The busy holiday travel period is supposed to put a smile on the face of the airline industry. Instead, it got a black eye as payback for a few severe customer-service blunders...

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The busy holiday travel period is supposed to put a smile on the face of the airline industry. Instead, it got a black eye as payback for a few severe customer-service blunders.

The computer meltdown that forced a Delta Air Lines-owned regional carrier to cancel all its Christmas flights, and the US Airways staffing problems that resulted in a 10,000-bag pileup in Philadelphia, compounded the financial bruising large carriers suffered all year at the hands of their small-but-growing, lower-cost rivals.

For starters, the delays — whether caused by computer, labor or weather problems — add to the cost of doing business. That’s something US Airways, Delta Air Lines and other major carriers can ill-afford at a time when jet-fuel prices are soaring and fare levels are too low to cover their operating expenses on a good day. Stranded passengers are often given lodging, meals or seats on other airlines, while employees must be paid overtime.

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Perhaps more troublesome for the industry going forward, analysts said, is the public-relations damage caused by the holiday snafus — the latest being a Northwest Airlines flight from Amsterdam to Seattle that lasted 28 hours, in which the jet was diverted to Moses Lake, food and water ran short and the toilets stopped working.

The delay resulted from fog, mechanical glitches and regulations that limit the number of consecutive hours crews can work.

“We’re finally seeing the big guys getting closer to cost parity with the low-cost carriers and so we’re entering a phase where the battleground now is going to be on customer service,” said Kevin Mitchell, who runs the Business Travel Coalition, a Radnor, Pa.-based advocacy group.

To the extent consumers think financially distressed carriers are staffed by workers grumpy about wage and benefits cuts, carriers such as US Airways, Delta and United Airlines face another disadvantage to fiscally fit rivals such as Southwest Airlines and JetBlue Airways, Mitchell said.

He said US Airways’ baggage fiasco was by far the worst incident of the past week and it will damage the image and bookings of the bankrupt carrier. The airline has said it could liquidate early next year without more concessions from employees.

But there could also be ramifications for the rest of the carriers, which lost more than $5 billion over the first nine months of 2004 and, with few exceptions, are not expected to turn a profit in 2005.

“It just adds to this perception that travel is just not what it used to be and is, in fact, getting worse,” Mitchell said.

US Airways hopes to counter that perception this weekend with help from managers who have agreed to volunteer at its hub in Philadelphia. It was there that an unusually large number of baggage handlers and flight attendants failed to show up for work, according to the airline, crippling operations already hampered by bad weather.

For its part, Delta’s regional subsidiary Comair said it will replace the scheduling system that malfunctioned with one that can handle more transactions.

Transportation Secretary Norman Mineta on Monday asked the agency’s inspector general to examine the problems that caused Comair and US Airways to cancel thousands of holiday flights.

Meantime, discount carriers are trying to use their rivals’ misfortune to their own advantage.

AirTran issued a news release Monday, “AirTran Airways Holiday Performance Sparkles,” in which its CEO, Joe Leonard, thumbed his nose at US Airways by boasting “our baggage handling performance was exceptional” and that “our crew members went above and beyond the call of duty.”

Southwest and JetBlue took a different approach, but the message to US Airways — we’re coming after you — was clear. Both slashed round-trip fares in markets where they compete with US Airways.

US Airways spokesman David Castelveter said his company recognizes competitors are going to “crow” a little bit, but that it won’t detract from the airline’s focus on rebuilding relationships with customers.

“It’s clear that there are customers that are upset with us and that are going to book away from us,” he said. “We’re trying to restore the confidence of customers we let down.

“We will be reaching out to customers in other ways that I can’t discuss right now,” he said.

Airlines also need to work on their relationships with their employees, who have sacrificed pay, benefits and more to help their companies, said Robert Mann, an industry consultant based in Port Washington, N.Y.

“You’ve got to have motivated employees, but it’s hard to motivate employees in a positive way when you’re just whacking them over the head all the time.”

Mann said tension between labor and management was not the only industrywide strain exposed in the past week.

By dangling low fares, carriers have helped revive passenger traffic to levels not seen in several years. But with this surge in fliers, delays on runways and in the skies are increasing and likely to get worse.

The bad weather that hit the Midwest just before Christmas — and the labor and technological mishaps that made matters worse — only highlighted the underlying stress in the system, Mann said.

Even if airlines manage to make it through this holiday weekend without more foul-ups, “the delays in the summer of ’05 and beyond are likely to be just as bad as the late 1990s and 2000,” Mann said.