Winging It: Airlines can survive if they adapt

The news about the airline industry seems to get worse every day. More and more, people who only follow the business through news headlines ask me questions such as: "Wow, things are so bad, are there going to be any airlines around if the price of oil keeps going up?"

The answer is, of course there will be. In the coming months, even if the airlines' fuel costs - and ticket prices - keep rising and your choice of carrier diminishes, many of you will continue to fly. Your job and the health of your business will demand it.

Leisure flying may sag for an extended period of time, but some portion of the population will still need to take the kids to Florida, visit the grandparents, or take that long-planned trip to Europe. And remember that millions of retiring baby boomers think of leisure travel as a civil right and will provide a boost to the discretionary market for decades to come.

But there's no question we're going to see serious upheaval in the airline industry this year and next, with cuts in capacity leading to less choices on some routes, higher fares, more bankruptcies, and employee layoffs.

The rising fares will probably get as much consumer attention as any of the issues, as it should. Yet, as much as I've ranted over the years about absurdly high prices on routes from Philadelphia, where only the "Big Six" legacy airlines compete, I'm realistic.

Airlines will have to find price points that customers accept, even if the entire fare structure has to go up. Given the chance, some carriers always find a way to gouge those who have no choice when they fly, while offering discounts to those who do.

So where do we find hope in this cloudy outlook?

Look first at the response to higher fares and less competition from business travelers as the economy limps along. The last time we went through this upheaval, after Sept. 11, 2001, the major airlines already were seeing road-warrior resistance to ridiculously high fares, noted Kevin Mitchell, chairman of the Business Travel Coalition. That provided an opening for AirTran, JetBlue, Southwest, Spirit and other low-cost carriers to grow significantly in the business-travel market, he said.

That, in turn, forced the old carriers - and most of their employees - to adapt to a lower operating-cost structure as the Internet allowed business and leisure travelers to be better shoppers. The airlines that survive this time around will have to adapt again.

Another part of the adaptation will involve technology. Retired Southwest chairman Herb Kelleher told me last month that one of the projects he will continue to work on for the airline is a hunt for a next-generation midsize jet that cuts fuel use by 15 to 20 percent compared with today's most modern 737. "There's a worldwide competition to come out with a more fuel-efficient plane," he said.

Another bright spot: As airlines cut back their schedules, flight delays should go down, too. That's not a given, however.

The air-traffic control system may continue to have fewer people than it needs to handle the traffic, as many controllers themselves say is the case now. Congress and the Federal Aviation Administration may continue to move too slowly to develop new air-traffic technology that will use the available airspace more efficiently. At the same time, no one wants safety margins compromised by allowing beleaguered airlines to skip inspections and outsource aircraft maintenance to unqualified contractors, an area that requires close monitoring.

Perhaps the current airline crisis also will spark new thinking in this country about having a more balanced transportation system. Already, higher gasoline prices and, to a lesser extent, higher air fares, are sending more travelers to Amtrak and public transit, where it's available.

After years of being starved for funds, Amtrak doesn't have a large enough network to be a practical alternative to flying for most business travelers. The only exceptions are the Northeast corridor and a few places on the West Coast and around other big cities. Yet Amtrak is barely able to keep up with the demand, often selling out space on the routes it does have, when fuel costs soar.

I doubt we would lament the loss of air service to smaller cities as much as we do if more intercity trains were available to fill the void.