Stayin' Alive

This post is a bit circumstantial but it is a topic worth pondering. Yesterday, AirTran announced a $13.5 million Q2 loss. Aside for the obvious hit to the balance sheet, this type of hemorrhaging forces AirTran -- and many other airlines -- into survival mode. If you read the linked Atlanta Journal-Constitution story will see a detailed description of everything AirTran is doing to stop the bleeding: attempting to renegotiate contracts with the Teamsters, slashing flights and securing an agreement with a credit card company with an acceptable line of credit.

That's all great. But, the main issue here is that none of the above activities are revenue generating and only one -- flight slashing -- was successful in lowering costs. As you get to the end of the story you see that AirTran's Q2 year-over-year revenue was actually up 13%, but costs jumped 37%. So, yes, cost-cutting is great, but airlines stuck in these position have to spend a tremendous amount of human resources negotiating deals with 3rd parties to save money. And all while that is happening it is a difficult dynamic to also concentrate on getting that other side of the equation up.