Short-term, the bankruptcy filing by United Airlines parent UAL Corp. will likely not affect passengers greatly, as tickets are still being honored and the airline’s frequent flyer program remains intact. But over the longer term, the upheaval at United — and its impact on the rest of the industry — could change the way you travel and how much you pay for your ticket.
United's bankruptcy filing gives the airline a chance to get out from under the crushing debt load and costly labor contracts that have buffeted its bottom line. By slashing wages, cutting flights, and paying creditors pennies on the dollar, the carrier hopes to shrink its costs and return to profitability.
So if you’re holding a United ticket, you won’t be stuck with a worthless piece of paper — though you may have to scramble to another airline if your flight is canceled. So far, a few nervous flyers have already switched airlines, but most passengers holding United tickets are apparently taking the bankruptcy filing in stride, according to Richard Copland, CEO of the American Society of Travel Agents.
Since most travelers buy their tickets with a credit card, they can be assured of a refund, he said.
“Using cash is a mistake,” said Copland. “If you do not get the service that you contracted for under your credit card, the credit card company has to give you back your money.”
United customers with accumulated frequent flyer miles will also continue to be able to use those credits for free flights. Some analysts suggest the airline may even boost the use of targeted discounts to its best customers — instead of relying on wider fare cuts — to spur sales. But passengers cashing in their miles may have fewer flights to choose from as United scales back operations.
While a smaller, leaner United will likely keep flying, the outlook for passengers on US Airways is less certain. The smaller carrier, which filed for bankruptcy protection in August after the government blocked its merger with United last year, still draws on a marketing partnership with United to attract passengers. If United shrinks capacity, that will likely mean less revenue for US Airways, which is already falling short of the revenue targets set in its application for federal loan guarantees.
“It’s unlikely U.S. airways will survive the next three years as a brand,” said Henry Harteveldt, an airline analyst at Forrester Research.
It’s also not clear what the impact of United’s transformation will have on air fares overall. Over the long term, as airlines continue to shrink, tighter capacity could make it easier to raise fares. But that’s not likely until the U.S. economy regains its strength and businesses loosen their grip on travel budgets, said Copland.
“Airlines fares should not go up in the short term because the demand is not there,” he said. “People are not flying.”
United’s bankruptcy could also bring big changes in the way airlines move passengers through the air transport system. To cut costs, say some analysts, United and other major U.S. airlines will begin moving away from the current “hub and spoke” system — in which passengers are herded through major airports with numerous connecting flights — to more “point-to-point” routes with fewer, direct flights per day. That means that, over time, you’re more likely to find yourself on a smaller plane, according to Harteveldt.
“In five years, I don’t think you’ll see any widebodies in the U.S. market — with the exception of (high volume) routes like New York to Florida,” he said.
The shift away from the hub system could also mean you’ll fly more non-stop flights. But that depends a lot on where you live. Smaller markets will likely continue to be reached with multiple connections. Some could lose service altogether, according to Copland.
“There are already less and less flights to less and less places,” he said.
A shift away from hubs could also bring a change in ticket pricing, say analysts. For leisure travelers, fewer, smaller flights could mean higher prices — or at least fewer discount seats on each flight. But business travelers — or other passengers who now pay a steep premium for booking at the last minute — could see those fares come down.
“The hub and spoke system was designed to provide extremely high levels of availability for business travelers; there was almost always a flight available,” said syndicated travel columnist Ed Perkins. “Up until two years ago, business travelers were willing to pay five or six times the leisure fare for that degree of convenience. But the last year or two has convinced them that maybe we don’t need quite that much flexibility.”
Though United is expected to keep flying and make it through the bankruptcy process intact, there’s no guarantee it will succeed. Bankruptcy court has turned into a graveyard for once prosperous airlines like TWA, Pan Am, and Eastern Airlines.
Analysts say the first sign of real trouble will come if United begins selling off pieces of its network, which includes hubs in Chicago, San Francisco, Los Angeles, Denver and Washington, and lucrative routes to London’s Heathrow Airport and Asian destinations like Tokyo.
But if it does falter, other airlines would simply pickup the slack.
“Chunks of United would wind up providing the same network it does now with somebody else’s paint on the tail,” said Perkins.