The airline industry continues to be caught in a severe financial downdraft, as the effects of a weak economy and the aftermath of Sept. 11 send carriers to a second year of heavy losses. These industrywide effects have also been felt locally — US Airways has laid off more than 1,000 employees in Charlotte and Raleigh-Durham-based Midway Airline’s suspended operations in July cost additional jobs. Yet despite setbacks, North Carolina’s main airports remain attractive — and busy — places to fly from.
Industry losing billions
The airline business has always been highly cyclical in nature. In good times, business and individuals have more discretionary funds available and are willing to spend some of them to fly. In bad times, travel, especially air travel, is often one of the first items reduced in a corporate or family budget. As a result, the airline industry tends to do very well when the economy is well and struggle — or worse — during economic downturns. This trend has been exasperated by the effects of Sept. 11.
While fewer people are flying in general, the reductions are especially large on short-haul flights. A recent AAA survey shows that 22 percent fewer people are flying on routes of 200 to 400 miles. With increased security and the delays that might — or might not — be caused by it, time, convenience and cost factors have driven many people to other forms of transportation or not traveling at all.
Compared to the same month two years earlier, traffic in September on United Airlines was off 15.4 percent, off 11.4 percent at Delta, down 12 percent at Northwest, and down 14.6 percent at Continental. Traffic at Southwest Airlines was down only 1.4 percent in September 2002 compared to September 2000, but unlike other airlines, Southwest has continued to add capacity. It’s load factor — the percentage of seats it filled — fell 8.9 percentage points over the two-year period to 56.8 percent in September 2002.
The U.S. airline industry lost $8 billion in 2001 and is expected to lose an additional $8 billion this year. Best-case scenarios have the industry breaking even in 2004 if the economy recovers.
US Airways doing poorly, CLT doing OK
Current market conditions have hit no major airline harder than US Airways. The carrier, which has a major hub and heavy maintenance facilities in Charlotte, lost a billion dollars last year even before Sept. 11. With the shortest average flight length of the six large hub-based airlines (Southwest does not have hubs per se) and a strong presence in the Northeast, US Airways has experienced a disproportionately large reduction in demand. Compared to September 2000, the airline’s traffic this past September was down 26.4 percent. The carrier is operating under Chapter 11 bankruptcy protection.
Despite the generally difficult market conditions, Charlotte/Douglas International Airport (CLT) continues to do remarkably well. The largest US Airways hub in terms of flights, it also has been has been the least-affected by the airline’s troubles.
Given that US Airways has more than 90 percent of the flights out of Charlotte, total airport figures may be taken as a measure of the hub’s vitality. The number of boarding planes in Charlotte (originating or connecting) was 1,091,674 in August 2002, compared to 1,118,850 in August 2001, and 1,026,999 in August 2000. On a percentage basis, enplanements at Charlotte/Douglas were up 6.3 percent in August 2002, compared to August 2000.
The importance of the US Airways hub is not limited to just the immediate Charlotte area; the only scheduled air service from New Bern, Jacksonville, and Greenville, N.C. are to Charlotte. Those wishing to fly to or from Wilmington or Fayetteville must do so over either Charlotte or Atlanta. Charlotte is one of only three destinations served from Asheville.
Even should US Airways fail, the carrier’s Charlotte operation might well prove appealing to another airline. The markets served by US Airways from Charlotte do not duplicate other airlines route structure except for Delta. Charlotte/Douglas also offers the second lowest per passenger cost of any hub airport in country.
The strength of the Charlotte market has not gone unnoticed by other airlines. American Trans Air started service to Charlotte from Chicago’s Midway service this past summer. ATA, which originally was offering three flights a day, will add a fourth daily flight this month. “Demand in Charlotte has been remarkable,” John Hula, ATA’s vice president of planning, told The Charlotte Observer. “It’s at break even, but that’s outstanding in this environment.”
American Airlines will also expand its flight offerings from Charlotte this month, with new daily nonstop service to its hub in Miami.
RDU doing well, too
The failure of Midway Airlines as an independent operator has obviously reduced the number of travelers using Raleigh-Durham International Airport (RDU). More than 70,000 people changed planes at RDU in both August 2000 and August 2001, the overwhelming majority on Midway. In August 2002, by comparison, only 379 travelers used RDU as a connecting point.
The number of people beginning their trips in Raleigh-Durham, however, has remained remarkable steady over the past two years. Originating traffic was down only 1.3 percent in August 2002 compared to August 2000.
Raleigh-Durham International, like Charlotte/Douglas, has attracted new routes even in the wake of Sept. 11. America West began service to Raleigh from Phoenix and Las Vegas in May.
American Airlines has announced plans to begin nonstop service to San Juan, Puerto Rico this month and to San Jose, Calif., in March. American Airlines has also picked up most of the market share that Midway once held. Between the mainline carrier and its American Eagle commuter division, boardings in Raleigh grew from 68,444 in August 2001 (including passengers on TWA, which American acquired) to 96,005 this past August.
Lowrey is associate editor for Carolina Journal.