Why Southwest is scarier than Airtran

October 9, 2010 on 1:00 am | In Airline Service | No Comments

After the merger announcement between Southwest Airlines and Airtran last week, there was quite a bit of speculation on who would be relieved by the announcement and who would be on edge over it.  Conventional wisdom (which includes me) saw this move as relieving Southwest of some burdensome competition in some markets such as in the NorthEast and in Milwaukee.  Airtran competed effectively to drive down pricing with their flights. 

Some have said Delta has nothing to worry about and Frontier has been foolish enough to see this as an improvement for them.  I think Delta needs to worry a lot and Frontier is made weaker from this merger.

In Atlanta, Delta won’t see much change in Atlanta, I agree.  It’s possible that in the regional area near Atlanta, Delta may even do better in the short run.  However, Southwest has something Airtran didn’t:  frequency.  I think that Delta will discover that when Southwest’s capacity for frequency is deployed on traditional Delta / Airtran routes, competition is going to get a bit stiffer.  The truth is, Airtran had many destinations but not always that much frequency.  It’s one reason they were tolerated by many legacy airlines.

However, legacy airlines have generally always defended routes from other carries including LCC carriers by the ability to add frequency.  That’s never worked well against Southwest .  Southwest doesn’t go into a market with the idea of being a small player.  They enter routes where they can deploy reasonable frequency right off the bat and they know how to schedule flights just as well or better than most legacies.  Southwest’s size is already formidable weapon and it got a lot more formidable when the Airtran merger got announced.

Frontier and other LCC carriers (Hi jetBlue!) shouldn’t feel relief either.  It’s that same frequency with an additional weapon that can spell hard days ahead for them, too.  Southwest can compete with anybody’s frequency and I can think of just one LCC in just one area that has the frequency and capability to match what Southwest can ultimately deploy.  jetBlue has that in the New York City area.  But that’s it and Southwest is clearly building momemtum to be a bigger player in the NYC area. 

That additional weapon?  Network.  Yes, Southwest isn’t a traditional hub and spoke carrier but they do know how to make their network work for the consumer.   People aren’t adverse to connections if the price is right and the risk is relatively low.  Southwest has lots of focus cities / hubs to provide network access to destinations that the other LCC carriers just don’t have. 

Frontier has Denver and Milwaukee and is spread thinly in many cases.  While they compete against Southwest in Denver, that’s changing slowly.  They’ll never compete against Southwest in Milwaukee because Southwest is already capable of offering a network of destinations that Frontier can’t begin to approach. 

Southwest has also done something that other LCC carriers have foolishly ignored.  They covered the midwest.  It isn’t sexy territory but it’s territory with lots of industry and commerce and need to get from point a to point b.  It’s an area that appreciates a frugal approach to life and it’s an area with lots of family connections between cities.  It’s also an area that has a strong attraction to the leisure areas that Southwest is strong in such as Florida and Arizona and California. 

And now Southwest will have international capability to those same kinds of attractive leisure destinations in the Caribbean and Mexico.  Frankly, I think Frontier should be very scared of what Southwest can bring to the table because it potentially spells their demise.  I think jetBlue needs to start thinking about how they can grow their network and quite adding flights to the Florida and the Caribbean from the NorthEast. 

jetBlue is also weak in another respect.  They’re building focus operations in cities that are notoriously difficult to operate from in weather.  Their operations can be significantly impacted in New York City, Boston and Baltimore-Washington by the very same storm system.  All three of those are focus cities for them.  Southwest doesn’t have those same weaknesses.  They fly in the same areas and they’ll no doubt grow in those same areas but they continue to manage their risk by operating flights from those areas to other focus cities that are far less likely to be impacted by the same storm system. 

And Atlanta will just add to that capability.  I’m not saying Southwest’s system is perfectly isolated from risk but it is far more insulated from risk than other carriers like jetBlue and even the SuperLegacies. 

Southwest is scarier because it has lots of resources and can operate in a very agile manner.  The LCC’s can’t and the SuperLegacies can only do so much within the limitations of their hub style operations.

The Next Merger

September 30, 2010 on 1:00 am | In Airline News, Airlines Alliances | 5 Comments

About 24 hours after the Southwest Airlines / Airtran announcement, rampant speculation on who American Airlines should partner with started up.  The truth is, while I can make an argument for them to merge/acquire US Airways, I think they’ll shy away from a merger.  If they do go shopping for an acquisition, I don’t think it will be oriented towards a real “merger” a la Delta/Northwest or ContiUnited. 

There are a couple of targets left.  Alaska Airlines strikes me as one that should interest Southwest, American Airlines and Delta.  I think it’s pretty hard to get a deal done with Delta because of regulatory issues particularly in the Seattle area.  I think it’s pretty hard to for AA to get a deal done with Alaska because both parties have high labor costs and AA just won’t know what to do with the rather unusual operations Alaska performs in Alaska. 

I don’t think anyone is going to buy jetBlue at present and jetBlue’s CEO says they’re going to grow organically.  I would be happy to see jetBlue just get outside of its NY/Florida comfort zone and stop treating the midwest like it has the plague.

Frontier could be an interesting proposition for jetBlue, I think.  Sadly, I also think that Republic Airways is going to hold on to Frontier for dear life given what’s going on in the regional airline world.  Nevertheless, I do think that jetBlue could harmonize Frontier’s service and routes to the jetBlue way and make something of that airline. 

US Airways?  Well, they are the somewhat pretty girl who never gets asked out anywhere except to make some other guy jealous.  Until they get their labor house in order, I think it’s going to stay that way.  Their executive corps, however, ought to be attractive to someone.  Despite all of US Airways weakenesses and their “East/West” style of ops, those guys make money.  There is a lot to be said for that. 

I think they are more attractive for bringing into a new alliance.  Currently, US Airways belongs to Star Alliance but ContiUnited kind of makes them look superfluous.  SkyTeam just doesn’t need them either.  Oneworld aka American Airlines/British Airways,  on the other hand, could perhaps take advantage of them.  The deal would have to be a bit sweet because US Airways, if nothing else, is enjoying a nice “under the radar” ride on Star Alliance right now. 

I can’t think of anyone who could find a use for Virgin America at this point except, well, the Virgin Group.  Even the Virgin Group seems to have a hard time seeing a real value for working with Virgin America.  If they had any money, I would point them to Frontier but I think Republic Airways would just laugh out loud.

The truth is, I think there is suddenly some opportunity out there to start a new airline.  I would look for weak airlines who have major hubs and very little competition.  Some place where business customers and leisure travelers alike are dissatisfied with their current offerings and restrictions.  Some place that has a history of embracing the airline industry and where you can hire experienced people to kick that venture off.  That would be a great place to start something new.  I wonder where such a place might be?

Front coach seat for another fee? No thanks.

August 20, 2010 on 1:00 am | In Airline Fees, Airline News, Airline Seating | No Comments

American Airlines is introducing a new fee.  This time, a fee from $19 to $39 can you get you a seat up front in coach including bulkhead seats and it will allow you “group 1” boarding. 

Personally, I’m all for offering more varied product on aircraft.  That’s the one development among “debundling” that I am in favor of.  However, please offer me something of real value.  Frontier gets it.  United gets it.  Airtran gets it.  Even Southwest Airlines gets it. 

AA doesn’t get it.  A seat that has no more pitch or other benefits except that it is “up front” and I can potentially board earlier (and sit in an uncomfortable seat longer before take-off) isn’t more value.  If the seat comfort isn’t going to change, do I really care if it’s up front or in the back?  Well, maybe I do if I’m on a cranky old MD-80.  Does it afford me more opportunity for overhead space?  No, not really.  Despite reports to the contrary, it’s just not that hard to find overhead space.  Sure, the bins are more crowded but you can still access them. 

If anything, it’s the jokers who put their luggage up front and then take their seat in back that annoy me.

But I’ll gladly pay for more seat pitch and a generally more comfortable seat.  I’d gladly pay $20 / segment to gain 2 more inches of pitch alone.  And I can already get that on an airline of my choice in most cases.  For the prices AA is offering for this “service” you can more often than not get an Airtran business class upgrade.  You can get more seat pitch and more service on Frontier.  You can get more seat space on jetBlue.  Southwest Airlines’ fee for priority boarding affords me a real opportunity to choose one of the best seats in a 737 for a cheaper price and you can bet I’ll have bin space on the SWA flight no matter what since they aren’t fools and charge exorbitant fees for baggage checking.

Perhaps this might have some appeal to a business traveler but I don’t think such a fee is going to be reimbursed as an expense.  That certainly wouldn’t fly at my company, a major aerospace and defense firm. 

How about a $25 fee that A) gets you a exit aisle seat and B) *guarantees* your checked luggage arrives with you?  That might be particularly attractive to AA flyers.

At the end of the day, for any traveler except the most extravagant, it’s money that can be better spent elsewhere.  And if you are that extravagant, you’re probably getting an upgrade to first class anyway.

Frontier, Lynx and the Q400

August 15, 2010 on 1:00 am | In Airline Fleets, Airline Service | No Comments

In a month, Frontier will have withdrawn the remaining Bombardier Q400 aircraft from the Lynx fleet and I continue to think that my have been a mistake.

Lynx routes will be operated by Republic Airlines E170 jet aircraft.  I get that “pure jets” remain somewhat attractive but I think the Q400 will have been shown to have earned more profit on those same routes.  I get that Republic needed to find a use for some of their aircraft, too, but I continue to believe that retaining the Q400 would have proven profitable.

Yes, I’m repeating myself.  It was a small fleet but a fleet that fit extremely well.  In addition, the Lynx outfit was one of the things that really caught Southwest Airlines’ eyes during bidding this time last year.  If you’re catching SWA’s eyes, you *must* have something going for you. 

It’s interesting to me that despite the emphasis on finding lower costs, so many airlines continue to ignore the turbo-prop.  Yes, Continental has it for its regional flights on a large(ish) scale but that’s about it if you ignore Horizon Airlines. 

The fact that Alaska/Horizon Airlines is making pretty good money from them and on segments that, frankly, are a bit long for the Q400, should be signaling something to other airlines.  But those airlines remain tone deaf and I think that’s a shame. 

I look at the flights that American Eagle flies regionally from DFW and it makes me cringe to see those old ERJ-140 aircraft going to Texas and Oklahoma and Lousiana destinations that could be served so much more efficiently with a Q400 or ATR-72.  The same is true for the Chicago area. 

I honestly believe that the airlines are the only ones afraid of these aircraft, not the customers.  Imagine how much more competive one might be using them, however.  Low fares are the key, not a jet engine.

Round Up Comments

August 9, 2010 on 2:14 pm | In Airline News | 1 Comment

I’ve been on vacation for the last week and a half but now I’m back and there are many things I want to comment on.   Instead of one subject, here are a few quick observations on recent airline news.

Mexicana:  Blaming labor is probably appropriate in some respects but this is an airline with other problems as well.  And let’s not forget that management allowed those salaries to climb as high as they did.  If the numbers being cited in media are anywhere near correct, salaries are outrageous and would have been ultimately untenable 8 years ago or more.  Is there a solution?  Only if labor unions are willing to negotiate new contracts that are probably 40 to 50 percent less than existing ones and only if another company is willing to come in and buy the airline.  Dubious on both points.

Frontier:  I see that Frontier Airlines is moving their Houston operations to Hobby Airport and this is probably smart.  They’ve already seen that they can compete with Southwest and it makes them more convenient for the HOU/DEN business traveler who is primarily concerned with oil.  It also makes me think of the current Love Field plan and just how restrictive it is for another airline to enter that market.  Dallas has hurt itself on that one but the hurt will only be realized in another 4 years.

JAL and American Airlines:  The Dallas Morning News Airline Biz Blog is reporting that JAL has sent 100 of its managers to American to learn, well, management.  AA is encouraging JAL to use the financial analysis systems that it uses and which were instrumental in weathering the financial storm.  While I agree that AA was more agile than many when it came to weathering that storm, they’re also somewhat boxed into a corner now too.  Delta would have taught them to suck it up, take the hit and get on with life instead of prolonging the status quo.

American Eagle:  There is now more talk of “spinning off” American Eagle from AMR and while that would put some money into AMR’s pockets (quite a bit, I suspect), it leaves both airlines with not a lot going for it.  American Eagle goes independent and has to fight for its contracts in a world of regional airlines that are becoming increasingly competitive with equipment that is largely dated and inefficient and a labor force that is pretty well paid compared to most.  American Airlines then has to find new partners (potentially) with lower costs but also with equipment to match existing scope clauses and the ability to work the American Way.  Keep American Eagle, it fits, it works and you don’t need that trouble right now.

Delays:  Here we are in August and, still, no real problems with tarmac delays.  Airlines seem to be able to restrain themselves and keep their ops going just fine.  Remember, the real problem occurs when customers start complaining about cancellations and that makes it news.  Right now, all seems to be going OK.  Let’s see how the Q3 financial numbers turn out too.

My favorite route

July 17, 2010 on 1:00 am | In Airline Fees, Airline Fleets, Airline Service | No Comments

I like to watch the fare prices on various routes that I fly from time to time but none more so than the Dallas to Milwaukee run.  To me, it’s an example of what real competition can do and I’ve written about it before.  You can read my earlier post HERE.

Well, I took some time to see what was going on with that route now by sample fares and flights for mid-week departures between the two cities in August.  First, the good news:  Fares are holding steady at or about $170 for advance purchase tickets. 

Second, the better news:  Airtran is using the Boeing 717 on that route already.  No SkyWest CRJ-200 regional jets, we get the real Airtran on a real aircraft that is really pretty comfortable.  I figured Airtran would move in with the larger aircraft if only to put pressure on Midwest Express.

Now some bad news:  Airtran is only flying an early morning and late afternoon flight on the DFW to MKE run.  It’s worse on the MKE to DFW segment with a plain morning departure and late evening departure.  I’m guessing it’s the best they can do for now but they’re going to need at least one more flight to make that really work.  Their current offering via Atlanta is *not* what I meant by needing another flight either.

Midwest  aka Frontier aka Republic is hanging in there.  They have 3 flights using the E-170 Embraer jets and that’s really not a bad aircraft for that route.  With 2×2 seating and a bit bigger cabin, it works for what is essentially a long and thin domestic route.  Well, long-ish anyway.  The bad news is that Midwest  aka Frontier aka Republic has its first flight on the DFW-MKE run after 10am in the morning.  That’s about 2 hours later than necessary.

American Eagle is hanging in there.  This is a route that used to often cost as much as $300 round trip just 3 years ago and that was the best fare you could get.  Often the only tickets to be had were in excess of $500 and the only choice you had was to fly to Chicago and take the bus if you wanted to save money.   But here is the interesting part:  American Eagle has its 5 flights a day and I will say they’re well laid out in terms of departure and arrival times.  However, American Eagle is now using the CRJ700 on 3 of those five flights (the remaining two use the clapped out ERJ-140)  and their fares are as competive as anyone’s. 

And then there is Southwest.  Southwest’s cheapest fares are competitive with everyone else’s and continue to be one-stop flights with no plane changes.   Those flights are now running about 3 hours, 25 minutes however and that’s a bit longer than they were taking earlier this year.   The non-stop flights of the other airlines are doing it in 2 hours, 20 minutes.   Still, they are the bargain choice for 2 reasons.  First, Love Field is cheaper to fly from for more people in the DFW area in that its taxes and fees are slightly cheaper and the travel to Love Field and parking at Love Field is cheaper too.  Second, Southwest still isn’t charging for baggage.  That means for someone checking a bag, the savings could range from $35 to nearly $80 and that’s real savings. 

In practical terms, for me as a passenger to that destination, I probably could save as much as $50 each way in “real” savings by using Southwest.  And I’d do it in the aircraft that had the *most* seat pitch of those serving the routes.  That’s worth the extra hour of transit time on a leisure flight and might just be worth it on a business flight too. Why?  Because my door to door time in the Dallas area is likely to be about the same using Love Field or DFW.  I don’t have to drive as far to Love Field airport, take as long to park and/or transit into the terminal, check in quite as early or frenetically and that amounts to probably as much as an hour gained making the trip from the door of my house to the door of my family’s homes in the MKE area about the same no matter which airport and airline I take. 

But I can save about $100 round trip if I’m flying with checked baggage and that’s a deal. 

If Airtran wants to win Miwaukee, this is an important route for them to succeed on.  They’ve got the right equipment for the route now but they’re going to have to work on their frequencies and departure times a bit to really win.  Right now, their schedule looks like a compromise.

Midwest is probably continuing to do well but let’s see how they do when the brand changes to Frontier.  I’m not saying they’re out of the game.  To the contrary, this whole competition thing on this route could end up being Midwest/Frontier and American Eagle again in a year or two.  Midwest has good frequencies, good flight times (mostly) and good service.   However, Southwest will win this route, I think, when they can start flying it non-stop But that opportunity is still 3 1/2 years away.

What happens with Regionals?

June 11, 2010 on 1:00 am | In Airline Fleets | No Comments

There is no doubt the airline industry is changing again.  With legacies merging to become SuperLegacies and owners of very diversified fleets, there is more and more pressure on regional airlines.  In addition, the bankruptcies of the 2000’s have led to airlines with lower cost structures and revised contracts that allow more “regional” flying of mainline routes.  That would imply more regional airline flying but the “regionals” flying those aircraft under those scope clauses are, for the most part, owned by the legacy airlines. 

Republic airlines has been attempting ot diversify itself by buying Frontier and Midwest.  Mesa airlines is just holding on by a thread.  ExpressJet tried branded flying and corporate flying without much luck.  So, where does it from here?

I think cost is going to be the driver in the future.  Regional jets became prolific for one reason in the 1990’s:  cheap oil.  That’s gone and it is unlikely that we’ll ever see it again.  Three regional airlines adopted a newer model of flying modern turboprop aircraft and I think it is interesting that those three also happen to be pretty profitable and reliable operations.  Horizon (wholly owned by Alaska Airlines), Frontier’s Lynx and Pinnacle (Colgan) on behalf of Continental all adopted the Q400 turboprop and made it work very nicely. 

Yes, Lynx is going away since Republic couldn’t justify a small subfleet when it had other aircraft that were more expensive and which would sit idle if not used on behalf of Frontier.  However, even Southwest Airlines was very intrigued by what they saw of Lynx last year when they decided to bid for Frontier.  Horizon continues to be profitable and flies this aircraft on some pretty long routes and remains competitive with regional jets and even some mailine aircraft.  Pinnacle (Colgan) has done very well for Continental out of the NYC area and will soon be expanding its turboprops into Houston for Continental.

The turboprop is much cheaper to operate.   A 30% to 40% load factor can result in a break even flight whereas some airlines effectively lose money on similar routes using small regional jets. 

They are cheaper to buy.  A Q400 costs less to purchase than an E170/190, has almost as many seats and is just as comfortable for 90%+ of all routes.  They’re also a little bit cheaper to maintain.

The modern turboprop can fly block times on routes of 500nm or less that are competitive with any jet.  Oh, there might be 5 minutes difference in the block times between a Q400 and an E170 or B737 but it’s a competive block time.  Why?  The turboprops reach crusing altitude faster, can take off from more runways and can land quicker (reduced time to go from cruising to landing altitudes.) 

I think we’ll see independent regional airlines explore more turboprop flying for the legacy airlines in the future.  It is a niche that fits them well and, yes, goes back to basics.  The regionals which are flying mainline routes with semi-regional jet equipment are going to be subsidiary companies of legacies in the future.  The legacy airlines can use them to onboard new pilots and use them as places to keep pilots hired when furloughs are necessary from mainline flying.  Unions like that and, as a result, are likely to embrace allowing more “scope” for flying the 70 to 100 seat aircraft on more mainline routes in the future.

Midwest Airlines is off my deathwatch.

April 13, 2010 on 12:00 pm | In Airline History, Airline News | No Comments

Midwest Airlines is off my deathwatch.  Why?  Because it is dead, Fred.  Republic Airways has shocked no one by announcing that it will be the Frontier brand that will represent both Frontier and Midwest going forward.  See news on the anouncement HERE.

 

No one will be really surprised by this because at the end of the day, two brands wasn’t going to work with one shared fleet and the Frontier brand is the stronger national brand.  In addition, what national recognition Midwest did have has eroded tremendously in the past 2 years.  Finally, Frontier was just the bigger airline. 

 

Are the animal spokespersons sticking around?  Yes.  Not surprising since the person leading the branding now is the person who developed the aninal campaign for Frontier originally.  The next new animal will be the badger, an animal icon for the state of Wiscosin.

 

Midwest?  I am sorry the Midwest brand is gone now if only because Milwaukee is my birth town and I always felt that the people working for Midwest really did put something special into their airline.  It wasn’t the cookie for me.  It wasn’t the large seats.  It was the nice people.  When you called to make a reservation on Midwest, you got a very friendly and very knowledgeable person.  That had a lot more value to me than a cookie.  

 

Unfortunately, an airline based in Milwaukee isn’t a recipe for success.  An airline based in Milwaukee and using Kansas City as a focus city isn’t a recipe for success either.  I do wish Midwest had gone over to Airtran.  While the brand would have been gone still, I believe the people working for Midwest would have been appreciated more.

 

With the Frontier brand sticking around, I do hope we’ll see a return to a more focused and innovative Frontier identify that, in my opinion, has been muddied quite a bit already.  That Frontier was competing very well in Denver and could continue to compete well so long as we see its unique offerings come into focus again.

Republic and QANTAS

April 6, 2010 on 9:00 am | In Airline News | No Comments

On April 16th, Republic Airways will unveil its choice of brand going forward to use on both Midwest and Frontier Airlines flights.  Does anyone here think it won’t be Frontier?

 

On another note, here is a video shot from inside a QANTAS A380 showing a tire blowout and subsequent fire during a landing in Australia.

 

American and jetBlue – that wasn’t anything I expected

April 2, 2010 on 8:00 am | In Airline News | No Comments

The Dallas Morning News ran THISstory on Wednesday about new cooperation between American Airlines and jetBlue.   In short, the two airlines will swap slots at JFK airport (AA to *gain* 12 slot pairs) and Washington Reagan National Airport (jetBlue to *gain* 8 slot pairs) and start cooperating (interline agreement) on flights where they do not compete. 

 

It will become possible for a passenger in Burlington, VT to fly jetBlue to JFK and then seemlessly transfer to American Airlines to fly to London Heathrow airport.  This is a good thing for both airlines.  AA gains the opportunity for more feed into its major trunk routes (not flown by jetBlue) and jetBlue gets feed for its more obscure routes not served by American or American Eagle.  These feeds will take place both at JFK and Boston’s Logan Airport in the Northeast and, most importantly, these “complete” flights are only available via American Airlines at the present.  jetBlue doesn’t have the capability to offer such things yet. 

 

Both airlines get to increase their potential strengths at airports where they want to compete harder and it’s a deal that is much more likely to happen with the FAA’s blessing than the Delta/US Airways deal currently under proposal.  The deal also likely works to keep an airline such as Southwest Airlines or Airtran marginalized at those three airports without appearing to suppress all LCC competition since the deal is with jetBlue after all.  This is smart.

 

However, it greatly disappoints me that jetBlue has taken this route.  It isn’t unprecedented since jetBlue is already cooperating with airlines such as Lufthansa (who owns 17.5% of jetBlue) and Aer Lingus but it is disappointing because it shows jetBlue willing to be a 2nd tier partner with a legacy instead of building upon its own successes.  Can you really see jetBlue adding flights from the NYC area to destinations in Texas or Chicago now?  That would be highly unlikely. 

 

It would appear that jetBlue has decided the status quo is good enough instead of challenging other airlines in new markets as was their mandate and focus when starting the airline.  It’s a safe play and even profitable in the short term but it limits their ability to compete and deliver new service in the long term.  Now it sounds as if their strategy is to be more like Alaska Airlines (friend to many, enemy of very few) and a lot less scrappy like Southwest, Airtran or Frontier/Midwest.

Southwest – WestJet – Delta

March 31, 2010 on 12:30 pm | In Airline News | No Comments

Two days ago, the new CEO of WestJet stated that WestJet would be pursuing a code share agreement with Delta with the potential to implement this either before or in place of their existing agreement with Southwest Airlines.   Several reports tie this in with the proposal to give WestJet some slots at (5 pair) at La Guardia Airport in the Delta/US Airways slot swap deal currently being discussed. 

 

First, I continue to be skeptical that there will be an agreement between Delta and US Airways for this major slot swap between La Guardia and Washington National airports given both the FAA’s and Department of Justice’s attitude towards this deal.  Other than Delta and US Airways, no one is thrilled about the idea of Delta and US Airways getting to “pick” their competition by granting these slot swaps to airlines who aren’t poised (and never really will be) to compete with these two legacy airlines.   If a deal does go through, I expect it will look different than the current proposals and it will involve a transparent auction of these slots to a high bidder. 

 

Nonetheless, this is a bad announcement for Southwest airlines for a few reasons.  First and foremost, the thundering silence that continues from Southwest since this announcement was made sort of indicates they were as caught off guard by this as anyone.   It isn’t good for such a large airline to appear as unprepared for this development as they seem to be.

 

Second, the original deal between Southwest and WestJet is part of a 3 nation alliance between Southwest, WestJet and Volaris, all airlines operating in the tradition of being LCC carriers and all with a model similar to Southwest’s own.  Southwest was clearly the leader in this alliance and it appears that it’s delays in getting themselves positioned to start this alliance have hurt this agreement.   Acting like the 800lbs gorilla and then not getting the job done in time doesn’t make you appear to be an agile player in the airline community. 

 

Southwest has said the delays came from making other changes a priority within their IT system.  Whilethere are some changes such as new business class options, none of those changes to date are the kinds of things that should have delayed such an alliance for a year or more.  No other airline would have taken nearly as long to integrate into that kind of alliance and that points out problems with Southwest’s IT system.  Southwest is accustomed to going it alone on their systems (they do not, for instance, participate in a global reservations system) andhave done so for nearly 20 years.  Now, that departure from industry norms is starting to hurt them apparently in being unable to make these kind of changes and integrations in a quick and agile fashion.

 

Third, Southwest’s image of leadership among LCC carriers is further hurt by this.  Many founders of LCC carriers have pointed to Southwest as their inspiration for how to run a modern airline.  No doubt that this is true but it also points out that these 2nd and 3rd generation LCC carriers have become more responsive to both their customers and the potential for new business than Southwest has managed.  Losing that image of leadership is a bad thing for Southwest both externally and internally. 

 

Making substantial partners wait to engage in a strategic alliance that, by all accounts, should be very beneficial as well as ground breaking is neither smart nor a good show of leadership.  Canada really only has 2 airlines capable of entering into an agreement like this and the last thing you want is to annoy the 2nd largest airline of Canada into exploring options with a heavy hitting airline such as Delta and its associated alliance, SkyTeam.   Volaris may prove to be more patient but you have to wonder if they aren’t asking themselves if there is another partner in the US who might be interested in them.  A partner such as jetBlue or Virgin America or even the Republic Airways two-headed beast, Frontier/Midwest. 

 

This doesn’t mean that a wholesale change in leadership is called for at Southwest but it may well indicate that it is time to find ways to become a leaner, more agile competitor.  The days of simply having to show up and winning customers are over.  Witness the competition that SWA is seeing in new markets such as Denver and Milwaukee.   In this industry, winners attack and grow rather than ponder and play it cautious.

DFW MKE Fares are getting cheaper

March 24, 2010 on 8:00 am | In Airline Service, Travel Hints | No Comments

Since I wrote this post HERE in mid January, I’ve kept an eye on airfares between these two cities.  A check made yesterday revealed that advanced purchase (and not too advanced as in less than 30 day) fares are now at $158.00 on American Airlines and Airtran.  They are a few dollars higher on Midwest and a few more dollars higher on the Frontier flight that is actually the Midwest flight. 

 

Airtran hasn’t started these flights yet and when they do, they’re planning to use SkyWest CRJ-200 aircraft for those trips.  Not the most comfortable airliner for 2+ hours of flight.  It’s interesting to note that since I last visited this subject, AA has upgraded its equipment to CRJ-700 aircraft on most of the flights with just one ERJ-145 remaining.  Midwest/Frontier continues to use Embraer E-170 equipment and both those aircraft are quite tolerable for the trip. 

 

Even more interesting, Southwest Airlines is now offering not one but two “direct” flights with no plane change between the two cities and their cheapest available fares match Airtran’s offerings.   The flight times are 3 hours, 10 minutes which is just shy of an hour more than the others nominally.  In other words, they’ve shortened up the transit time by 20 minutes and when you consider where you live in Dallas, flying through Love Field just might make that a wash at this point.  You also get to fly a mainline Boeing 737 instead of a regional jet.  The real kicker is no bag fees on Southwest which, in many cases, makes Southwest the cheaper flight and potentially no longer than the others “door to door” for many in the Dallas area. 

 

I would say that if Airtran does expect to keep this route, the CRJ-200 isn’t going to be adequate for that route.  They’ll need to offer the kind of service they have on their B717 aircraft to siphon away traffic from both AA and Midwest.

Republic, Frontier and Midwest

March 23, 2010 on 8:00 am | In Airline News | No Comments

I found THIS  short story on Republic Airways and noticed the elevation of a Frontier executive to VP in charge of branding and marketing.  Ian Arthur, the man who oversaw development of the animal campaign(s) at Frontier has been put in charge of branding and marketing for Republic’s two branded airlines:  Frontier and Midwest.

 

Republic plans to unveil a new “face” for these two airlines blending the “best of both” airlines together.  Quite a few people may hope for something with Frontier’s flair or Midwest’s comfort but I think a third thing is going to happen. 

 

I suspect we’ll see a harmonization that relies on commonality for aircraft and that means Frontier probably returns to more of a traditional 2 class model and Midwest see its brand go away both in name and colors.  Republic uses its fleet of regional jet aircraft to augment these airlines  and they can’t afford to configure either to fit a highly distinguished brand. 

 

I suspect LiveTV might well go away because I’m skeptical that Republic wants to fit that product to their E-170/E-190 fleet.  What I really suspect is going to happen is we’ll see the Frontier name but the brand turned into a vastly more generic experience for passengers.

Republic Airways hits a labor bump.

March 15, 2010 on 11:00 am | In Airline News | 1 Comment

USA Today/AP has THIS story about Frontier mechanics who are represented by the Teamsters union going to court to enforce a contract.  Republic wants to move maintenance to Milwaukee (home of the other branded airline they purchased, Midwest) and it has offered to move mechanics from Denver to Milwaukee to do this maintenance.  The mechanics and their union claim their contract specifies the maintenance will be done in Denver and they’ve gone to court to see who is right. 

 

The worst part of this isn’t the move in my opinion.  The worst part is that Republic has apparently told the mechanics that anyone who moves to Milwaukee won’t be in the union.  Why is this bad?  Well, for one, even the courts aren’t fond of union busting via mergers and bankruptcies.  Another is that Milwaukee is, itself, a very unionized city still.  I’m not sure you want to get a reputation for being anti-union in such a city where you’re still attempting to court customers as the “home town” airline. 

 

Republic may even get away with this move but it also attracts the attention of unions and they may now face unionizing attempts at their “core” airline unit(s).   While unionizing attempts aren’t nearly as successful as they once were, they continue to be a bit more successful in the airline world which is heavily unionized and where those belonging to a union almost universally do better with respect to pay and benefits.   Yes, Delta is somewhat the exception here but I fully expect them to become much more unionized in the future as well.

 

Are unions inherently bad?  No, they aren’t.  Bad union contracts are bad.  Antagonistic relationships with unions is generally bad.  And in the political and economic climate that many workers exist in today, unions really don’t look so bad anymore. 

 

A couple more moves like this and I’ll move Republic onto my death watch.

Airline Labor Problems

March 12, 2010 on 3:00 pm | In Airline News | No Comments

Anyone who follows this industry is well aware of labor problems at many US and European airlines.  There have been at least three major strikes I can think of in the last month in Europe (BA, Lufthansa and Olympic).  American Airlines seems to have had almost its entire operations labor force at the negotiating table for the past 4 years and not a one of them seem to be acting like a deal is soon to be had with several threatening to ask for release from negotiations to begin a 30 day cooling period and one (the TWU) who has asked for such a release. 

 

Even Southwest Airlines has had a couple of snags in the past year with its pilots union and their TWU local.   Delta’s flight attendants are making noise about trying to unionize again and this time they may have the votes for it when you consider that Northwest’s flight attendants were rabidly unionized.  Frontier employees haven’t rebelled yet but I kind of wonder if that isn’t closer to happening than many realize given Republic Airways’ direction.

 

US Airways has problems with its pilots’ unions not being able to get along well enough to come to a consensus on whether or not the sun rose in the east.  I do wonder how long it will be before we see the unions at United Airlines begin to overheat much like American Airlines’ already are. 

 

Sure, there are some airlines who are managing to get along with their operations employees pretty well.  That includes Southwest Airlines, Continental and even Frontier (for the moment.)  However, a pretty vast number of airline employees seem to be simmering just before the boil over point and I’ve begun to wonder if there doesn’t need to be a better industry solution to collective bargaining than what they’ve got now.  With the way things seem to be headed, particularly at legacy airlines but certainly not limited to them, there could be a truly momumental perfect storm of labor actions in the US. 

 

I won’t argue who is paid well, paid poorly or over-paid.  I certainly won’t argue who is or isn’t over worked either.  Frankly, if you think being an airline employee in operations is a cush job, you really don’t have visibility into just what those jobs entail and just how many hours a day they consume.  But if there is this much job dis-satisfaction among these ranks, clearly change is called for and I really don’t think this is all about money.

 

I think this is about job satisfaction.  Yes, the union leadership (such as it is and that ain’t much) expresses the grievances in monetary terms but I really don’t think it’s all about the paycheck.  I think it’s about feeling job satisfaction and feeling some meaningful reward from the job which, yes, includes salary levels.  For airlines, I think this about a need to have greater flexibilty and ways to improve productivity that aren’t constrained by decades old rules. 

 

Who is going to find a better way in this system which is largely based on 1930’s law and habits?  I really wonder if there is any industry leadership who has the ability to find a better way.

Midwest Airlines

March 3, 2010 on 8:00 am | In Airline Service | No Comments

There has been a great deal of talk about Midwest Airlines and Republic Airways’ intention to consolidate that brand with its Frontier brand in the near future.  Most notable is that few people seem to be decrying the loss of Midwest Airlines anymore.  Certainly not like they were when Airtran attempted to take them over a few years ago. 

 

Midwest ceased being an airline last year and became a brand only.  When Frontier and Republic equipment began to fly its routes, the distinguishing features of that brand were eroded heavily.  Now it’s basically a logo and a location and no one seems to care anymore and that means the brand has little, if any, value.

 

Will Frontier be the new brand?  No one has really said much about what the plans are but there have been a few vague hints that it might be a new brand altogether.  The fact that anybody is talking about this in vague public hints really shows just how much Sean Menke is already missed in getting this thing figured out. 

 

Frontier has an excellent brand and one that could well work in Milwaukee just as good as it has in Denver.  Frontier had better service differentiation and a better selection of products than Midwest ever hoped to have.  It’s nationally known and folks in Denver have learned to be very loyal to it.  Others could too.

 

A new brand is the mis-step that I think many are wondering about.  You can only have so much of a “virtual” airline in operation until people begin to wonder who they’re flying with.  Dilution of both brands in favor of a much more generic but new brand is not a good idea. 

 

There are signs the industry is, perhaps, starting to slowly recover.  That recovery is likely to be slow and painful and it isn’t the time to be trying to introduce yet another new airline brand to the country and compete against established airlines who are arguably better situated to compete already (SWA, Airtran). 

 

Republic would be far better off to work on consolidating the operations between both Midwest and Frontier and standardizing on the Frontier brand which means getting the Frontier services onto all aircraft too.  Marketing and sales then will have much better guidance on what they’re selling and who they are selling it to.   No matter what the brand’s name, it’s time to get a cohesive marketing plan together and begin executing it on all fronts including online social media as well as local sales efforts.  Wait too much longer and Frontier, as a brand, is liable to go the way of Midwest and I’ve already pointed out that that brand suddenly has no value to anyone anymore even in its home market.

Republic Airways Orders 40 CSeries Jets

February 25, 2010 on 12:00 pm | In Airline Fleets, Airline News | No Comments

Republic Airways Holdings, Inc., the parent company of Frontier and Midwest as well as 4 other regional airlines, has ordered 40 new Bombardier CSeries CS300 jets with options for another 40 as well. 

 

The CS300 will seat about 120 people in a mixed class layout and has enough range to fit current Frontier/Midwest needs especially if they select the CS300ER (about 2900 nautical miles range).  It’s an aircraft that really begins to infringe upon B737/A320 territory (especially the A318) and which promises very good efficiency, particularly for the kinds of missions Republic flies. 

 

These are most certainly for the branded Frontier/Midwest network.  They fit the missions that both of those brands are flying now and compliment the existing A319/A320 Frontier fleet as well as the EJets currently flying for both Frontier and Midwest.  The CSeries 2×3 Economy configuration has the potential offer a better product than many airlines offer with their larger aircraft since a passenger has just a 20% of getting a middle seat versus 33% chance on a 737/A320 aircraft. 

 

These aircraft will not fly for the regional airlines serving legacy airlines such as Delta, US Airways or United.  The unions for those airlines will never allow that kind of semi-mainliner aircraft fly on behalf of the legacies.  No doubt Republic look to re-allocate some of their EJets such as the E170 back over to such flying and this purchase gives them more flexibility in the future. 

 

This is  a big order for Republic Airways.  Nominally worth about $3Billion, Republic no doubt got significant discount for being the launch customer of this version (Lufthansa has already ordered the CS100) but it does make me wonder if they can afford the order right now since Republic has spent much of its cash holdings and it remains to be seen if legacy airlines are going to be happy about continuing contracts for regional service with an airline that is now competing with them on a mainline level.  Time will tell since these jets aren’t due to enter service until 2013 and there will likely be some delay added to that rough date.

Frontier, Denver and Newport News

February 5, 2010 on 2:24 pm | In Airline News, Airline Service | No Comments

Frontier has announced some new flights recently but there is one that caught my eye for two reasons.  One, I know and use the Newport News / Williamsburg Airport and, two, that’s one strange route.

 

Now, the Newport News / Williamsburg airport is a secondary airport for the Norfolk area but it is really only convenient to a small portion of Norfolk and those living on the peninsula between Norfolk and Williamsburg.  (Anything much past Williamsburg is more conveniently served by Richmond International Airport (RIC).   

 

Understand, I think Republic/Frontier clearly saw something to the route because they’re putting an E-190 jet on it first and plan to upgrade it to an A318 later.  However, it puzzles me as to what they saw since there are exactly ZERO non-stop flights between those two areas at present.  Sure, I would imagine there is some connecting traffic via AA and United Airlines through both DFW and ORD but there just can’t be much or one of those two airlines would have something working on that route by now. 

 

This one just doesn’t make much sense to me.  There are no obvious business ties between the two cities and even the military contractors that have offices in both cities don’t have much business that is shared between the services in those two cities.*   Yes, Norfolk is a big military area but it is primarily a Navy/Marines area where Colorado is primarily Air Force.  Newport News / Williamsburg is a nice airport to fly into if you’re going to that side of Norfolk or anywhere on that side of the bay.  I like it because I visit family in Williamsburg and its just a 15 minute drive from there to the airport compared to nearly an hour to Norfolk (ORF) or an hour or more to Richmond (RIC).  I’m glad for Airtran serving it but while I do see the connection for Airtran, I don’t see it for Frontier. 

 

There are plenty of connections serving DEN-PHF but they all funnel to flights from Atlanta or Charlotte (Delta/Airtran and US Airways respectively).  Those flights are all on small RJ’s and the fares, frankly, don’t seem to offer a whole lot of yield either.  Prices for a late February flight with a Saturday overnight stay are as low as $205 ranging up to about $240 (for any flight someone would realistically take.)  That doesn’t suggest a lot of yield available. 

 

I’d love to know what Frontier saw that made it seem such a smart move.

 

 

* I work for a major first tier Defense contractor myself based in Richardson, Texas.

Sean Menke leaves Frontier, er, Midway, no, uh, Republic!

January 16, 2010 on 8:00 am | In Airline News | No Comments

Sean Menke, largely the architect of Frontier Airlines’ success over the past several years and who was the innovator who brought a la carte pricing to both Frontier and Air Canada is leaving Republic Airways according to this Dallas Morning News Aviation Blog report HERE.

 

I don’t see this departure as a condemnation of Republic so much as Menke is probably wanting to move on to bigger and better things.  With long ties to the Denver community, moving to Indianapolis probably wasn’t high on his list of things to do.   With his track record in this industry, Menke represents the kind of talent other airlines need and I’m sure his list of offers is already growing rapidly.   There are several airlines who could stand to have someone of his caliber.   And let’s face it, with Brian Bedford in the top position at Republic, there was nowhere for Menke to go.  In his mind, it was probably better to leave now than to stay in a position with no upward mobility and a narrowed scope. 

 

However, Republic is going to miss this key executive in a bad way, I think.  Menke was just the kind of person you need to merge brands together while preserving the image necessary to succeed in the airline industry.   While Midwest is only a brand now, it is an important brand in that portfolio.  Managing brands is something Republic has almost no experience in doing and this is a critical time for them. 

 

I think Republic will find someone to do this but I also think this development does spell the end of the Midwest brand in the near future.  It is just too difficult to manage to brands that, while both are good service products, both are not entirely in harmony with each other either.  Frontier is ultimately the stronger brand nationally and has the service product that fits closest with with industry trends now.  I think sometime in the next 12 to 18 months, we’ll see one brand (Frontier) and Milwaukee’s status as a “hub” will draw down to that of a focus city at best.

 

The key question is will Republic find someone who “gets” what they’re trying to do and can brand and market to that approach?  And can they get him/her in time to keep the whole enterprise from stumbling.  That’s where I worry because Republic isn’t in the habit of having to find such talent for a branded enterprise and it takes a while to figure out what you need and who you need.  If CEO Bedford has strong industry contacts among the branded airlines, he would be wise to get work making those calls asap.    An executive search for 9 months won’t fly for this.

Welcome To The New Year (part 1)

January 1, 2010 on 12:30 am | In Airline Service | No Comments

Now that it is 2010, what can we expect?

 

Unlike this time last year, probably not much.  There was some momentum for change last year that really doesn’t exist this year.   Airlines will continue to fight to hold their own in the marketplace and with the reduction in capacities, even the worst of the lot will likely cling to life this year.

 

North America:

 

Major airlines of North America have made all the changes they can and all are managing their businesses and cash very closely right now.  I don’t expect much, if any, change to develop in the next 12 months but let’s take a look anyway.

 

American Airlines has some labor issues to address but with the current economic climate, they have been getting away with their efforts to defer those issues.  Labor unions would like to push a few issues with American but they’re smart enough to realize that now isn’t the time.   Most likely they’ll continue their face saving efforts at making a point with their members but I don’t expect any real labor action at this airline this year.  Perhaps, if things get better, we’ll see some movement in the 4th quarter.

 

United Airlines, my least favorite legacy airline, has similar issues that American has with labor but, again, those labor issues aren’t likely to see much movement either.   I suspect that United will continue to move more of their flights over to regional airline partners because its worked (for now) and their customers will find themselves on more and more regional jets.  Since price is the prime driver for customers right now, they’ll accept that move and hate the flights as much as they always have.

 

Delta/Northwest should see more of its operatioins combined and, possibly, a unified single operating certificate by the end of the year.  That doesn’t mean much for their customers since Northwest aircraft are being painted into Delta colors at a furious rate.  The service product is already being harmonized to a fair degree and it’s a good one already. 

 

I don’t see any major aircraft purchases and I remain interested in whether or not they’ll keep their 787 orders.  There has been rumour and innuendo that they won’t but I kind of think they will keep them.  Their 767 fleet is old (except for the 767-400) and I can’t think of a reason why you wouldn’t want to have the 787 begin filling the role of those aircraft.  I’ve wondered if their hints aren’t just an opportunity to get Boeing to get interested in offering a better deal for more aircraft. 

 

US Airways needs two things in this next year.  First, they need their pilots to get together and start operating as a single group.  As dangerous as it is to try to interfere with a union group, I wonder if US Airways won’t wade into the problem in an attempt to have a final resolution.  Certainly they could argue that they’ve been patient enough. 

 

They also need to manage their cash very, very closely.  Cash is blood to an airline and US Airways has a bit of risk in this department.  Should cash holdings be depleted more, they’ll have to start seeking that merger partner again and no one appears interested in marrying with them.  This is another reason it needs resolution for its labor problems.   That said, I don’t see US Airways disappearing or filing for bankruptcy again. 

 

Continental Airlines has felt the hurt this past year and its unlikely to feel much better this year.  Their business model depended a bit more on business class travel and the economy hurt that demand the most.  That said, I can’t imagine a better group of managers for keeping that airline on track through the rest of the downturn.  Things will hurt and belts will be tightened a bit more but I don’t see the service product changing.   When the economic downturn does really turn the corner, Continental will be better placed to succeed than many. 

 

Despite their recent move to the Star Alliance, I do *not* see Continental getting any closer to United Airlines whatsoever.

 

Low Cost Carriers / Regionals:

 

Southwest Airlines continues to manage itself to the tune of its own drummer and the results of their long(er) term thinking are showing left and right.   They’ve managed to make solid overtures to business clientele in areas that, I suspect, count more day in and day out.  

 

I don’t see a merger partner in the future for them except,  possibly, for Sun Country Airlines.  For some reason, I see this as a real winner for Southwest in that it gives them space and routes in Minneapolis / St. Paul, a labor group that is accustomed to delivering Southwest style service and which can be harmonized into the Southwest labor groups relatively easy.  There is no rumour of this purchase but Sun Country has its own problems and it’s a match that fits the Southwest acquisition model. 

 

I think Southwest will remain persistent in its Denver expansion and will work hard to create a network in the upper midwest states of Wisconsin, Minnesota, Illinois and Missouri.   The wild card, in my mind, is the Washington D.C.  area and the NYC/Boston areas.   Shuttle type service is what Southwest knows very well and I wonder if they won’t try very hard to organically grow their flights in these areas.  If so, Southwest needs to find an “in” at Washington Reagan airport.  To do this, they would need to buy a shuttle operation from US Airways and/or Delta.  Perhaps US Airways will be interested in such a sale if their cash holdings erode more. 

 

Frontier/Midwest/Republic:   I don’t know what happens here.  Midwest really isn’t an airline anymore.  It really isn’t even a brand anymore.  It’s a name for selling tickets.  Frontier remains an airline and a brand and Republic seems to want to continue caring for both.  Since Republic is managed by very smart people, I kind of think that they may look for a way to wind down the Midwest name over the next 12 to 18 months and make Frontier the primary airline.   A tasty cookie isn’t a good reason to keep the Midwest name around.

 

Airtran deserves some applause.  This airline has managed to grow itself some, find new markets and earn some money during one of the worst downturns in the airline industry.  

 

Their move into Milwaukee has succeeded and promises to continue to succeed.  Milwaukee is a loyal city, to be sure, but it is a city that appreciates value even more.  Airtran has managed to offer great value, good service and appeal to a city that just a couple of years ago was kind of anti-Airtran.   The one obstacle in their way is the arrival of Southwest, another airline very good at offering value and appealing to the Milwaukee kind of customer.   I think Airtran has the upper hand but they are by no means the sure winner in this market.  Southwest may be able to beat them with frequency.

 

Virgin America keeps showing up and usually right after I become convinced they’ll disappear.  I still don’t know what this airline does best and I still don’t see them as being a scrappy enough operation to fight their way into the cities it needs to be in.   Virgin continues to dance around Chicago (claiming they can’t get space but if they wanted it bad enough, they could).  Their product would servce cities such as Dalllas, Denver, Houston, Chicago, Atlanta, Baltimore, Philadelphia, and, perhaps, Cleveland/Cincinatti very well.  

 

Instead, they added flights from the west coast to Fort Lauderdale and talk about adding service to a Texas city such as Austin.  This is too timid.  The CEO, David Cush, seems afraid to compete against his old employer (AA) and that is a shame since they have a very competitive and attractive trans-continental product.   I would speculate on VA being bought by another airline but . . . why?  They just don’t have much there and seem to have little interest in exploiting real advantages that they do have.   Maybe they’ll just run out of money and get shut down.

 

Alaska Airlines has felt the heat from Virgin America but they continue to do pretty well with their little airline and they continue to do it without being aligned with a major.  I don’t see much changing for Alaska Airlines.  They’ll continue to be a scrappy airline with good service to a limited number of destinations.  And, somehow, that seems OK when it comes to Alaska.

 

Next up, the world.

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