Alaska air carriers hit turbulence.

• Author: Richardson, Jeffrey
• Position: Industry Overview

Fare wars, income losses and massive cutbacks continue to give northern airlines a rocky ride.

Hard times in Alaska's air carrier industry got personal last year. Corporate cost-cutting axed thousands of jobs, orders for new planes dwindled, and airport improvements screeched to a halt.

The fierce competition between MarkAir and Alaska Airlines, which seemed overrated a year ago, has persisted and grown bloodier, resembling the airline rivalries emerging elsewhere in the country.

The ability of MarkAir and other carriers to wage below-cost fare wars while operating under the protection of U.S. bankruptcy laws has emerged as a central, divisive issue in the industry. The result is that while rates have dropped, non-bankrupt carriers unexpectedly have lost millions, and all players have scrambled desperately for money-making markets and cost-cutting measures to improve business.

Heavyweights like Alaska Airlines weren't the only carriers feeling the crush of a changing industry. In the first quarter of this year, SouthCentral Air dropped passenger service between Anchorage, Homer and Kenai and laid off 48 employees.

In addition, American industries closely tied to air carriers -- such as aerospace manufacturing and catering -- have suffered, and the war's not over yet.

Numbers Game

Alaska's air carrier indicators reflected a mixed bag last year, but in the final analysis, added up to awful. Perhaps most serious were the substantial losses sustained by carriers as they jockeyed for market position. One national industry publication said U.S. carriers have lost more money in the last three years than they've cumulatively earned since 1945.

In Alaska, this poor performance depressed statewide employment in the air transportation sector, which plummeted from 7,900 in August 1992, to 6,900 in January of this year as carriers cut routes and laid off pilots, flight attendants and other workers.

Cargo carriers also could have used a more robust market. The nation's tepid economic recovery was reflected in a decline in the volume of domestic cargo handled at Anchorage International Airport, which dropped about 20 million pounds in 1992 from the year before, according to government statistics.

While passenger and cargo landings at the Anchorage Airport were up last fiscal year, most of the gain came from increased activities caused by the Alaska Airlines/MarkAir contest, which also involved several other carriers. Given the volatile nature of this competition, landing data is not currently a...