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Action United Airlines is taking after the episode of bumping passengers on a flight to Louisville caused public protest in media with live pictures, include offering more financial incentives to passengers to vacate seats on overbooked flights, and setting up new rules for handling such situations. Upto $10,000 will be offered to passengers in travel vouchers. Only safety and security would be considerations once passengers are already on the plane. Other airlines are also taking these steps- Delta has set $9950 as the amount maximum to be offered to passengers as vouchers. Other steps United is taking are special call center for overbooking, and reducing number of overbooked flights, offering $1500 no questions asked for lost baggage. United's Board has also acted by not promoting Mr Munoz, the CEO to chairman, and by making it essential that executives show meaningful improvements in customer experience to get incentive compensation. These steps are a result of the report that looked into the failure at United in bumping passengers who were already seated made by the airline. ...

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The forcible removal by aviation police of United Airlines passenger Dr Dao from a flight due to scheduling issues caused a major uproar in social media, with many people saying they will not fly United again. In this report Susan Carey says people close to United say the airline has too rigidly asked employees to follow the rule book, that the problem could have been avoided by airline employees using choices that are not in the manual or rules book. Sources say employees at United can face termination for not following the rules, and deviating from rules is discouraged. Also raised is the issue why the airline employees did not raise the compensation from $800 to something much higher considering the problem being faced, and why higher up managers were not involved earlier. United has lagged behind other airlines in JD Power customer satisfaction surveys.

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Competing effectively for passengers on Asia routes and on other global routes is critical to generate 90% of synergy savings for the new American Airlines after the merger with US Airways, says Denning. Winning passengers from Delta and United will require good execution.

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Southwest pioneered lower cost domestic travel under founder CEO Kelleher. It did not charge fees for checking in bags and seats were not assigned. This model is now being questioned as baggage fees are generating $1.3 billion at American, $1.2 billion at United and $1 billion at Delta Airlines. Even a smaller airline like Spirit generates $1 billion from baggage fees. Additional sources of income are passengers charged for seat selection. Southwest generates about $70 million from baggage fees and does not charge for seat selection. Southwest sees not charging for baggage as part of its culture and current management is not changing the status quo.

Other problems are that Boeing can deliver only a fourth of the plane Southwest ordered. As a result the airline is facing a crisis and Eliott Investment Management now owning 11% of the company is pushing for change including ouster of the CEO and the Board.

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For passengers air travel nowadays is travelling on planes that are often totally booked. This is because airlines are cutting flights. And with fewer passengers after the economic crisis hit, airlines are having a difficult time cutting flights enough to meet the continuing drop in the number of passengers. Before the crisis business and international travel was a good source of revenue, now this is fading as there is more competition on transatlantic routes with about 50 airlines offering flights between US cities and European cities. The liberalization of air travel between the two continents with the 2007 "open skies" agreement is keeping downward pressure on prices. The International Air Transport Association says the number of passengers travelling on business and first class tickets between N. America and Europe was down 18.4% in April 2009, compared with same month in 2008. Traffic between N. America and Asia was down 26%, for the same period. This is hitting Lufthansa ansd KLM-Air France hard, but is helping Easyjet, Ryanair, and Air Berlin. As demand drops airlines will continue to cut capacity, and this will be done by cutting the number of flights on a route and using smaller planes. After all this capacity cutting takes place by September, OAG Aviation estimates that the seats on domestic flights will drop to 66.5 million from a peak of 84 million in 2001, a drop of 21%. Some airlines which rely less on corporate travellers will not see as steep a drop. These airlines are Southwest, JetBlue and AirTran. Airlines that may not survive the effects of the economic crisis, with tight credit and drop in air travel, and volatile oil prices, are United Airlines and US Airways. United relied heavily on corporate and trans-Pacific fliers before the economic crisis. Fitrch Ratings cites this in reducing the credit rating for United to junk status, as well as the heavy debt maturities in 2009 and 2010. In June 2009 United raised $175 million by issuing new debt, but at an interest rate of 17%. At US Airways the combined airline with America West after a$1.5 billion merger is struggling. It has the thinnest cash position of any airline according to a Morningstar research analyst, and may need further borrowing to meet debt payments. With all assets already mortgaged US Airways may have little borrowing capability left....

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United which is running advertising ads touting its newly designed flat seats on international flights for business class passengers to sleep in like a bed, made $274 millon in the second quarter with improved revenues on its international flighs and lower costs on domestic flights and improved utilization at 89%. Note that even though domestic passengers declined by 2%, United did so much better on international flights with a 16% increase over the prior quarter.

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Spirit Airlines strategy to charge for almost everything from snacks to bags, reservations on the phone and other items for a flight- making it a bare bones flight like that of European budget carrier Ryanair- has proven very successful. Spirit's net profit per plane is now the highest by far in the U.S. airline industry. Spirit leads with $2.06 million profit per plane, followed by Delta at $1.21, United $1.19, JetBlue $0.51, Southwest $0.32, US Airways $0.21, and American at a negative $2.32 million, according to Ascend and FactSet Research. Spirit has stayed away from business fliers, instead pursuing the frugal flyer, other than the seat everything has a price. Boarding passes cost $5, water $3. Spirit started the trend to charge for bags. Southwest has moved away from the no frills arrangement and Spirit is gutsily moving that way. Carryons in the overhead bin run $30-$45. Compared to other airlines which get only 6% of revenues from add on charges, Spirit gets about 50%. Since 1989 Spirit earned $289 million, compared to $1 billion for way larger Southwest. Bill Franke, a former CEO of America West Airlines in 1990's, bought Spirit with the idea of modeling it on Ryanair in Europe, after Spirit could not turn a profit flying Midwest passengers to Florida. He teamed up with CEO Baldanza to run the operation on a hands on basis with only 1% going for advertising, and Franke doing some of the ads in emails. Running flight on a tight schedule means late flights and with tight seating and strict refund policies, Spirit has many complaints. It has the worst on time performance in the industry. Yet it has planes running close to capacity in today's frugal customer environment. Prices are about 30% lower than competitors according to industry analysts. Franke and Baldanza seem to revel in this, sensing that they have struck the right tone for a frugal flier, and outdone cost pioneer Southwest. ...