An Emirates A380 on approach to London Heathrow airport was struck by lightning (and rather dramatically I might add) and it is captured on video.

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The US Airline Pilots Association representing all of US Airways pilots is calling for the resignation of US Airways Vice President of Safety and Regulatory Compliance Paul Morell citing unaddressed lapses in safety as the primary reason.

This is what happens when you don’t have respectable relations with your labor union groups.  Safety is popular target for airline unions because it is very difficult for the airline to address the topic without appearing to be on the defense for something that may not have even been going on.

And airline unions target their company when they haven’t gotten a deal and it looks as if they aren’t going to get one soon.  It applies pressure. 

Is US  Airways unsafe?  No, it isn’t.  The airline is clearly running a safe operation.  Whether or not it could be even safer is a question I cannot answer (and nor can the airline pilots either.)  That calls for an objective third party audit of US Airways safety.  Coincidentally, it appears that US Airways declined to participate in such a study because that is what USAPA talks about in its public complaints.

I am a big advocate for there being as much transparency and objectivity possible in evaluating safety at airlines.  I think participation in programs where pilots can self report safety incidents without consequence is an excellent idea and I firmly believe that airlines should participate wherever possible in third party studies. 

That said, US Airways may have had an excellent reason for declining participation and we’ll leave that up to them for a response.

I have to take a shot at USAPA for this:  It is no less responsible to make safety a political issue than it is for an airline to decline participation in third party safety studies.  There are plenty of issues to talk about but casting aspersions on the safety of airline to apply pressure is over the line.

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Last week, a total of three Muslim imams were denied travel to Charlotte, North Carolina by two different airlines.  One in New York City by American Airlines (who offered no real reason why) and two more by Atlantic Southeast Airlines operating for Delta Airlines (because a pilot felt that some passengers remained uncomfortable with their presence despite not one but two security screenings.)

I’ve already posted about this and I’ve already said shame on Delta.  I’ll say shame on American Airlines as well. 

Focusing on someone’s religion as a security risk is extremely foolhardy.  Ignorance is not an acceptable excuse even where security is concerned.  More importantly, we’ve already experience far too many of these incidents in the past 10 years to excuse flight crew or security personnel behaviour on this subject. 

Denying these people the ability to fly is tantamount to making them second class citizens (whatever their nationality) for no other reason than their religion.   As a nation, we have historically resisted allowing religion to be a reason to persecute someone but in the case of muslims and particularly Muslims wearing traditional robes and headgear, we seem to have suddenly accepted that that is OK.  Just because someone speaks a foreign language (Arabic or any other language indigenous to a Muslim culture), we’ve almost enthusiastically treated those people as security risks.

This is sheer stupidity for two reasons.  First and foremost, it goes against the very grain of our nation and our constitution and the gains we’ve made with respect to civil rights over the past 50 years.  It’s an insult to our national culture and our national laws. 

Second, it shows we aren’t being objective about our security concerns.  Good security comes from good objectivity, not subjectivity.   You can no more point to Muslims as a risk by virture of their terrorist acts than you can point to Catholics as being a risk by virture of the terrorist acts of the IRA.  In fact, I would point out that if that was valid criteria, you would actually be at greater risk from Irish Catholics than you would a Muslim from Yemen because the Irish Catholic can far more easily “blend in” with our national background. 

As far as I can tell, we don’t ban Irish Catholics from flights because of their religion or accent.  Oddly enough, we do not even ban Hindi people because of their association with violent Hindu extremists. 

I blame the government for promoting this behaviour but I particularly blame the airlines for allowing their staff to practice it.   The best and only response to either of the incidents from last week would have been to find a flight crew that has good sense and board these people for their flights.  Tolerating this racism within a company is stupid and bad business.

An abundance of cautiou doesn’t mean you get to give into predjudice.  And let me point out that if we continue to tolerate this, there is no reason that some other class of people can’t be identified in the future to practice this predjudice against.  That class could be white women over 50 or black children or hispanic males over 20 or white men between 30 and 40.  You aren’t immune to this potential.

Then there is Rageh Al-Murisi, the man who banged on an American Airlines cockpit door on a flight to San Francisco.  It’s notable that this man wasn’t dressed in a way that would particularly identify him as a Muslim or an imam and he got onto his plane.

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The name International Airlines Group, holding company for both British Airways and Iberia and managed by BA’s Willie Walsh, couldn’t have a more appropriate name.  Or more bland.  But that is the stated purpose since IAG is about managing brands across the world rather than conquering the world with one brand.

That kind of makes other airlines and industry watchers wonder who the next target is.   Many considered QANTAS a target but that almost seems illogical to me despite the close ties between QANTAS and BA.  It doesn’t get them much more in QANTAS’ part of the world.  But it is true that it is a strong brand.

Instead, I think IAG is looking for strong brands in parts of the world that they want more access to.   I think that means Asia and I think that means North America.  Those are the two centers of commerce that Europe does business with and adding a brand in each of those areas only helps grow the business. 

The challenge is adding a brand from another country because most countries still have laws governing ownership of their airlines.  So that, to me, means targeting brands in countries with liberal, commerce centered laws and/or in British Commonwealth nations. 

It’s the Cathay Pacifics, Air Canadas and Air New Zealands that would, to me, appear to be more attractive on a global basis.  Strong brands with strong customer loyalty. 

It won’t be about access to facilities or fleets.  It’ll be about identify brand strength with a service product that harmonizes reasonably well with IAGs current brands.  It will be about getting strong executives who’ve crafted strong business plans for their regions.  It won’t be about getting a firesale price on airline because, frankly, those airlines have nothing to offer but a few assets and assets are easy to buy.

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Richard Anderson, CEO of Delta Airlines, has pointedly and consistently talked about managing an airline for a profit and while that seems like a no brainer, I’m not sure everyone does that. 

Delta has recently announced cuts in capacity and while that, too, seems like a no brainer, I think people miss Delta’s point.  If a route isn’t earning a profit it needs to go.  Few airlines use this as their criteria.   The larger point from Delta is that it isn’t about market share and I agree. 

In addition to capacity cuts, Delta has also announced a program targeted towards early retirements to trim their labor force as well.   This is to match capacity cuts and rightfully so.  Oh, mind you, I think this is also about getting the work force to average a younger age in seniority as well but that is something airlines have to do on a regular basis as their work force tend to stay with not nearly as much “churn” as other large companies experience.

Southwest has always managed for a profit and it has proven it can be done.  It’s kept its workforce levels consistent with its business and, more importantly, it doesn’t fly routes that cannot regularly produce profit.  Not for nothing, this is one reason why several cities are worried that SWA will cut Airtran routes currently serving them with subsidies.  SWA doesn’t see subsidies as a sustainable profit model.

There is something that I often remember my father telling me about the airline business (he’s a former EVP from an airline no longer in business and from 30 years ago.  You have to look at ever route between two cities as a small, entreprenurial business.  You have to invest in the business and you have to get a return on that investment in a timely manner.  Failing that, you have to drop it and move on to other opportunities.

This is what Delta is doing.  Instead of managing for surival, they’re managing for profit.  Instead of managing for sheer size, they’re managing for profit.   Instead of managing on the basis of what another guy is doing, they’re managing for profit.   In Delta’s most recent earnings call, Richard Anderson made the comment:  “This isn’t a hobby.” and I think that underscores the proper attitude about being results oriented.

This is not what we seeing American Airlines doing.  It wasn’t my sense that United Airlines was doing this pre-merger with Continental and it isn’t necessarily my sense that even some LCC carriers such as JetBlue are making this their goal.  Notably, I do think that US Airways is doing this and the results show.

So when does someone ask when AA’s management team plans to manage for profit?  I haven’t seen AA manage their route system for profitability.  I haven’t seen them manage their labor force for profits.  I haven’t seen them manage their fleet for profitability.  I’ve seen them managing for the status quo in the hopes that other airlines will return to AA’s fate when it comes to costs. 

The question is, why should you expect that when there has been a fundamental change in your competitors attitudes towards managing their business for profit?

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Muslim Clerics removed from flight.

It’s time we get over ourselves when it comes to Islam and clerics serving that religion and culture.   Shame on Delta and ASA for not replacing the pilot instead.

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American Airlines will be testing streaming video on two WiFi equipped airliners using the existing onboard GoGo system.  Apparently the GoGo system was robust enough to store this video and rather than be streamed from a ground location, the content will be stored onboard the aircraft and distributed via the onboard WiFi system.

I think wireless is a great idea for aircraft.  Weight is a fundamental issue on airplanes and WiFi allows this to be overcome in many cases.  However, I’m not so sure WiFi is ripe for this yet.  Streaming video is a bandwith hog even when sent to laptop devices (which in most cases can accept higher definition on screens that are often now as much as 17″.   What happens when 50 people stream video from the same system at the same time on the same WiFi system?

Ensuring robust enough servers is easy.  Ensuring robust enough WiFi is not.  If customers experience buffering delays, this will be an epic fail in the test.  Especially if they’re paying for this content.  While you can boost WiFi bandwith by streaming it on an “N” standard, “N” standard is still pretty new.  New laptop users will have it but not necessarily laptops that are as little as 3 years old.  Bandwith is still a problem to solve.

I hope this is relatively successful.  My instincts tell me that aircraft aren’t ready for streaming video via WiFi with the current technology.  At minimum, I think you may need to be using “N” standard for this.  In fact, the real solution might be a power outlet and an ethernet connection at every seat which is fundamentally cheaper and lighter than an entire IFE system at every seat.

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Mayor of Fort Worth, Mike Moncrief, with the agreement of Dallas’ Mayor Dwaine Carraway, says that Southwest needs to pull Airtran out of DFW much faster than what has been so far indicated.  There is a belief that Southwest might not have Airtran exit DFW until December.

Southwest, under the agreement over Love Field, is supposed to lose one gate for every gate it operates at DFW.  Everyone with an opinion agrees that it was not practical to expect SWA to stop Airtran flights to DFW upon the day they consummated the merger.  Gary Kelly has said from the beginning that there is an urgent intent to transition away from DFW as quickly as possible but has never stated what the date is for that.

Now quite a few parties in Dallas want to see Southwest commit to an expeditious transition and one that doesn’t see December as a target date. 

You wouldn’t think that an entire community would be so hostile towards an airline that by anyone’s measure has done so much for the community.   This is the other, uglier side to Southwest’s history in Dallas and I’ve always found it entirely distasteful.   It’s in poor taste to engage in this hostility towards an $11billion company that has remained loyal to the Metroplex and which has certainly behaved as a far better corporate citizen than another Metroplex based airline that happens to sit within Fort Worth city limits.

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Advertising Age had a brief interview with Herb Kelleher of Southwest Airlines recently and one thing about it struck me quickly.  It’s a lesson many businesses could stand to learn.

When things got tough for Southwest, they spent more, not less, on advertising and marketing. 

It’s a lesson I learned myself more than 10 years ago when I was partners in a construction firm and new construction jobs dried up.  You don’t fold up, you go hunt the business even harder. 

It seems like an obvious thing but it really isn’t.  Just take a look around you and at what has happened with a great many businesses over the past 3 years.  The first reaction to bad times is to stop spending money . . . period.  People retrench and hunch down to try to withstand the storm about to hit. 

And a few others go and innovate.  With Southwest, it’s advertising but it is much more as well.  They innovate.  They look for smart savings.  They embrace change and they empower people to use good judgement in executing that change.  In the 1990’s, when fuel prices spiked as a result of the first Gulf War, Southwest pilots suddenly started requesting higher altitudes on their flights to the surprise of other airlines and air controllers.  In fact, they got downright aggressive about getting optimal altitudes for their flights.  Why?  Because it saved money. 

Now, among US airlines, Southwest is virtually the only one embracing the need to invest in GPS technology to be prepared for NextGen air traffic control.  Other airlines are making statements to the press about its expense and how the US government should pay for it.  Southwest has it, is implementing it and benefitting from it.  It saves them money now and it will save them more money in the future. 

When Boeing was designing the cockpit for the Next Generation 737 aircraft, Southwest (Boeing’s biggest customer for the 737) asked that the new flat panel cockpits be designed to emulate the “steam” gauges being used in their 737-200/300 fleet so that there would be no transition between the aircraft for its pilots.  Why?  Well, training was one reason but there was a better one underlying that:  Pilots would be able to seemely switch from aircraft to aircraft during their flight day without having to slow down and re-think what they were doing each time they took over a new aircraft.  That made turning flights quickly still doable.

What do you do when it gets tough?  Innovate and advertise.  That’s what Southwest does.

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Southwest and Airtran are now one airline legally although both will continue to operate separately in varying degrees during their transition to one operation.  Once change that will come sooner than later and one that will disappoint me at that is Airtran leaving DFW airport.  Southwest isn’t permitted to fly from both airlines because of a clause in the law(s) governing operations from Love Field Airport. 

It disappoints me because Airtran was my “Southwest Alternative” when it came to flying to destinations on the East Coast.  It  was faster and easier to fly Airtran via Atlanta to many of those destinations and it was just as inexpensive.  Now, those flights will have to be on Southwest which is hamstrung with the Wright Amendment law(s). 

I’ll also be disappointed to see Airtran’s business class go away.  It was a great value to upgrade to and offered what was most important (to me) which was better seating.   It’s not about the food or being addressed by my name or a mint, it’s about being more comfortable for what was a great price.

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Southwest Airlines is now the number 2 carrier at Denver with Frontier Airlines (as well as Republic Airways flying) dropping to number 3 now.  The good news:  this is more at the expense of United Airlines than Frontier.  the bad news:  dominance is dominance. 

I’m not entirely surprised at SWA’s success at Denver but I do think that, like others, it is a bit surprising that this took as long as it did.  United, Frontier and Southwest have been in a pitched battle for that market for years now.  This was never a battle about SWA beating Frontier.  This battle was about SWA owning market share and pushing out more expensive incumbents.  That would be United.

Frontier never was and still is not big enough to be a real threat to Southwest.  Based on Frontier’s route decisions, they aren’t going to be a real threat to SWA either.  Frontier is looking for low hanging fruit that has little or no competition.  Southwest is connecting focus cities to focus cities region by region and sees Denver as a good place to establish itself on several of those mainline routes. 

If anyone should fear Southwest, it’s United.  You can’t sustain attacks from two low cost carriers forever and stick around.  As the ContiUnited merger plays out in integration, I expect Denver to look less and less important to that airline as a hub.

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Despite the exceptional record of profitability and growth for Southwest airlines, I’ve often felt that the financial markets do not treat Southwest quite as the airline it is.  In fact, I can’t identify another airline in the United States that has such a record but, despite that, its stock price often is low and my perception is that analysts don’t trust the success.

The Dallas Morning News Aviation Blog has an entry about Standard & Poor keeping a close eye on SWA now that it is about to close on its merger.  There is a belief that this merger will weaken SWA’s financial profile and that SWA will incur greater financial risk going forward.  There is no doubt that this exists as a possibility but it seems to ignore that Southwest’s strengths going into this merger. Strengths that other airlines didn’t have during other recent mergers.

I think Southwest will find it difficult to integrate parts of Airtran.  I think they will incur significant costs doing so and I think they’ll find it more difficult than they are portraying.  All of that said, I also think that SWA is better positioned to consummate this merger than virtually any other airline around.  I think that we’ll see more harmony in the labor integration than we’ve seen in other mergers (even Delta who did it relatively well has been facing union election after union election every since it merged with Northwest.)

The fleet integration has far less risk than what we’ve seen in other mergers.  The pathway forward in rationalizing routes is far more clear than in other mergers and the Justice Department hasn’t identified any conflicts of real concern in this marriage either. 

So why do others get a pass?  Take a look at the share prices of United Airlines since the ContiUnited merger.  Both airlines had significant financial risks and significant labor risks in that merger and, yet, the share price is exceptionally high with a far more cloudy future than Southwest has.

I think Southwest tends to be thought of as a regional player despite its national stature.  And I think it remains difficult for even educated analysts to trust the year after year success that Southwest has enjoyed.  I believe that they feel it is still too good to be true and they continue to wait for the other shoe to drop.  After more than 25 years of financial success, I think it’s time to get over that and value this airline for what it is:  Possibly the most long term successful airline in existence.

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It comes as no surprise that air fares are rising again.  They rise every time oil rises in price.  They generally rise out of proportion to the cost of oil and there is a reason for that, too.  

One reason air fares are rising a bit more rapidly this time compared to 3 years ago despite oil prices being somewhat less still is that refiners are actually charging more for the refined fuel than they did a few years ago.  Believe it or not, airlines don’t have quite the pricing power people think they have when it comes to the pump price of their fuel.  It’s my observation that the only one who makes money when oil prices are volatile are the oil companies who sell refined products such as fuel. 

Airlines actually did a pretty good job of spotting their dilemma and bidding the air fares upwards rapidly.  As someone formally educated in economics, it fascinates me to watch air fare volatility due to sudden rises in costs.  Unlike many other “free market” areas in the world, the air fare world operates with more “freedom” and more “anti-competitive” moves than you get to see in most industries. 

It works like an auction.  One airline generally “bids up” airfares with an increase and waits to see if other airlines match them.  Airlines can’t cooperate on prices but they can signal each other.  A fare increase is a question that reads like “Can we all raise prices and get along?”  The response is whether or not other airlines raise prices as well.  Another airlines or a few airlines may well raise their prices, too and generally after a few days, usually not more than a week, we know if they’ll stay there.  Sometimes several airlines raise prices but the price increase fails because one airline doesn’t agree. 

Generally speaking, it’s the major and nationwide airlines that get to set prices that way.  It’s the smaller, low cost airlines that can defeat those prices on specific routes but it is rare for those smaller, low cost airlines to set a price increase nationally. 

Southwest Airlines has often been the spoiler in fare increases.  SWA is a lot more “national” than most realize and it manages its costs a bit better than most, too.  In addition, that airline is willing to work from slimmer margins than most.  But in this most recent season of rising air fares, SWA hasn’t played the spoiler very often.  It has a few times but SWA has actually become a leading indicator as to air fares by agreeing to those rising prices far more often than it historically has.

Over the past 3 months, airlines have agreed to these increases far more than is usual.  Why?  Consolidation.  There are three SuperLegacy airlines left and one “national” LCC carrier and one legacy remain as well.  There are no upstarts remaining that can push air fares down and those who are setting prices all have costs that are closer to each other than has been the case in a long time. 

Good for the airline industry?  No, not really.  There is less competition and the competition that remains actually has a reduced incentive find savings elsewhere.  Good for the consumer?  No, not really.  Higher air fares lead to people reducing their travel which has other implications for the travel industry.

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If you fly enough, you’ll have a bad experience on an airline.  It is inevitable and one bad experience does not describe an airline’s ability to delivery service.  Too many people judge airlines on one experience, in my opinion.

Social media can be similar.  One bad rant does not describe an airline.  However, one bad rant does have the potential to become the story.  Recognizing that, many airlines have adopted social media departments to help control the story.  I’m fine with that because why shouldn’t an airline be able to defend itself?

However, then there are the airlines who adopt social media solely to try to control the story and those airlines are missing the picture when it comes to social media.   Participating in the story is just one half of the objective to social media.  The other half is responding. 

In the social media sphere, it’s about quick and timely answers with real solutions.  Some airlines have figured that out, some haven’t.  Some airlines who have figured that out still slip and fall from time to time.  That’s the nature of the game in social media. 

It’s about risk.  Social media is about accepting a certain amount of risk in letting your social media department respond with a certain freedom accepting the idea that vetting an answer or only permitting non-responsive answers isn’t going to promote a good image.  Instead, airines who do this well accept the idea that you cannot always make a bad story go away even when you do answer appropriately.  Think Kevin Smith and Southwest Airlines.

Now we have This Rant about American Airlines.  American Airlines doesn’t possess the kind of corporate culture that succeeds in social media.  The first word of advice I would give them is that if you cannot empower your social media team to make something happen, stay out of social media.  Lame responses really are worse than no response and, what’s more, they give your competition an opportunity to poke at you. 

What this gentlemen describes, I’m sad to say, is far more common than it should be.  His experiences are exactly what I have experienced over and over again.  They are the reason why it is a better bet for me to fly SWA or Airtran or Continental with a connecting city than it is to get on AA to fly someplace non-stop.  The really insulting part of it is that if you are flying from an AA hub, you more than likely are paying a higher price for that non-stop flight. 

Furthermore, these kinds of experiences including the social media Twitter response point up to just how little AA does value its customers.

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This past week, analysts chastised American Airlines for what they perceive to be lackluster capacity control in light of rising fuel costs.  What they want is a tighter market for airplane seats and for fares to rise even more.   Airlines began reducing capacity by removing inefficient aircraft from their fleets either temporarily or permanently and put plans for new routes (i.e. growth) on hold.  This resulted in higher fares and, frankly, some pretty remarkable turnarounds for airlines.

In fact, it worked so well, analysts became instant fans.  The problem is, such capacity discipline is, in part, dependent upon the entire industry practicing it.  As you can imagine, it doesn’t work too well when one airline is reducing capacity and another airline adds it right back.  It works when the entire industry is facing a sudden change in market conditions that affects all of them equally.  Sudden, unanticipated rises in fuel costs are a good example of that.

But it isn’t the solution for the airline industry in terms of long term profitability.

There are solutions to rising costs that don’t involve reducing or restricting capacity.  Airlines can get more labor productivity or reduce costs elsewhere such as in food and drink.  They can lighten the aircraft to lessen fuel burn and they can add improvements to their aircraft to improve fuel efficiency.  Some have the cash to add newer, more fuel efficient aircraft to their fleet and some don’t.  In other words, not all airlines are created equal and while one set of airlines may wish for capacity control, another set of airlines may well see opportunity in that move.

Costs aren’t the only thing driving an airline either.  One airline’s flight attendant labor hour may equal another flight attendant’s labor hour in pay but not productivity.  One airline may well be managing their fuel hedging better than another.  One airline may have a younger flight crew than another as well. Capacity control can only do so much.

Capacity control is the short term solution to a long term problem.  Short term solutions don’t fix companies and they don’t promote good strategy.  What analysts should be calling for is better management, better fleet planning and better labor relations.   The value of that stock will ultimately be better for a longer period of time when the company is managed better over a longer period of time.

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The Department of  Transportation has announced new rules governing airline behaviour in a variety of areas that should become firm in about 120 days.  First off:  Baggage fees.

Airlines will be required to refund baggage fees in the event that the airline loses a piece of checked baggage.  This, to me, is a no brainer and I’m going to make a prediction that airlines are going to cast about to find a loophole in this rule.  I think someone is going to try to change the “contract” for carrying this luggage.   Airlines are going to be faced with a lot of demands for refunds as a result of this and not only is that lost revenue, it also spells out additional costs in managing those refunds.

International airlines will have a “4-hour” rule mandating departure take place within 4 hours of leaving the gate.  They’ll also be required to supply food and water after 2 hours.  I think this is a fine idea and, frankly, I would even support a change of the domestic rule to 4 hours as well.  Both would be reasonable in my opinion. 

Airlines will be required to prominently display all potential fees and taxes for their fares on their websites.  I’m still trying to find the rules so that I can read them but I do wonder if this requirement applies to fares displayed on websites (and other venues) maintained by other companies.  Regardless, this one is a no brainer to me.  Airlines should be required to have a bit more transparency in this area.   Now it is time for consumers to step up and *read* what they are buying.

The airline industry response to this is roughly “Rules Bad!  Market forces good!” 

No, not really.  There is such a thing as too much regulation.  However, airlines are huge corporations with a lot of power on their side.  To act as if individual consumers can force this change if they want it is disingenous.  Government regulation is also good and in these cases, it’s about leveling the playing field between the consumers and the airlines. 

However, I’ll also say that I believe that with these rules, the playing field is leveled and it is now up to the consumers to do their work.  It’s time to read what is displayed with respect to the fares you are shopping.  It’s up to you to claim your baggage fee refund.  And it’s time to stop acting like every departure delay is a conspiracy against you.  In short, it is time to act like responsible adults instead of like children enjoying a temper tantrum.  You are getting what you asked for so now you need to step up and behave appropriately as well.

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They did it again.  AMR, parent company of American Airlines, has lost money for the 1st quarter of this year totaling $436 million.  Ironically, AA executives will likely earn bonus compensation this year because of the way their compensation deal is structured to offer shares in the event that the 10 major shrink to a lesser number.  They have.

1st Quarter Earnings reports will probably show just a few airlinese earning a profit:  Southwest, JetBlue and Alaska Airlines.  Losses will be blamed on higher fuel prices (they are) and airlines earning a profit will have that attributed to being a low cost carrier with lower costs.

That isn’t so true.  Southwest’s costs are less than, say, American Airlines but they are no longer the lowest in the business.  Alaska Airlines is certainly not a low cost carrier as they operate like a legacy airline and they are a legacy airline.  They have, however, been smart in renewing their fleet with very fuel efficient aircraft in contrast to the other legacy airlines who haven’t. 

There are a few lessons here:  Fuel is and will probably be the most volatile component in airline operations going forward.   Labor may not be the key driver in airline costs anymore.  Fuel efficiency is probably going to win over “cost of ownership” when it comes to the decision of buying new aircraft.  Delta’s model of retaining old aircraft may end up being a very poor strategy with volatile fuel prices.  Finally, good labor relations leads to good productivity and good productivity leads to profits.  All three of those airlines work hard to maintain good employee relations.

Back to AMR:  It’s unsurprising that the flight attendants are ranting at American Airlines for its poor performance.  Their methods are incendiary but their point should be taken:  This isn’t a leadership team that has performed.  Mitigating losses to a lower level isn’t performance.  Particularly when taken into account over the past 10 years. 

Arguing that the compensation paid to the executive team is necessary to attract competence is probably a valid point.  AA has often argued that it has to pay the salaries it pays in order to attract talent and keep it.  The question that, I think, has gone unasked is:  Is this really a top talent team? 

Can you really argue at this point that the executive team is full of top performers when the total losses over the past 10 years adds up to over $11 billion?  Pay the compensation, absolutely.  But perhaps it’s time to pay it to airline talent that have a better track record.

Remember that this is the team whose corner stone strategy includes waiting for other airlines to have the same labor costs as they do.

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AMR has said in today’s financial results call that it will order an additional 2 more 777-300ER aircraft from Boeing. 

Is American Airlines opening up piggy banks one at a time and counting their pennies and only ordering aircraft as it is sure it can pay for them?  This makes for 5 total aircraft ordered of the 777-300ER over the past 4 months.  The orders, so far, were initially for 2 with one added the following month and now an additional 2 more added.  Each of these aircraft will be delivered in the 2012-2013 time period.

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Japan’s Sendai Airport, scene of major damage from the tsunami and featured in this post, has re-opened for service again.  According to Today in the Sky blog, Sendai was cleaned up with a great deal of help from US servicemen.

The airport still has a long way to go in being completely restored to business.  However, Sendai was able to accept its first commercial flight from Japan Airlines just 30 days (April 13) after the disaster.  Apparently much of the cleanup was performed by US servicement who got started just hours after the tsunami when they cleared a small portion for their aircraft to land.  The work was done quietly which was in accordance with directives to maintain a low profile during relief efforts.  When the airport re-opened, the US servicemen were already gone.

From my own perspective, this kind of thing is actually more in accordance with how US servicemen usually operate when assisting with relief in disasters.  It’s selfless and it never embodies chest thumping.

Filed under: Airline News by ajax
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Aeromexico, Mexico’s flagship airline these days, says its IPO (Initial Public Offering) was oversubscribed by two times.  The airline managed to bring in about $330 million ($3.9 billion pesos) from the IPO on Friday.

These funds will be used to finance the purchase of 10 Embraer 190 jets and 10 Boeing 737s.  The airline already operates 40 737s and has so far added 8 Embraer 190 jets. 

The IPO represents 15% of the company’s equity presently.  Aeromexico was acquired by Mexican investors in 2009 and instead of representing a cash out by investors, this signals new investment in the airline which couldn’t come too soon.

Aeromexico owns a mixed fleet that is both old and new.  It expects to receive new 787s to replace its aging 767s soon and it still operates almost 40 ERJ-145 aircraft.  While fuel is somewhat cheap in Mexico, it still is a prime driver of costs for airlines there.

Filed under: Airline News by ajax
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