As flight cancellations spread, costs add up for industryby Harry R. Weber on Apr. 10, 2008, under Edge
ATLANTA – Another day and hundreds more flights grounded. The financial toll and loss of goodwill among travelers from the debacle that spread further Thursday beyond American Airlines’ massive cancellations could be severe — on an industry already reeling from high fuel costs.
Lawmakers were asking questions and some fed-up air travelers headed for trains. Others gave the airlines a pass, saying the companies were doing the best they could.
“I’m really upset, but I’m trying to keep a positive attitude for the sake of my children and my husband, who’s wandering around looking for us,” said Rainie Nelson, a 39-year-old from Park Ridge, Ill., who was stranded at Chicago O’Hare International Airport with a toddler and an infant while on their way to Palm Springs, Calif.
Of American employees, she said, “There is no point in yelling at them. It’s not their fault. So, I’m going to be as nice as I can be.”
Mingo Valencia, a 60-year-old stuck at Hartsfield-Jackson Atlanta International Airport while heading home to Midland, Texas, wasn’t so gracious.
“Poor management,” he said bluntly.
Congress also weighed in Thursday. The FAA official who ordered the audits last month, Nicholas Sabatini, faced tough questions from a Senate subcommittee about the agency’s lax oversight of airlines and his own accountability for recent breakdowns. The FAA noted that airlines had 18 months to complete the work on the MD-80s since the initial order was issued in September 2006.
American, a unit of Fort Worth, Texas-based AMR Corp., had canceled nearly 2,500 flights this week as of Thursday due to the safety inspections of its MD-80 aircraft following an FAA warning, and said an unspecified number of additional cancellations were expected through Saturday.
Alaska Airlines, Midwest Airlines and Atlanta-based Delta Air Lines joined the wave, each canceling a small number of flights on MD-80 aircraft on Thursday.
Roughly 250,000 passengers have been affected by the American cancellations this week alone.
Other carriers like Continental Airlines, JetBlue Airways, AirTran Airways and Northwest Airlines said they passed the first round of FAA audits with a clean slate and did not expect extra maintenance work or flight delays. It was impossible to say whether that could change since the FAA is conducting another round of safety audits.
The cancellations come at a time of high fuel prices and mixed success among the major air carriers at getting domestic fare increases to stick. The fact that airplanes are flying very full is making it difficult for airlines that cancel flights to find empty seats on other carriers to rebook their passengers.
“This disruption is severe,” said Webster O’Brien, an industry expert with aviation consulting firm Simat, Helliesen & Eichner. “People are going to be unhappy. There isn’t going to be an easy way to walk everybody out of it.”
No one knows for sure how much money the mess will cost the airlines, particularly American, which couldn’t provide an exact estimate Thursday. Analysts say the toll at American could easily be tens of millions of dollars, perhaps much more. American would say only that the figure would be in the tens of millions.
Besides lost revenue from the canceled flights, American also was giving $500 travel vouchers to an unspecified number of inconvenienced passengers and putting some travelers up in hotels. There also could be transportation costs to and from hotels, extra overtime for employees and the long-term costs of losing goodwill among customers.
American spokeswoman Andrea Huguely said the company’s number crunchers were working through the issue.
“We won’t know the cost of this until probably Saturday night, when we expect to have all of our MD-80s back in service,” she said.
The cost to other airlines also was unclear, and the pain could continue, analysts said.
“Just given the level of scrutiny, it wouldn’t surprise me if there were more cancellations and groundings at other airlines,” said Standard & Poor’s analyst Philip Baggaley.
He said the disruption was worse than some major storms that have affected large airline hubs.
“The costs are fairly substantial,” Baggaley said. “Given that the cancellations have been spread among a number of carriers, this will make it harder for airlines to turn around and try to raise fares, particularly in the weakening economy. It does indeed come at a bad time.”
Some travelers looked for other modes of transportation.
Amtrak has seen a spike in passengers since the flight cancellations began earlier in the week, especially in the Northeast, spokesman Cliff Cole said.
“Our ridership was heavy yesterday, is heavy today and is likely to be heavy tomorrow, based on our reservations,” Cole said Thursday.
Greyhound Lines Inc. spokesman Eric Wesley said he was unsure whether demand had increased because many bus customers buy tickets at the last minute.
At the Minneapolis airport, meanwhile, Tammy Kennedy of Indianapolis was frustrated by the American Airlines situation.
“First it was on, then it was canceled, then it was on again, then we got in the plane and sat on the runway in Chicago for an hour,” she said Thursday of her flight to Minneapolis.
She said the flight caused her to run late for a meeting.
“I probably won’t fly American again,” Kennedy said.