Even as big airlines are beginning to successfully rein in labor costs - $1 billion in annual concessions from Delta's pilots being the latest example - soaring fuel expenses are essentially negating their effects, leaving many of the carriers in perilous financial shape. "It's like they're all treading water, but they've got 100 pound weights around their necks," said airline consultant Robert W. Mann of Port Washington, N.Y. "You can only do it for so long."
As a result of cutbacks in recent years, labor expenses for the airline industry as a whole are about the same today as they were a decade ago at about 34 percent of total costs, according to the Air Transport Association. But that masks the differences between high-cost carriers such as Delta Air Lines Inc. and UAL Corp.'s United Airlines and competitors such as Southwest Airlines Co. and JetBlue Airways Corp. that pay workers lower wages. And while all carriers have been hit by higher fuel costs that Mann says will account for about 17 percent of industrywide operating costs in 2004 - up from 12 percent in 2002 - executives of high-cost airlines face the most pressure to find other ways to cut costs.
On Thursday, US Airways and UAL reported third quarter losses of $232 million and $274 million, respectively. The seven largest U.S. carriers reported more than $1.3 billion in combined net losses for the third quarter and lost $5.1 billion for the first nine months of 2004. And with oil prices trading above $50 a barrel, even the plucky budget carriers are beginning to show signs of strain. |