The Today In The Sky Blog has this report today.  Northwest Airlines unions apparently took exception to management directly asking workers what kind of work environment they would prefer in the upcoming Delta / Northwest merger.

The ability of unions to shoot themselves in the foot in this industry boggles the mind.  This union reaction clearly spells stormy weather for Delta in the post-merger organization too.  Between this story and my last post, it becomes clear that union leadership at Northwest is aligned with no one, including their membership, other than themselves and maintaining their current power.  That is not the purpose of a union now or in the past. 

Reactions like this only serve to set up a battle line between the union and the airline and today’s airlines cannot afford such conflict if they are to concentrate on succeeding.  It is, first and foremost, in the interests of the union for the airline to make a profit for when they do, they better further their argument for better pay and work conditions.  It isn’t in the airlines best interest to simply cave into craven demands underlined with childish behavior.

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The Fort Worth Star Telegram blog, Sky Talk, reports that the union staff of the Allied Pilots Association will be doing informational picketing of their offices today.  The union, representing the support staff of the pilots and managers of the APA, says they have been working without a contract for over 400 days now.

 Update (10:25am CDT):  The Dallas Morning News now carries this story on its blog.

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United just announced a new Buy on Board food program for both their domestic and international flights.  You can read all about it here.

The basic summary is that snacks will be eliminated on domestic flights in favor of selling Buy on Board food in economy.  In domestic business class, beverages remain complimentary but now they will charge for food.  In addition, meal service on international coach service will, on many trans-atlantic flights, be reduced to Buy on Board as well.  Best of all, Buy on Board prices will be going up too.

What’s more, flight attendant staffing will be reduced to FAA minimums on such flights. 

So, United Airlines is reducing service in business class (coach already gets FAA minimums), reducing or eliminating more food service and charging more for their Buy on Board product while having fewer fight attendants available to sell the over-priced product.  This stunning and bold new move has earned United 1st place on my death watch because any airline stupid enough to do such things to their service product and particularly to their business class customer deserves to be out of business by Christmas. 

I’d say this was too painful to watch but it isn’t.  I’m going out to buy popcorn for this one.

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The Dallas Morning News Airline Biz Blog has This Story today.  I’m certain there are a number of reasons why airline traffic will be down for labor day but I’m equally certain that airlines are starting to feel the effects of far higher prices when it comes to travel demands. 

If this is true, LCC carriers such as Southwest and Airtran are probably grearing up to add even more capacity in existing and new markets.  These carriers can offer low prices on a sustained basis in addition to a basic service level that doesn’t quite show contempt for the consumer.  Legacy airlines such as American Airlines, United and DeltaNorthwest has cut service, introduced a number of new fees and raised fares considerably so far this year.  There isn’t nearly as compelling a case for travel on a legacy carrier as there once was. 

In fact, I’m  not sure what the argument is for traveling on a legacy carrier unless you seek a business class accomodation (available on Airtran, however) or a highly convenient direct flight.  Even the basic frequent flier no longer enjoys many of the privileges accorded to him or her in the past.  Fees for redeeming frequent flier miles are now designed to “buy” the ticket and the seats available for frequent flier redeemers is more reduced than ever before. 

At this point, a traveler has about the same or better experience on one of the low cost carriers, sometimes enjoys *better* amenities (Hello Jet Blue, Airtran and Frontier) on newer airplanes all for a fare that is, at the least, competitive with any legacy carrier. 

Many airlines have already begun their capacity reductions and they probably total about 5% in their markets.  So, we have a 5% reduction in travel demand matching a 5% reduction capacity which means there is about the same amount of people (per seat) chasing a low fare as before.   That means that air fares won’t go up anymore and some airlines will likely begin to look at attracting customers by reducing or eliminating these new fees going into the fall/winter season.  My prediction is that one or more legacy carriers will eliminate or reduce the first checked bag fee for travel sometime in November and December.

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The Dallas Morning News reported that American Airlines will be both accelerating 737 deliveries as well as taking up new orders for the Boeing product.

As they replace MD-80 aircraft (The Boeing 737-800 is as much as 20% to 25% more fuel efficient than the equivalent MD-82/83), your chances of a middle seat go from 1 in 5 to 1 in 3.  That said, I still find the prospect of flying newer 737s more attractive than the alternative.

I remain completely puzzled that American Airlines and United Airlines have not ordered 787 aircraft.  The 787 fits into their fleet and routes very well and offers just that kind of gain in fuel and maintenance efficiency that both airlines desperately need.  Currently, only Northwest Airlines and Continental Airlines have the B787 on order among the legacy carriers although US Airways does have some A350 aircraft ordered.  Indeed, the A350 ordered by US Airways seems a bit too large for their needs even when the purchase is justified with the cross-cockpit qualifications that the Airbus product offers with US Airways existing A320/A330 products.

The new DeltaNorthWest Airlines will have Northwest’s B787 orders and will continue to take deliveries on the B777-200LR it already has ordered.  Those two aircraft come very close to each other in performance and seat-mile costs in the ultra-long haul market but the 777 has the advantage when it comes to cargo-carrying capabilities.

I cannot believe that for the foreseeable future, there will be no true 757/767 replacement and it is even more difficult to believe that airlines continue to make plans to retain most of those aircraft for the foreseeable future.  Both the 757 and 767 have AviationPartnersBoeing winglet programs in place now resulting in fuel efficiency gains as much as 6% on the 767 but they still remain older aircraft with ever increasing maintenance needs.

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The pilots of both Delta and NorthWest Airlines have approved a new joint collective bargaining agreement according to CNN.  This is likely the biggest obstacle, labor-wise, to this merger although I do think that there is potential trouble when it comes to the flight attendants of each airline.

You see, Delta’s flight attendants are not unionized but they do enjoy some of the best pay, schedules and working conditions of any of the legacy airlines.  NorthWest flight attendants, however, are highly unionized and have not traditionally been very management friendly.  No doubt, some of that enmity is earned.  From time to time, there is a movement to unionize Delta FAs but it always results in a no vote with only about 1/3 of their FA’s ever voting for a union.

In this new matchup, it is quite likely that Northwest flight attendants will move to organize under the new company structure immediately and they themeslves have a physical majority over the total number of Delta flight attendants.  See where this is going? 

Delta, particularly the current leadership, needs to go to great lengths to try to head off that move for two reasons:  First, they just gave a very handsome deal to the pilots and flight attendants are going to want to share in that wealth.  Second, they currently enjoy unprecedented flexibility that allows them to work much more closely with the flight attendants on things like scheduling and other work rules.  That flexibility rewards both parties presently but a pro-union/anti-management organization will cut deeply into Delta’s ability to maneuver in today’s business climate.

I don’t hold out much hope for Delta though.

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Airlines have begun making it possible to have a boarding pass using a 2D bar code to check in via PDA and/or Cell Phone.  Here is Continental Airlines’ website regarding this new innovation.

In principle, this is a great innovation for many travelers but it comes with some warnings not mentioned by any airlines at present.  If you are a true frequent flier then you are likely aware that sometimes your mileage isn’t credit from a flight now and then.  Airlines require that you send a copy of your boarding pass to prove the credit. 

Airlines such as Air Canada and Continental have not figured out how to give you credit when you have a PDA/Cell Phone boarding pass.  So, if you try out this option, buyer beware for now anyway.

Ultimately, this is a great innovation and choosing this option does not prohibit you from having a boarding pass printed at check-in (generally by swiping a credit card) so if your cellphone / PDA isn’t working, you’re still covered. 

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The Milwaukee Journal Sentinel has this story today.

Northwest Airlines has disclosed that it has written off its $213 million investment in the partnership with TPG Capital (Texas Pacific Group) that owns Midwest Airlines. Not only does it reflect Northwest’s view on the survival of Midwest Airlines, such a move also likely influences other investors views of both Midwest and the airline industry.

Texas Pacific Group is not in the habit of investing in companies and letting them fail but without new leadership and a new strategy for attracting traffic, Midwest has a very poor outlook. TPG does have leadership that is famliar with the airline industry such as David Bonderman (founder) who acquired Continental Airlines in 1993 and who was instrumental in bringing Gordon Bethune into the company from Boeing (trivia: Gordon Bethune worked for Braniff as VP of Maintenance at the same time my father was EVP of Marketing.)

However, at this point TPG would have to look seriously at acquiring another airline and merging it with Midwest. That would difficult given Midwest’s fleet (Boeing 717 and now grounded MD-80), its hubs (Milwaukee and Kansas City) and its expensive labor force (as much as 40% more expensive than industry average.)

Midwest has been unable to define itself as either a premium service or low cost airline and its struggle to be all things to all people is bleeding it of cash and opportunity. It would have been much better off merging with Airtran when that airline began making offers in December of 2006. Airtran already operates a large fleet of Boeing 717s and Boeing 737 aircraft and could have brought more long haul routes to Milwaukee and increased traffic at Kansas City as well. Even Midwests strategy of Signature and Saver service (effectively a 4 abreast business class and 5 abreast coach service) mates very naturally to AirTran’s own service product.  In fact, it continues to defeat me why Midwest so ardently defended against the merger in favor of TPG and Northwest except that, perhaps, the senior executive staff saw a chance to remain in power.

At present, there are no other airlines that make for an attractive partner with Midwest except AirTran and AirTran is now expanding its presence at Milwaukee with both short and long haul flights on its own.  In short, AirTran doesn’t need Midwest anymore and the only business case for acquiring them is to shrink capacity on Milwaukee routes its either operating or plans to operate.  Indeed, AirTran operates on a business model that fits nicely inside the MKE Airports strategy of being Chicago’s 3rd Airport by offering high value, low cost service to a wide variety of destinations.

Fans of Midwest Airlines celebrate its cookies and high quality service.  Unfortunately, what Milwaukee really requires is a low cost airline that connects to a variety of destinations important to Milwaukee businesses. 

AirTran has the fuel efficient equipment to operate the soon to be discontinued Midwest routes of MKE-SFO, MKE-SEA, MKE-LAX and MKE-Florida.  In fact, it already operates flights into all of those areas and has the ability to feed far more traffic into those routes than Midwest was able to do with its relatively small network.

Look for Midwest to continue to be squeezed by both AirTran and Northwest in the next few months with little space to maneuver.

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