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United CEO thinks travel is better with fewer flights and higher fares

Mar 29, 2013 1:58 am

Skift Take

It’s the age-old debate: It’s good for consumers if the airlines are healthy, but it doesn’t feel too good when there are fewer flights and fares increase.

— Dennis Schaal

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United Airlines CEO Jeff Smisek thinks the airline business is transforming into a profitable industry, thanks to fewer flights and higher fares.

Mergers have helped bring rationality to the market, Smisek told an aviation conference Thursday. For far too long, he said, too many airlines were chasing too few passengers.

“I’ve been in the industry for 18 years and this is the first time that I have hope for this business,” he said.

In the past few years United and Continental have merged. So have Delta and Northwest, Southwest and AirTran and now American and US Airways.

Smisek used his speech at an aviation summit hosted by the U.S. Chamber of Commerce to repeat many of the top talking points of his industry’s lobbying group, Airlines for America, which is pushing a national airline policy.

The message: airlines still face too many taxes, not enough support from the government and could benefit from a modern air traffic control system.

Smisek said a new satellite-based air traffic control system would not only save fliers time but also cut fuel usage by 10 percent. United alone consumes about 4 billion gallons of jet fuel a year.

“That’s more than one day’s supply of oil in the world,” Smisek noted.

Mergers have helped airlines price tickets at a rational level, he said. In the past, Smisek added, “we priced our product below its cost and tried to make it up on volume.”

Airlines are now run by professionals, looking to make a profit for shareholders, he said. And despite those rising prices, he thinks flying today is still “an incredible bargain.”

“In the bad old days of the industry, people got used to fares that were absurdly low,” Smisek said, noting that they didn’t even cover the cost of fuel.

“This is a business that remains brutally competitive,” he told the conference.

Copyright (2013) Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed. 

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