The Allied Pilots Association, union of pilots with American Airlines, has never been very well organized but now they’re out to give USAPA (US Airways Allied Pilots Association) a run for their money in the stupid department.

Chairmen of certain bases in the North East and who are on the APA board of directors went rogue by writing and then sharing email that heavily criticized ALPA and ALPA’s providing services to APA in the negotiations with American Airlines.  The short version is that ALPA decides to pick up its toys and go home by terminating its services to APA after the email was circulated, commented on and not refuted by anyone at APA except the APA President and his team.  If you want the full details, read THIS and THIS  entry from the Dallas Morning News Aviation Blog.

I do not blame ALPA and its leader, Lee Moak, one tiny bit.  No good deed goes unpunished when dealing with APA and ALPA was merely the latest victim.  Why engage when the organization your servicing has a board populated by people who all think they’re in charge and they’re vision of leadership is the right one?  It’s a no win situation.

This is highly representative of the behaviour that APA President David Bates has tried to abate.  It was his promise when campaigning for the job that dysfunctional behaviour would be addressed.  Bates & his team have actually worked hard at this and everyone agrees that negotiations between APA and American Airlines were finally moving along productively.

Now APA is faced with having to regroup and find someone else to negotiate on their behalf and has to prove to American Airlines and the National Mediation Board that it can manage itself.  Right now, I don’t think they can do that.  So these rogue base leaders have shot themselves in the foot . . . again.

Which is why I now compare them to USAPA.  The self harm being done in both organizations is astounding.

Ironically, ALPA has some of the best leadership going for itself these days and Lee Moak is the guy who understands the issues that unions face with today’s airlines.  APA, under its current structure, will never get what it wants because it resembles a farce and nothing more. 

The very best thing that could happen is for the silent majority to start reorganizing pilots to be under ALPA and rid themselves of the non-leadership that APA provides.  Call it a coup.  Trying to work with rogue base chiefs is never going to yield success.

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Let’s summarize where Republic Airways is today with its strategy of purchases over the past few years,.

1)  Bought Midwest Airlines and traded away its mainline aircraft for E-170 and E-190 aircraft.

2) Bought Frontier Airlines, chased away the CEO making that enterprise cash positive.

3) Merged brands and used a mish-mash of aircraft to provide service in both Denver and Milwaukee focus cities causing confusion among consumers.

4) Unable to get Frontier to earn money and now is seeing it as such a drag on Republic earnings that they’re making deals with labor where they trade equity for labor savings.

I’m not against Bryan Bedford (CEO of Republic Airways) or even against Republic Airways itself.  Not in general.  However, I cannot see what it got for its money by buying Midwest Airlines and I don’t believe anyone else saw the value there either.  He didn’t turn it around and it didn’t provide a very good footprint in Milwaukee that made competing against Airtran and Southwest very viable.  The truth is, Midwest should have gone to Airtran.  On the other hand, did Airtran dodge a bullet?

I do think that Frontier’s success was based upon its people and, more specifically, Sean Menke.  I do not think that Republic understood that substituting available aircraft in for Frontier branded and operated aircraft for a hodge podge of flights was a *bad* idea.  Brand is everything in an airline.

Brand stands for what, exactly, the consumer can expect when he/she buys a ticket on them.  The lack of consistency and lack of focused marketing and the lack of a coherent route plan has made it possible for Southwest Airlines to start taking away market share in Denver.  Even United may be benefitting. 

There was a reason why SWA wanted Frontier.   Frontier (pre Republic) was the airline that SWA couldn’t seem to knock down.  SWA thrived in Denver at United’s expense rather than Republic’s.  The airline that can fight off SWA is one that SWA is interested in.  SWA knew that Frontier’s model was working and working well despite hard competition from SWA.

Rather than identifying the value that Frontier had in its operating model, Republic just did what they wanted and lacking the knowledge of how to operate a mainline branded airline, they made some real amateur moves.  This is where we learn that just because you can operate a regional airline working contracts for legacy airlines successfully doesn’t mean you know *anything* about running a mainline airline itself.

But to Bedford & Co’s credit, they are trying to solve problems well in advance of when those problems become almost unsolvable.  At least cost wise and those guys know how to manage costs, I think.

Yet, there is something missing and that is coherent, focused brand leadership in the form of a relatively independent president of the company.  It won’t be Sean Menke but you can find talent elsewhere.  There are plenty of airlines who’ve got people who do understand what’s needed. 

I think ego, however, will preclude that happening and we’ll see Frontier sold off to another airline eventually.  My guess?  Jetblue.

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Right on the heels of Southwest terminating flights between Spokane and Seattle (due to low loads), Alaska Airlines / Horizon has announced that it will be filling that gap with Horizon flights.   Alaska already services that route but they are offering more flights and should be doing so with its Bombardier Q400 fleet which is ideally suited to that route and which will provide just as quick service but costing the airline far less than it costs Southwest to operate 737s.

This is why I believe that Southwest has to start looking at aircraft that can operate such fleets with less cost.  The 717 can’t offer the cost savings that a right size regional jet and/or Q400 can.  And, frankly, I think the Q400 could be operated *very* effectively by Southwest in its smaller markets. 

While Southwest says it doesn’t operate hubs (and it really doesn’t), it does operate focus cities that would benefit greatly with feed.  For example, imagine Wichita, KS flights to Kansas City, Oklahoma City, Tulsa and Denver.  Or flights from places such as Boise, Spokane, Salem or Salt Lake city to Portland and/or Seattle.

There are plenty of places where those aircraft could operate not only very efficiently but at no loss of schedule time either.  Think flights into focus cities such as Dallas, Houston, Chicago, Denver, Seattle, Phoenix, Atlanta, Baltimore, and several cities in Florida.

If Southwest is prepared to be a multi-type fleet, then the Q400 and Embraer E-170 series have something to offer them.

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Airtran has been serving Williamsburg / Newport News  Virginia for many years now.  Originally with regional jet aircraft and later with Boeing 717s and fairly successully.  The airport is an excellent alternative to Norfolk, VA’s airport which is difficult at best to access when you’re across the bay. 

It’s a personal hit as I’ve used the flights to go to Williamsburg, VA to visit my own family there.  The airport is easy to access and just 20 minutes from Williamsburg vs 1.25 hours from Richmond and .75 to 1 hour from Norfolk. 

Airtran says it is economics.  I find that just a touch too hard to believe since Airtran had a total of 7 flights to the airport.  I think this has to do with it being competitive with Southwest Airlines’ service into Norfolk (ORF) airport.  Left alone, SWA would end up with flights to Norfolk, Newport News and, potentially Richmond (served by Airtran presently.)

If you had to keep one airport, you’d want to keep Norfolk since it better serves a massive amount of business travel into and out of the city.  Look for more route rationalization going on with Airtran as time passes.  Particularly in the fall and winter.

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A United Airlines flight from Washington, D.C. to Cancun had to divert to Havana, Cuba yesterday after pilots smelled a strong electrical odor in the cockpit. 

How often does that happen?  No one is sure it ever has with a US airliner.  US and Cuba don’t have formal diplomatic relations but the air agencies of each do cooperate as a matter of course.  (Cubana flights overfly the United States, for instance.) 

United Airlines sent another aircraft to accomodate the passengers since you can’t exactly book people on the next Cubana flight out to Mexico.  What’s happened with the first airliner hasn’t exactly been revealed but I would guess that mechanics were sent and the aircraft ferried to the nearest base possible. 

Was it legal?  Sure.  Captains have the discretion to make such decisions and I’m sure this one wasn’t taken lightly.

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Air India’s inability to meet its minimum entrance criteria set by its contract to enter the Star Alliance means that the two parties have mutually agreed to “suspend” the integration of Air India.

Or have they?  One person speaking for Air India says Air India received notice from a Star Alliance project manager that all the minimum critieria had been met. 

Some say that this is about politics and, specifically, about India protecting the market share of Air India by being very cautious (to use the politically correct saying) in granting traffic rights into and through India.   It’s no surprise as many airlines have indicated a desire to fly more to India.  In addition, no airline with the A380 has yet been able to fly to India with it because airport authorities say the airports aren’t ready (while airport managers scratch their heads and say “Yes, we’re ready.”) 

Air India is owned by the Indian government and entry into the Star Alliance was a part of its plan to have Air India stand on its own and, eventually, become a private airline.  This hurts Air India far more than India’s refusal to grant flights into its country hurts other airlines.

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The one thing that analysts and industry watchers have wanted to see in American Airlines is something better than the incremental strategy of holding the line and hoping other competitors costs rise.  They want to see something transformational instead.

To the outside, the big aircraft order announced by American Airlines was transformational and it certainly obscured the bad news of the 2nd quarter financial results.  American had lost millions while its chief competitors earned millions. 

The aircraft order really wasn’t transformational.  If anything, it reflects AA’s incremental approach to its problems.  Those aircraft aren’t arriving next year.  In fact, they’re not arriving for 2 more years and even then they’ll be arriving over roughly a 10 year period with the re-engine aircraft not arriving until 2017 (Airbus) and 2018 (Boeing). 

In the meantime, American has to deal with American today in 2011.  It’s increased numbers of newer, more efficient aircraft don’t start until 2013.   So what does it have on its plate today?

First, my favorite bone to pick:  it has not gotten labor agreements with its unions and what is worse, they appear not only to be far away from these agreements.  In many cases, talks have been largely on hold or barely running for the past year.  This has had two effects.   The markets don’t like the uncertainty in this area and rightfully so.  It indicates that the airline isn’t taking its costs seriously enough and the same is true for its service product.  In addition, it (AA) has created a serious morale problem among its employees.

Second, how long can a huge airline continue to operate with losses that approach $1 Billion per year?  You can mortgage your assets for more cash all you want but at the end of the day $1 Billion per year is one hell of a loss to sustain over and over again.  The truth is, airlines can operate for years with losses because of the cash flow they produce.  However, they are never too big to fail. 

In addition, there is always a day of reckoning that arrives when problems aren’t dealt with .  Again, in the airline industry, you can put this off for years but that day of reckoning has a way of arriving that surprises everyone when it does come.  The perfect storm of bad conditions for an airline finally coalesces and we start reading that the airline is in such a dire situation it can’t make its payroll much less its fuel bill.

American’s board of directors and, more specifically, its executive leadership in the form of Gerard Arpey, Bella Goren, Tom Horton and Dan Garton seem intent on preserving current shareholder value as opposed to leading an airline into the next decade.  This team resembles the wealthy guy that never seems to have problems who we one day discover is living in a beautiful house with no furniture because he had to sell it all to maintain his image. 

There is no question that having astute financial managers is critical for airlines today.  There is equally no question that no airline succeeds and earns a profit without being innovative and market leading and paying attention to the customer. 

Look at every airline earning a substantial profit (relative to their revenues).  Every last one of them is being led by a team that is focused on its customers and its service model.  They are open with their employees, focused on making their customers happy and investing constantly for the future.  When they have problems, they dig into them and find real solutions.   And they make no lame apologies for poor performance when that happens.

American Airlines is the antithesis of this.  And lest you believe this exists only in American Airlines, I would point you to jetBlue who, since David Neeleman’s departure, has been focused on the status quo as well.  They aren’t earning and they certainly aren’t enjoying real growth.   And take a look at failed airlines of the past such as Pan Am, TWA and Eastern Airlines.  The resemblence to American Airlines behavior is shocking.  Each of those airlines engaged in a similar pattern of behaviour for a long time and suddenly found themselves in the middle of that perfect storm that led to their demise (arguably TWA had righted itself but, unfortunately, this was done about 2 years too late.) 

And take a look at the airlines who turned themselves around.  The most popular story told is that of Continental Airlines.  Any airline that has had to recover itself has done so with transformational behaviour, not with incremental steps.  That transformational behaviour has always focused first on improving employee relations and, second, improving customer experiences.  It’s never been about floating more debt to survive.

Transformational behaviour comes from leaders, not managers.  They are different animals.  Great leaders hire great managers but they lead from the front rather than hiding behind a telephone conference call with analysts every quarter.  They get out there and work like crazy to communicate and set good examples and to connect with customers.  They lead and their employees follow that leadership.

Yes, economic times are very tough today and many companies have real problems.  For many businesses, this is an era of survival and I get that regrouping is sometimes necessary.  But even the other industries that were in far worse shape than the airline industry are engaged in transformational change.  GM is suddenly producing cars that by any measure are the equal of Toyota’s and they’re earning real profits.  Ford got exactly the right guy for leading their company through such an intense crisis in the car manufacturing business and he managed to avoid bankruptcy where the other two didn’t. 

And we have American Airlines relying on partnerships with other, healthier airlines who, in many cases, are engaged in transformational behaviour and, at the least, who are led by people who are leaders rather than managers.  The intent of these partnerships, in AA’s view, is to add incremental revenue.  AA has signaled its intent on letting its partners be transformational and hopes that it can skim the benefits wherever possible. 

But AA doesn’t take a hint from these other airlines and it isn’t taking risks and it isn’t being transformational.  How long before its own partners begin to doubt the value of being aligned with American Airlines?

I don’t know why anyone would buy one share of stock in AA today.  The current leadership team has been in place more or less for 10+ years.  In that time, its fought battles with the intent of maintaining the status quo rather than winning.  There is absolutely no evidence, none whatsoever, that this team wants to lead.  What value is there in investing in a company that isn’t being honest with itself?  Invest in Southwest Airlines or even United Airlines.  Invest in Costco or J.P. Morgan Chase.  Invest in companies that are acting honestly and addressing their own issues honestly (successfully or not).  Invest in companies that show leadership rather than mere deft cash management.

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So, here is some interesting news.  According to the Sydney Morning Herald (Australia), QANTAS is finding its 4 times a week flights to the DFW area using a 747-400ER as both successful and profitable.  The airline began the flights just 3 months ago and is already seeing load factors in the 90% range (with about 80% of that load being leisure and 20% corporate/business.)

There have been a few diversions to South Pacific locations for refueling due to adverse headwinds but none recently.  There have also been a few complaints about luggage being delayed due to load limitations.  Both because the route is on the outer limits of the range offered by the 747-400ER. 

If the success is as good as claimed by Qantas NSW regional general manager Peter Collins says it is, I wouldn’t be surprised if QANTAS either changed the service to an A380 in the future or if it added 6 or 7 times a week frequencies.  QANTAS has already said that when its 787s become available, they’ll likely service the route with multiple daily frequencies. 

QANTAS has both 787-8 and 787-9 aircraft on order but I would expect that the aircraft they’ll want to use is the 787-9 (provided the range promised is delivered) and that means a long time from now.  In the meantime, the A380 can offer as much range with greater capacity as the 747-400ER for this flight when it can operate its aircraft with the uprated Rolls Royce Trent engines at full thrust again. 

In any case, it’s good to see QANTAS succeed with this route and I look forward to seeing it developed even more as time goes by.

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Delta and US Airways will get to consummate their revised slot swap deal between each other which grants Delta dominance at La Guardia Airport / NYC and US Airways dominance at Reagan National Airport / Washington, D.C.

The airlines will have to sell off a small set of slots to airlines that have little or not competition at either airport in order to satisfy the DoT. 

Is this good for the consumer?  Depends on who the consumer is.  Arguably, more sensible connections from regional airports into those airports will be good.  However, I do not know why we, as a country, participate in allowing airlines to form fortress hubs in this day and age.  Fortress hubs are neither efficient nor good for the consumer in the long run. 

Selling off a paltry number of slots to small airlines with no presence at those airports does not foster competition.  It fosters a tenuous toe hold that could take years and millions of dollars of investment to ever grow into something else. 

This is why if an airport is slot controlled, I firmly believe those airports should be required to “auction off” those slots on a regular basis.  Allowing airlines to “own” slots and preserve them as an asset has just fostered anticompetitive behaviour such as airlines “sitting” on the slots by operating unprofitable (but not very expensive) regional jet flights into the airports until they want to use the slot for something bigger.   Imagine what would happen if lower cost airlines could buy into those airports through auctions and offer lower prices.

Competition doesn’t come in the form of an airline getting to operate 2 or 3 daily flights into an airport dominated by an airline that has hundreds operating into that same airport.

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It’s been quite a while since the Continental United merger was announced and pilots from both sides are *still* negotiating their integration.   This stands in stark contrast to the SWA / Airtran deal announced a few days ago and completed in far less time than the ContiUnited merger has been going on.  It’s been over a year now since the ContiUnited merger was announced.

This is about pay, seniority and job security.  Both sides of the table have given up significant pay over the past 10 years or so and both want a raise that shares in the wealth.  United has more senior pilots and that’s a threat to Continental pilots.  Continental pilots have enjoyed quite a bit of job security as a result of scope clauses that have limited Continental to using regional airlines for 50 seat missions or less. 

Mostly, neither side wants to budge.  I think the Continental pilots have viewed this merger as more threatening than any anticipated.  Despite the appearance of this being Continental with the United name to the public, more and more of the United model has been retained.  Any attempts to “outsource” Continental flying to United has been stopped in courtroom skirmishes by Continental pilots who don’t want to see regional jets flying *their* routes. 

So what breaks the impasse?  It’s hard to say.  There isn’t much One Love going on here despite the fact that both are represented by ALPA.  United pilots are very militant and Continental pilots are very concerned.  Failure to reach an agreement on much of anything here has caused these talks to look stagnant. 

ContiUnited can’t start benefiting from this merger until it has a merged single certificate as an airline and until it can flow flight crews between both airlines.  That day isn’t in sight as of today. 

Furthermore, management can’t afford to agree to an unsustainable raise for both sides given the current economic climate.  So there are few incentives that management can offer to stimulate an agreement among the pilots. 

Is this going to be another US Airways / America West problem?  Right now, I don’t think so.  It already doesn’t represent the smooth transition that Delta and Northwest enjoyed but it can be wrung out.   The problem here is that there is no momentum.  Continental pilots felt Continental was doing just fine on its own and that they were doing better than most pilots out there.  United pilots are out “to get theirs” at almost any cost.  Someone, somewhere, has to find something for both parties to agree upon and get some momentum going for an agreement.

Continuing these talks for years or coming to an agreement that falls apart hurts the pilots the most.  Senior Continental pilots are going to need to have some assurances with respect to seniority that go beyond “date of hire” integration.  Pay is the easy part here.  Job security and seniority are the hard parts.  Seniority in particular because a Continental pilot that is, say, bumped from his job as a Captain on a 777 stands to lose quite a bit of pay. 

I suspect we’ll see these jobs “fenced” at the airlines with a date sometime in the near future (3 to 5 years) of breaking down those fences so that pilots can bid for jobs they want on each other’s equipment. 

How does all of this happen?  It should happen with Jeff Smisek, CEO of ContiUnited.  It’s always dangerous for  a company leader to get directly involved but he needs to find a way of assuring both sides and an incentive for them to agree upon something.  That incentive is going to cost but the sooner he finds it, the sooner United starts making consistent profits.

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In what I will declare to be the most greedy of moves for 2011, most US airlines have decided to raise fares to offset the FAA taxes that have (temporarily) disappeared as a result of Congress’ inaction on a new bill for the FAA.

By most US airlines, I mean airlines such as American, United, Continental, Delta, US Airways, Southwest, AirTran and JetBlue.  By raising fares, I mean they’ve raised them about 7.5% to offset the taxes that disappeared.   A few airlines such as Virgin America, Frontier Airlines and Alaska Airlines have so far not raised fares to grab that cash.

I am immensely disappointed in this development and particularly disappointed that I find both SWA and Airtran in that group.  Airlines don’t deserve this money and it is shameful behaviour to run and grab it.

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In addition to its blockbuster aircraft order, American Airlines also announced it was “spinning off” American Eagle airlines to free AA up to use other regional airlines.  I’m not sure how you spin this as good news either.  Your mother company doesn’t want you anymore because your too expensive now.  How do you sell a company that no other airline will want to use?  By issuing stock to existing AMR shareholders. 

American Eagle is in bad shape to compete in the real world.  It lacks a fleet that other airlines would want and it burdened with quite a few ERJ-140 aircraft that no one wants.  They aren’t useful anymore and they’re getting kind of old for a regional airliner these days. 

The good news for pilots there is that they have an escape path from this train wreck in the making.  Existing American Eagle pilots will have the right to “upgrade” to American Airlines as American Airlines has need for new pilots.   Let’s take note that there are first officers flying the MD-80 aircraft who’ve been on reserve for 10+ years.  It sounds good that they have an escape path but that escape path is currently blocked. 

Yes, American Airlines probably should use other, more cost efficient regional airlines.  No, they aren’t really going to get much money for American Eagle.  They’ll be rid of it but that’s the best that can be said. 

Anyone notice that AMR lost money again?  $250million plus compared to other mainline legacy and SuperLegacy airlines who have, once again, earned good profits in a crappy economic climate.  American has improved its cash holdings by arranging a sale and leaseback of 30+ aircraft and that will give them some breathing room but there are lingering problems that don’t appear to be getting addressed by the board of directors.

First and foremost, what about your labor problems.  How can a company operate healthy if most of its service staff are angry, sad, bitterly disappointed, hateful and resentful they work in the airline industry?  You don’t earn profits despite that condition, you earn them when you fix that condition.  Why this isn’t a public discussion for AA, I do not know.  Directors aren’t requiring that the hard work be done.  Instead, they appear to continue to bless the existing conditions in the hope that one day other airlines will have just as crappy a situation as they do.

That isn’t sustainable.

And that goes to the other problem.  AMR leadership.  Many saw the “historic” aircraft order as “bold” leadership.  I’ll point out that A)  this was long overdue by a few years and B) it cost they virtually nothing to make the order.  There was no “risk” or “vision” involved.  That isn’t bold leadership.

We haven’t heard about how AA is going to focus on profitable routes and a profitable network system.  We haven’t heard how AA plans to compete against 2 mega-carriers in its midst who are operating profitably and who are addressing their problems (successfully and unsuccessfully, the point is that they are addressing them).  We haven’t heard a word about how AA plans to deal with a coming storm of competition with Southwest Airlines  who will be able to operate what flights it wants to domestically from Love Field airport in just a couple of years. 

Partnerships with others don’t fix problems.  Aircraft orders don’t fix problems (although I’ll concede that if they had these aircraft today, they would be a lot better off).  Selling off assets to improve cash  holdings doesn’t put you in position to win against your competition, it just allows you to fight a holding action longer. 

What does turn around an airline (or any other business), is strong management and leadership from the front.  American Airlines hasn’t got that.

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Update:  For reasons I cannot fathom entirely, the transition to the name of SureJet has been put on “ground hold” to use the words of SkyWest.  Apparently there has been a rather strong reaction against the name.  Other airline bloggers have hooted at it and it escapes me why.  It’s just a name to bring to operations together. 

No, it’s not some new upstart Ultra Low Cost Carrier.  It’s the new name of the combined Atlantic Southeast Airlines / ExpressJet operation.   SkyWest owns the two operations now and wants to promote a more “One Team” like environment in the newly combined operation.

The new business will be based at ASA’s Atlanta headquarters and will have contracts for a majority of  major network carriers.  SkyWest will continue to operate separately. 

Lest you think this new operation is bush league, let’s look at their numbers.  SureJet will have over 400 jets and 10,000 employees working for it and that’s larger than some major LCC airlines.

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I wrote a long blog post early yesterday morning about American and the rumoured order it was about to make.  Then, later in the day, the rumours started flying that it would announce the order today (Wednesday).  And, boy, did they.

Let’s look at the details first:

• 460 aircraft on firm order with both Boeing and Airbus
• Boeing sells AA an additional 100 current 737NG aircraft.
• Boeing sells AA 100 737RE aircraft with the CFM LEAP engine.
• AA takes another 40 options for the 737NG and another 60 options for teh 737RE.

• Airbus sells AA 260 A320 Family Aircraft
• 130 are for current generation A320 family with the sharklets to be introduced in 2012.
• 130 are for A320NEO aircraft (with arrival in 2017 and so much for talk that the A320NEO line was sold out.)

The aircraft will begin arriving from both lines in 2013 and American Airlines thinks it will have one of the youngest fleets in about 5 years.

So what does it mean?  Well, for one, the cost to announce this order was tiny compared to a traditional order.  These aircraft will be on operational leases and it appears AA didn’t have to put much money down for these firms orders (if any.) 

This order will be of dramatic benefit for the airline when it comes to saving on fuel.  If AA had a fully modern fleet now, it’s likely it would not have lost money this past quarter.   The benefit in fuel savings on this order will take a while to be realized. 

This is the first official mention of a 737 re-engine and I think we’re going to see some gnashing of teeth on the part of some airlines over the idea that a fresh design is likely 10+ years away.  This might be good for AA, it isn’t good, necessarily for Southwest Airlines or Ryanair.

This is a big win for CFM and its LEAP56 engine and while the engine is only announced for the 737RE, it is almost certain that that engine will be chosen for the A320 family.

What this isn’t is a loss for Boeing.  The post I composed and just deleted talked about how having a single source for your aircraft wasn’t really practical for an airline of AA’s size and all other SuperLegacy and Legacy airlines operate mixed fleets already as a function of a merger.  What those airlines have learned is that neither Boeing nor Airbus has a supply chain that can meet all their needs all of the time and on time.  It wasn’t irrational for AA to go to Airbus.

However, this is a pretty big loss for Boeing in the psychological warfare arena of aircraft sales.  This will be spun many ways but at the end of the day, Boeing got bruised and is not the aircraft manufacturer who gets to crow about success today.  Expect other SuperLegacy airlines to take a long, hard look at this deal and begin to negotiate for their own SuperDeals on aircraft with both manufacturers. 

Why did Airbus win more orders?  Because AA already has a large 737 fleet.  It didn’t need quite as many 737s.  This really is an order of equals practically speaking. 

I do think the A321NEO will be the 757-ish replacement and I do not think that AA will upsize aircraft to the 737-900ER down the line.  Therefore, I think the A320 family order will be either

A) A full mix of A319/320/321 aircraft with multiple bases or

B) A320/A321 aircraft with focused bases

I rather doubt that the A319 or the B737-700 will be ordered at all.  This order is about a marginal increase in capacity over time for most routes with the 757s leaving ever so slowly over time. 

And that points out a glaring gap that I haven’t seen anyone talk about yet.  Through this order and previous small orders, American Airlines will have upguaged their entire fleet and particularly so in the next 5 to 7 years.  Presently, the smallest aircraft in its fleet will be the 737-800 or A320 at roughly 160 seats.

What serves the 120 to 150 seat range?  The MD-80’s are departing and rightfully so.  American Eagle has CRJ-700s that are configured from 63 to 65 seats and AA is currently scope clause limited on how many of these aircraft it can fly.  Now, AA has also announced that it will spin off American Eagle soon and we’ll talk about that in a future post but that only means AA can (and will) access other regional airlines for its sub-100 seat flying.

What fills the gap?  If AA manages to get a new pilot agreement that allows AA to subcontract its sub 150 seat flying, I’ll be rather shocked.  I do not think the pilots are going to cede that territory under the current contract or whatever agreement is made for the near future. 

I realize that AA has been serving markets that might demand a 120 to 130 seat aircraft with higher frequency using smaller jets but it can’t do that forever.  Is there another order for aircraft lurking in the background here?  Maybe.  The Bombardier CSeries does fit that whole very nicely and does it in harmony with this announced order.  In fact, it presently is the only airliner that does.  Embraer gets close but it doesn’t quite get there.   If I were Bombardier, I would be knocking on American Airlines’ door with a most excellent finance package for its CSeries CS100 and CS300.

There is one more question lingering as well . . .

How will American Airlines paint its A320 family?  The aircraft cannot be polished like its 737 counterparts.  I strongly suspect we’ll see a metallic silver used with the current paint scheme over that.

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Suddenly, there are small signs everywhere about the Southwest Airlines / Airtran Airways integration.  It Kansas City, Airtran is moving over to Southwest’s terminal and occupying SWA gates marked for their use.  A good move, in my opinion, because it starts associating Southwest with Airtran sooner rather than later.

Southwest has also kicked off a One LUV tour that recently stopped in Atlanta.  SWA employees visited Airtran crew areas at the airport to answer questions and generally welcome Airtran to the family.  Also a good move because it’s those face to face contacts that begin the formation of relationships that will be needed as the two airlines combine together more and more.

Wichita, Kansas has approved a move to continue subsidizing Airtran flights into and out of Wichita.  Wichita has wanted Southwest flights for a long, long time and this move seems oriented towards at least getting Southwest to try out Wichita for a brief while.   Currently, Airtran serves Wichita with flights to Atlanta only but perhaps Southwest will try out flights to other destinations that make more sense for Wichita such as Denver, Chicago or Dallas. 

I’m sure we’ll see more signs of integration over the next few months as well.  For instance, it would be relatively easy to move operations within the Southwest fold in Minneapolis, Chicago, Milwaukee, Baltimore, Denver and, well, you get the idea.  Except where space is an issue, I think we’ll see Airtran flights start moving into and out of Southwest gates instead.  There is a lot of overlap in this area and the only places where it might be tough are in those focus cities where Southwest is already constrained with gate space.

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Southwest and Airtran pilots have reached a tentative agreement on integrating seniority lists and a transition plan for doing so.  The sigh you just heard was Gary Kelly and team relaxing just a hair because this was the test for smoothness in this merger.   Conventional wisdom has it that a merger integration goes smoothly if the pilots manage to agree without too much rancor.

Southwest needed this.  It’s not just an indicator but a leader and most other labor unions will likely fall into agreement fairly rapidly if they see the first one worked out fairly and relatively quickly.  This was pretty quick for any airline merger. 

The details aren’t known yet and that is the real test.  Pilots’ unions are funny groups and have, by far, the most to lose in these deals.  They’re quick to disagree with their boards if they think they’re not getting handled fairly and splinter groups have been known to torpedo agreements. 

On the surface, it would appear to be a no brainer since Airtran pilots would start earning the exceptionally generous SWA salaries.  But seniority is *everything* in these deals and a generous salary doesn’t mean as much if an Airtran captain has to go back to being a first officer and has no chance for upgrade for years.  On the other hand, no SWA pilot is going to be happy if he sees his upgrade to captain opportunities suddenly diminish significantly because a whole bunch of another companies’ pilots just got put in front of him.

My guess?  Captains will stay captains and first officers will remain first officer and the blend will be based on some formula that takes into consideration just how long that pilot has been in his current seat.  The company probably made some guarantees on no outsourced flying and some growth (contingent upon the airline industry health).  To a pilot, growth means opportunity and job security.

It didn’t hurt that SWA made it clear over the past several days that there would be no layoffs as a result of the merger and given their record on layoffs, there was a lot of credibility behind that statement.

I felt that this would probably go pretty well if SWA pilots managed to not appear to be too grabby and I didn’t expect them to.  However, the real trouble area I think may exist is among flight attendants.   SWA flight attendants earn well and have a great deal of flexibility.  In addition, they have a very senior core that is, by definition, far senior to the typical Airtran flight attendant.  An equitable agreement based on seniority is going to put a lot of Airtran FA’s down at the bottom. 

Given that flight attendants earn less than, say, pilots, their basing opportunities are very important to them as its defines lifestyle.  What happens if a great deal of SWA flight attendants can displace Airtran FA’s in Atlanta?

While I doubt that pilots are “fencing off” bases (although its possible), I wouldn’t be surprised to see the FA’s fence off certain bases (at least in Airtran focus cities) for Airtran FA’s only. 

This is good news for everyone and it will be very interesting to see the flight attendant agreement get done.

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Boeing Commercial Aircraft President Jim Albaugh met with American Airlines executives, including CEO Gerard Arpey, a couple of days ago and I think, tentatively, this is a positive development with Boeing.  On the surface, it certainly signals that Boeing does consider American Airlines a very important customer.  It *might* signal that Boeing has started to realize that airlines really aren’t just poking at them over a new single aisle aircraft.

I say might because there is a tendency for Boeing to not always recognize that a customer really is at risk until the very last moment. 

Nevertheless, Boeing presidents don’t go calling on just every airline executive team on a whim.  It would be my hope that Boeing got an earful on what is needed and, more importantly, the timing for meeting that need.  For about a year, all we’ve heard is trade studies about re-engining vs new single aisle aircraft and that things tilt a bit towards an all new aircraft for 2019. 

I think airlines would like to hear about a new single aisle aircraft kicking off development asap with entry into service around 2017.  There is probably some wiggle room there but only after commitments have been made.

While news reports say Albaugh visited American Airlines, I do wonder if Southwest wasn’t visitied as well.  If not, I expect we’ll see another cannon shot across Boeing’s bow from SWA in the near future.

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A reader wrote me yesterday about some pricing he saw between Kansas City and New York City (Newark Liberty International Airport aka EWR)  recently.  In the past, he’s always flown Continental on a regional jet non stop for a competitive price.  Most recently, he saw the same flights for far higher prices than in the past with other airlines offering one stop pricing that reflected what he was used to.  He asked if this was one effect of the recent Continental / United merger and I said that I didn’t think so.

I think the pricing were seeing from airlines today, particularly on non-stop exclusive routes, is reflective of just how hard it is to make money in this business today.   In United’s case, they probably enjoy more competition into and out of Newark than they used to.  However, they also need to earn more money and show promised profits.  On exclusive non-stop routes, they’re going to price seats for the most they can get. 

Business travelers do differentiate between non-stop and multi-stop flights.  They may be closed off from traveling in business class these days but most aren’t being required to take the least expensive coach seat.  In the reader’s particular market, they probably fill those regional jets with mostly business travelers and business travelers remain a big piece of profit for airlines.

I pointed out to the reader that he could probably enjoy almost as quick a flight on more comfortable equipment if he shopped Southwest Airlines but that points up another issue.  With the conflicts going on with Global Distribution Systems and American Airlines as well as the fact that LCC carriers in many cases are using GDS companies and/or online travel agencies to advertise their fares.  Absence of those fares being shown makes it possible for network carriers to raise prices on those GDS systems and earn more.

And this is why I would like to see LCC air fares start showing up on these travel websites.  I think there is quite a bit of low hanging fruit for the LCCs to reach on these sites and I think the travel websites have the potential to continue on in the travel world if they find a way to embrace and entice LCC carriers.  In addition, it narrows the fare gap we see between network carriers and LCCs.

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One consequence of the A321NEO is that everyone is talking about it being a Boeing 757 replacement.  Everyone talks about how the 757 fleet needs to be replaced and I think quite a few people are missing the point on the 757.

It’s an aircraft conceived of in a regulated era, born in a deregulated era and an airplane that has never really been part of a family of aircraft.  It’s a red headed step child that despite its status, airlines found a use for it.  It was built with too much range, too much power and for an airline model that didn’t include hubs and frequency.

Everyone talks about airlines needing to replace their 757 fleets and its true that these airliners are now old by any standard and will need replacement in the fleet.  But the one thing we shouldn’t do is assume that the mission being served by the 757 is the mission that airlines want to use their next aircraft for.

I’m not sure there needs to be a 757 replacement.  I’m also not sure that we don’t need a 757 replacement.  The original missions that Boeing conceived of for the 757 are not the missions that airliner served primarily.  It would be a mistake to assume that airlines want to replace 1000 757s that are serving long, thin trans-Atlantic routes or trans-continental routes.  They don’t.  Airlines simply found that they could use that expensive asset on those routes and earn money.

But airlines may well have already identified how they want to serve that mission in the future and it may well not resemble anything close to the current 757.

Boeing is right to let the airlines define the missions.  The next Boeing 757-like airliner to come from Boeing will be from a family of aircraft and it never really was the 737-900ER even though that airliner can serve in place of the 757 on most domestic routes.

I don’t think we’ll ever see such a hybrid airliner made again.  Can you imagine Boeing or Airbus sizing an aircraft to fit a smallish market and then providing it with over-powered engines?  I can’t.   Building a family of airliners is about tailoring the aircraft to fit the missions very well and todays missions are very different than they were even in the 757s heyday.

Don’t expect the A321NEO to be a 757 replacement.  Expect it to be an excellent coast to coast airliner for longer, thinner routes between those cities.  I don’t think it will be used for Hawaiian and trans-Atlantic routes in great numbers although it may get employed on a few of those missions if it can work and make an airline money.

Who says airlines want to fly such an aircraft to all kinds of cities in Europe?  I don’t.  In fact, I think that airlines aren’t that interested in such routes (they may be profitable but only just so) being served by such small aircraft.  Such routes don’t yield a very attractive number of dollars on a daily basis and they do come with risks to that profit that airlines don’t enjoy (fuel stops, for instance).

I would also point out that the engines needed for a “true” 757-like replacement don’t exist today.  There are no new next generation engines in those thrust ranges at this time and I’m unaware of any real plans or needs for such in the next ten years either.

But if airlines want a 190 seat trans-Atlantic capable airliner that is efficient and reliable, they’ll communicate that to Boeing and Airbus.  The fact that Airbus and Boeing aren’t running around and chatting up such an idea kind of indicates to me that that requirement really isn’t in the top 5 airline mission requirements being talked about today.

The next generation of single aisle airliners will be different than the current generations because those missions evolve.  Airlines will be asking for something different than just a better 737-700 replacement.  They’ll be asking for a range that will serve their current and projected future needs and that will define airliner families that look very different from the Boeing 737 and Airbus A320 series.

If anything, I think the mistake Airbus made with its NEO development is that it is only offering better engines, not a better aircraft.   It won’t have a better cockpit, better seat layout and it won’t be lighter or more durable or more reliable.  That’s where Boeing can really zing Airbus and where it should.

However, for Boeing to do so, they have to, you know, announce the damn project and get on with it.

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American Eagle / American Airlines is being singled out for having (14) 3-hour delays out of a total of 16 in May.   That’s quite a lot and they happened all on one day when there was, so to speak, a perfect storm of weather going on in Chicago.  By all accounts, passengers held on board for 3+ hours were treated very well and that’s the good news from all of this. 

Some would say that American had no choice in this particular instance but I ask everyone to consider what I think are  interesting facts about this particular day in Chicago.   First, it happened at one of the world’s busiest airports, Chicago.  Second, the diversity of airlines at Chicago is exceptional for any airport.  Third, not one but two airlines are hubbed at Chicago’s O’Hare airport: American and United.

I’m not sure I buy that all 14 were unavoidable since by all appearances, most every other airline managed to figure out their problems and take care of them.  It’s worth looking into to find out why American Eagle was so much more impacted by this than, say, United Airlines or its regional airlines. 

I also think that the conditions of weather at O’Hare are exactly what the 3-Hour rule has provided for when it comes to exceptions to it.  The weather would not allow deplaning in several instances (and I do buy this) and the congestion wouldn’t necessarily allow safe and effective returns to the gates either. 

This development isn’t a reason to revisit the rule although I’ve stated before and I’ll state it again:  I think this should be a 4 hour rule.   It would allow more flow of passengers through airports in these situations and fewer cancellations while stopping egregious delays that effectively end up trapping customers in long, thin, metal tubes. 

While I think the rule would be better revised to 4 hours, I also think that before we give American Airlines a pass, a little investigation should be performed to see how the airline was addressing these delays and what, if any, real and practical alternatives were available.

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