I'll say this for the airline industry: It sure isn't boring.
This morning, members of its pilots union rejected the latest contract offer from US Airways
US Airways is under pressure to reduce costs ahead of payments due at the end of the month or face bankruptcy a second time. Management has said that covering its obligations will require $1.5 billion in new cuts. That includes $300 million in givebacks from pilots -- more than a third of the $800 million total the airline is seeking from union employees. After an ugly spat, late last week US Airways looked as though it might broker a deal with the pilots. No longer.
Reuters reports that the 12-member executive committee of the pilots union couldn't agree on management's proposal, with particular opposition coming from representatives from Philadelphia and Pittsburgh. The rejection makes it more likely the airline will go back into hock. Yet the ordeal seems to have emboldened other carriers in need of cutting costs. Consider:
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Northwest
(NASDAQ:NWAC) last week added fees to overcome what it estimates are $70 million in ticketing distribution fees. AMR's(NYSE:AMR) American Airlines quickly followed suit by charging new fees on tickets booked through its reservations centers or at the airport, although it failed to adopt Northwest's more controversial policy of not absorbing as much as $7.50 in fees for tickets booked through travel agents using distribution networks such as Sabre(NYSE:TSG) , a policy that the airline has since rescinded. -
UAL also last week said it will need to cut costs by at least another $655 million, but published reports say this could include 6,000 job cuts. The airline isn't talking, but a spokesperson admitted that more job cuts would at some point be needed.
- And Friday Continental Airlines
(NYSE:CAL) said it would follow United and skip pension contributions this year to preserve cash.
What's it all add up to for investors? It's hard to say for sure, but it seems increasingly clear that in the next year or more nearly every airline will transform itself to be a low-fare carrier. Should that prove true, then those already running slim operations, such as Motley Fool Stock Advisor pick JetBlue
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Fool contributor Tim Beyers has no ownership interest in any of the companies mentioned, although members of his family are retired from United Airlines. You can view Tim's Fool profile here.
