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Just as it did throughout the week, air travel turmoil dominated business news this weekend.
Since US Airways filed for bankruptcy a week ago, followed shortly by American Airlines' decision to cut 7,000 jobs and reduce flights, news outlets have been scurrying to find new angles on the story. Several journalists found that a major source of trouble was cheap fares available online. Never-ending price competition became the norm, yet the biggest carriers tried to maintain service, resulting in inefficiencies and thus losses, The New York Times reported Sunday.
"For all their frustrations with stingier services, millions of travelers still count on full-fare convenience at no-frills prices," the Times article says. "But with businesses unwilling to pay the high fares that have subsidized leisure fliers, and the Internet giving travelers new tools to find bargains, that formula is giving way.
Now, suffering their worst financial losses ever, the nation's largest carriers — through bankruptcy filings, broad restructurings or more subtle responses to the stark moves of their sickest competitors — plan to start bringing service more closely in line with their fares."
That means lower levels of service and convenience, industry observers said. "Travelers can expect crowded planes, fewer flight options," the Baltimore Sun says, adding that the industry's problems can also be traced to the dot-com collapse and a loss of big spenders.
Many observers say nothing will help until airlines cut costs, especially labor expenses. United Airlines, which has warned that it may follow US Airways' into Chapter 11, is handcuffed by its union contract signed in August 2000 by then-CEO James Goodwin, concluded the Chicago Tribune. The United contract set a bad precedent for the industry, some experts believe. "When they signed that, management at every other airline wanted to go strangle Goodwin," said aviation consultant Michael Boyd told the Tribune.
It's about time the current hub-and-spoke system collapsed, declares columnist Jeff Gelles of the Philadelphia Inquirer, whose major airport (like those of many communities) is dominated by US Airways. "Simply put, US Airways might be the closest thing we have to a local airline, but I'd shed hardly a tear if it vanished like some forlorn radar blip suddenly lost in the Bermuda Triangle," Gelles writes. "I'm not callous. I hate the prospect of US Airways' employees losing their jobs, and I worry about collateral damage to the Philadelphia region. But the truth is that I often can't afford US Airways' fares. And I'm tired of having to travel to Baltimore just to avoid them."
Why Baltimore? Because Southwest Airlines -- the über-company of discount airlines -- flies out of Baltimore-Washington International Airport. "The pattern is clear that fares will fall on any individual route that gains service from a lower-cost airline," Geddes says.
Southwest is often held up as the model that all other airlines strive to follow. But in general, air travel has offered almost nothing worth following for long-term investors, notes St. Louis Post-Dispatch columnist David Nicklaus. "The trouble is, most airlines have been terrible investments for their shareholders," Nicklaus writes. "Few analysts like the industry as anything more than a short-term trading play. "They're nothing you'd want to put your money in and hope to retire on it in 20 or 30 years," said Tom Leritz, an analyst at Banc of America Capital Management in St. Louis."
Maybe investors could try up-and-coming drug companies instead. A new venture capitalist breed is turning to biotech and health cares, the San Jose Mercury-News found: "Driving the shift is the aging of America. Baby boomers are closing in on old age, and the market for drugs and medical devices is expected to explode over the next 20 to 30 years. The potential for lucrative profits is luring young scientists, who are leaving their lab frocks and trying their hand at the risky game of VC for the first time."
Let's hope they're better businessmen than Elvis Presley, whose recent death anniversary spurred the Houston Chronicle to look into The King's money management. "When Elvis Presley died, his finances were in such sad shape that the managers of his estate considered selling Graceland," the Chronicle notes. "The white-columned, Georgian-style home was just too expensive to maintain."
Fortunately, the Presley heiress has much more competent people looking after things for her these days. Forbes magazine recently estimated that the Elvis estate pulled in $37 million from June 2001 to June 2002, which would be more than any other dead celebrity. That could have bought plenty of Elvis' favorite peanut-butter-and-jelly sandwiches.
While we're on the subject of anniversaries, conspicuous consumption and business news, check out an Associated Press article on the 10th birthday of the Mall of America. The skeptics were wrong, and the biggest shopping center (attendance of 40 million annually, more than Disney World and Disneyland put together) in the United States revolutionized the retail industry, AP says: "It ended a nearly 40-year period in which innovation in mall design simply meant building something bigger..It succeeded by proving the irony that, with things to do besides shop in a mall, people tend to shop more. Over the past decade, hundreds of malls aimed to keep shoppers around longer by adding sit-down restaurants, multi-screen theaters and other entertainment as the Mall of America did."
Some recent U.S. visitors are going further -- all the way out of the country, as a sluggish tech sector combined with more stringent U.S. immigration policies drive foreign workers north, according to the San Francisco Chronicle. Canada -- which aims to admit 200,000 to 250,000 immigrants per year and usually falls short -- assigns applicants points based on education, language, adaptability and experience.
"With the U.S. economy going south, some engineers are heading north," writes Chronicle journalist Vanessa Hua. "Canada's appeal lies in its points-based immigration system, which generally takes six to 12 months to award permanent residency. ... If a candidate meets the minimum number of points and has proper documentation, he or she will likely obtain residency, said Jeffrey Abrams, a Canadian immigration lawyer."
Go where you want, but for all our sakes, try to keep it uninteresting. "Boring, dull but still good news" declares the headline for the Miami Herald's latest Money Matters column. The non-events of last week turned out to be very good for the stock market, columnist Harriet Johnson Brackey pointed out: "The recent absence of bad news is the best thing that's happened to the stock market since summer began. Investors must love these dull and boring August days. So boring the Dow can quietly zip up more than 1,000 points."
Speaking of boring...
Sunday morning TV: Iraq, the economy and baseball
Iraq was the closest thing to a theme for this edition of Sunday morning news programs. Fox News Sunday, ABC's This Week and NBC's Meet the Press dragged out Republican foreign policy experts such as Henry Kissinger, Lawrence Eagleburger, Jack Kemp, Richard Perle, and Sen. Richard Lugar to talk about doubts on an Iraqi invasion. Much of the talk stemmed from a Wall Street Journal editorial by Brent Scowcroft, a former national security adviser who believes it is too early to invade Iraq. TV analysts made much of Scowcroft's skepticism, since he worked for the current president's father and is expressing doubts held by other Republicans.
This Week squeezed in an economic discussion, largely focused on President George W. Bush's economic summit in Waco, Tex. earlier this week. AFL-CIO President John Sweeney and William Niskanen, chairman of the libertarian-leaning Cato Institute, agreed that nothing new and almost nothing useful came out of the meeting. A Bush spokesman disagreed, of course.
Meet the Press also went from Iraq to business, with the NBC show looking at the airline industry. Service is going to get worse because the focus is mostly on price these days, said Robert Crandall, former CEO of American Airlines.
Guest host Brian Williams suggested that the net result of the industry's turmoil could be fewer, but stronger, airlines. But former airline regulator Michael E. Levine disagreed.
"The hope that consolidation will somehow save the industry is an error, actually," said Levine, now a law professor at Yale University. "One of the problems that the industry has had is that it has been very vulnerable to its labor groups. And if we consolidate very far in this industry, you’ll get to a position where one of the labor groups will be able to take out a one-quarter or a third of the industry capacity, and that will cause very, very severe difficulties for the public. I also think that as long as the aircraft that are removed from service are not blown up in some major orgy of aluminum destruction, they can come out of the desert into the hands of discount carriers."
The NBC discussion also featured two members of the House of Representatives' aviation subcommittee. Rep. John Mica, R-Fla., and Rep. Peter DeFazio, D-Oregon, promptly fell into their party stereotypes, with the former complaining about government bureaucracy overseeing the air marshal program, and the latter suggesting that airlines need re-regulation (read: more government).
CBS' Face the Nation eschewed hard news at the start of its program to lead with its own version of ESPN's Sports Reporters. CBS anchor Bob Schieffer moderated a discussiona about another leisure business: baseball, which is threatened with a strike on Aug. 30 if owners and players can't hammer out a new labor agreement. CBS didn't get anyone actually involved with the negotiations and instead settled for two sports journalists -- USA Today'sHal Bodley and Sports Illustrated's Frank DeFord -- and one Hall of Fame shortstop, Ozzie Smith.
Full disclosure of baseball teams' books would help, said Smith, sidestepping the question of whether baseball players realize that almost no one sympathizes with people being paid millions to play a kids' game. Not that anyone feels sorry for the owners either, but asking George Steinbrenner and other owners of teams in large markets to stop buying the best players is a fruitless exercise, DeFord said.
Also talking baseball was Sen. Jim Bunning, R-Kentucky and a Hall of Fame pitcher. A strike will kill baseball as we know it and relegate the sport to "second-tier" status with hockey, Bunning said on Fox News Sunday.
No one addressed other, non-labor-related baseball issues, such as the fact that most people -- outside of sportswriters, nostalgic individuals, George F. Will and Ken Burns -- find football inherently more interesting.
» See last week's Sunday Wrapup
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