s a nightmare, a total nightmare. Delta should be closed down forever, as far as I’m concerned.

TERENCE SMITH: Forever may have to wait. Comair, which resumed service at 15 percent capacity yesterday, is expected to have all its operations back by midweek.

TERENCE SMITH: For more about the cause and effect of this weekend’s problems, we turn to Darryl Jenkins, former director of the Aviation Institute at George Washington university. He’s now a visiting professor at Embry-Riddle Aeronautical University in Daytona Beach, Florida. And Tom Leritz, he’s a transportation analyst with Argent Capital in St. Louis. Welcome to you both. Darryl Jenkins, can you recall a weekend meltdown like this, especially at Christmastime?

DARRYL JENKINS: Well, we’ve had a lot of bad Christmases with travel because of storms and like that but this is really one for the record books. Quite frankly there is no excuse for either of the airlines on this. These were problems caused by airlines, disrupted tens of thousands of travelers’ holidays. For this there is really no excuse.

TERENCE SMITH: Tom Leritz, what is your analysis of what happened specifically to U.S. Air this weekend?

TOM LERITZ: I think when you look at USAir, they’ve gone through a number of problems over the last couple of years. They’ve been in bankruptcy two times over the last two years, and if you look at the labor situation, labor has had to make numerous concessions. So I think morale is very low at the airline.

It’s very unfortunate how the situation evolved over the Christmas holidays. They are hurting their customers if revenues do drop; there is a bad situation there. You could see a liquidation in January. That is still a possibility.

TERENCE SMITH: Tom Leritz, still with you for a moment. Was this deliberate job action, in your view?

TOM LERITZ: It is unofficially not a job action but morale is very low at the airline and the labor is angry at management and they shouldn’t take it out on the customer that’s providing the revenue. And there are substitutes out there. There’s a lot of competition out there. It’s a very intensely competitive industry and very inopportune time to upset your customer base.

TERENCE SMITH: Darryl Jenkins, what do you think? Was it a job action, official or unofficial?

DARRYL JENKINS: Whatever happened, the customer was terribly inconvenienced. At lot of these people will never come back and USAirways’ revenue is decline and they will probably take another revenue hit because of this. This is very unfortunate. I know a lot of people at USAirways have been working very, very hard to save it and the pilots and others have made enormous concessions to try to keep the airline flying. This is one of the most unfortunate things I’ve seen.

TERENCE SMITH: As Tom Leritz said, it didn’t begin on Friday. It goes back years.

DARRYL JENKINS: They have a history of making bad decisions. Some of the best decisions I’ve seen in terms of shutting down hobs and cutbacks have been taking place in the last year, year and a half. I would hate to see something go under because of something caused by so few people.

TERENCE SMITH: Tom Leritz, you spoke of the low morale. You were talking about low morale brought on by the salary cuts and I suppose the notion of having your very job threatened.

TOM LERITZ: Yeah, that’s right. I think it’s an industry phenomenon. I think what you’ve seen over the last four years since 9/11. You had Sars, you had Iraq, you had a tough question economy. The environment has changed. Cost at many of the legacy carriers, the cost structure is rigid and it’s high and you’ve had new entrants like Jet Blue, Southwest Airlines. It’s an extremely competitive industry, the legacy carriers have had to adapt, they’ve have had to reduce costs.

A lot of the cost structure is labor costs. That’s really where the legacy carriers are attacking and unfortunately this year you’ve also had fuel costs go on up you. So even though they’re making inroads in terms of cost of labor, fuel costs offset that this year, so it’s been another unfortunate year for the industry.

They’ve lost $30 billion over the last five years. It looks like things are going to start to get better. Hopefully fuel prices come down. The economy picks up. Traffic picks up and absorbs some of this excess capacity.

TERENCE SMITH: There is a way out of this for USAir?

DARRYL JENKINS: This young man we are talking with is an optimist. I have been around long enough I don’t expect them to get better. I expect them to get worse. I’ve never been disappointed in that forecast, so I assume costs will continue to be high; revenues will continue to go down, and things will get worse over the next year.

TERENCE SMITH: If you talk about liquidating the airline, it would go out of business, what would they do with the equipment? How does that work?

DARRYL JENKINS: A company in Chapter 7 liquidation, they shut down operations, all the employees lose their jobs and basically they begin selling off their assets. What will be difficult in an environment like this, an airline like USAirways, is they have got 200 plus planes. I have no idea what you are going to do with 200 plus planes in a depressed market like this.

This could have repercussions all through the system in terms of what planes are worth and these are things that airlines use for collateral and security with loans for banks and pension funds and things like that. This is a very hard time for the industry. I do believe it is going to get worse and it would not surprise me if we lost some old friends this year.

TERENCE SMITH: Tom Leritz, the optimist, what about those frequent flier miles that people I’m sure would wonder about if, indeed an airline like USAir goes into liquidation?

TOM LERITZ: Yeah, I think that again the customer is on the short end of the stick on a lot of these situations. And, you know, the frequent flier miles, they try to protect those more because those are your customers. But they’re probably fair game as well to be cut. And back to the other point about the industry being in a tough situation. The fares to enter the industry are extremely low and the fares to exit are extremely high.

I mean, USAir has been in two bankruptcies, and even if they liquidate, somebody else will probably buy up the assets and continue to use the assets. So what you would need is a strong economy to suck up that excess capacity. You are starting to see that happen. It will probably take sometime. But eventually it will come back.

TERENCE SMITH: All right. Darryl Jenkins, let me ask you about the other problem beyond the weather, which was this incident at Comair, this computer malfunction. What do you know about it? What caused it?

DARRYL JENKINS: We really don’t have any details on what caused it other than that there is no reason for a company like Comair and Delta not have to redundant systems for something this critical. Your crew scheduling is one of the most important things you do and it is required by law that crews can only fly a certain amount of time.

The only way you can track it, it is so complicated now, is through computer software. So they have a software component this important — and not backed up is really unforgivable.

TERENCE SMITH: Tom Leritz, we should explain that Comair — is it an actual subsidiary of Delta?

TOM LERITZ: Correct. It is a natural subsidiary. And the focus of Delta is they’ve moved more to the subsidiaries to try to lower their costs. They’re trying to implement more regional jet type of traffic to try to better match the supply and demand make-up. So it’s part of the way to lower the cost structure.

TERENCE SMITH: This is an airline that’s flying generally smaller planes on shorter routes to fill in Delta’s system?

TOM LERITZ: I think many of the legacy carriers are focused on trying to better match supply and demand. One of the ways to do that is through the regional carriers. There is still a lot of work to do though. Delta Airlines has lost $6 billion over the last three years. They’re going to lose money again this year.

So there is still a lot of work that they need to do. Another point on Delta is not only are they competing against the low cost carriers but competing against companies like USAir and United Airlines that have already gone through bankruptcy, already gotten a lot of the wage concessions and they’ve lowered their cost structure. Delta hasn’t done that in a while and they still have a pretty high cost structure they need to address.

TERENCE SMITH: Darryl Jenkins, is this a black eye for Delta?

DARRYL JENKINS: Delta Airlines has been a friend of mine for 25 years. I have worked for them. I have nothing in my heart but love for them but this weekend they will receive no comfort from me.

TERENCE SMITH: You see it as mismanagement that they didn’t have a redundant or back-up system for something as vital as this?

DARRYL JENKINS: For something as vital as this, they should have a redundant system. Of that there is no question.

TERENCE SMITH: Tom Leritz, finally, looking at the industry broadly, you see some upside, some prospects. I guess the question in my mind is what is happening to USAir, a more dramatic example of a broader problem?

TOM LERITZ: I think if you look at USAir, it is one of the poorest competitors in a very poor industry. It is very tough to make money in this industry, again because the barriers to entry are so low and the barriers to exit are so high. However, there are instances when you have a good economy, usually economic growth spurs air traffic growth as well.

There’s excess capacity out there now. It has gone through a lot of problems over the last several years. Management has focused on the cost structure; they’ve focused on reducing labor costs. If oil comes down, if you get revenue growth spurred by a better economy and better fares, there will probably be an opportunity to fix some of the problems in the industry.

TERENCE SMITH: But Darryl Jenkins, you still look skeptical.

DARRYL JENKINS: I am indeed.

TERENCE SMITH: All right. We’ll have to leave it there and obviously we’ll see as this goes on exactly what the consequences are. Thank you both very much.

DARRYL JENKINS: My pleasure.

TOM LERITZ: Thank you.