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May 31, 2012 on 7:58 pm | In Trivia | No Comments
A great video of a stored Southern Air 747 without engines trying to lift off in flight as high winds weathervane the aircraft.
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May 29, 2012 on 11:18 am | In Airline Service | No Comments
There have been a few people out there attempting to get into the scheduled commercial airline business over the past year. A recent example is the group attempting to start a new People Express with 737-400 aircraft. All have been aiming at niche markets and I think that is doomed to failure.
It’s attractive to look at the old Southwest Airlines / Ryanair model of flying to secondary airports and think that you too could succeed with this by flying into an airport near a major city. That did work when airfares where stunningly high in such markets. Today, not so much.
The problem is that these niche carriers have to compete with the likes of Southwest, JetBlue and even Allegiant and Spirit Airlines. These airlines are flying into major(ish) airports with low fares and offering rock bottom fares in most cases.
Even flying into major markets with a superior service doesn’t always guarantee profits. Take a look at Virgin America who began service in 2007 and has not yet earned a sustained profit. They hang on and even incrementally improve their performance but even after 5 years, the airline does not earn a return on investment yet.
If you want to succeed with a new airline, you have to first have a monstrous amount of capital. It’s capital that gets the deals done for things like aircraft and facilities. You have to have a good service product at fares that are competitive. Competitive fares exist across the board among airlines, however. Even legacy carriers are offering extremely competitive fares in most markets.
You have to be brave enough to go up against the largest airlines in the world. In the United States, that means competing against Delta, United, American Airlines and Southwest. Not a single one of those airlines is afraid of competing and all have learned lessons in not ignoring a newcomer.
New airlines will be started but now isn’t the time. The US airline industry needs time to digest its changes and time to let things settle on the markets each airline is serving. Even when they are started and successfully so, they will have to be managed by people who want to grow the business.
JetBlue was the major up and coming airline in the industry right up to the moment the board of directors panicked over operations due to winter storms and fired David Neeleman. Now it’s an airline that is looking for routes to feed into existing structures and it ventures outside its home areas rarely.
Speaking of David Neeleman, he is the one I expect to see back in the United States one day. I think we’ll see him starting a new airline sometime in 2015 to 2017 and it will be a refinement of his JetBlue and Azul (Brazil) airlines but with even more capital that he has raised in the past.
But most will fail. The attraction to starting, owning and operating an airline is strong but it requires a very special leader and those people come along only a few times each generation.
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May 25, 2012 on 1:00 am | In Aircraft Development | No Comments
Boeing’s Charleston 787 assembly line rolled out its first 787 a few weeks ago and it took flight for the first time on May 23 for a “B1” flight test. 3 more 787s will be built at Charleston this year and all 4 are for delivery to Air India (which can ill afford these right now but that’s another blog post.)
Am I the only one struck by how relatively smoothly the Charleston site got built, staffed and its first airplane assembled? Obviously there was some learning curve alleviated as aircraft were assembled in Seattle. However, this is the first commercial aircraft assembled at that site and there was just no real muss or fuss about it.
I suspect the Charleston site not only is going to reduce risk for Boeing over the next few years when it comes to the 787 but I also think that this effort is going to cause Boeing to look at other areas for manufacturing when it comes to other aircraft.
Seattle will remain Boeing Central for aircraft manufacturing but I think we just witnessed an excellent argument for Boeing not scaling production higher and higher for an aircraft in Seattle but to decentralize assembly of aircraft to other areas when large quantities are demanded for an airframe.
I really don’t think Boeing took nearly as much of a victory lap over their Charleston achievement that they could have.
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May 24, 2012 on 1:00 am | In Airline History, Airline Service | No Comments
The Fort Worth Star Telegram’s Mitchell Schnurman has THIS POST on SkyTalk about companies keeping morale high to maintain profitability. It’s timely since it coincides with my own blog post about the labor cost that American Airlines is incurring with its battle over costs with the unions.
Profitability is about quite a few things in a major company such as an airline. It’s about keeping a strict eye on costs, certainly. It’s also about keeping a close eye on cash flow and cash holdings. One little storm can cost an airline tens of millions of dollars. It’s about maintaining strong metrics in ontime departures and arrivals and it’s about being smart enough to buy a fleet to do the job you have without overextending oneself.
Some airlines have been profitable with poor labor relations. Generally that has occurred at a “peak” in the airline industry curve and almost always when contracts are in place and not up for re-negotiation.
How an airline survives the downturn in the airline industry has a lot to do with employee morale. Employees with a strong, loyal morale tend to fight for their company. They realize that their jobs and their success are tied to their airline succeeding more often with more customers more of the time in those bad times.
Employee morale isn’t about high salaries. It really isn’t. Study after study has shown that employee morale can’t be maintained at a high level with just a high salary.
It’s about making employees a part of the business. Giving ownership of problem solving to employees who experience the problems. Providing a share in the profitability and providing benefits that allow them to feel secure with their families while they work. It’s also about employees perceiving “shared pain” on the part of their management team when things are bad. There is nothing worse than an executive earning a bonus while other employees are “sharing the pain”.
A workplace where treatment is both fair and just is also important. Valuing the inputs of a baggage handler should be just as important as valuing the financial analyst who monitors and sets pricing.
It isn’t just about your union employees delivering great service to customers either. It’s about being able to get agreements to cover your needs now and the future. A company that is doing right by its employees is better able to negotiate union contracts to cover new flying, new aircraft and new partnerships. The faster you can negotiate those contracts, the more competitive advantage an airline has.
It’s notable that Southwest and Delta airlines are working very hard with their union employees to put new contracts into place to cover opportunities for new business very quickly. It’s also notable that airlines such as American Airlines and United Airlines aren’t doing too well with their employees and aren’t executing new strategies to compete and, most importantly, earn sustaining profits.
Employee morale isn’t the only key factor to success. But it is one of the top 2 or 3 key factors and one that several airline CEOs seem to be ignoring more and more as time passes by. Historically, the airlines who have done well both in regulated and deregulated environments with respect to profitability are those that had genuine leaders as CEOs. Shareholders would be wise to pay more attention to leadership at the helm and a little less attention to quarterly profitability.
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May 23, 2012 on 8:44 am | In Airline Fleets | 2 Comments
Southwest Airlines’ Boeing 717s are going to be subleased to Delta with deliveries of about 3 per month starting in 2013. Southwest thinks this is good for them as it gets their basic aircraft type back to one (the 737) and Delta thinks this is good as it is getting a cheap fleet type that can meet needs in the 100 seat category for longer “regional” flights.
Delta is a fan of the McDonnell Douglas aircraft and the 717 is just that. They are typically robust, long lasting aircraft and the cost to purchase these is often so low, they make sense even when their fuel efficiency isn’t the best.
One aspect of this deal seems a bit odd. I’m rather surprised that Southwest, Boeing and Delta didn’t work a deal to take them fully off Southwest’s books and transfer ownership either to Delta or create new leases for Delta. Both airlines are big Boeing customers and I would think that Boeing would want to facilitate a win/win deal between the two airlines.
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May 18, 2012 on 1:00 am | In Airline News | 2 Comments
The bankruptcy proceedings of American Airlines are, to me, exceptionally interesting in the airline industry today with respect to labor. It’s been a while since we’ve seen such a breakdown between labor unions and airline management (since United Airlines in the late 1990s and early 2000s) and this breakdown of trust and communication inside American Airlines is particularly bad at this point.
When I look at American Airlines as a company, I ask myself just how such a reasonably well run entity got derailed so badly over the last decade. At the core, the airline industry is selling a service and within that industry, we have a marketplace that is fairly free market oriented in pricing. However, pricing is generally determined by who has the lowest costs on a particular route. When there are no or few barriers to entry on a route, the airline with the lowest costs will generally set the price for that route.
We often hear just how much price is the driver in a choice of airlines but I’ve never felt it was purely price and I believe that over the years, there is subtle but strong evidence to my belief. Everyone thinks Southwest Airlines wins on price and while that might have been true in the 1980s and earlier, it really hasn’t been true for the past 2 decades. They often do set the prices on routes but they’re generally matched by other airlines. When you speak to loyal Southwest Airline customers, it generally comes down to it being very convenient, very predictable and generally a more service oriented experience.
Curiously, convenience, predictability and service quality are a function of labor more than any other input. Labor is what makes those achievements possible. Also curious is that the most successful airlines generally are the ones who manage a good relationship with their employees. That doesn’t mean they give into labor demands over and over, it means they have a rapport, communicate well with each other and find common ground.
It’s notable that Southwest and Delta Airlines each have reasonably good relationships with their employees since these two airlines are the ones that are gaining more passengers, better revenues and consistent profits. That’s no accident.
When I look at American Airlines and the actions its taken over the past five years to come to new labor agreements, I have to give them a grade of “F” in labor management. Even if you strip away labor rhetoric, you find that AA really never did much to come to an agreement with their employees. They kept their company line but they never sought to find some common ground and their communications all too often struck me as “Times are tough, work harder, do more.” After a few years of that, the general response to that was “Times are tough for everyone, suck it up and find a way to make it more worth our while to work for you.
Since bankruptcy, AA has more often reminded me of a mafia strong man than a company trying to get its act together. The steps its taken to reduce labor costs and the magnitude of those labor costs reductions is striking. Again, even if you strip out the labor rhetoric in response to AA’s actions, the moves that American Airlines has made in the past 6 months just strike me as premeditated, heavy handed and stubborn. It smacks of accountants looking at financial numbers and never looking up from their desk to notice the human element involved here.
They can and likely will get what they want in court in terms of breaking labor agreements. They may impose severe cost cuts unilaterally and may even exit bankruptcy as stand-alone company. They may get exactly what they think they need from a financial perspective.
But how does that improve the revenue side? How do you win business customers with a service model that is delivered by demoralized and angry employees? How do you get productivity to improve when your labor hates your guts and just wants their paycheck and to be left alone?
AA’s labor hates American Airlines management. Hates them with a passion generally reserved for bad dictators. It’s a seething, lingering hate that isn’t easily resolved. And there is no movement to get it resolved.
If labor and AA management were a married couple, this would be relationship headed for divorce, not reconciliation. Reconciliation doesn’t occur when you take all you want (not need but want) and then act as if the other party should be grateful for winning . . . nothing.
There is real damage happening here. Enough that it calls into question whether or not AA can remain a viable company even with the labor cost reductions. Viable comes from providing something someone wants to buy and from the ability to sell that something to a great many people. How many people want to ride on Surly Airlines 2 years from now? They will if they have to but they won’t if they don’t.
That stuff gets fixed when leadership is shown. Leadership shouldn’t come from the unions. It should come from the executive management of the airline. I’ve tried hard to think of a real example of leadership that has happened over the past year at AA and I honestly can’t think of a single example of leadership being demonstrated. Not one.
If I were a shareholder, that would scare the hell out of me. I’d have a company exiting bankruptcy with the task of building new value and the inability to do so because no leadership exists. Delta CEO Richard Anderson says that its time for airlines to return a responsible profit on investment. I could not agree more. And that does mean that more productivity and lower costs are probably called for. But it never meant kick the employees into submission. And Delta never really has done so. It found common ground, got the deal made and ensured its employees were marching in the same direction.
Are we seeing that kind of leadership at American Airlines? If you were an objective investor and saw that kind of dysfunctional behavior, would you be encouraged to invest in that business? In any industry?
What’s the cost of angering and demoralizing your employees for the next 5 to 10 years?
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May 17, 2012 on 1:00 am | In Airline Fleets | No Comments
We could spend tens of posts evangelizing for one manufacturer over another in the Airbus vs Boeing wars. I spent some time wondering how it is each overcame the other at various times and decided to chart their respective aircraft on seating, range, speed and engine count. It’s not hard to see why the 767 got trumped by the A330. The A330 was the logical growth aircraft. It had the right seating, range and speed.
Similarly, it’s not hard to see how the 787 is trumping the A330 and 767. It hits the sweet spot in seating (not too large, not too small) while killing competitors on range and speed. The same is true between the 777 and the A340 (and I’ve thrown in the MD-11 for comparison). Again, the 777 trumps its competitors soundly in all three categories.
But most remarkable of all is seeing just how the 777 stacks up in present form against the A350. Now I understand why Boeing continues to be the preferred aircraft so far. The A350 competes and even competes reasonably well but it still doesn’t really trump the 777 and in some cases, it doesn’t get close to beating the 777.
See the results below:
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May 16, 2012 on 1:00 am | In Airline News | 1 Comment
Chief Commercial Officer Virasb Vahidi at American Airlines says that American is engaged in studying how to modernize its brand going forward. Part of that modernization may come in the form of American Airlines embracing a livery change.
AA’s aircraft livery has been the same since 1967 which, even for an airline, is one very long time.
American Airlines has made the polished aluminum look a part of their brand since the DC-2 and has resisted adopting a fully painted aircraft for decades. However, new aircraft coming into the world aren’t made of aluminum and cannot be polished. Furthermore, while polishing aircraft instead of painting them saves fuel, it also increases the maintenance of the airliner as well. If it truly saved a great deal of money, other airlines would be doing it as well. They aren’t.
Would a livery update be revolutionary? I doubt it. I think we would likely see a white aircraft with a slight revised logo at best.
But if anyone at American Airlines is reading this, I vote for these looks instead:
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May 15, 2012 on 1:00 am | In Airline News | No Comments
It’s not a catchy name, in that form.
Last Friday, AMR/American Airlines capitulated a bit in publicly stating it would engage in examining the possibility of a merger with some other airline. This after beating a drum for 2 weeks that it was fine, there was nothing to see here and American Airlines was a better airline if it exited bankruptcy as a stand alone enterprise first.
The thing is, an airline in bankruptcy is answerable to many parties. It must answer to the courts and creditors and it must justify its decisions, particularly those related to bankruptcy, at every turn. There isn’t nearly as much maneuvering room to do what one wants to do in those conditions and I’ve often wondered over the past few months if that wasn’t the prime driver for Gerard Arpey’s decision to leave the company.
Is this a merger? Nope, not yet. But US Airways has played this very, very well so far. They’ve got the public support of unions and have managed to make themselves look more and more attractive to interested parties who aren’t tied to AA through employment or as a major creditor. The next steps will be to win over Boeing by reaffirming the aircraft orders made last year and to win over HP by reaffirming a desire to go forward with the new reservations systems. Not hard to do as any merged entity will need both the new aircraft as well as the new reservations systems.
My prediction is that we’ll see some sort of understanding between the two airlines some time in June. It will be about brotherhood and great synergies and that no one need to worry about their jobs. Worst case scenario sees Tom Horton elevated to non-executive chairman (and I doubt that that happens) with a small handful of American executives retained. More practically, Tom Horton leaves for a different industry and maybe 1 or 2 executives are retained for the new company.
The best part will be seeing the new livery for such a company.
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May 14, 2012 on 1:00 am | In Aircraft Development | No Comments
Emirates CEO Tim Clark has decided to beat the drum of wanting a new, upgraded and revised 777 and he would like Boeing to announce it pronto. Emirates has a very large fleet of 777 aircraft and likes to retire its aircraft from the fleet after about 12 years. They also have the A350-1000 on order (20 orders) and have behaved very cool towards Airbus over that aircraft’s delays and its inability to be a real game changer against the 777.
Boeing probably has done a fair bit of definition for the 777-8X/9X aircraft and its likely they’ve held substantial conversations with customers to get a better feel for what should be offered. I’m not entirely sure that what is offered is going to make Tim Clark happy as he generally wants more, More, MORE range in an aircraft. Sadly, most airlines don’t need ultra-long range capability nearly as much as they want excellent fuel efficiency and very low seat mile costs.
The 777-8X is likely to be somewhat satisfying to Emirates but I suspect the -9X won’t be quite what they want. Remember that Emirates wanted to see a 747-8i that had a few hundred more nautical miles range and Boeing wouldn’t give that to them.
It’s a tough position to be in at Boeing. Emirates could act as a launch customer for a very successful upgrade of the 777. On the other hand, Emirates will be the toughest critic possible of the aircraft all through development.
Boeing has quite a handful of things going on right now, too. The 787 program is getting better and better but still requires quite a bit of care and feeding in order to develop the 787-9 and 787-10 over the next few years. The 737-MAX program will keep a large portion of engineers busy for the next 5 to 6 years and that leaves very little engineering capability left over for the 777 development.
I think we’ll see some sort of firm definition get announced early next year and I think that an authorization to offer the aircraft will only come after Boeing sees customers signal their willingness (and even eagerness) to buy the aircraft from around the world and not just from the Middle East. That is going to take a while.
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May 13, 2012 on 1:00 am | In Airline News, Airline Seating | No Comments
American Airlines announced lie flat seats for its business class sections on 777-200ERs and 767-300ERs. The changes are to start in 2014 and I yawn. Part of this announcement made it clear that about half the 767 fleet will be retired going forward and it is easy to assume that means there is the expectation that the 787 will be rolling into the fleet. I’ll yawn again.
I think American Airlines made this announcement, in part, to distract from its rather ugly look that it has in its bankruptcy proceedings. Those US Airways announcement really put a hit on them and their hearings in New York regarding breaking the union contracts made them look worse. So why not announce new seats that won’t show up for several years?
Am I the only one who thinks of The Emperor’s New Clothes when watching American Airlines these days?
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May 12, 2012 on 1:00 am | In security | 1 Comment
An 18 month old baby of Middle Eastern descent was removed from a JetBlue flight this week due to this child’s name being on some portion of the No Fly List. The TSA worked with the airline but also states that it did not put this name on the no fly list and did not play a role in the child and its family being removed from the flight.
All good and fine except that this is clearly a security failure. Let’s consider the fact that this was an 18 month old BABY. Then let’s consider that despite the obvious circumstances and despite the fact that the parents were not on a No Fly List, everyone “followed protocol” and did the stupid thing.
Good security comes from good judgement. Clearly we, as a country, continue to not use good judgement.
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May 11, 2012 on 1:00 am | In Airline News, Airline Service, Airports | No Comments
Southwest Airlines wants to build a small international terminal at Houston Hobby airport and thinks that doing so will benefit Houston with more jobs, more economic impact for the city and everyone wins. United (Continental) Airlines doesn’t want a damn thing going on at Houston Hobby and definitely does not Southwest Airlines beginning international flights from that airport. United thinks that allowing this will reduce jobs, have a negative impact on the economy and, well, HOUSTON SHOULD JUST DO WHAT UNITED WANTS BECAUSE WHAT’S GOOD FOR UNITED IS GOOD FOR HOUSTON.
It’s like watching Southwest Airlines and American Airlines fight over Love Field airport in Dallas.
Make no mistake, this fight is over competition. Southwest provides LCC competition on international flights from Houston to Mexico, Central America and the Caribbean and that is United Airlines’ major domain from that airport. In fact, those United routes are a huge profit earner for the airline. Of course United doesn’t want the competition.
Airlines, especially SuperLegacy airlines, hate competition. And they loath competition on the very routes that earn them the most money.
Here is my take: Southwest wants to introduce more flights to Houston Hobby. In the process of introducing international flights there as a kind of “hub” for SWA International operations, it will almost certainly introduce more connecting flights to more SWA focus cities such as Dallas, Atlanta, Chicago, Baltimore, Los Angeles, etc. This is a good thing. Southwest has a great product and one that isn’t going to negatively impact Houston.
United Airlines has major investment in their fortress hub at Houston Intercontinental from commitments made by Continental Airlines pre-merger. Houston Intercontinental is a fortress hub for them like DFW is a fortress hub for American Airlines. Fly into IAH and you’ll be amazed at how dominated that airport is by one airline. It is a crown jewel of hubs and the last thing United wants is an airline poaching customers from those routes. But one reason why those routes are so profitable for United is that there is virtually no competition.
Competition is good. Houston should allow Southwest to build its 5 gate international terminal. It will benefit Houston and if United isn’t quite so profitable there, so what? I don’t think there will be a massive increase in overall traffic to international destinations served by both airlines a la “Southwest Effect”. I do think that SWA will poach quite a few customers locally and I say that what benefits the businesses and private parties of Houston is far more important than whether or not United gets to have its cake and eat it too.
The airlines are actually similar in labor costs but SWA maintains higher productivity. It’s not as if United doesn’t have a fighting chance against SWA, it does. For one, it has a frequent flier program that will be stronger for Houston residents most likely and it has the ability to feed as much traffic as it wants through Houston to southern international destinations.
The one party here that I do not think gets hurt with this is the city of Houston.
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May 10, 2012 on 1:00 am | In Airline Fleets | No Comments
QANTAS is deferring delivery of 2 Airbus A380 aircraft until the 2016 and forward time period in an effort to lower costs in order to compete more successfully with Virgin Australia.
It’s a bit of a blow to the A380 program in some ways and it adds to the pain of cancelled orders from China for the A380 as well. However, Airbus will be able to deliver the aircraft to other airlines at present. I suspect that airlines with a substantial A380 fleet are finding the aircraft quite successful on the routes it can be deployed on and I know that Lufthansa regards it as having lower seat mile costs.
However, I continue to believe that there are only so many routes it can be deployed on to earn regular profit. QANTAS would take delivery of these if there was enough demand as they are replacing aging 747-400 aircraft. Lower seat mile costs are great but only if you can fill the aircraft regularly all year round.
I’m not sure all airlines are doing a very good job with that and Lufthansa’s choice in having both the 747-8i and A380 kind of speaks to the fact that while seat mile costs are important in the equation, filling the aircraft is just as important. A full 747-8i earns more money than an A380 at 85% load factor.
The A380 will continue to sell . . . slowly. It will continue to be delivered and it will continue to get deployed on various routes but it remains a niche aircraft at best. That’s OK, so is the 747-8i. The real profit earners going forward are going to be the 777 series from Boeing and the A350 from Airbus.
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May 9, 2012 on 1:00 pm | In Airline News | 1 Comment
The Los Angeles Times has this story about American Airlines actively prosecuting its AAirpass holders for fraud. Purchasers of the AAirpass essentially paid big sums of money for an unlimited, lifetime first class pass and many bought them in the late 1980s and early 1990s. They actually made financial sense for some and some purchasers used them in ways that American Airlines never conceived of.
Personal note: When playing the “what if” game on what one would do if one won the lottery, I always said that I would want an Airpass first above all other things.
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May 9, 2012 on 1:00 am | In Airline News | No Comments
Israeli’s President, Shimon Peres, balked at extra fees for things like carrying oxygen tanks from El Al for a state visit to Canada and decided to book his flight on Air Canada.
This is a perfect example of why El Al doesn’t work too well as a state airline of Israel.
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May 8, 2012 on 1:00 am | In Airline News | No Comments
US Airways has announced new routes from its Philadelphia hub to Austin and San Antonio as well as adding a 6th frequency to DFW airport as well. This is, without doubt, an attempt to put more pressure on AA in its merger quest and demonstrate that the airline can satisfy travelers in Texas.
Consider that US Airways is pointing out that it already competes admirably on a trunk route like DFW to PHL. This is an argument that service they provide is up to American Airlines passenger standard and exceeds them more than likely.
Putting direct flights in to San Antonio and Austin is also a statement that it intends to move into Texas and do well whether American Airlines wants to cooperate or not. Those two cities provide an exceptional amount of “feed” into DFW and US Airways is going to try to poach that feed with direct, non-stop flights.
These are bold moves and designed to get the attention of American Airlines. If AA responds with its normal “we’re not bothered” statement, I think they’ll find themselves subject to scrutiny from both creditors as well as its board of directors. You can only ignore the elephant in the room for so long.
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May 7, 2012 on 12:18 pm | In Airline News, Airline Service | No Comments
American Airlines’ PR machine continues to beat the same drum on how they’ll succeed exiting bankruptcy as a standalone airline. The story is that they’ll fly considerably more international flights, do even more code sharing and partnering with existing Oneworld airlines and “right size” their flying with the new fleet they’ve ordered.
And everyone else keeps saying that ain’t gonna get it done.
Analysts don’t like the extremely aggressive growth being spoken in the plan because it reflects above industry average in growth when capacity restraint has shown that that is the pathway to reliable revenues. Growth may only come from one thing: Exiting bankruptcy with such superior labor costs that it can undercut other SuperLegacy airlines on price and start a fare war. That would anger just about everyone in the business.
Codeshares have been touted by AA for several years now but AA never seems to aggressively capitalize on these codeshares. It adds some incremental revenue here and there but the additions never seem that strategic and even its codeshare and interline partners seem inclined to poach on AA’s turf right now. There is, after all, a reason why both JetBlue and Delta Airlines have added flights between NYC and DFW: AA is vulnerable and, frankly, not doing a good job of keeping the interest of its business travelers.
International flying is more profitable and American Airlines has ordered the aircraft for increased international travel in the form of 777-300ERs and 787 aircraft. It has not managed to achieve a contract for those aircraft at all with the pilots union and seems to have forgotten that it couldn’t manage an acceptable agreement with the pilots to add a new route between Dallas and China a few years ago. What makes it think that pilots and other aircrew are going to agree to more flying internationally on these aircraft without some concessions? It’s a bargaining chip that the unions have and will use.
Finally, nothing in the business plan addresses what are fundamentally important issues for the airline presently. It performs much worse on the revenue side today because it has older, less pleasant airlines, a website that just angers more than serves its customers, service fees that seem hostile towards a customer and a service staff that seems intent on delivering a cynical and lackluster service product to its passengers.
Where is the plan to upgrade aircraft into a pleasant experience? Where is the plan to get employees happy again to serve their customers? Where is the website that, you know, allows you to prepay for a checked bag when checking in online? Where is the rational fee structure that makes sense and an implementation that doesn’t feel like extortion to the passenger?
You can beat the same drum hoping to get people dancing to the beat but if the beat is awkward and without rhythm, no one is going to join you on the dance floor.
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May 6, 2012 on 1:00 am | In Trivia | No Comments
May 2, 2012 on 1:00 am | In Airline News | 1 Comment
Delta Airlines bought a fuel refinery in New Jersey that has the ability to provide as much as 80% of all their fleet fuel needs and which has direct connections to both JFK and La Guardia airports by pipeline. Most airlines hedge their fuel costs by purchasing fuel oil contracts which happen to track closely in price with the cost of jet fuel (which isn’t sold with market contracts). It offsets price spikes and makes fuel costs more predictable and manageable.
Delta’s purchase of the Phillips66 refinery is an interesting move. The cost was relatively low $150million for the purchase and an additional $100million to fully convert the refinery over to jet fuel production. To an airline, that’s pocket change. To Delta, that means they can cut out a significant portion of the middle man in their fuel costs.
How do the fuel the fleet from New Jersey only? They don’t. They’ll supply their own fuel to their own aircraft in the NYC area, yes. That fuel demand in that area alone will find Delta saving big dollars. They’ll also sell that fuel to other airlines at those respective airports at a profit which will then offset Delta’s fuel costs in other parts of the country. It’s a way of hedging prices more closely to the market prices for jet fuel and gives them an assured supply in a market that has historically been a bit touchy on prices.
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