For long time readers, it will come as a surprise that I flew American Airlines anywhere.  Relax, this was a trip made on award points. I confess that I did regard this as an opportunity to re-check my thoughts regarding travel on American Airlines.

I scheduled myself to fly from DFW (Dallas / Fort Worth) to EWR (Newark, NJ) for my brother’s wedding.  When checking the schedule, I noticed right off that, once again, the flights available for this route all included what I like to refer to as the Ubiquitous MD-80.  Mostly MD-83 aircraft.

I despise the American Airlines MD-80 fleet.  They are old, very old, compared to virtually any other legacy airline fleet in the United States.  They are not well kept aircraft and lack any cabin updates that would be described as meaningful.  Their seats are extremely dated and you have to love (not) a seat that you can sit on and actually feel the support structure through the cushion.

It’s true that I’ve always liked the 3-2 seating configuration in this aircraft because only 1/5 of all seats are middle seats instead of 1/3.  That said, I readily acknowledge that the McDonnell Douglas DC-9 fuselage is not the most economical around and should have drifted away to retirement about 20 years ago.  China’s COMAC who is building the ARJ21 should take note.

There is a reason why the AA MD-80 fleet is seeing more and more mid-air engine shutdowns and other problems that are cancelling and grounding flights.  It isn’t well maintained.  Yes, the MD-80 is built like a brick outhouse but if it isn’t maintained in the manner of, say, Delta, it starts to deteriorate badly.

On my outbound trip, I watched another AA MD-83 lineup and do a full power take-off while we waited on the ramp for our turn.  This aircraft was a former TWA aircraft as it had the “TW” suffix to its registration.  It made it about 1/4 of the way down the runway, clearly suffered a problem as it appeared that thrust on the aircraft wasn’t equal and suddenly the aircraft did a rejected take-off and quite quickly took a high speed exit from the runway.

If AA pilots are feeling frustrated by this aircraft, I feel your pain.

So, let’s kick off the outbound segment of this trip.

American Airlines Flight 1554 (DFW – EWR)
Scheduled Departure Time:  11:40am  Actual Departure Time:  12:12pm
Scheduled Arrival Time:  03:49pm  Actual Arrival Time:  03:45pm

Arrival at DFW airport was smooth and I almost always use The Parking Spot on the north side of the airport because A) it’s far less expensive, B) I can get into the terminals as fast or faster than DFW long term parking and C) I can remember the name of the place.

I made it to the terminal and checked both my bags and then found myself killing some time because I actually arrived faster than I even planned thanks to a quick driver at the Parking Spot.  The terminal was fairly crowded and I’ve come to despise the bottlenecks at DFW known as the TSA.

DFW’s design isn’t TSA friendly and I get that it is expensive to run many entry points to DFW but, hey, that’s the design of the airport and better to accommodate it or redesign it.  In AA’s case, they just live with it.

I entered the line with AA Priority Access privileges and despite bypassing roughly 2/3’s of the crowd, it still took me approximately 15 minutes to pass through TSA.  I find it disappointing that after 11 years we still are removing shoes, belts, jackets and other items of clothing to get through security.  Even more disappointing with the new(ish) scanners in lieu of being sexually assaulted.  Yes, I used the scanner.  The backscatter scanners are quick(ish) but really don’t save anyone any time since we’re still removing our clothing, our jewelry, our wallets and our dignity.

The Dance of the Privileged Passengers aka boarding the aircraft was somewhat delayed and when begun, it was slow due to gate agents more interested in frantically locating standby passengers than, you know, filling the aircraft with those who were there.

First hint for AA:  Manage your standby passengers better and when you have more than 30 people waiting to go standby, make the call for the passenger once, maybe twice and move on to the next.  Don’t spend 10 minutes making repetitive announcements requesting that Johnny Doe please come to the counter for his standby ticket.  If Johnny isn’t interested enough in getting on the flight to be standing at the ready to get his ticket, move on to someone who is.

Despite Priority Access for this flight, I boarded after roughly 1/3 of the flight had already boarded.  It’s shocking how many people boarded for first class.  I counted 21 people going through as first class passengers.   The problem with that is that there are only 16 first class seats on that aircraft.  Right, so the gate agents weren’t really paying attention to whether or not it was someone’s turn.  I suspect this was true as well for Executive Platinum and Gold passengers given the number of those who went through.

Next hint for AA:  Don’t do this Dance of the Privileged Passengers unless you are truly willing to enforce who gets on by status.  Otherwise, it becomes a farce in which the dishonest are awarded with early boarding.  Although, one does question the sanity of a person who wants onto an AA flight early.

Passengers boarded in a disorganized and frantic fashion while literally claiming overhead bin space for their overstuffed carry-on bag as much as 5 or 6 rows away from arriving at their seat.  I boarded with a small briefcase and jacket.  Many seemed to be carrying considerably more than intended by current rules.  For instance, I’m pretty sure that a large purse, backpack and carry-on rollaboard was a bit over the line.

The flight finally departed the gate, struggled to the runway 100% full and did an exceptionally high powered takeoff to the north that took a fair bit of runway nonetheless.

We climbed fairly quickly, achieved cruise altitude pretty quickly and after the Chatty Captain finished his lengthy description of his flight plan, the flight attendants went to work doing their beverage service.

This beverage service was amusing to watch.  I was in seat 12A which was the 6th row back in economy. With 2 flight attendants working this service, you would expect it to move along reasonably well paced despite the full load of passengers.

You’d be wrong.  I timed it.  It took 38 minutes to reach me and offer me a beverage.  I requested and got orange juice and asked if there was food available.  There was in the form of either a roast beef or chicken sandwich.  I was hungry and asked for the roast beef sandwich while trying to offer my credit card.

I’m still waiting for that sandwich.  Folks across the aisle from me aren’t waiting for theirs.  Theirs came roughly 5 minutes after their request.   Another hint for American:  If you want to sell things on board and earn extra revenue, then deliver what’s been requested.  Furthermore, don’t make it hard to get later.   Seriously, you have to act like you want to sell the stuff to get people to buy it.

The aircraft arrived in New Jersey quickly taking just 2 hours, 33 minutes as a result of some very fast tailwinds that day.  Somehow my butt was still quite sore after what is a fairly short trip time.  I believe it was the metal structure it was riding on due to very worn cushion material.  I’m not one of those guys who minds thin cushions.  I don’t.  Airtran had fairly thin cushioning but it was cushioning.

Summary:

• Boarding experience:  B-
• Flight Crew experience:  C
• Onboard Seating experience:  D (Because there is no reason for this discomfort on a airliner today)

• Departure / Arrival experience:  A (but you got lucky with a high speed jetstream pushing the aircraft AA.)

Tomorrow, the return trip.

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I’m going to New Jersey. On yet another ubiquitous MD-80 that looks as if it was rode hard and put up wet.

10 years ago.

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Leeham News has a short blog entry referencing this article about Southwest and its Airtran merger and integration.  It is difficult to figure out where to begin in trashing this story.  But let’s take a shot at it:

1. Southwest Airlines will remain a single aircraft type using the 737 in the various variants it has today and in which it plans to have in the 737MAX.  The 717 has been offloaded to Delta and will be gone in a fairly short period of time.
2. Airtran is not based around the 717 solely.  It, too, uses the 737-700 which is also a significant part of the Airtran fleet.
3. Airtran is a hub and spoke operation but it’s major hub is Atlanta only with significant focus cities (a la SWA) elsewhere.
4. Airtran does not operate just primarily into major hub airports.  It has had a significant number of flights into cities that are smaller than the typical SWA destination that it made profitable using the 717.
5. As SWA takes over Airtran routes, it’s adapting them to SWA’s point to point model.
6. SWA has huge focus cities which kind of resemble hubs.
7. Atlanta was the only airport that SWA could fly into in that area.  There was no smaller, inner city airport.
8. SWA has been operating into and out of major hub airports already.  Notice its operations, for instance, into La Guardia and Newark airports.  It’s operated out of LAX for a long, long time.  Phoenix as well.  Same for Denver.  It’s figured out the “how to operate at a major airport” problem for a long time.
9. Airtran does present Latin American opportunities but also Caribbean opportunities and SWA has already announced plans for Puerto Rico as a first step.
10. It completely misses the point that Airtran, as a subsidiary operating entity gives SWA the chance to accelerate international flights via the Airtran reservations system.

I’m sure people see my point.  This isn’t SWA’s first rodeo and for sure it knows how to deal with a variety of destinations and airports.  What it completely ignores is SWA’s already high and rising labor costs which is an area of concern.  The creators of that “report” would know this if, you know, they had listened to Gary Kelly’s concerns expressed at a variety of quarterly earnings calls.

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With the AA Pilot Contract ratified by the Allied Pilots Association, speculation as to what’s next has gone into full overdrive.  Some think American Airlines will make a case for its stand-alone bankruptcy exit plan and some think this clears the last hurdle for a merger with US Airways.

American Airlines has asked that the court set a hearing to approve the contract more quickly than the customary 21 days.  I suspect that request is more about checking the box quickly than anything.  With this contract settled, American Airlines is done with the big challenges of reorganization in its mind.

Is it done?  Frankly, we’ve seen them address costs in a very aggressive manner and not just in the area of labor.  AA’s fleet has been slashed of aircraft and leases on other aircraft have been renegotiated.  Costs have been addressed more than adequately.

But where is the revenue plan?  It remains the cornerstone market strategy of old.  Routes haven’t been radically altered and hubs haven’t been re-tooled and new markets haven’t been explored.  Bankruptcy reorganization gives AA time to work on this area too and it appears there has been no real interest in putting in the same effort here as what has been done to costs.

My concern is that American Airlines has achieved another 10 year holding action.  Time will tell but this reorganization feels like the company has puts its hopes into the cost cutting basket without truly addressing the need to grow revenue and, frankly, repair relations with employees.

I sit amazed that the company hasn’t acknowledged its challenges going forward with respect to employee morale.  Were I an analyst, I would be worried about this companies exit from bankruptcy not because the employees would intentionally sink the ship but because a service company such as an airline is extremely dependent upon its employees providing a positive experience.

American Airlines seems to think it’s still the dominant player in all its markets and that people don’t have choice.  That’s just not true.  Los Angeles and New York City are extremely competitive marketplaces and areas where other airlines have been much more aggressive than AA to date.  Chicago is a very, very competitive market with United Airlines and Southwest Airlines eating at American’s constituency every day.  Miami / Fort Lauderdale has a tremendous amount of LCC competition and airlines are flying to South America from other gateway cities and competing just fine with AA.  Dallas / Fort Worth has increasing competition at DFW airport and the prospect of a fairly unlimited Southwest Airlines in 2014.

The differentiating difference for an airline over the next 3 ot 5 years in the SuperLegacy category is going to be service and its those employees who have been roughed up badly who will be delivering it.  What’s being done to sooth those wounds and what’s being done to incentivize a positive experience for passenger?  A plan for this would be a good thing.

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American Airlines enjoyed a 58% on-time rate in September.  The sound and fury of very angry pilots and an operation not coping well.  To put things in perspective, United Airlines experienced an 82% on time rate and Delta had a 89.7% on time rate.

US Airways, AA’s suitor for a merger, managed an 87% on time rate and was the 2nd best CONUS legacy airline behind Delta.  Southwest Airlines was right behind US Airways at 86.5% and was tied with another airline for that position:

American Eagle.

Yes, American Eagle managed an 87.5% on-time rate.  A regional jet operation that traditionally doesn’t do as well as its mainline partner ran absolutely great ops for September.

I have a suggestion for US Airways if they manage to strike a deal with AA:  Get Dan Garton back from American Eagle quick.  Garton is one of those rare AA executives who manages to outperform and yet never quite get the respect for his achievements.  He’s done very well at American Eagle and did very well at AA before getting shoved aside in favor of Tom Horton as heir apparent.  I like Garton and I like the way he communicates to American Eagle employees.

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No, this isn’t an announcement of Southwest Airlines serving its first international destination.  Puerto Rico, you see, is a United States Territory.  Airtran already serves Puerto Rico (and several international destinations) and this is an announcement of Southwest replacing Airtran service with Puerto Rico with Southwest service.

That said, it should provide some real experience to Southwest in serving an off-shore destination and help them identify weaknesses in preparation for serving true international destinations.  One wonders if Southwest taking advantage of the human capital it has in Airtran for doing international services.

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Virgin America has a net loss of $671 million.  It’s a great airline and certainly the one that everyone said they wanted but . . . it ain’t making money.

And it should be by now.  Virgin America never quite seems to close the revenue gap despite promises that that will happen.  Yes, they have succeeded on many routes and, yes, they are popular with the business traveler who has tried them but . . .

Virgin America doesn’t offer the business traveler what he wants:  Frequent flier miles that go someplace they want to go.

The true business flyer already can access great service and comfortable seats.  They get upgraded on the legacy airlines and sniff at the lowly economy fliers who trudge past them.  They don’t *need* more service.  It’s a nice to have when it comes to Virgin America for these travelers but not a must have.

What the legacy airlines have that Virgin doesn’t is frequent flier miles that give these people the chance to fly their family to great destinations for vacation.  Virgin America doesn’t.  Unless you want to go from San Francisco to New York City.  Not many do.

As much as I want to support Virgin America as a contender, there comes a time when such an airline needs to go away.  I believe that time might be arriving since they have no (announced) plan to improve revenues and profits.  Their advantage is evaporating quickly against legacy airlines and despite their low costs, they can’t even beat Alaska Airlines.

Who should buy them?  You know, a great businessman such as David Neeleman could put JetBlue, Virgin America and Frontier together and create a national airline.  I’m just pointing out the opportunities here since each airline uses the same aircraft type (Virgin and Frontier use the CFM powered version while JetBlue uses the IAE powered version) and which would suddenly have focus cities that cover the East Coast, West Coast and even part of the Midwest.

It’s not a foolish idea.  There are synergies there that would serve all three airlines.  Each has some valuable slots at slot controlled airports. And a 3 way combination isn’t entirely unprecedented in this industry either.

Use JetBlue’s reservations and IT infrastructure.  Use Virgin America’s A320 orders for expansion and use Frontier’s assets to build a real Midwest operation.

But it would take a very visionary airline industry leader.  Someone who has started successful airlines and who is brave enough to take advantage of opportunities and who knows how to compete with major legacy airlines.  Someone who, you know, is driven and leads well.  A guy who speaks both English and Portuguese.

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Gary Shteyngart wrote a story for the New York Times titled “A Trans-Atlantic Trip Turns Kafkaeque” describing a 30 hour transit from Paris to New York City that involved maintenance problems, returning to an airport (London), an overnight stay and more trouble getting home.

Any one trip can turn into a horror.  It’s happened to the best of airlines.  There are some telling points to this story, however.  First, maintenance problems (again) start this off with delays that for American, shouldn’t be so difficult to deal with for an airline with substantial operations in both Paris and London.  These problems aren’t happening in Omaha, Nebraska.

Given that they are happening major destination points for American and given that the bulk of the horror took place in London, a place where AA has a major operation and support from partner British Airways, it just shouldn’t happen.  Finding a usable 767 shouldn’t have necessarily been the hardest thing to do.  Nor finding a crew for that 767.  In addition, even if a 767 couldn’t be found for the flight, it should have and could have been possible to take care of a great many of those passengers on flights with AA or BA.

It’s an example of an airline not trying.  Trying counts for a lot.  You’ll never keep all people happy but you can substantially reduce the impact of such events by just trying.   There are 13 flights daily between JFK and London Heathrow if one considers both AA and BA.   There are another 6 flights between London and Chicago (BA and AA again).   there are 4 between London and Dallas and 4 between London and Miami and another 4 between London and Los Angeles.  that’s a total of 31 flights from London to the “cornerstone” cities of American Airlines if one considers both American Airlines and its codeshare partner British Airways.

If every seat on that 767-300 was full (and I virtually guarantee they weren’t), there would be only 225 passengers to take care of.  30 business class and the remainder economy class.  The math here isn’t hard.  If you can’t deal with 225 passengers at your major European focus city, you have a problem that goes far beyond maintenance.

I’ll grant that accommodating international passengers in a foreign city is a touch more challenging than a domestic flight.  Here is what you do:

1. Dispatch multiple agents including a British Airways representative to the gate to meet the flight.  Make sure they have communications with them such as cellular phones that will allow them to communicate with company operations personnel.
2. Get the passengers through customs in a quick and organized manner and collect them on the other side into small groups of about 30 passengers.
3. Ask your reservations center(s) to allocate 6 to 8 agents with dedicated phone connections to the gate agents for fast re-booking.
4. Determine the final destinations of the passengers and start routing them to alternate hub cities where possible.
5. For the very few you cannot take care of, refer them to a final agent who should make accommodations available at a nearby hotel (preferably located on or near the airport) and book them on the first flights out that permit connections to their final destinations.

Flights cancel.  It happens.  Having a contingency plan and some staff on hand to deal with this problem is not hard.  That aircraft turned around 1 to 2 hours away from London.  That’s enough time to call in a few extra staff to help.  It really is.  Again, this wasn’t happening in Kabul, it was happening in American Airlines’ major European focus city where its prime trans-Atlantic partner was located.

Keeping passengers happy and, more importantly, keeping passengers such as a writer for the New York Times happy, pays big dividends in the end.

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Over the weekend, I was contacted by several people about the American Airlines “pilot strike”.  Yes, everyone was talking about the pilot “strike”.  No, I’m not kidding.

There is no pilot strike.  There is no APA union sanctionized work action going on right now.

But . . . there does appear to be an informal “work to rules” campaign going on right now if anecdotal reports are to be believed.   It appears to be focused on maintenance items and most particularly oriented towards equipment that nominally can be “MEL’d” (Minimum Equipment List) for continuing a flight.

It would appear that the mechanics are cooperating as well.  By that I mean the mechanics are dutifully investigating and writing up problems in a meticulous manner.  All of this is resulting in big delays within the American Airlines network and it appears to include American Eagle labor as well.

While it may not be organized by the union, I would expect AA to go to court and ask for a court order to the union to stop these actions.  US Airways suffered similar actions in Charlotte and Philadelphia about a year ago when US Airways (EAST) pilots decided to throw a temper tantrum at that airline.  US Airways went to court and got a court order issued to the union to stop that behavior.

In other news, another American Eagle flight was delayed for 4 hours when two flight attendants decided to have a public spat with each other and the captain of that flight decided the two couldn’t work together.  Whether or not the pilot was smiling as it all went on, we do not know.   It appears that one flight attendant called for their colleague to stop using their phone during taxi and everything went down hill from there.

This stuff is going to get worse, much worse, before it gets better.  Expect American Airlines to suffer increasing delays and cancelled flights over the next 2 to 3 months at the least.  Labor is unhappy and labor is making its unhappiness known in very troublesome ways.

This isn’t just because of bankruptcy or reduced benefits, it has much more to do with the open loathing labor has for AA executive staff with CEO Tom Horton being at the top of that list.  The hostility is raw and angry and unlikely to fade any time soon.

And I repeat again:  This is why I do not believe that American Airlines has its revenue problem solved for exiting bankruptcy.  All the corner strategies and alliances in the world cannot stop labor from sabotaging the company’s reputation.

Customers are getting angrier by the day and voicing that anger in very public ways.  I think we will see traffic erode on American Airlines over the next 3 to 4 months at minimum and possibly longer.  Once you lose those customers, it will be very, very hard to convince them to come back.  They are already abandoning AA as a travel option wherever possible according to anecdotal reports.

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QANTAS and Emirates have done a deal to work closely together on codeshares and flying between Australia and Europe.  This sees QANTAS backing away from a very long standing relationship with British Airways and a shift in using Singapore for QANTAS’ mid-point hub to Dubai.

This is a smart choice for QANTAS.  The tie-up doesn’t impact their operations at all and it allows QANTAS to use Emirates to distribute customers to Europe more efficiently while also providing the same service to London and the UK as well.

Emirates has eschewed the alliance game mostly but this is a very good move for Emirates as well.  Emirates will now have feed from a long established brand and it brings a greater legitimacy to Emirates.

But this hurts British Airways.  The partnership it has had with QANTAS has allowed the two airlines to survive on that long Kangaroo route between Australia and the United Kingdom.  Now BA must go it alone and that will be a tougher thing to achieve success on.

Oneworld will be impacted by this as well.  Part of me once thought that some sort of union between British Airways (IAG), QANTAS and American Airlines would have made for a very, very strong network.  Now, QANTAS is walking away from established behaviors and tradition towards doing business in a new way.  Quite rightly, too.

QANTAS will likely remain in Oneworld and you won’t see the cooperation between QANTAS and other partners fade away either.  But you won’t see any love between QANTAS and British Airways anymore either.

Frankly, I do wonder why QANTAS doesn’t just fly Australia to Dubai and let Emirates do all the work from Dubai onwards.  It’s a good fit that would actually allow QANTAS to get more use from its aircraft than flying ultra-long haul routes.

I do foresee one change for my own local area:  I think we’ll see an A380 flying the Dallas / Fort Worth to Australia route in the near future.  Say in one year or less.  I think this new Emirates union will free up aircraft and given the high demand that the DFW-Australia route has seen, QANTAS could use an A380 to fly SYD-DFW and DFW-SYD non-stop which would only help grow that route more by eliminating that nasty stop in Brisbane on the return portion.

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As was inevitable, there are now public interest groups decrying a merger between US Airways and American Airlines as anti-competitive and bad for the consumer.  No surprise.

Industry consolidation has been good for airline profits and we definitely have seen airlines move towards a more sustainable business model as a result.  I would, however, credit capacity restraint for as much improvement in airline profits as anything else.  Frankly, all of the major airlines in the United States (with the exception of AA) have impressed me with their discipline in the marketplace.  It isn’t a discipline ever seen before and after 4 years, I think we’ve seen a transition to a truly different way of operating airlines.

That new model for operating as an airline includes looking at routes in the right manner, for once.  They are now being treated as “businesses” and evaluated individually for profitability.  In the old model, it was about market share at any cost.  The problem with market share at any cost is that it required unfettered, almost violent, competition between airlines on routes and found routes being operated at a substantial loss for years.  That has largely stopped now and I applaud the airlines for showing enough discipline over the last 4 years to make that stick.

Airlines also now seem to recognize that defending market share at any cost is a bad model as well.  Curiously, the one airline that seems to have continued to trouble itself with defending routes is American Airlines.  Until bankruptcy, the airline has “punished” intruders on its “turf” over and over again with high frequency, high capacity and extremely low fares to push out that intruder.

Finally, I think airlines have actually realized that providing a reasonable service experience is important again.  It’s not the service model of the 1970s or 1980s, no.  However, it also isn’t the embodiment of the idea that all a customer ever wants is a rock bottom price.  If price was truly the only key to winning on a route, Spirit Airlines and Allegiant would be exploding with growth never seen before.  They aren’t.  In fact, what we have seen is that broader offerings of service levels attract more revenue per seat and that’s what airlines need.

US Airways has, in many ways, been a leader in executing change to meet the new industry model.  It has figured out how to drive incremental revenue in ways that exceed most any other airline.  At the same time, they have steadily improved customer experiences across their lines both on and off the airplane.  They are now an airline that can be depended upon to deliver passengers to their destinations reliably and with their luggage.  Am I the only one to notice that US Airways is about the only legacy airline to not experience a major public embarrassment over customer treatment in recent times?

American Airlines is actually the antithesis of US Airways and has shown a strong reluctance to acknowledge the industry changes.  They’ve pursued market share, they’ve defended routes at all costs, they’ve been more price driven than any other legacy airline and many LCC airlines.  They have not upgraded or improved their cabin experiences in any significant way since the 1980s.   Their website drives customers away or at least angers customers.  Their aircraft are old, inefficient, and painful to fly.

The SuperLegacies, United and Delta, have done quite a bit to improve everything across the board and one thing that AA hasn’t done:  evaluated routes for profitability on  a regular basis.  Furthermore, UA and Delta now see opportunity on routes that have traditionally been owned by American Airlines.  They’ve even overwhelmed cities where American Airlines was once a major presence and a dominant player (NYC, Wash D.C., Chicago, Los Angeles).

SuperLegacies are now evaluating competitors routes and going after those routes which are yielding major revenue.  Delta and United both are targeting both AA and US Airways as well as holding their own against airlines such as JetBlue and Southwest Airlines.

Yes, American Airlines and US Airways need each other.  American’s operations need US Airways executives who know how to methodically fix operations in a lean manner.  US Airways needs American’s hubs and routes to build much better network yield.  Yes, US Airways can exist quite nicely as a stand-alone airline.  It cannot expect to rise to the scale of the SuperLegacies and compete both domestically and internationally over the long term without a merger.

A combined US Airways / AA company nominally looks like the biggest airline in the world once complete.  That won’t necessarily be true.  There will be consolidation and rationalization between the two airlines  but the entity will be a member of the SuperLegacy group and it will have the potential to compete in the market on a level playing field.  That’s all they can ask for.

3 SuperLegacy airlines, Southwest (who doesn’t quite fit into any category now), and a smaller stable of LCC carriers looks about right for the modern competitive landscape.  At this point, I actually think we will see increased competition over the long term among the Big 4 and that will be good for the consumer.  We will not, however, see that increased competition until there is a Big 4 and until those airlines have time to settle their operations in the new competitive landscape.  If the US Airways / AA merger were consummated by the end of 2013, I would expect a rational and highly competitive marketplace to be fully emerged by 2017/2018.

If there is an area where I see reduced competition in the US, it’s among the LCC carriers (and doesn’t include SWA).   I think the narrowed gap in costs and differences in revenue models between the LCC carriers and SuperLegacies removes the best business argument for an LCC carrier.  It will be a struggle for those carriers in the future and we do need them.  On the other hand, if a relatively new LCC carrier with rock bottom costs can’t compete against SuperLegacies, the market place has done its job.

So, no, I do not think the proposed US Airways / American Airlines merger is wrong.

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Yesterday, I discussed how the pilot shortage is unfolding domestically for airlines and the growing problem it will become in the very near future.

If the problem shows up in 5 years, we are already late in addressing the problem.  It takes time for people to move through the various levels of experience needed to become an airline pilot.  You cannot make an airline pilot in a few weeks or months.

In my view, there are a few things that could be done to start mitigating the problem.

1)  Find a way to apprentice pilots into the airlines.  Pay for the training and education in return for a commitment and a living wage that sees salary growth on a slower curve.

2) Revisit this 250 hours vs 1500 hours required rule.  Raising it to 1500 hours was in response to the Colgan Buffalo accident and, in my view, an inappropriate reaction to a single event.  Lower the hours to 500 or 750.

3) Turn regional airlines into these apprentice shops and tie upgrades between the regionals and national airlines.

4) Attract new entrants with bidding and seniority systems that reward productivity.  Currently, there is no incentive to become a pilot for a legacy or SuperLegacy airline as you’re likely to sit in the same seat for 10 to 15 years in many instances.  Find ways to reward productivity because it is a win for the airline and a win for the pilot willing to work hard for his / her upgrades.

5) Find ways for pilots to make their skills and their seniority more portable to other airlines.  If airline A needs to furlough 300 737 pilots and airline B needs 100 more 737 pilots, there has to be a way to allow those needs to get met without punishing the pilots with entry level salaries again.  ALPA, you could work this out if you wanted to.  The point is to facilitate supply transferring to where there is demand.  Otherwise, pilots tend to “hang on” at existing airlines in the hopes of keeping their seniority while seeing their skills wane from lack of use.

6) Find ways to sponsor flying clubs at the high school level.  That’s where the bug for flying is best started.  The teens who learn to fly at 15 and 16 are teens you can recruit out of college when you need them.  The industry should be doing this already but doesn’t.  Flying is expensive and horribly so compared to 20 or 30 years ago.  Many who would willingly be attracted to the profession get diverted from it due to the entry costs.

Nothing here is revolutionary.  Most of it embodies steps that could be implemented in one year or less.  All of it requires the industry to acknowledge the looming problem and to be allowed to cooperate with each other to foster a better supply of new entrants when they’re needed.

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There has been increasing chatter in the airline world about an impending pilot shortage.  This is a shortage that some regions of the world are already beginning to feel.  Here in the United States, there is no real pilot shortage but largely due to industry consolidation and bankruptcy as well as new FAA regulations that extended pilots’ careers from age 60 to age 65.

But the shortage is coming.  Those pilots whose career got extended (and by default who stalled the careers of those pilots who are junior to them) are now approaching retirement age again.  That alone will flush out an ever increasing number of pilots.  In addition, the pilots left standing after industry bankruptcy and consolidation are the most senior and that leaves the balance who are working for legacy airlines pretty senior compared to the rest of the world.  Again, those people will only be leaving in ever increasing numbers.

At the bottom, there are ever increasing barriers to entry for new pilots.  Frankly, why someone would choose to be a pilot today has to be questioned quite a bit.  It typically costs in excess of $100,000 to get the education and training just to position oneself to start accumulating hours necessary to become an entry level pilot at an airline.  New law requires new pilots at airlines to have 1500 hours intead of 250 hours just to start work.

Let’s not forget what should attract a person to the career:  A reasonable salary, reasonable benefits and reasonable job security.  None of those exist for pilots who are beginning their career.  Today’s typical pilot starts out in extremely low paying positions (less than $25,000 / yr) at airlines such as regional carriers whose position in the industry is tenuous at best.  There is no reasonable salary (and often no reasonable salary for a decade or more after entering the industry), the benefits remain fairly good at most airlines but the job security is no longer there either. Many pilots find themselves laid off, furloughed or dismissed over and over again.

Tomorrow, how this problem might be fixed.

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Delta Airlines plans to start having its regional airline affiliate ExpressJet fly from Dallas Love Field to Atlanta using 50 seat Canadair regional jets.  If they are Canadair, they’re CRJ200s most likely.

I see some good and bad in this.  First, Delta is clearly interested in seeing if it can poach a few more AA customers on that route with service that is more convenient to a Dallas businessman.  I suspect that it can and will succeed in that sense. In addition, this is a shot across the bow at Southwest Airlines who cannot currently offer non-stop service between Dallas and Atlanta.  In this scenario, Delta will offer the better service.

The problem is that if these aircraft aren’t configured to offer business class seating and/or very comfortable economy class seating, I don’t see anyone being very interested in using the flight(s) regularly after their first experience.  The CRJ100/200 is not a comfortable aircraft and could only be described as such when compared to the Embraer ERJ-140 aircraft.   It’s going to take a bit more than convenience to permanently win over customers on that route from Southwest and American Airlines.

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QANTAS is moving from 4 flights / week to daily flights in its DFW to Australia operations. QANTAS flies non-stop from Sydney to Dallas and non-stop from Dallas to Brisbane with follow on service to Sydney using the Boeing 747-400ER aircraft it has. Previously, it’s been reported that QANTAS load factors have typically exceeded 85% and that the flights have, at times, been load limited or range limited as a result of both passenger and cargo demand.

In other words, this route is *really* succeeding for QANTAS and is attracting a lot of American Airlines network feed. Most felt that this route would go to daily service fairly quickly and it has after about a year of service. My prediction is that the next step will be to add an A380 to the route. Think I’m crazy? I’m not.

The 3 class 747-400ER carries 364 passengers and travels the route at the very limit of its range. 85% load factor for that aircraft translates into about 310 passengers. If the aircraft is being load or range limited with those load factors, it sounds as if there is more demand than can be supplied by the 747-400ER. An A380 can supply 450 seats, ample cargo capacity and has more than ample range to fly DFW-SYD and SYD-DFW without being load limited or range limited at all. 310 passengers equates to 69% load factor for the Airbus A380. If QANTAS continues to stimulate demand and work well with AA making DFW a gateway city to Australia (which is very attractive to east coast residents), an A380 absolutely could be justified as the next step.

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American Airlines has announced direct, non-stop service from Miami to Asuncion, Paraguay with 4 flights per week starting in mid-November. Here is the kicker: These flights will be on AA 757 aircraft.

The distance between the two cities is just a bit over 3800 nautical miles and within the service range of the 757 but I suspect there will be a bit of planning done for non-scheduled fuel stops as a “just in case”.

While the flights are interesting and fit within the capabilities of the 757, I suspect these will not be pleasant, comfortable flights for those in economy class. It will be close to a 10 hour flight on a narrow body aircraft and American’s 757s aren’t well known for being a newer bunch of aircraft. The interiors and seating haven’t been refreshed in some time. First/Business class should be comfortable but I wouldn’t expect much from the back of the aircraft.

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In its execution of the new, better plan for increasing revenue, American Airlines has announced a new codeshare partner for international flying. American plans to begin codeshares with Air Tahiti Nui on flights between Los Angeles and Tahiti (Air Tahiti Nui) and between Los Angeles and 15 destinations in the United States (American Airlines). American has said for 6 months that it would increase its partnerships to enhance revenue and network opportunities in its system.

If you detect sarcasm in the above paragraph, you’re right.

To paraphrase a certain financial analyst at JP Morgan Chase: Is that all you’ve got, American?

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There have been a few people out there attempting to get into the scheduled commercial airline business over the past year.  A recent example is the group attempting to start a new People Express with 737-400 aircraft.  All have been aiming at niche markets and I think that is doomed to failure.

It’s attractive to look at the old Southwest Airlines / Ryanair model of flying to secondary airports and think that you too could succeed with this by flying into an airport near a major city.  That did work when airfares where stunningly high in such markets.  Today, not so much.

The problem is that these niche carriers have to compete with the likes of Southwest, JetBlue and even Allegiant and Spirit Airlines.  These airlines are flying into major(ish) airports with low fares and offering rock bottom fares in most cases.

Even flying into major markets with a superior service doesn’t always guarantee profits.  Take a look at Virgin America who began service in 2007 and has not yet earned a sustained profit.  They hang on and even incrementally improve their performance but even after 5 years, the airline does not earn a return on investment yet.

If you want to succeed with a new airline, you have to first have a monstrous amount of capital.  It’s capital that gets the deals done for things like aircraft and facilities.  You have to have a good service product at fares that are competitive.  Competitive fares exist across the board among airlines, however.  Even legacy carriers are offering extremely competitive fares in most markets.

You have to be brave enough to go up against the largest airlines in the world.  In the United States, that means competing against Delta, United, American Airlines and Southwest.  Not a single one of those airlines is afraid of competing and all have learned lessons in not ignoring a newcomer.

New airlines will be started but now isn’t the time.  The US airline industry needs time to digest its changes and time to let things settle on the markets each airline is serving.  Even when they are started and successfully so, they will have to be managed by people who want to grow the business.

JetBlue was the major up and coming airline in the industry right up to the moment the board of directors panicked over operations due to winter storms and fired David Neeleman.  Now it’s an airline that is looking for routes to feed into existing structures and it ventures outside its home areas rarely.

Speaking of David Neeleman, he is the one I expect to see back in the United States one day.  I think we’ll see him starting a new airline sometime in 2015 to 2017 and it will be a refinement of his JetBlue and Azul (Brazil) airlines but with even more capital that he has raised in the past.

But most will fail.  The attraction to starting, owning and operating an airline is strong but it requires a very special leader and those people come along only a few times each generation.

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The Fort Worth Star Telegram’s Mitchell Schnurman has THIS POST on SkyTalk about companies keeping morale high to maintain profitability.  It’s timely since it coincides with my own blog post about the labor cost that American Airlines is incurring with its battle over costs with the unions.

Profitability is about quite a few things in a major company such as an airline.  It’s about keeping a strict eye on costs, certainly.  It’s also about keeping a close eye on cash flow and cash holdings.  One little storm can cost an airline tens of millions of dollars.  It’s about maintaining strong metrics in ontime departures and arrivals and it’s about being smart enough to buy a fleet to do the job you have without overextending oneself.

Some airlines have been profitable with poor labor relations.  Generally that has occurred at a “peak” in the airline industry curve and almost always when contracts are in place and not up for re-negotiation.

How an airline survives the downturn in the airline industry has a lot to do with employee morale.  Employees with a strong, loyal morale tend to fight for their company.  They realize that their jobs and their success are tied to their airline succeeding more often with more customers more of the time in those bad times.

Employee morale isn’t about high salaries.  It really isn’t.  Study after study has shown that employee morale can’t be maintained at a high level with just a high salary.

It’s about making employees a part of the business.  Giving ownership of problem solving to employees who experience the problems.  Providing a share in the profitability and providing benefits that allow them to feel secure with their families while they work.   It’s also about employees perceiving “shared pain” on the part of their management team when things are bad.  There is nothing worse than an executive earning a bonus while other employees are “sharing the pain”.

A workplace where treatment is both fair and just is also important.  Valuing the inputs of a baggage handler should be just as important as valuing the financial analyst who monitors and sets pricing.

It isn’t just about your union employees delivering great service to customers either.  It’s about being able to get agreements to cover your needs now and the future.  A company that is doing right by its employees is better able to negotiate union contracts to cover new flying, new aircraft and new partnerships.  The faster you can negotiate those contracts, the more competitive advantage an airline has.

It’s notable that Southwest and Delta airlines are working very hard with their union employees to put new contracts into place to cover opportunities for new business very quickly.  It’s also notable that airlines such as American Airlines and United Airlines aren’t doing too well with their employees and aren’t executing new strategies to compete and, most importantly, earn sustaining profits.

Employee morale isn’t the only key factor to success.  But it is one of the top 2 or 3 key factors and one that several airline CEOs seem to be ignoring more and more as time passes by.  Historically, the airlines who have done well both in regulated and deregulated environments with respect to profitability are those that had genuine leaders as CEOs.  Shareholders would be wise to pay more attention to leadership at the helm and a little less attention to quarterly profitability.

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Southwest Airlines wants to build a small international terminal at Houston Hobby airport and thinks that doing so will benefit Houston with more jobs, more economic impact for the city and everyone wins.  United (Continental) Airlines doesn’t want a damn thing going on at Houston Hobby and definitely does not Southwest Airlines beginning international flights from that airport.  United thinks that allowing this will reduce jobs, have a negative impact on the economy and, well, HOUSTON SHOULD JUST DO WHAT UNITED WANTS BECAUSE WHAT’S GOOD FOR UNITED IS GOOD FOR HOUSTON.

It’s like watching Southwest Airlines and American Airlines fight over Love Field airport in Dallas.

Make no mistake, this fight is over competition.   Southwest provides LCC competition on international flights from Houston to Mexico, Central America and the Caribbean and that is United Airlines’ major domain from that airport.  In fact, those United routes are a huge profit earner for the airline.  Of course United doesn’t want the competition.

Airlines, especially SuperLegacy airlines, hate competition.  And they loath competition on the very routes that earn them the most money.

Here is my take:  Southwest wants to introduce more flights to Houston Hobby.  In the process of introducing international flights there as a kind of “hub” for SWA International operations, it will almost certainly introduce more connecting flights to more SWA focus cities such as Dallas, Atlanta, Chicago, Baltimore, Los Angeles, etc.  This is a good thing.  Southwest has a great product and one that isn’t going to negatively impact Houston.

United Airlines has major investment in their fortress hub at Houston Intercontinental from commitments made by Continental Airlines pre-merger.  Houston Intercontinental is a fortress hub for them like DFW is a fortress hub for American Airlines.  Fly into IAH and you’ll be amazed at how dominated that airport is by one airline.  It is a crown jewel of hubs and the last thing United wants is an airline poaching customers from those routes.  But one reason why those routes are so profitable for United is that there is virtually no competition.

Competition is good.  Houston should allow Southwest to build its 5 gate international terminal.  It will benefit Houston and if United isn’t quite so profitable there, so what?  I don’t think there will be a massive increase in overall traffic to international destinations served by both airlines a la “Southwest Effect”.  I do think that SWA will poach quite a few customers locally and I say that what benefits the businesses and private parties of Houston is far more important than whether or not United gets to have its cake and eat it too.

The airlines are actually similar in labor costs but SWA maintains higher productivity.  It’s not as if United doesn’t have a fighting chance against SWA, it does.  For one, it has a frequent flier program that will be stronger for Houston residents most likely and it has the ability to feed as much traffic as it wants through Houston to southern international destinations.

The one party here that I do not think gets hurt with this is the city of Houston.

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