Ted, we hardly knew ye.
Just five years after United Airlines launched its “airline within an airline,” it announced Wednesday that it will ground the “no-frills” carrier next year and transfer its fleet of 56 fuel-efficient Airbus A320s to more profitable routes to replace thirsty 737 and 747 craft.
United is hardly alone in the new rush to flee the financially unfriendly skies. Houston-based Continental Airlines said Thursday it is cutting 3,000 jobs and reducing capacity by 11 percent. Two weeks ago, American Airlines, the nation’s largest airline, said it would cut capacity 11 percent to 12 percent after the peak summer travel season. Other carriers, including Denver-based Frontier, have announced cutbacks.
Ted was launched in the wake of United’s 2000 bankruptcy and aimed at providing single-class coach service to leisure destinations. But those are exactly the markets most at risk in the face of ticket price increases driven by soaring fuel costs. Now, United plans to restore first-class cabins on the Airbuses and try to recoup costs with higher ticket prices on its remaining routes, which rely more on business passengers.
There have been many rounds of cutthroat competition and reorganizations since the Airline Deregulation Act became law on Oct. 24, 1978. But the current turbulence poses more lasting challenges to tourist states like Colorado.
Earlier aerial dogfights featured established “legacy carriers” burdened with high labor, health care and pension costs struggling against startups that paid lower wages and benefits. While traumatic to the employees who lost jobs or benefits, such reshufflings place posed no real long-term threat to Colorado’s tourist business. If Legacy Carrier X went bankrupt but Startup Y replaced it and continued flying skiers in and out of Denver International Airport, our cash registers kept ringing.
This round is different, portending a permanent shrinkage of air traffic that may reduce tourist travel. Some analysts have called on U.S. carriers to shrink about 20 percent to cut spending on fuel and labor. Such cutbacks in service will inevitably drive up fares as passengers compete for fewer seats in the air. Tourists, whose disposable incomes are already shrinking in the face of rising gas prices, may decide to vacation closer to home.
Meanwhile, those same rising gas prices will imperil Colorado’s summer vacation business, which depends heavily on Mom and Dad gassing up the SUV and bringing the kids from their Chicago suburbs to see the Rockies.
Ironically, the threat to our tourist business comes just as Colorado, which curtailed tourism promotion in 1992, has finally renewed its effort to attract visitors. After so many years of misguided complacency, our state may now have to fight harder than ever just to keep our share of a shrinking tourism pie.
