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Gaming Guru

Richard N. Velotta

Experts: Vegas Should Fly Through Airline Turmoil

19 May 2004

The nation's established air carriers are continuing to lose ground to upstart low-cost competitors, speakers at an aviation conference in Las Vegas said Tuesday.

While the big six U.S. airlines are in a battle for survival that will require them to seek mergers, alliances or even file for bankruptcy protection, Las Vegas should weather the aviation industry storm well, one panelist said.

"Las Vegas is in the catbird's seat in terms of getting service," said Vaughn Cordle, chief analyst with AirlineForecasts LLC, Washington, D.C.

Cordle was a panelist for the GSE (Ground Support Equipment) International Expo, one of several organizations meeting at the Las Vegas Convention Center as part of Aviation Industry Week. About 5,000 people in various sectors of aviation are attending the three-day event that concludes Thursday.

The aviation industry is important to Las Vegas because nearly half the city's gamblers and resort guests arrive in the city by plane.

Cordle said in an interview following his panel presentation that while the major air carriers are at financial risk, "it's fantastic for the upstarts."

"They'll be competing to come into this market," he said.

Recent new service announcements in Las Vegas are bearing that out.

In recent months, the biggest strides for putting new flights into Las Vegas have been made by Southwest, America West, Allegiant and Air Tran, all low-cost operators.

The big six legacy airlines -- United, American, Delta, Continental, Northwest and US Airways -- have a combined market share of only 25.5 percent of the seats coming into McCarran International Airport.

United, the No. 3 carrier at McCarran, actually has no mainline presence since it revamped its strategy between February and May and converted its 33 Las Vegas flights to its Ted discount subsidiary.

Meanwhile, most of the nation's leading low-cost carriers offer at least one daily flight to Las Vegas. JetBlue, Frontier, Spirit, Sun Country, Delta subsidiary Song and ATA Air all have a presence at McCarran.

A Washington, D.C.-based low-fare start-up carrier, Independence Air, which is launching operations today, is considering flights to Las Vegas in its second wave of service announcements later this year.

The other major carriers have either dropped flights or stood pat in Las Vegas. In April, Delta dropped two Las Vegas flights while Northwest and Continental have dropped one each.

Cordle said he expects Delta to join United Airlines in bankruptcy court before the year ends.

Panelists said the legacy carriers are in poor financial shape because they have overwhelming pension commitments and many of the employees who have been with the company for years are retiring. They also said the airlines are burdened by high salaries negotiated by unions for pilots, flight attendants, mechanics and ramp workers.

"At the current rate, the low-cost carriers will overtake the classic carriers by 2020," said panelist Morton Beyer, chief executive of Morten Beyer & Agnew Inc., Washington, D.C.

But he said mergers and alliances should keep those companies alive, especially since the brand names are of value.

"United may be the most bloated airline in the world, but it still has a powerful brand name," he said.

In a separate presentation on similar topics, John Goglia, an outgoing member of the National Transportation Safety Board, said the aviation industry has to look at innovative ways to save money if it is going to enjoy the profitability many companies enjoyed in the 1990s.

"I don't think the old business model (prior to the Sept. 11 terrorist attacks) will ever return," Goglia said.

He said the U.S. aviation industry should look to models in Europe for ideas and can't rely on the government for help. He cited centralized transportation planning as an example of how Europeans have done a better job of turning their airports into economic hubs.

He said the British have developed a rail system linking Heathrow and Gatwick airports to central London's largest train stations, giving travelers quick access to the entire country. Meanwhile, many major U.S. airports, including some of the nation's newest in Pittsburgh and Denver, were built far from population centers without rail transportation.

He complained that Washington's Dulles International Airport, serving one of the world's largest government centers, has no rail line.