USA Today’s Today in the Sky Blog is reporting that Alaska Airlines has announced that it will begin charging a 1st bag checked fee on July 7th.  This announcement comes after reporting more losses for this past quarter. 

I remain adamantly against the 1st bag checked fees being charged but must admit that if an airline was going to do one, it should do one in the manner of Alaska Airlines.  Alaska Airlines is going to offer a guarantee that your bag will be at the carousel within 25 minutes of arrival or you receive $25 or 2500 frequent flier points. 

This allows Alaska Airlines to compete better against legacy airlines by bringing their bag fees inline with the rest of them but offer greater value in the process.  This is a guarantee that I suspect will net a real response for Alaska.   No other bag check fee offers such a guarantee at present.  To the contrary, all other airlines charging such fees continue to do so in light of rather severe delays and losses for baggage. 

This addition also finds Southwest Airlines, last of the real majors and borderline legacy airline, the lone standout for baggage fees.  Gary Kelly, CEO of SWA, was even badgered by financial analysts during a recent conference call to discuss the most recent quarterly reports to consider adding such fees.  Kelly has steadfastly refused so far claiming that Southwest sees this move as being a strong negative among its customer base.  I actually agree since their customers remain some of the most price sensitive in the market.

It also stands in contrast to Delta Airlines’ recent announcement of a $50 first bag checked fee for international flights.   A move that I predict will ultimately be rescinded due to competition from both US and foreign based international carriers.

The question is whether or not other airlines currently charging such fees will be willing to offer similar guarantees.  Since so few compete with Alaska Airlines right now, I suspect it will be resisted as competition.  However, I also believe that one or more legacy airlines in the US will now begin considering the introduction of such a guarantee in order to bolster their position against their competitors.  My pick?  Delta Airlines or Continental Airlines.

Delta has an executive team that is  well aware that the a la carte pricing model is successful but they are also the most cognizant of presenting real value for their product.  Continental Airlines could steal a lot of press and thunder by making such a guarantee and it would also align them more close to Alaska Airlines, an existing Continental code share partner.

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The Dallas Morning News Aviation Blog is has a story about Continental reporting exceptionall dramatic declines in unit revenues over the past month.  This is, I believe, the third time Continental has reported rapidly declining unit revenues in the past few months. 

At first, one might question what is going on in the industry that shows one legacy airline reporting such poor numbers and there seems to be no similar dire reports from other legacy airlines.  Indeed, most others are meeting expectations (remember that expectations as domestic industry aren’t that high to begin with right now) and yet Continental seems to be struggling.  

After thinking about this for a couple of days, I think I might have realized what is going on here.  First, every airline earns its money from different hubs.  There are very few overlapping airline hubs in the US.  Continental has hubs in Houston, Newark and Cleveland, for instance.  American has their major hubs in Dallas and Chicago.   Delta has major domestic hubs in Atlanta and Salt Lake City.  What this means is that each airline derives a good portion of its revenue in markets where they are dominant and if those markets are doing poorly, they will too.

Now, Continental has Newark and Houston to contend with and both of those areas are large banking and financial centers.  Both are suffering a little bit worse than many in this economy and I suspect that business travel has been reduced dramatically in those areas.  Business class travelers are downgrading to economy and economy fliers just aren’t getting their trips approved at all. 

So far, Chicago and Dallas have weathered this storm a little better than expected and I think both American Airlines and United Airlines are managing to maneuver just enough to continue to meet financial expectations.  Atlanta is also doing just a little bit better as is Minnesota which means Delta continues to have maneuvering room.  Delta is exposed in Detroit, however.  Their subisidiary, Northwest Airlines dominates all of Michigan and industries in that area are being heavily impacted by the economy. 

Continental has made its success story from providing excellent service to business travelers.  It was (and will be again one day) a successful strategy due to focusing on attracting full fare or near full fare passengers and they focused a lot less on chasing the lowest fare passengers.  With economizing being the watchword at every company, I suspect many of the usual passengers are either deferring travel or quite possibly moving it to LCC competitors of Continental. 

The key to Continental’s (and other airline suffering this kind of revenue problem) surviving is being able to weather the crisis while maintaining their superior service.  That becomes doubly difficult with no end in sight for this economic crisis.  However, their management team is extremely capable and very tuned in to the needs of an airline.  If there is a team that can manage this event, it is Continental’s. 

I continue to watch for signs that United is weakening more financially and, so far, there are very few public hints.  This strikes me as odd since United is a bit more exposed than most.  They have a generally less fuel efficient fleet, they are subject to more direct competition from both legacy carriers and LCC carriers at more of their hubs and they have what may well be the most acrimonious relationship with their labor of all the legacy carriers.   It makes me wonder what, if anything, they might be successfully concealing in their financial health. 

American Airlines is reporting numbers that suggest that they are struggling to maintain their cash reserves at this point.  They are, however, taking steps to reduce their costs by cutting their fleet numbers and renewing more of their fleet than originally planned.  However, they too, have bad relationships with their labor organizations.  In fact, every major union at AA is now actively lobbying for the opportunity to move closer to a strike.  There is not one word of any agreement on any contract issue and AA’s strategy appears to be delay, delay, delay.  At some point, you really do have to come to agreement with your unions and get on with other important management issues of the day.

I think Continental will recapture its regular business traveler as things improve.  They do too good a job of taking care of their customers at a competitive price.  Other airlines, however, may discover that their customers have found better options.  After all, if you are going to be abused, why not be abused for the lowest price possible?

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UPDATE:  This was an April Fool’s Day Joke.

Southwest Airlines has announced the creation of a new subsidiary airline tentatively named Atlantic Express which will serve routes between New York City and London.  The new subsidiary airline will be staffed by current Southwest Airlines crews and has placed an order with Boeing for new 747-8 Intercontinental aircraft. 

Southwest Airlines CEO and President Gary Kelly is quoted at the 9am news conference saying “We looked at every kind of aircraft we could use for this route but the only one that made sense is the 747-8i.  As most people know, we prefer new aircraft and our business model depends on both passenger volume and frequency.  We went to Boeing and negotiated for the best deal possible on 10 new Boeing 747-8i aircraft to serve this route.”

There has been frequent speculation on what cities Southwest would use to serve New York City’s La Guardia airport (Southwest obtained 7 slot pairs to operate at the airport just a few months ago) and it would appear the question is answered now.  Southwest will serve La Guardia once a day with flights from Chicago-Midway and Houston-Intercontinental feeding connecting traffic to 5 daily round trip flights to London-Heathrow airport. 

Southwest’s / Atlantic Express’ new New York City schedule and aircraft can be viewed HERE.

Filed under: Airline Fleets, Airline News, Airline Service by ajax
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The CrankyFlier and the Delta blog have both alerted me to some new features coming on board with Delta.  Delta has added the ability to see status on upgrades and standby lists for flights to their main website and they intend to add these features very shortly to their mobile website for PDA Phone users.

Adding the ability to make these checks via cell phone or phone/PDA is a huge advancement for airlines and I suspect we’ll see more of these feature additions to most mainline airlines over the next year. 

For those of you interested in accessing Delta’s mobile site, you can go HERE for instructions.  I’ve already blogged about Continental Airlines’ system HERE.

Filed under: Airline News, Airline Service, Travel Hints by ajax
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Southwest Airlines started service between Minneapolis / St. Paul and Chicago today according to the Minneapolis / St. Paul StarTribune.  The newspaper reports that Southwest managed to kick off the new service with their trademark attention to customers.  Passenger Service Agents even managed to get their first customers to sing a song before boarding.

This marks Southwest’s first of several new routes for this year into new markets.  New York City (La Guardia) and Boston Logan are the next to receive Southwest routes. 

For now, Southwest will be linking MSP to Chicago only but I do foresee them adding routes to other Southwest focus cities such as Denver, St. Louis, Indianapolis or Detroit.  Typically, Northwest Airlines fights back against intruders on their mainstay routes but with the takeover by Delta, one wonders if their is enough attention being paid to the new competition versus integrating the operations.  Other airlines have entered the Chicago / MSP route and left it months later badly bruised from fare wars instituted by the dominant three legacy carriers at the two airports, Northwest Airlines, United and American Airlines.

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CNN is reporting that US Airways has dropped its beverage (non-alcoholic) charge for coach passengers citing negative perceptions of its brand. While i did think it reflected negatively on US Airways, I am, to some degree, surprised that they dropped the charge. 

This charge has been in place for quite a long time and while other airlines declined to adopt it, it had been reported that US Airways’ a la carte pricing was working well and that presumably included the beverage charge.  It was a bit of an extreme in the airline world to charge for things such as soda, water and coffee but there had been numerous reports that it was also working acceptably well.   Some reports portrayed it as reducing workload for US Airways flight crew and that most passengers had accepted it with little reaction.

I can only conclude that US Airways has made this decision as a result of evidence that it was affecting their bookings in some way.  Indeed, for those business travelers now relegated to traveling in economy, it may well have been responsible for driving decisions on who to fly when a choice presented itself. 

However, I don’t think this spells the end of a la carte pricing among the airlines.  A way to manage revenue and improve profitability has revealed itself and airlines will continue to avail themselves of it in the future.  Airlines will probably adjust their pricing according to market conditions but expect things like luggage fees and blankets for sale to continue.

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USA Today’s Today in the Sky Blog is reporting that Richard Branson, billionaire backer of V Australia (Virgin Blue) as well as Virgina Atlantic, Virgin America and Virgin Nigera has pronounced that one of the new or future competitors on the US – Australia routes will have to drop out.  I myself predicted someone would have to fall out in this post HERE.  The difference is that I predicted it would be United or V Australia. 

I agree that United Airlines is probably the most vulnerable on this route system but even United has something that V Australia doesn’t and that’s a network feed.  United can route its considerable network to flights departing for final destinations in Australia and that’s tapping a country (the United States) with a population of over 300 million. 

V Australia, on the other hand, does have the network feed from Virgin Blue but it pales in comparison to QANTAS and it has no firm partners in the United States at present.  (I don’t count a very weak agreement to sell seats on Alaska Airlines from Los Angeles to Seattle.)  Even if V Australia entered into an agreement with its US cousin, Virgin America, it still isn’t tapping into a major network.  Virgin America can feed some traffic from major cities and that’s good but those major cities (New York, Bostin, San Francisco) are exactly where their competitor may be strongest.  United has the San Francisco market, QANTAS and Delta has both NYC and Boston covered. 

QANTAS also has the powerful OneWorld alliance to help as well.  Airlines such as American Airlines help feed it traffic from their networks to destinations in Australia.  V Australia has no such alliance or even a single dominant partner.  Delta, on the other hand, has never flown to Australia but has a huge network in the United States, modern equipment to fly to Australia and a will to do so. 

After 2 to 5 years, I would expect QANTAS and Delta to be the dominant airlines on these routes and potentially the only airlines.  I agree that United may well be the first to go but I don’t think V Australia has that much greater a chance of sticking out to success. 

Filed under: Airline News, Airline Service by ajax
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Update:  For those interested, the Hang Up Act (as reported out of House committee) can be viewed in its entirety HERE.

The Runway Girl has posted THIS entry to her blog on the subject of in-flight use of cell phones.   Mary Kirby (aka Runway Girl) is apparently distressed over the “Hang Up Act” rolling around Congress and decries it as  “silly”  and is apparently in solid support of the Passenger Communications Coalition which is comprised of members she often writes about.

Silly eh?  I don’t know about that.  If I were an airline, I would want to avoid use of cell phones on aircraft in the US as much as possible.  Adopting a libertarian attitude and comparing what is going on in the Middle East and Europe isn’t a very unbiased outlook either.  US Airlines fly crowded, uncomfortable flights that are often late, understaffed with a minimum of flight crew and which only serve to antagonize passengers already.   European and Middle Eastern airlines fly in different cultures that set a very different scene for the use of cell phones and how that might be perceived as a personal space violation when compared to the United States and Canada. 

Allowing in flight chatty people to conduct phone conversations seated among other passengers under those conditions is a good idea?  Really?  Who manages disruptive people abusing that privilege?  The flight attendants?  Really?  The pilots? 

While I do agree that many would likely not abuse such a privilege, I fear what happens both to the perpetrator and the victims when some guy refuses to lower his voice and stop disrupting passengers when asked to.  Aircraft here in the US are already on a short fuse with temperaments.  As an airline, I really wouldn’t want to invite more opportunity for conflicts and I certainly wouldn’t want to add to my staff’s list of things to control.

Add in-flight connectivity to the internet all you want.  Allow text messages and web browsing via cell phones all you want.  Be very careful about introducing something that has the potential to violate personal space such as cell phone calls.  Cell phone calls and internet connectivity are not the same thing and to treat them as such is folly.  And recognize that different cultures might well allow for the successful adoption of new technologies in one place and mandate against them in another place.

Filed under: Airline News, Airline Service by ajax
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We often hear the claim from airlines, particularly legacy airlines, that it is the business class passenger who pays for the bulk of a flight but is that true?  Well, maybe. 

The frequent business flyer does provide much of the profit that an airline might earn but the business class passenger on today’s domestic flight is often a frequent flier who paid for a coach ticket and who received enough upgrade points to move to Business Class.   But that passenger doesn’t necessarily make for a profitable flight either. 

If the full fare business traveler was the most profitable passenger on an aircraft, then all of those business class airlines formed over the years would still be around, wouldn’t they?  Over the years airlines like Legend (a business class airline that flew from Dallas to major trunk destinations in the 1990’s) and like EOS and MAXJet (who flew the NYC to London trunk routes) tried the all business class model and it never worked. 

Some would say it was because there just aren’t enough business class travelers any one day for a  particular flight.  Others would say it was because the legacy airlines fought back with greater frequency, frequent flier awards and unprofitable fares that put them under.  The truth is, it was probably a bit of both but if an all business class airline made sense, it would have succeeded by now.

Everyone pays the the way for a flight in reality.  Most often, it’s those last 5 to 10 passengers on a flight that provide any real profit for an airline and those last 5 to 10 passengers are often passengers who wouldn’t have flown but for a discounted fare being available.  Airline revenue management dictates that an airline has to sell as many of those seats on a particular flight for a price that people are willing to pay.   Some people are willing to pay $1000 for a seat that others only value at $200.  Airlines manage this demand by offering unrestricted fares for a high price and discount fares with a string of restrictions that most business travelers can’t accept.  These different fares create enough demand for a flight and if it is done the right way, that flight earns a profit. 

If those low discount fares didn’t make sense and add profit to the bottom line, the airlines wouldn’t offer them.  You, the consumer, wouldn’t benefit from those low fares if there weren’t a certain number of people willing to compete for them at a low price by conforming to the restrictions placed on them. 

When the airlines reduced their capacity in the latter half of 2008, they essentially bet that there would be increased competition for those last few seats and that the competition would raise fares for those same seats.  Now it appears that that theory had a fault.  Once more airlines have realized that at a certain higher price, those last 10 passengers will either forgo that airline trip or find another means to make the trip.   When they start declining those opportunities, airlines have to reverse course and make a concerted effort to win them back by offering fare sales through expensive advertising. 

Why would airlines routinely engage this activity?  Because that is what competition is about.  It’s a natural part of any business cycle and it means that the market is constantly adjusting to its present circumstances. 

With the rather dramatic fall-off of demand, we are, once again, seeing low fares blossom again.  It isn’t because fuel is cheaper.   Cheaper fuel makes a fare sale a bit more possible but what happens if an airline sells a ticket for late April and finds itself paying twice the cost of fuel in January?  They lose money.  No, low fares show up because filling those airplanes is critical.  If they take off with an empty seat, it is giving up a revenue opportunity forever. 

Filed under: Airline Service, Deregulation by ajax
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The Cranky Flier made this post to his blog last week. In short, CF decried a woman’s New York Times Op-Ed on the demise of the glory days of travel which she apparently experienced as a flight attendant for TWA.   The Cranky Flier reckons that the changes that deregulation has brought on are what has made air travel affordable and to bring back the high service given in the 50’s, 60’s and early 70’s would deny that access to most of us.   Quite honestly, I do agree with him but I think a point was missed in Ann Hood’s Op Ed as well.

I’m pretty sure that Ms. Hood was decrying the loss of the great meals, comforting flight attendants and more correct behaviour but I think what prompted her Op Ed was actually a perceived lack of service on *any* level by airlines today.  I don’t think anyone realistically expects air travel to include 3 choices of meals, pillows and blankets and free cocktails anymore.  However, what causes people to continue to get upset is the generally poor nature of any service provided by most airlines.

I experienced that service as an airline brat from the late 1960’s to the early 1980’s and it really was pretty remarkable in many respects.  However, I don’t miss the Chateau Briand on Braniff flights between Dallas and Portland and I really don’t seem to miss the first class seat or the pillows or drinks.  OK, I do miss the seats but that is because I’m a 6’2″ man weighing 260lbs with long legs. 

What drives this perceived lack of service is airlines not keeping promises made when you buy a ticket.  Those promises are outlined by airline advertising which is quite good at showing a relaxing customer on an airplane enjoying a drink as he or she flies to their destination with the expectation that the airplane will be kept at comfortable temperature and will arrive on time.

Let’s look at what an airline passenger might enjoy from the time they decide to book a flight to the time they arrive back home from their trip.   First, they must book their flight online.  Most people not only don’t mind this, they prefer it these days.  However, none of us are amused when we attempt to book a flight online only to find the website overloaded from a fare sale or network disruption caused by weather.   If the customer tries to phone the airline to book they’ll be faced with long phone queues, surly reservations agents and the threat that their airline ticket is now going to cost them a bit more for booking via phone.

The customer is gratified at being able to check in early through the web but when they arrive at the airport they discover that checking in their suitcase requires them to stand in another long line in order that they might essentially check-in a second time so they can check a bag.  Even if they only have one bag, they’ll have to pay a fee to check it unless they are a road warrior with some sort of privileged status with the airlines’ frequent flier clubs.   Then they get to stand in yet another line while watching those same privileged fliers go through an express line with the TSA. 

Once at the gate, they’ll have to work to find an open seat to sit in while waiting for boarding call because aircraft are flying much more full these days and most gates at most airports aren’t designed to accommodate the loads that many airlines serve on their narrowbody aircraft.   At the boarding call, they get to watch those same privileged fliers board first onto the aircraft (even if they aren’t flying first class that day with their free upgrades they still get to board first) and then wait for their group to be called while some fellow passengers cheat and just board early anyway.  Since most customer service agents at the gate are unwilling to enforce the rules in many cases, these cheaters get away with that move.

If the passenger has a boarding call in the last 1 or 2 groups, they get to discover that all the other passengers have apparently carried their life’s possessions with them and occupied all the overhead luggage space.  If they say anything about the lack of space, some flight attendant will inform them that they might have to gate check their bag or put it under the seat in front of them.  Putting a bag under the seat in front of you hasn’t really been possible for adults since the early 80’s when airlines reduced seat pitch in coach from an accommodating 34 to 38 inches of space down to a tight 30 to 32 inches of space.   So, they put their coat in a crammed overhead bin and hand over their luggage to a surly flight attendant who is annoyed that they now have to catch the attention of ground personnel so the bag can be loaded in the luggage compartment.

Once seated, the passenger waits and waits for departure from the gate which is delayed a few minutes.  Finally after watching their watch for an additional 13 minutes, someone hurriedly closes the door and the pilots get a pushback.  Technically, the flight has left on time at this point.  Only the pushback results in them taxiiing slowly towards the runway where they run into a traffic jam of aircraft waiting to take off because most airports are woefully lacking in the infrastructure to accomodate the number of flights trying to depart at the same time. 

After another delay of 20 minutes, the aircraft takes off.  As it levels off, the surly flight attendants go to work immediately to serve their one beverage service during the 2 hour flight.  Now, the passenger knows that soft drinks (and virtually any other beverage) now costs money so they ask for water when it is their turn and find a surly flight attendant telling them that will be $3 for the half litre bottle of water they offer.   The passengers declines the water and tries to recline their seat only to discover that while the seat may recline, it reclines right into the knees of the passenger behind them who objects loudly. 

Upon arrival at their destination, the passenger collects their things and moves slowly towards the door.  In some cases, they now must wait on the airbridge for their gate checked luggage to be brought up to them and in other instances they must now trudge off to find the baggage carousel to collect their things.  Because these aircraft are flying so full, this amounts to another delay of 20 minutes or more. 

Once they have their baggage, they make their way to the curbside and take out their cell phone to call the person picking them up to tell them they are at the curbside now.  They have to do this because security no longer allows anyone inside the terminal and the airport management is now charging $7 to park in the parking structure for less than an hour to pick up their party.  

Go through that kind of experience each way and it is no wonder that passengers are decrying service from airlines left and right.  If you only experienced half of what I’ve described just now, you’ll loathe and hate the airline you just flew.  Not because you weren’t served a 3 course meal but because the airline who implicitly promised you a safe, relatively pleasant and on time experience didn’t even really pretend to try to deliver that promise. 

What people want is for an airline to be honest in what they’ll provide and to honestly deliver it with the possible exception of extraordinary circumstances.  Oh, there are a few airlines who do deliver on such things and they quite rightly also make a profit.  Southwest, jetBlue and Continental all come to mind as airlines that really do delivery almost every time.  However, for much of the US traveling public, those three airlines aren’t an option nearly as often as they would like. 

Indeed, the situation I just described is almost precisely what I experienced flying Airtran last year from Dallas to New York City.   It’s disappointing at the least and offensive in most respects.   Did I like the ticket price?  Sure.  But if you accurately described the more likely service scenario and then asked if I wanted to pay $50 more to just get where I wanted to go without that scene playing out, I’d happily dive into my wallet and hand over the cash.  

The problem isn’t that we’re addicted to the lowest fares possible.  We’re not.  We, the passengers, are too stupid to realize that the airlines aren’t really going to deliver on those implicit promises.  Like the co-dependent wife who keeps taking back her alcoholic husband, we keep going back to the airlines and expecting a different experience.  The truth is, if we would examine our last service experiences with various airlines and seek a different choice until we found an airline that treated us well, airlines would pay attention. 

Why?  Because it quite literally costs nothing extra to deliver what an airline generally promises today.  jetBlue, in particular, gets that concept and that is the biggest reason why they have succeeded flying from JFK airport in spite of all the known obstacles to flying from that airport.  So does Continental as they have huge hubs at weather delayed airports too but they understand that giving the customer the implicitly promised service leads to greater success on their part.  Southwest promises less service than either of those two airlines but has some of the highest customer satisfaction of any airline because they DO DELIVER ON WHAT THEY DO PROMISE. 

It isn’t the glory days of service that we miss.  It’s the constant disappointment we experience on airlines today that causes us to lament a lack of service.  It simply doesn’t exist for most passengers.  We are treated better, on average, at an inexpensive restaurant where we spend about $9 for for a meal than we are on an airline where we spend $200 or more for a flight.  Most airlines’ attitude is to chastise the passenger for complaining.  That’s the motivator for the glory days.   In the glory days, airlines didn’t act like you should be grateful just to have a seat on their aircraft.  They acted grateful that you chose them to make you trip on.

Filed under: Airline Service, Deregulation by ajax
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Pilots and flight attendants are perceived as having jobs that are easy and financially secure.  This is largely due to the fact that flight crews commonly have several days in a row off each month where they are able to enjoy a different schedule and life.  Flight crews, in fact, have just as much stress, fatigue and constraints as any other job. 

Many in the flight crew start out augmenting their income with 2nd and even 3rd jobs they work during their off-duty hours because they earn so little money at the start of their careers.  A fully trained and qualified pilot starting out on his career can expect to make as little as $20,000 / year and flight attendants often earn less than $16,000 / year to start.  So in order to pay their rent and other living expenses, they take on flexible 2nd and 3rd jobs.  Later, when they are earning living wages, they tend to keep those jobs because their needs and wants have continued to grow in proportion to their total income.  In other words, they become a bit financially addicted to the supplemental income those 2nd and 3rd jobs provide.

Airlines pay so little to start because the lifetime costs to employ that flight crew members can be very expensive when they enter the last half of their career.  Unions have negotiated contracts that are first and foremost dependent on date of hire seniority and flight crew turnover is therefore very small compared to other industries.   There is no incentive to look for another job with another airline unless your present employer goes through a significant contraction or bankruptcy and has to lay you off.  Even then a flight crew member may well have incentives to earn supplemental income and wait for a callback rather than seek employment with a new airline. 

But it is airline management that has created this problem because they’ve failed to redefine the job positions to fit a new economic reality.  They exacerbate their situation by treating their employees (and unions) as hostile entities to be fought at every turn rather than finding new, more efficient ways to employee people. 

Airline management needs to first realize that the lifetime earnings of flight crew are unlikely to go significantly down or up.  But there is a way to distribute that income during the flight crew career in a way that provides better job security, more productivity and in a way that provides the stability employees want. 

First, stop paying flight crews horribly low salaries in their early years.  These people are trained and qualified professionals and deserve to be paid a wage that is more commensurate with the job skills they must possess to perform in those roles.  In other words, it’s time to pay a living wage right from the beginning.  Pilot’s should earn from $40K to $50K to start, for instance,   And pilots should recognize that in return for a living wage right from the start, they have to offer more flexibility in work rules.  They need to be willing to work on a more daily basis but for fewer hours per day so that airlines can begin scheduling them in a more rational manner.

Second, airlines should pay salaries that are roughly equivalent to engineers.   A senior engineer (not manager but engineer) can earn as much as $100K / year at the zenith of their career but not $300K.  For that kind of wage, an engineer must enter management and exhibit performance that justifies that wage.   Pilots should have retirement plans that are also commensurate with engineers.  Not pensions that pay out by the years of service but, rather, modern investment plans such as 401k plans that allow them to manage their futures and have some opportunity for portability.  Pensions are tied to seniority.  401k retirement investment plans are tied to the person and smart choices. 

Why is such a system better for a pilot?  For one, it reduces their dependency on one airline.  They are far less tied to the fortunes of their employers and have more opportunity to leave a badly managed airline in favor of a better managed airline.  Let’s face it, who wouldn’t want to work for a better managed airline in favor or a badly managed one?  Making that possible industry wide would provide more opportunity for pilots to manage their stress and the demands their job makes on their personal lives. 

Unions should focus less on maximizing wages and more on improving the quality of life for their members.  Unions have the power to negotiate better work rules that alleviate horrific fatigue and stress and which provide a more humane way of living.   Happiness really doesn’t come from a top wage.  It comes from a living wage and having a real life.  Unions should seek more security for their members by negotiating flexible work rules that might allow flight crews to fly part time or job share with someone else.  That kind of flexibility would allow airlines to schedule flights more rationally and earn more profit  and be better positioned to offer wage increases more regularly rather than fight them at every contract negotiation. 

Airline management must recognize that the largest variable controlling their financial success is their flight crew.  Flight crew represents the largest part of their costs and the biggest factor in determining the service product they offer.   Treat them humanely and pay them a living wage and airlines can begin to experience more profit which will only make their investors happy. 

Unions have to recognize that the work rules in place now were only fitting for airline up to the late 1970’s.  It’s time for them to define how to best serve their members by identifying all the variables involved in a prosperous career rather than simply wages.   They should push for company financed training, better scheduling and work rules that permit both parties to profit from extra effort put forth serving a flight.

The go! Airlines pilots mentioned in yesterday’s post were fatigued because they were flying 8 leg segments for multiple days in a row.  Why?  Because under the present system of compensation and work rules, airlines must schedule pilots intensively in order to get the most for each dollar spent.  Airlines would actually be more flexible with hours worked if pilot’s earned a salary and had a negotiated minimum and maximum of hours to be worked each month.  

Under a new system such as I described above, pilots (and other flight crew) would no longer feel tied to working for an airline that punished them with a grueling schedule week after week.  They could seek better employment elsewhere without necessarily taking an enormous pay cut to do so.  Airlines would have more predictable labor costs, greater productivity and an incentive to take better care of their crew. 

It would also solve another looming problem for airlines.  A shortage of pilots.  Presently, the barriers to entering a career as a pilot are huge.  Airlines require new hires to obtain their minimum qualifications for hire at the employees expense and then pay them near poverty level salaries for the first several years of employment.  Fewer and fewer people can afford the $100K to $150K price tag to obtain those initial qualifications and certainly find the idea of earning a poverty wage after being hired unappealing. 

Under a new system of training the pilots and paying a living wage initially, airlines can attract new people to the jobs and ensure a steady, well trained and stable work force that wants to come to work and offer an efficient service product.  Potential pilots (and other flight crew) have better opportunities to enter the profession and a career that is more stable in the early years and entirely profitable throughout the lifetime of the employee.

Filed under: Airline News, Airline Service, Deregulation by ajax
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I want you to imagine waking up at 5:00am on a Monday morning and then being at work by 6:30am.  Once at work, you’ll be climbing into another car and driving 1 hour trips across a busy metropolitan area such as Chicago or Dallas or Los Angeles.  At each stop you’ll have about 5 to 10 minutes to go to the bathroom or to get something to drink or munch on through the day.  You do this from 7:30am until 7:30pm at night. 

Once finished, because you are far away from your home, you get a motel room and go someplace to eat like Chili’s.  You do get to sleep by 10pm (and mind you I just gave you only 2.5 hours to find a motel, get something to eat and then get yourself prepared to sleep which sounds like a lot but really isn’t) but you are in a strange, hard bed and your sleep is disturbed somewhat. 

You get up at 5:00am again, shower and pack and get a ride back to your duty station and climb back into a car to drive from 7:30am to 7:30pm again under the same conditions described above.  Once done, you do get to go home and sleep and arrive home at around 9pm.  You have to eat, get to sleep and, once more, get up at 5:00am to do this routine one more time all day.

How tired are you going to be on that third day of duty?  Almost anyone, physically fit or not, is going to be pretty exhausted.  He or she will be prone to make mistakes in their daily work and will find it difficult to stay awake at the wheel at certain points of the day.  That’s the life of a domestic airline pilot.  It’s really not any different for flight attendants, by the way.   Oh and before we go on, I want to point out that that pilot working those duty hours will actually only be paid for about 8 or 9 of the 12 hours they’ll be working on such a schedule. 

Now, some people might be tempted to say they could or did handle such a schedule and it wasn’t any big deal.  Really?  No big deal?  Well, I’ll agree that many of us have had to work such a fatiguing schedule (including myself during my courier driver days 20 years ago) but let’s not act like it isn’t a big deal.  It is.  Under such situations, most people will make bad mistakes, act irritable towards fellow workers or even customers, they’ll eat poorly and they’ll be prone to falling into micro-sleeps (nodding off for brief moments) during their work. 

Is that who you want flying you from Chicago to Cedar Rapids?  Well, you have probably a 2 in 3 chance that your pilot on such a flight will be just that fatigued.   Think about that for a few moments.

 Earlier in 2008, two pilots (an experienced captain and first officer) fell asleep while flying a go! Airlines (a subsidiary of Mesa Airlines) commuter flight in Hawaii.  The NTSB has released a final report on that incident which can be found HERE.  In short, both the captain and first officer had flown schedules not unsimilar to the scenario I described at the start of this post and both fell victim to fatigue.  While there was no harm suffered from their falling asleep, it is a disturbing development.   Mesa fired both pilots as a result of this incident which, in part, ultimately came to light from their self reporting the problem (as well as the problem being originally identified by ATC when they tried to clear them to their destination.)

It highlights a problem that is growing among pilots over the past 20 years.  Fatigue and work rules to mitigate it are a major subject of many, if not most, union contract negotiations.   Airlines are fighting new work rules as proposed by the FAA in court now.  Pilot unions are refusing to cooperate with work rule variances on many new ultra-long haul routes that have the potential to be major money makers for airlines.   Two years ago, American Airlines bid to fly a route from DFW airport to China and ultimately had to amend their proposal because the pilot’s union refused to give a work rule variance for the 18+ hour flight.  American Airlines lost the bid as a result. 

In Part 2, I’ll discuss the opportunities to make a real change in this problem that could benefit both pilots and airlines. 

Filed under: Airline News, Airline Service, Deregulation by ajax
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And now we come full circle back to the United States and Europe.  Both have highly developed, highly competitive airline markets.  Each has both LCC type carriers and legacy carriers (and Europe’s legacy carriers are the former national flag carriers in many respects.) 

This won’t be a rebuilding year.  To the contrary, both markets really need one large airline to be removed from the market.  In the case of the United States, I firmly think that should be United Airlines but in Europe that is a harder guess.  If I had to pick an large airline in Europe for the surprise of the year, it would be Lufthansa.  They are, by all accounts, a great airline but I smell trouble in that group.  First, they have been buying into airlines that have been unable to survive on their own.  That lack of survival, in many cases, isn’t because of poor management but just a lack of market share being available to them. 

Lufthansa has bought SWISS, for instance.  I’m not sure why and I’m not sure if they can tell us why.  They could have just as easily taken SWISS’ business  and left them in a heap.  Further, Lufthansa has a lot of Airbus A340 aircraft.  Those airplanes just don’t compete on high capacity, long haul routes anymore.  What’s more, they also have orders in for the Boeing 747-8, another large capacity, four engine aircraft.  Their competitors, Air France/KLM and British Airways, have seen the light in buying more and more Boeing 777 aircraft for their long haul, high capacity routes.  It costs less to operate them and they make more money as a consequence.  So, going out on a limb here, I say we’ll discover that Lufthansa is nearly insolvent some time by the end of 2009. 

Both markets in Europe and the US will continue to face challenges in costs (fuel and more particularly labor) and LCC competition will continue to press air fares downwards.  The real solution for large legacy carriers won’t be found this year.  Expect more losses (with some exceptions such as SWA and jetBlue) and more merger talk in general.

Here are a few more random predictions:

• United Airlines will ask Glenn Tilton to resign and hire an experienced airline executive.  One possibility will be Doug Steenland, most recently Northwest Airlines CEO and now Vice-Chairman of Delta.
• Southwest Airlines will, for the first time, examine adding another aircraft type to their fleet.  My guess is it will be the Embraer 170/190 series.
• Airbus will land a major order for aircraft from a traditional Boeing customer in the United States.  My bet is that Delta orders more Airbus A330 aircraft.
• China and Japan will drop their regional jet programs or, at the least, defer them for up to 5 years.
• Bombardier will announce a major order (more than 20 aircraft) for the Q400 Turbo-Prop from a US Airline.
• If fuel prices remain steady, Airtran will seek to form a small mid-western hub.
• Last but not least, one LCC type carrier such as jetBlue or Virgin America will attempt to fly to DFW Airport (wishful thinking on my part.)

Happy New Year Everyone.

Filed under: Airline Fleets, Airline Service, Death Watch by ajax
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In keeping with the theme set with yesterday’s post, let’s continue on with some predictions.

The MIddle East

Emirates, Qatar and Etihad:  All airlines that have aggressive growth plans (both in fleet size and the capacity of their aircraft) that don’t seem to be based in reality.  While each of those airlines has successfully developed themselves into eastern hemisphere global airlines, what’s next?  There are few opportunities to grow to the United States or the Far East (both range and regional prejudices apply there) and that leaves Europe (somewhat saturated already) and Africa (not a real place to grow due to low demand).   But they have to fill an amazing number of widebody aircraft they’ve ordered.  We won’t see a merger or a bankruptcy here but I do believe we’ll see these airlines start to reconsider the orders they have on the books and they will slow their growth by deferring these orders.

China

China’s airlines have been on a buying binge as well but, again, with a weakening domestic economy as well as a weakening international economy, they have no place to go.  Like the Middle East contenders, they are likely going to start deferring orders as well. 

The Far East

Airlines based in Taiwan, Korea, Japan, Thailand, Indonesia and Singapore will all maintain their status quo more or less.  There is some possibility that some orders may be deferred but I will bet that some airlines will actually make new orders for new aircraft although not for growth but for greater operating efficiency.

Australia

QANTAS and its affiliate Jetstar have made major investments in new aircraft and major plans in new market development.  However, development of new routes in the Far East and Southeast Asia will slow or even contract as reduced demand continues.  What’s worse is the new competition they’ll experience on their routes to both Europe and the United States.  I expect some order deferrals (probably for the 787) and growth plans will be slowed or deferred altogether as they retrench in the face of competition.

Virgin Blue / V Australia will be challenged in several ways.   They’ll likely continue to do well in the Australian domestic market but now they face competition in the Australia / United States market not only from QANTAS, Air New Zealand and United Airlines but also from Delta.  There will be too many airlines chasing too few seats in this market and the two most vulnerable airlines, in my opinion, are United and V Australia.  United because its service product pales in comparison to any of the other airlines and V Australia because their business model is based more on economy travel than business and first class.

South America

We’ll not see any real growth (with one exception) and we’ll likely not see any real failures here either.  The governments of South American countries tend to jump in and save their national airlines when doom is near. 

Aerolineas Argentinas should be Argentina’s Alitalia but I suspect a takeover of this airline from Grupo Marsans (a Spanish conglomerate) by the Argentine government will happen sometime this year.   Aerlineas Argentinas will continue to muddle through with a incoherent fleet of Airbus aircraft funded by the government and Argentina will see no growth and possibly some severe contraction in their markets because of a failed air traffic system and a very weak economy.

Brazil will continue to be stable more or less but existing Brazilian airlines will have to now contend with David Neeleman’s new airline, Azul.  Neeleman (who holds dual citizenship in Brazil and the United States) understands Brazil and will be offering a highly competitive, high service airline founded with Embraer E-190 aircraft that are very well suited to the Brazilian market.  It will be jetBlue all over again in Brazil for the next 5 years.  However, I expect this new Neeleman airline will one day become an international airline flying both in South America as well as to Europe and the United States.  I’ll go ahead and predict this development for 2014 and they will use Airbus equipment.

Africa

Not much to say here.  African airlines come and go with stunning frequency and usually without much notice.  Delta will continue to develop routes to Africa but this will be aimed towards the very few, relatively stable, major cities Africa has.  South African Airways will find someway to continue to exist but I expect a switch from Airbus aircraft in their long haul services (A340 aircraft currently) to a Boeing fleet using the 777-200LR and 777-300ER and GE engines.  This switch alone could make them profitable.   My prediction is that we’ll hear about a Request For Information (RFI) or a Request For Proposal (RFP) by the end of the year but more likely at this year’s summer airshow in Paris.  It will be a small order, at first, and quite possibly contingent upon Boeing finding new owners for the A340 aircraft they already own.

India

With their new, highly competitive market, India has become a rather intense version of the US market.   With a weakening economy here as well, I look for consolidation and liquidation as the answer.  Look for Kingfisher to merge with someone else such as Jet Airways with Jet Airways being the name retained by the end of 2009.  Another possibility will be forced mergers and/or liquidations by the Indian government particularly if the current party loses power.  The rather laissez faire experiment in airline deregulation in India has left a bad taste in many people’s mouths, most particularly in the opposition parties not currently in power.  India’s current Prime Minister Singh holds degrees in economics and is widely credited with economic reforms in India but the fractured and unsuccessful airline industry is something for the opposition to make a point of.

Stay Tuned for Part III

Filed under: Airline Fleets, Airline Service, Deregulation by ajax
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It’s always fun to make predictions about the coming year, right?  Of course, I may well review my predictions in December of 2009 and decide against doing it again.

Boeing 787:

This aircraft will finally experience its first flight and I believe it will occur on or about its new scheduled time (early April).  For Boeing, credibility is now at stake and they really do have to begin meeting deadlines.  Financial analysts are becoming too skeptical of the company for comfort and airlines want their airliners.  Boeing does have a reputation for being able to pull itself together and get something done in a crisis and that should serve them here. 

I also believe we’ll see both static airframes begin their tests and new build airframes begin to flow from Boeing in about 6 months.  My prediction?  The 787 will prove to be a very capable aircraft and will meet or exceed its performance promises.

Airbus A380:

Airbus met its revised schedule of delivering 12 A380 airliners in 2008 . . . barely.  Originally it was scheduled to deliver 13 in 2008 and 25 in 2009.  Now Airbus says it will deliver 21 in 2009.  However, it is becoming clear that Airbus is now quickly learning how to build these aircraft and turn them out.  I predict they’ll exceed their 21 goal in 2009 by at least one aircraft.

Boeing and Airbus:

Both aircraft makers will begin to speak about the future of short to medium haul aircraft again.  With milestones for the 787 and A380 being met, I suspect they’ll become more comfortable in speaking of the future of their aircraft lines.  Look for discussions on both the 737 and A320 aircraft families and what interim technologies might be employed to improve their performance.  I suspect we’ll hear about both weight saving materials being adopted as well as the potential of new incremental improvements on existing engines.  Particularly the CFM-56 engines used by both makers. 

US Airlines:

First, let’s take a look at my deathwatch candidates.  The sudden and precipitous drop of oil prices allowed each of them to take a breather.  Midwest Airlines, however, continues to speak little, fly only a little and its investors have got to be running out of patience.  I still believe that they’ll ultimately go away.  How they do it is the question.  Rather than bankruptcy, I believe it will either be a sale or as a subsidiary airline of Delta/Northwest with the latter being most unlikely.  Who will they be sold to?  Good question.   Perhaps Airtran will get what they wished for and develop indigestion.

Frontier continues to muddle along but faces rather intense labor strife still.  I think their situation improved not only because oil prices dropped but because United continues to offer some of the worst product in the industry and because Southwest slowed its growth and took a breather.  While I firmly believe United will do nothing to improve its product, I do think Southwest will return to its goal of killing Frontier as a Denver competitor some time in the late spring.   I suspect Frontier will emerge from bankruptcy this year but I also firmly expect them to be out of business or acquired by December of 2009.  Who buys them?  I’ll bet on Jet Blue.  The aircraft fleets are compatible and Jet Blue has to start building a hub somewhere else in order to continue to experience strong growth.  Frontier gives them that chance.  The long shot?  American Airlines.  Why?  Because Frontier is working with AMR’s Sabre Reservations system now. 

United Airlines, my favorite airline to hate.  The Cranky Flier loves to rag on Alitalia and I love to rag on United.  United has lost a tremendous amount of value over the last year and continues to have some of the highest hourly costs of any US airline.   They’ve done nothing to improve labor relations, their service product or their fleet efficiency.  Glenn Tilton is hated by airline pilots but I predict he is goint to be hated by investors before the end of summer.   What happens?  I’m really not sure.  The best thing that could happen is for them to liquidate.  However, I think some airline will see some value there and attempt to buy United and make use of its assets.  Who?  The logical choice is Continental but I believe they’ll hold on to their independent streak.  So my next guess is a US Air / United V 2.0 merger will come about.  Could it work?  I doubt it but Doug Parker (CEO of US Air) wants another merger and United offers hubs he doesn’t have and some aircraft fleet compatibility.   I’ll go “all in” and bet that we see a US Air / United Airlines merger announcement by December of 2009.

Moving on from the death watch, let’s look at other US Airlines for a few minutes.

American Airlines will maintain its status quo but will begin to feel pressure to conclude some union contract negotiations this year as financial analysts begin to view their lack of progress less and less favorably.  CEO Gerard Arpey will begin to feel the heat but barring a large mistake on his part, will retain his position as CEO.  One possibility, however, will be bringing on a potential successor as President of the airline.

Southwest Airlines will also mostly maintain its status quo but I will predict that by late summer its new CEO Gary Kelly will be under fire from both employees and investors for his shotgun approach to growth.  It is beginning to look like it is unplanned and what people most value in Southwest is its ability to form and execute a coherent plan.   There will be no mergers, no real growth and a sinking stock price by December but I think Mr. Kelly will hold onto his position until 2010 barring a major unforeseen development. 

Continental, the best kept secret.  Continental will maintain its status quo with, perhaps, very moderate growth in the international sector while it waits to see what happens domestically.  They’ll enter the Star Alliance (exiting from SkyTeam) but discover it offers little value to them as well.   I don’t think they’ll seek to merge with anyone in the next year but if they did, I’d pick them for going after someone like Alaska Airlines rather than United or US Air. 

Stay tuned for Part II.

Filed under: Airline Fleets, Airline Service, Airports, Death Watch by ajax
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USA Today’s Today in the Sky Blog is reporting that Australian news outlets are now writing about an imminent announcement that Delta will begin flying from Los Angeles to destinations in Australia.  Such destinations likely begin with Sydney and add Melbourne and/or Brisbane. 

If true, this will mean that Delta will be the first airline to fly regular scheduled routes to all 6 inhabited continents in the world since Pan American Airlines.  More important, it means competition for QANTAS, V Australia and United Airlines.  

Currently, QANTAS is by far the main leader in that market flying Boeing 747-400 and Airbus A-380 aircraft.  It has been said that about 1/5 of their net profit comes from such routes.  V Australia, an international arm of Australia’s Virgin Blue, was originally scheduled to begin flying Boeing 777-300ER’s in December but had to slip the start to February 2009 due to Boeing’s labor strike this past fall.  United Airlines flies the same routes regularly with 747-400 aircraft that by many accounts are worn and tired and certainly not offering the service options the other two do.

It seems that Delta, if it does fly the route, is planning to use 777-200LR aircraft that are very capable of flying the distances as well as carrying a full load of cargo while doing it.  Ironically, the 777 was originally designed with QANTAS in mind although they never ordered any of the aircraft.  Indeed, with optional fuel tanks and a light cargo load, it is said that the 777-200LR might be capable of flying from Atlanta to Sydney regularly although it is highly unlikely that this will happen.  A more likely choice might be a late build 787-800 which Delta will be receiving as a function of purchasing Northwest Airlines.

This kind of competition is not want any legacy carriers on this route want.  Delta is operating with relatively low labor costs, new aircraft that are the most efficient available for long haul routes and they have a new network (from their merger with Northwest Airlines) that will feed the aircraft to capacity loads.    If Delta does launch this service, look for United Airlines to withdraw from the market.  They are the airline that lacks both the service product and fresh aircraft to compete.  

Filed under: Airline News, Airline Service by ajax
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The Today in the Sky Blog is reporting that Frontier has rolled out a new pricing model on their website today.   The airline is an all coach service but now they are differentiating that service with the designations “Economy” (primarily a Southwest Airlines emulation but you pay for your luggage), Classic ( a reserved seat and DirecTV and no luggage fees) and Classic Plus (Classic with a snack).  There are other benefits and restrictions with each class.

While I do believe that product differentiation is the way to go for airlines in the future, I’m not sure this is differentiated enough to offer a customer a choice.  Yes, service and amenities grow as you pay more and that’s good but look at the Today in the Sky’s story and examine the pricing.  I’m not sure you are getting enough differentiation for the price differences charged. 

A coach passenger is buying on price, primarily and to make the product differentiated enough to entice the passenger into a higher price requires something substantive.  Is it DirecTV and a snack?  I suspect not.  I suspect that DirecTV is worth about $10 to the passenger and a snack is worth maybe $8.00.   Free checked baggage?  Well, for Frontier that might be a mistake since Southwest, their major competitor, already offers free checked baggage.  They don’t offer more legroom but their other major competitor, United Airlines, does and for a price differentiation that really might be a better deal.

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If Southwest gains those ATA slots and they do fly them all in and out of La Guardia, this does send an interesting message to those employees who are presently upset over the announcements of codeshares with both WestJet and Volaris.

You see, the big argument made for those codeshares was that it allowed Southwest to concentrate on its business model but enjoy the expanded business that those two airlines offered to Canada and Mexico.   It was an argument about focus and direction with the Southwest business model.  The employees, some of them at least and most important the pilots, have argued that with near zero growth planned for Southwest, these are routes (the international routes) that Southwest could fly with their own people and metal.

It’s an argument that I can see some truth in.   The flying remains a natural for Southwest.  After all, flying to either Canada or Mexico is not flying overseas.  Mostly it is flying to cities across a border in a manner that is quite consistent with the existing model.  While neither country would necessarily permit Southwest to build a network inside their country, there are plenty of provisions already in existence to fly to destinations in both countries. 

Southwest is perfectly capable of operating a website or websites that serve those countries as well.  Labor costs can’t be an issue because, frankly, they could literally outsource those functions to their two new codeshare partners.  WestJet knows how to turnaround a 737 and while Volaris owns A320 aircraft, they also know how to turnaround an airplane. 

Flying to either country does not require ETOPS aircraft and it doesn’t even necessarily mean overnighting aircraft and/or flight crew in either country.  Flights to either country can be “turns” that see no aircraft left overnight.   However, even if you did want to overnight staff in those countries, it isn’t logistically difficult.  Hotels are in abundance and all your staff need are passports.  Language really isn’t a problem either.  Oddly enough, Southwest flight crew speak English, a perfectly acceptable language for Canada, and I’ll bet that Southwest has plenty of crew capable of speaking Spanish already. 

Now La Guardia Airport does present some challenges that are contrary to the Southwest model.  It is a congested, expensive, weather affected airport with high labor costs and high costs to overnight aircraft.  I would wager that it is quite possibly MORE difficult to operate into and out of La Guardia than, say, Vancouver or Toronto or Monterrey or Gaudalajara.  

It also puts Southwest into one of the most competitive markets in the United States and while it does give them access to the business traveler, it does so in a major market where business travelers often expect and even demand creature comforts that Southwest doesn’t offer.   If you have the chance to fly 7 round trips to NYC, what cities do you connect NYC to?  This is mere speculation but I would guess that flights to Chicago’s Midway Airport are a given.  Possibly a flight to either Baltimore or Orlando or Houston or even Philadelphia.   I would actually bet heavily on Chicago, Baltimore, Orlando and Houston.  But even if it was Chicago only, you have, at best, 7 frequencies.  On that route, you would probably need a minimum of 7 frequencies. 

There is something that is unrevealed in this plan.  Certainly Southwest could boost frequencies by obtaining more slots in the future.  Maybe.  But that is historically difficult in a slot controlled airport and a market that rarely sees significant contraction in flight quantities.  It is even more difficult when you are entering a market that major legacy airlines will defend to the death.  No one has any incentive to cooperate with Southwest in making gate space or other facilities available. 

Filed under: Airline News, Airline Service, Airports by ajax
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Southwest Airlines has just announced a new codeshare with Mexican airline Volaris (partially owned by billionaire Carlos Slim.)  Like Southwest’s codeshare agreement with WestJet, this allows Southwest to gain access to international markets.  With these agreements with WestJet and Volaris, Southwest gets access to all of North America and gets to work with two airlines that have similar (not the same) operating environments. 

I’m quite certain that these new codeshare routes will, in fact, boost Southwest’s revenues (as well as the revenues of these other participants) and I’m sure both relationships will prove to be rewarding in many ways other than just money.  If one airline could operate throughout North America, it really would look very similar to this codeshare arrangement.  

These two new arrangements for Southwest found me pondering how it could be done better than just a simple codeshare.  One way to further integrate without attempting a merger (something all three airline’s governments are very unlikely to allow) would be operating an interchange. 

An interchange was a fairly common tool in previous decades within the United States.  The idea is that two (or more) airlines operate the same equipment on a route that is shared.  One of the most famous interchanges was when Braniff operated the Concorde from Dallas to Washington D.C. where an Air France or British Airways crew would take over and fly the aircraft across the Atlantic to either London or Paris.  At the time, each time the Concorde arrived in Washington, the aircraft would be “sold” to Braniff who would then hang new ownership papers in the cabin and change the registration temporarily for operation in the United States.  Obviously that kind of inconvenience would not be tolerated today between airlines but there really isn’t a reason for it either.

Wouldn’t it be interesting to see Southwest operate such an interchange with each of their partners.  A Southwest aircraft could be used to fly an international interchange between Canada, Mexico and the United States with only crews changing between focus cities for each airline.   For instance, imagine a B737 flown from Toronto to Chicago by a WestJet crew where a Southwest Airlines crew would take over and fly it from Chicago to Houston.  In Houston, a Volaris crew could take over and fly that same aircraft to Mexico City (Toluca) and then turn it around for a return trip.  

The advantage is that customers never have to leave the aircraft and it would therefore permit a more seemless network for transitioning from one country to another.  The only problem with that scenario is that Volaris has an Airbus A320/A319 fleet and while WestJet flies the 737, they are partial to the 737-800 type instead of the 737-700 aircraft preferred by Southwest.   Nonetheless, it does cause one to think about the possibilities that might exist between the three airlines. 

It also points to other opportunities for other airlines.  Codeshares are good and convenient for airlines but they still require a passenger to travel from one hub to another hub and when it comes to international connections, it does force the passenger to often de-plane, clear customs and transition to another part of an airport to continue on to a destination.  Sometimes that isn’t all that painful but more frequently it is a great inconvenience to the passenger and a barrier that many avoid.

With airline alliances relatively stable now, many could choose to adopt similar (if not the same) types of aircraft and offer trans-global interchanges for both companies and their passengers.  It also would allow them to further standardize their service and even possibly take advantage of fleet flexibility between partners.  For instance, what if QANTAS and American Airlines shared a portion of their 787 fleet and allowed it to “flex” between North America and Australia according to seasonal demands?

I suspect there are many more opportunities to be had from both codeshares and, possibly, a new version of interchanges between airlines. 

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The Milwaukee Business Journal is reporting a quote from a pilot at Midwest Airlines that the Boeing 717 Fleet may be completely phased out in 2009.  The speculation is that all of the existing routes will be flown using Embaer 170 aircraft leased from Republic Airlines. 

On the surface, this seems bad.  In reality, I see a gleam of hope for Midwest.  The Embraer 170 seats almost as many people as the 717 but cost much less to operate and its pilots are paid less as well.   It’s actually a comfortable aircraft to fly and it would quite possibly allow Midwest to fly profitably the remaining routes it has. 

Fans of Midwest Airlines’ Signature Service will no doubt be upset about losing access to that hallmark service but the reality is that it isn’t profitable and was probably retained way too long. 

I continue to wonder what Midwest Airlines wants to be in the future.  A small regional airline with no real connections to any other airline?  That really doesn’t strike me as a recipe for financial success.  They do have connections to Northwest Airlines (Delta) but I firmly do not see them becoming a “feeder” or “connection” airline for them.  Delta / Northwest simply have too many successful regional airlines already under their umbrella and, in fact, Ed Bastian, President of Delta, has already said that Delta expects to pare down the number of regional airlines serving Delta.

While I do think Midwest Airlines can make some money flying the E-170, I still don’t think they have a viable long term strategy for success.  They stay on the death watch for now.

Filed under: Airline News, Airline Service, Death Watch by ajax
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