Keith Alexander

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Despite pay-cut efforts, American Airlines could be the nation's largest carrier to file Chapter 11 bankruptcy. Flight attendants, pilots and mechanics unions have agreed to an immediate cost-cutting proposal totaling $1.8 billion to avoid filing for bankruptcy. American Airlines has also ousted chief executive Donald J. Carty. Similarly, Northwest Airlines is using the threat of Chapter 11 to persuade employees to accept $1 billion in annual cuts.

Other news affecting the airline industry includes the Severe Acute Respiratory Syndrome (SARS) epidemic. Major airlines have waived cancellation fees and business travel has decreased in response to the World Health Organization travel warnings to Beijing and Toronto in efforts to stop the rapid spread of the virus.

Post financial staff writer Keith Alexander will be online Tuesday, April 29 at 1 p.m. to discuss the airline industry, including the impact of the SARS epidemic.

Submit your questions and comments before or during the discussion.

Editor's Note: Washingtonpost.com moderators retain editorial control over Live Online discussions and choose the most relevant questions for guests and hosts; guests and hosts can decline to answer questions.

Keith Alexander: Hello everyone and thanks for joining in. As most of you know, this has been an incredible two years or so years for the airline industry. What a time it has been. I see we have numerous questions coming in so let's get to it. I will try to get to as many of your questions within the hour.

Washington, D.C.: With nothing certain, of course, which would you put better odds on: being able to use frequent flyer miles on Varig Airlines in September, American Airlines in December or United next February? I tend to think that at least American and United will be around for a while, though the last time I had a ticket oen a troubled airline it was on Pan Am, and the airline went belly up quite quickly (Delta honored my ticket).

Keith Alexander: Hello Washington. I have seen this question many times. It's very likely that both United and American will be around next year. United has been able to get the needed cost cuts from its labor groups. Those cost savings should facilitate United's bankruptcy organization. And despite the problems American Airlines is having, it too was able to get the needed cost cuts from its workers. And if American is forced to file for bankruptcy, it should still be able to reorganize. It may have to trim some unprofitable routes and layoff more employees, but it should still be able to emerge. Bottom line is that your frequent flier miles on both airlines are most likely safe.

Arlington, Va.: So which airline is next in the crisis seat? Delta?

Keith Alexander: That's a very good question. Delta, financially, seems to be better off than other carriers. Its employee morale might be in question because of bonuses awarded to its top executives last year. Delta is about to begin concession talks with its pilots, its only unionized work group. So it will be interesting to see how that goes. Just last week, the CEO of Northwest Airlines told his employees that if they do not agree to concessions, bankruptcy could be an option. But that's highly unlikely. While Northwest is having its financial problems, it's a little better off than its competitors. Also, another airline to keep an eye on is Continental.

Silver Spring, Md.: What's your gut feeling on U.S. Air -- will the airline ever be able to sell itself off?

Keith Alexander: Hello Silver Spring. Now that US Airways has been able to drastically reduce its costs, it's a much more attractive buy for another airline. However, given the state of the airline industry today, there isn't a large enough U.S. airline out there that is financially able to make such a move, especially since most of the airlines are asking for cost cuts from their employees.
Another factor that could make it difficult for US Airways to be acquired is the government. Remember, it was the Justice Department that objected to United's attempted purchased of US Airways two years ago.
For now, US Airways may have a good chance to make it on its own. But that largely depends on if the economy, especially along the East Coast, improves.

Junior, Miss.: What's the latest on Dulles' status as a United hub?

Keith Alexander: United has said that it was committed to its Dulles hub. As of now, it has not given any indication that it will eliminate its hub, despite what some of its creditors have suggested. United is having success in obtaining cost cuts from its employees. As a result, that may make it easier for United to afford to keep its Dulles hub. But again, a lot depends on the economy and international flying. United uses Dulles mainly as an East Coast feeder for its overseas flights. If international travel picks up, that could be more of a reason for United to stick with Dulles.

Somewhere, USA: Solvency/Reliability of Airlines: I am preparing to travel to Chile this December, and it turns out United Airlines has some flights which are conveniently scheduled. I am a bit worried, however, that by December it may be completely unstable financially. Would United facilitate another flight through another carrier for me if, for whatever reason, they cannot do it?

Thanks

Keith Alexander: Hello Somewhere. I've always wanted to visit that town. Again, United is making some strides in its reorganization which suggests that it the airline should be able to reorganize. However, it still has a long way to go. United doesn't expect to emerge until next summer and a lot can happen between now and then. But as for your December flight, it seems likely that United will still be around. Also, remember United is a member of the Star Alliance. That means if one any one of Star Alliance 14 member airlines fly into Chile, you can fly that carrier instead.

Van Ness, Washington, D.C.: What do you think of the idea that the U.S. airline biz simply has too many planes and too many companies? I believe that competition has made U.S. carriers very efficient but politics and bankruptcy courts prevent the removal of excess capacity from the marketplace-killing prices for everyone.

If so, do we let some carriers (US AIR?) go away?

Keith Alexander: This is a very valid question. In fact, many airline consultants and executives have argued this fact for some time. It is indeed true that there marketplace is saturated with airline seats. That is one of the reason why it's so difficult for the airlines to raise fares, which are at historic levels. And it's also the reason why you had some airline executives argue against the financial aid packages that the government approved both after the 2001 terrorist attacks and earlier this month.

Cottage City, Md.: Why are unions meekly accepting pay cuts when bosses are getting raises and bonuses? How can the boss be doing his job well if they have to request cuts from the rank and file?

Keith Alexander: I think labor unions would definitely argue against you characterizing them as "meekly accepting" pay cuts. The unions as both US Airways and United fought hard to keep their pay and benefits. In fact, at one time the future of both carriers was in serious doubt because the unions had not signed off on the cuts. But when it comes down to saving the entire airline and thousands of jobs or agreeing to pay cuts, most of the employees relunctantly voted to accept the cuts. Also, look at what happened at American two weeks ago. It was American's labor unions, especially the flight attendants, who voiced their anger and objected to their cuts in the wake of American's executives getting such hefty bonuses. In fact, some would argue that it was a result of the union's outcry that forced the resignation of American's CEO Donald Carty.

washingtonpost.com: Bring Your Own Air Fare (Post, April 29)

Bethesda, Md.: Are the airline labor cost savings coming from pay cuts or work rule changes? In my opinion, there's a lot more money, and less worker anguish, in work rule changes; look at Southwest. Your insights?

Keith Alexander: Hello Bethesda. The cost savings are coming from both pay and work rule changes. But as most airline executives would say, they would prefer the savings come from the work rule changes. Changing work rules makes an airline more cost competitive long term. Pay cuts are more of a short term fix. But the reason unions don't like work rule changess is because they often result in layoffs. When it becomes more economical to perform a task, that often means there's less of a need for as many employees to peform that same job.

Washington, D.C.: Can you recommend any books on the airline industry? I've been told that "Hard Landing" by Petzinger is good. Can you recommend it or others?

Keith Alexander: "Hard Landing" is by far one of the best books on the airline industry. I would also recommend Bill Adair's "The Mystery of Flight 427: Inside A Crash Investigation." It's a much more recent book since it examines the 1994 crash of a US Air plane near Pittsburgh.

Arlington, Va.: I don't know if you can answer this, but is it FAA regulations/law that a plane cannot land if someone is in the restroom? I witnessed a humilation of an elderly lady on a Delta flight with the flight attendant first helping her to the restroom and then a a minute later, banging on the door, screaming to get out because they were landing. I sat next to the elderly lady and the attendant did not inform her of this rule, though someone later told me this is a regulation. Would you be able to clarify this? Thanks!

Keith Alexander: The FAA does require that all passengers are seated with their seatbelts buckled during take offs and landings. After all, takes off and landings are the most dangerous periods during a flight. And unless the airlines install seatbelts in the planes' restrooms, it makes sense that the flight attendant became frantic. I do hope, however, the attendant was at least respectful of the elderly passenger during the incident.

Clarksburg, Md.: We have seen many options for airline food services, pickup, on board, etc.

Which do you think the most viable option, if any is?

Keith Alexander: As I always tell people, myself included, it's often easier just to stop past a fast-food restaurant and grab a burger or a slice of pizza and take it on a flight.

Washington, D.C.: Well, Delta is two weeks into its Song experiment. Any word on how it's going?

Keith Alexander: Song doesn't begin flying out of washington until later this year so we'll see what happens. It's still early yet, so we'll see if people start singing song's praises. (Sorry, I couldn't resist)But stay tuned to future Business Travel columns because I will be monitoring travelers' response.

Steamed in Reston, Va.: Are you as mad as I am, about the serious breach of trust the AA execs displayed to their employees?

I am not just talking about bonuses, I am talking about the MILLIONS of dollars the execs are sure to get even if the company goes under. and the fact that it was secret, AND that they tried to sneak the information out in the 10K after the union's vote (and filed for SEC extensions to hide their duplicity, blah blah blah)

apart from a firing squad, what do you think should be done to these guys? at minimum, I think they should be stripped of these bonuses and the severance money in the case of bankruptcy. are there plans afoot to do just that? (any suits, etc.)

I am also steamed that ultimately the TAXPAYER is paying for these bozos, b/c of the huge bailout Congress gave them. for shame!!

Also, what other airlines did something like this to their people? I can't believe the crass greed of CEOs these days. where are the honest people?

Keith Alexander: Hello Reston. What is going to be interesting is how this latest round of airline executive compensation plays out years from now when the airlines once again go through a difficult period and seek concessions from its workers or aid packages from the government. Airline employees have healthy memories and today's bonuses could make it difficult for executives to try to secure concessions again.

Hyde Park, Chicago, Ill.: Dear Keith-
Excellent chat, as always! What is your opinion of AA's chances of remaking itself into another Southwest, or at least, a Continental, i.e., more budget seats and two class service? Will they succeed? Thanks!

washingtonpost.com: Bring Your Own Air Fare (Post, April 29)

Keith Alexander: Hello Hyde Park. What is going to be interesting is to see how successful Delta and United are in trying to "remake" their operations and offer low-cost service. American has said it too was studying such a plan. But it's doubtful that plan will be on the top of American's list these days as it tries to overhaul its operations and reduce its costs. But remember, both Continental and US Airways tried similar moves and abandoned their efforts. United and Delta have tried this before as well and failed. Airline executives have said the only way to compete with the Southwests and JetBlues is by getting their costs down as low as possible and compete with their own product. One executive told me that just as there is room for the Wall Marts and the Bloomingdales, there's also room for the low-cost carriers and the traditional hub and spokes. We'll see.

Arlington, Va.: Why have airlines picked now to make it harder to qualify for elite status? It would seem they need their diehards more than ever.

Keith Alexander: Hello Arlington. The airlines have caught on to the fact that their best customers, the frequent business traveler, are no longer paying the top dollars they once did. So they had to figure out a way to get these passengers to return to those high-priced tickets. Remember, these travelers have become used to the perks that go along with elite status so it seems the airlines are betting that the travelers will do what they can to maintain that high-brow status.
Okay folks, with that I have to sign off. Thank you for taking out of your day to participate in the chat. I am sorry time would not allow me to all of your questions and comments. Until next time.

washingtonpost.com:

That wraps up today's show. Thanks to everyone who joined the discussion.

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