Chris Kahn, The Associated Press
PHOENIX -
New travel fees mean hundreds of millions of dollars a year for beleaguered airlines, and executives say they need them more than ever as fuel costs continue to suck profits out of the industry. Plane tickets, it seems, now come with only the bare-bones promise of getting from Point A to Point B.
United Airlines, US Airways and JetBlue all posted big losses Tuesday, though all three beat Wall Street estimates. Airline stocks, which have been at historic lows for many carriers, shot up as oil prices dropped more than $4 a barrel at one point in Nymex trading.
"We'll manage through this," US Airways Chairman and CEO Doug Parker said of the pressure to cope with fuel costs. "It's not outrageous to suggest that what's already been done is enough to get the industry profitable in 2009."
Amid Tuesday's dismal profit numbers, airline officials told analysts that the silver lining is that a la carte fees may eventually stem the bleeding.
US Airways, for example, expects to raise an additional $400 million to $500 million annually.
The Tempe, Ariz., carrier has been more creative than others when it comes to fees. Besides bag charges, it has added charges for sodas and choice seats in coach.
Meanwhile, JetBlue hopes to bring in about $40 million from customers buying seats with extra legroom this year. Its $15 fee for a second checked bag is expected to translate into about $20 million in added revenue. A ticket change fee, which doubled to $100 in the second quarter, is part of a "basket of fee changes" expected to produce $50 million for the year.
United, which expects a $3.5 billion fuel bill this year, said it could see $275 million in new money from checked luggage fees as well as other baggage charges.
The new travel fees are here to stay, said Terry Trippler of Minneapolis, who studies the industry.
"Whatever is going to cost them money is going to cost you money," he said. "You carry on a bag. The weight of that bag is going to cost the airline money; therefore, it will cost you money. You want a soda. Well, to carry those sodas on a plane or to buy them will cost them money; therefore, it will cost you money."
When people think of airlines, Trippler said, they should imagine it like a big bus with wings.
Besides the extra fees, airlines are expected to make big reductions in the number of routes they offer. By parking planes and cutting seating capacity, executives hope to keep demand, and fares, high for the remaining tickets. According to estimates by US Airways, any round-trip ticket needs to cost more than $299 to cover the cost of fuel.
US Airways said it would further cut capacity 6 percent to 8 percent on domestic flights in the fourth quarter, and then cut another 8 percent to 10 percent in 2009.
United will trim overseas routes by 7 percent in the fourth quarter. It dropped about 50 routes from its domestic schedule on Thursday alone.
JetBlue expects September capacity to be down 10 percent and does not expect to grow next year.
US Airways and United also announced that they would shrink their work force even more than previously announced.
United said it will aim to cut 7,000 jobs by the end of next year as it cuts flights, with the additional reductions coming from front-line workers. US Airways said it cut more management jobs.
Despite the weak earnings reports, airline stocks soared Tuesday as oil prices tumbled. Airline shares are still far below their values around the start of the year.
At the closing bell, UAL was up $3.42, or 68.5 percent, at $8.41. US Airways shares added $1.58, or 58.7 percent, to close at $4.27. JetBlue rose 61 cents, or 15.7 percent, to $4.50.
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