As first class seats go empty, look for airline consolidation
Jun 22nd 2009 11:00AM
Updated Dec 4th 2009 2:32PM
As the recession took hold, more people have stopped flying first and business classes, instead opting for coach, causing airlines to simply take out these premium seats. Even worse, some affluent travelers aren't downgrading, they simply aren't flying at all.
According to Reuters, the affluent are not the only people leaving the front of airline cabins. The news service reports that "Business travel has been in rapid decline since the economic recession took hold last year and savings conscious companies cut back on travel."
The high for premium classes which offer better seats and service makes those segments highly profitable, and their disappearance is another nail in the coffin of the airline industry. The industry, which already is facing falling traffic, is also seeing its profits are being turned into losses by the high fuel costs that accompany rising oil prices.
First class travel is the tip of an iceberg that could sink some airlines and drive them into mergers in an attempt to bring down costs and consolidate routes. Falling revenue will challenge the industry, which still has not recovered from the huge losses it posted in 2008 because of oil's ascent above $100.
If the recession wears on and passengers, first class or otherwise, don't return, watch for another wave of consolidation like the one that drove the Delta ( DAL) buyout of Northwest Airlines. The number of independent U.S. carriers is likely to shrink by one or two this year.
Douglas A. McIntyre is an editor at 24/7 Wall St.