Holidays don't cheer airlines

The busy holiday travel period is supposed to put a smile on the face of the airline industry. Instead, it got a black eye as payback for a few severe customer service blunders.

The computer meltdown that forced a Delta Air Lines-owned regional carrier to cancel all its flights on Christmas and the US Airways Group Inc. holiday staffing problems that resulted in a 10,000-bag pileup in Philadelphia compounded the financial bruising large carriers suffered all year at the hands of their small but growing lower-cost rivals.

For starters, the delays - whether caused by computer, labor or weather problems - add to the cost of doing business.

That's something US Airways, Atlanta-based Delta Air Lines Inc. and other major carriers can ill afford at a time when jet fuel prices are soaring and fare levels are too low to cover their operating expenses on a good day. Stranded passengers often are given lodging, meals or seats on other airlines, while employees must be paid overtime.

Perhaps more troublesome for the hobbled industry, analysts said, is the public relations damage caused by the holiday-travel foul-ups - the latest being a Northwest Airlines flight from Amsterdam to Seattle that lasted 28 hours, in which food and water ran short and the toilets stopped working.

The delay was caused by fog, mechanical glitches and regulations that limit the number of consecutive hours crews can work.

"We're finally seeing the big guys getting closer to cost parity with the low-cost carriers, and so we're entering a phase where the battleground now is going to be on customer service," said Kevin Mitchell, who runs the Business Travel Coalition, a Radnor, Pa.-based advocacy group.

Mr. Mitchell said that the baggage fiasco at US Airways was by far the worst incident of the past week and that it will mainly damage the image and future bookings of the bankrupt Arlington, Va.-based carrier, which has said it could liquidate early next year without more concessions from employees.

But there could also be ramifications for the rest of the U.S. carriers, which lost more than $5 billion during the first nine months of 2004 and, with a few exceptions, are not expected to turn a profit in 2005.

"It just adds to this perception that travel is just not what it used to be and is, in fact, getting worse," Mr. Mitchell said.