In late May, American Airlines announced that they were cutting 11 to 12 percent of domestic flight capaciy and adding surcharges for luggage at $15 for the first item in addition to $25 for a second bag, all in an attempt to stem their losses from historically high oil prices.
Today, United Airlines announced that they're following American's lead with the $15 surcharge for a first bag amid seat capacity cuts and job losses.
"With record-breaking fuel prices, we must pursue new revenue opportunities while continuing to offer competitive fares by tailoring our products and services around what our customers value most and are willing to pay for," said John Tague, United's chief operating officer.
US Airways believes the US airline industry as a whole will cut its seat capacity by nine percent in the fourth quarter of 2008, with more cuts to come in 2009.The International Air Transport Association (IATA) reported yesterday that oil prices are leading to an industry-wide $2.3 billion loss for this year.
That projection is based on $106.50 per barrel of oil. Oil is trading right now for over $136 per barrel.
Two dozen airlines are already filing for bankruptcy. IATA chairman Fernando Pinto says, "Many more will not survive."
IATA CEO Giovanni Bisignani cast the stakes in even sharper relief:
Skyrocketing oil prices are changing everything. The situation is desperate and potentially more destructive than our recent battles with all the horsemen of the apocalypse combined.
As sustained high, volatile oil prices persist, expect more cutbacks in service, more price increases and surcharges, more consolidation - like the mammoth merger of Delta Air Lines Inc. and Northwest Airlines Corp. - and more bankruptcies.
Industries based around cheap air transport might want to rethink their business models. As the Telegraph (UK) reported last week, the era of cheap air transport is over.
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