There has been plenty of buzz lately about merger activity among the major airlines. The latest thought is that Delta Airlines, Inc. (NYSE: DAL) and Northwest Airlines Corporation (NYSE: NWA) will join forces in a battle against record-high fuel and other challenges to the industry. But despite the positive effect some feel consolidation may have on the airline sector, passengers are still facing stressful travel. Crowded gates and cramped airplane seats. Delayed flights. The struggle to reduce one's toiletry kit to a series of three ounce portions. And it is only getting worse. A report in the New York Times reported that big airlines are cutting down on domestic capacity in 2008 and raising ticket prices while they are at it. For every $10 increase in a barrel of oil, airlines are forced to lift round-trip fares by an average of $18 (and who can blame them?). Black gold is currently hovering close to the $100 level; about a year ago, it was close to $50. In sum, air travel will be more expensive, and just as crowded (if not more so). In 2007, jets were already more crowded than they'd ever been, and posted the highest-ever percentage of late arrivals. Of the seven major carriers, all but Southwest Airlines Co. (NYSE: LUV) and Continental Airlines, Inc. (NYSE: CAL) reduced domestic capacity in 2007. United Airlines, of parent company UAL Corporation (NASDAQ: UAUA) expects to lower its domestic flight roster by 3% to 4% this year, and DAL plans to shave 4% to 5% of its current domestic flight offerings.
Adding insult to injury the Times reminds us: "Because full flights cause airlines all sorts of operational problems, travelers should also brace for continuing problems with delays and misplaced bags."
Since moving north to Chicago, I've become a quick fan of Amtrak. The seats are extremely roomy, you can walk around whenever you want, the food isn't bad, and there are outlets at every seat so I can work or watch DVDs throughout the ride. Tickets are cheap, and the service is pretty reliable. What isn't reliable are the timetables: a commuter ride to St. Louis gets in at a decent hour, but other destinations pull into the station in the middle of the night. And forget about the train if you're looking to go more than a few hundred miles. Until we have a better rail system, most of us are just stuck flying the decreasingly friendly skies.
Beth Gaston Moon is an analyst at Schaeffer's Investment Research.
