Magazine article Marketing

Airlines Fight to Survive Crisis

Magazine article Marketing

Airlines Fight to Survive Crisis

Article excerpt

Carriers are reeling from the financial as well as human cost of the US tragedy. How will they cope?

As markets worldwide dipped and stumbled in the wake of the terror attacks in the US, the already ailing airline industry is faced with an unprecedented crisis.

Transatlantic air traffic ground to a halt in the immediate aftermath of the attacks. But when the three-day ban on flights into and out of the US was lifted, British Airways and Virgin Atlantic faced a deluge of cancellations and plummeting ticket sales on transatlantic flights, the lifeblood of both carriers.

There has since been a stream of job cuts and reduced schedules in the sector. But even as their own jobs come under threat, airline marketers must begin plotting how to get their brands back on track.

The scale of the task is daunting. BA, which had already planned 1800 redundancies before the terrorist strikes, announced it would cut 7000 jobs across its operations - 13% of its workforce. It will also cut capacity by 10%. Virgin Atlantic plans 1200 job losses, shrinking capacity by 20%. Cuts will be felt in both airlines' marketing operations.

"We've announced 3000 redundancies in the support department," says BA marketing director Martin George. "It's inevitable that will have some impact on the marketing team."

A Virgin Atlantic spokesman says it's too early to say what effect the cuts will have on the airline's marketing operations, but adds: "It is fair to say that no area expects to be immune from the reductions."

The airlines hope to make most of the cuts through early retirements and voluntary redundancies. "I do not anticipate making anyone in marketing compulsorily redundant," says George.

'Worse in the US'

The numbers are even grimmer in the US. The nation's two largest carriers, United Airlines and American Airlines, plan more than 20,000 redundancies each. Continental, the world's sixth-biggest airline, plans 12,000 cuts. Plane manufacturer Boeing will make 30,000 redundant, while Midway Airlines has sought bankruptcy protection, and more are expected to follow.

WestLB Panmute transport analyst Gert Zonneveld says UK airlines may be battered, but are likely to weather the storm. "I don't think any of the big carriers are going to go bust," he says. "The big question is what happens in Europe. Virgin Atlantic and BA are the most vulnerable because of their heavy exposure to the transatlantic market. Smaller carriers that fly more routes to Europe should be fine."

Roger Tejwani follows Ryanair and easy Jet for WestLB Panmure. He says that while budget carriers may not suffer from exposure to the transatlantic troubles, they do face the problems of higher costs and longer aircraft turnaround times caused by increased security.

"Budget carriers' business models work on high turnaround, so any impact on check-in times is going to have an effect," says Tejwani.

Ballooning insurance rates and higher fuel prices could also prove damaging, and the cost of heightened security is likely to be passed on to airlines in the form of higher landing charges and other fees.

Nevertheless, Ryanair has been making bellicose statements of its fiscal health, and easy Jet commercial director Mike Cooper remains optimistic. "If you look at the economics of low-cost carriers, we're in a relatively strong position," says Cooper. "You can't buck the market, but there is latent demand we can tap into. The fuel cost situation is difficult to tell, as markets are waiting to see what the US response is. On insurance, we're all going to have to take it on the chin."

While tightened security has forced Ryanair and easy Jet to cancel some flights, Cooper doesn't expect to see much effect on turnaround times in the long term. "As long as you are aware of the security measures in place, you can manage your business around that," he says. …

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