With oil at $75 per barrel the airlines have no shot at making money. Their only hope to turn a profit is to raise fares. This is the last thing you want to hear, but it is the simple economic truth.
The industry may report a small total profit for the second quarter, but in the long run profitability is just a dream when oil is so expensive. On one hand, you have to feel sorry for the airlines, and on the other hand you have to wonder how they can keep making such bad decisions. We know many executives in the airline business, and these are smart people. When you sit and discuss the industry with them, you are convinced they could solve the airline industry's many problems and then tackle world peace by tomorrow morning. Then something strange happens. These seemingly very smart individuals head back to their corporate headquarters and make money-losing decisions with amazing regularity.
Their latest money-losing decision involves the Global Distribution Systems (GDS). American Airlines made the decision to start charging all travel agencies $3.50 per segment for the privilege of letting us sell you their product using the GDS. United, Continental and Northwest have announced the same policy as well. This latest stupid decision is set to begin September 1, 2006.
The amount of revenue this decision will raise will be very small, and the problems it will create will be very large. The good news in this for you is that all of the new agreements between the airlines and the GDS will guarantee you all of the major airlines’ lowest fares. The bad news is that it most certainly will cost you and us money. We will keep you posted.
Safe Harbors Travel Group is shaping a new age of business travel management. Safe Harbors’ expertise in business travel, global travel infrastructure, vendor management, expense and accountability reporting and travel information systems is helping clients achieve their business goals with a higher return-on-travel-investment. Headquartered in Baltimore, Safe Harbors provides global travel management to more than 100 corporate clients. To learn more visit SafeHarbors.com .