Do bankruptcies benefit travelers?

In the January 17 edition of The New York Times, consumer advocate Christopher Elliott reports on an interesting trend: Customer service on bankrupt airlines may actually be improving. Airlines “are more reluctant to eliminate anything that enhances perceptions of their customer service,” says Elliott. “Entering a bankruptcy proceeding can be a turning point in the way they treat customers.”

But the news isn’t all good. Reuters reports that bankruptcy filings by Delta and Northwest, coupled with the dissolution of low-fare carrier Independence Air, “have taken over a hundred aircraft out of service, boosting demand for the remaining seats.” Fewer seats means greater demand, and that translates to higher prices.

A recent analysis by the Air Transport Association proves the point. Average fares in the U.S. went up by more than one percent from January through November 2005 compared with the same period in 2004. Fortunately, reinforcements are on the way in the form of new jets this year from Southwest, JetBlue, and startup carrier Virgin America. And that, Bank of America analyst Robert Stallard tells Reuters, may leave the legacy carriers with “no choice but to add capacity” in order to keep up.