Memo to air travelers: Chill out.
Yeah, there's been some unsettling news lately. American, Southwest, Delta, and United have canceled thousands of flights over the past few weeks to conduct emergency inspections, following a Federal Aviation Administration crackdown on safety procedures. Four small carriers recently stopped flying, leaving customers holding worthless tickets. Delays are nearly at record levels, flights are more crowded than ever, and airlines are adding every surcharge they can get away with to help offset soaring fuel costs.
So granted, air travel is stressful and likely to get even tougher, especially for occasional fliers without access to VIP-level perks. But the sky isn't falling. What we're seeing are the strains of a fragile industry that's highly susceptible to competitive pressure and outside shocks, like oil prices well above $100 per barrel. And much of this we've seen before. Some of the myths that tend to emerge from turmoil among the airlines:
The U.S. aircraft fleet is unsafe. The FAA's safety concerns are certainly serious, which is why American and other carriers have thrown their schedules into chaos to ground planes, conduct inspections, and fix problems. Southwest has already paid a $10.2 million fine for lapses, and there could be other fines, along with tougher inspections or other new rules. But this is all part of a highly regulated industry that has suffered just one fatal crash over the past five years. Even with safety shortfalls, air travel is extremely safe, with an infinitesimal fatality rate compared with car travel.
Booking a flight these days is risky. Travelers who held tickets on four airlines that recently went belly up—ATA, Aloha, Skyway, and Skybus—are essentially creditors of bankrupt companies. Other airlines aren't required to honor their tickets, and most of those unfortunate ticket-holders are simply out their money. But the four carriers barely represented 1 percent of the U.S. market, and virtually all of the top 20 U.S. carriers are in much better shape. "Right now, we don't have sick airlines," says aviation consultant Mike Boyd. Overall, the airline industry is likely to lose money in 2008, largely because of high fuel costs. But major bankruptcies are highly unlikely, and tickets booked on any reputable carrier ought to be safe.
Fares are skyrocketing. Without a doubt, carriers are passing rising costs on to their customers. But even with $10 or $20 fare hikes, "there continue to be low airfares," says David Stempler of the Air Travelers Association. Fares have risen modestly over the past year, but since 1995 they've ticked up by a mere 14 percent, according to the latest figures from the Bureau of Transportation Statistics. That's less than inflation, which means the real cost of air travel has fallen since then.
All airfares are local, however, and the key factor is whether travelers have access to discount carriers like Southwest, JetBlue, and AirTran—all of which are reasonably healthy and growing. Discounters now carry about 27 percent of all passengers, up from 14 percent in 1995, and they also drive down fares on other carriers where they compete head to head. On routes where there's no low-cost option, however—like many flights out of Cincinnati, San Francisco, or Knoxville, Tenn.—fares have been painfully high for a while.
Perks are disappearing. It's certainly true that free perks are disappearing. But the industry is moving from all-inclusive pricing to an a la carte system, with no-frills service for those who pay the least and a nicer experience for those who spend a few bucks more. Sure, it feels outrageous when something that used to be free, like an aisle or exit-row seat, suddenly costs extra. So while your fellow fliers are bellyaching, why not pony up $10 or $15 for "premium" coach seating on many airlines and enjoy a more comfortable flight? The same goes for meals, extra baggage, and on-board entertainment: It used to be free, and now it's not, but digging out a few extra bucks might enhance the experience without breaking the bank.
Airlines hate their customers. Hate is a bit strong now, isn't it? Well, maybe not if you're stranded overnight in Cleveland. But U.S. airlines get a bad rap mainly because they face a set of circumstances unique for companies in what is basically a retail business. They're heavily dependent upon factors like airspace limitations that directly affect customers but are beyond the airlines' control. Profit margins have been historically low, and the airlines' biggest variable cost entails one of the most volatile commodities on the market, oil. Many of the things airlines must do to earn a profit—like packing more people onto fewer planes—directly degrade the experience of their customers. If oil were still at $40 or $50 per barrel, the airlines would be comfortably profitable—and a bit nicer. But those free peanuts were never that good anyway.