Discounts to Continue, Airline Chief Says
ALTHOUGH the dramatic price cuts announced by airlines early this week expire today, Northwest Airlines co-chairman Alfred Checchi expects discounted pricing strategies to continue ``until demand picks up.''
``With high fixed costs, overcapacity, and a highly segmented market, [airlines] will very likely have to continue current pricing policies,'' he says.
After Northwest announced cuts Monday, most of the industry - including American, United, Delta, and USAir - dutifully followed along. When USAir then announced price reductions of up to 40 percent on fares to Europe, American and United offered similar discounts.
Mr. Checchi and his co-chairman Gary Wilson have presided over a turbulent four years at Northwest. Along with a group of partners including KLM Royal Dutch Airlines, Checchi and Mr. Wilson bought Northwest in a leveraged buyout in 1989.
This summer, Northwest narrowly avoided bankruptcy through a plan that hinged on the cooperation of its banks, suppliers, and employees. Labor unions agreed to significant wage concessions in exchange for a 37.5 percent stake in the company.
Checchi, who was in Boston this week to address a CEO Breakfast Forum hosted by Northeastern University's business school, defended his tenure at Northwest: ``Despite a horrible series of events, we never sold assets, ... we sacrificed short-term profits, invested $4.5 billion in the company, and increased employment,'' he says. ``Statistically, we are now the most efficient major airline.''
Checchi admits that while the reorganization looks good in retrospect, ``the process of getting there could have destroyed our company.... But we have built something that has lasting value.''
His 42,000 employees hope so. But travelers also want those discounts to keep on coming.