It only took 10 years, but American Eagle parent AMR
AMR has struggled with a plethora of issues. Its labor costs are arguably the highest in the industry and negotiations with the workers' union has been going nowhere fast. AMR's fleet is relatively old compared to that of other national carriers United Continental Holdings
What the AMR bankruptcy does signify, however, is a clear and definitive changing of the guard from a national-carrier-dominated industry to regional carrier supremacy.
Think about it: every major national carrier has declared bankruptcy in the past decade -- some even twice! US Airways
Take Allegiant Travel
Another differentiating factor has to do with just how each company operates its routes. Allegiant, because it's so small, has the ability to shut down routes altogether if fuel prices rise too rapidly or passenger load counts dip too low. National carriers simply can't shut down popular routes without the fear of alienating their customer base.
The final reason Allegiant does well is because many airline consumers could give a damn about loyalty. The almighty dollar is what rules their decision-making process a lot of the time, and what most potential passengers are looking for is the lowest-priced flight possible. With alternate fees built in elsewhere (baggage, meals), Allegiant is able to pass along these savings at a markedly lower price than the national carriers can offer.
Another airline capable of undercutting the national carriers yet somehow able to keep customers loyal is Alaska Air
With AMR's bankruptcy, I can only assume that the talk of airline consolidation is right around the corner. As for me, I think the solution lies in breaking some of these national airlines into smaller components before we wind up in the same situation all over again in another five to 10 years.
What's your take on the airline sector? Are regionals the way to go or will national carriers reassert their dominance? Share your thoughts in the comments section below and consider adding these stocks to your free and personalized watchlist to keep up on the latest news in the airline sector.