I found THIS little nugget today announcing that Airtran will hold its annual shareholder meeting in Milwaukee on May 18th this year. At first glance, I might accuse Airtran of just pandering to the Milwaukee market. On further reflection, this is a bit more than just pandering. It’s too much effort for just pandering. It strikes me more as respect quite honestly.
I’m sure most see this as a shot aimed at Midwest Airlines since Midwest is considered Milwaukee’s home town airline. But I’m not sure it is aimed at Midwest so much as it might be aimed at both Southwest Airlines, American Airlines, Delta and United. There just isn’t any brand for Midwest even in Milwaukee anymore and to think it might still exist is to not give enough credit to those who live in Milwaukee. They aren’t fools, they can read newspapers and they’re just as smart as any other market.
But Milwaukee is a loyal city and I think Airtran is making the right moves in Milwaukee. Rather than just showing to offer a good fare, they’re investing in the city and I suspect that Milwaukee will respond to that. That’s why I think this move is aimed much more at Southwest, American and, yes, even United and Delta. AA, Delta and United all serve Milwaukee primarily through their nearby hubs and have never shown much respect for Milwaukee as a market. At least not until Airtran and Southwest showed up.
Southwest is the newest airline to arrive but Milwaukee has courted them for years without success. Southwest didn’t pay too close attention to Milwaukee until Airtran did. Only Airtran showed up, grew their presence in the market and now is respecting the city by making it a focus city, an employee domicile and now their shareholder meeting site. This all is very smart on the part of Airtran and it will get noticed.
Lufthansa is reporting a 152 million Euro loss for 2009 compared to a 1.3 billion Euro profit in 2008. No doubt that declining markets in Europe can account for a good portion of this reversal in fortunes particularly considering that the decline in Europe lagged behind that of the United States (and is likely to lag behind the US in recover too.)
However, their addition of Austrian Airlines and British Midland in 2009 is also highly suspect. I’ve been suspicious of their multi-brand strategy in Europe for a while and more so now after seeing their financial results. Adding sub-performing airlines to the portfolio is never a strategy that works in the long run (witness the demise of the original Swiss Airlines in 2001) and Lufthansa has so far not shown much inclination to benefit from harmonizing operations among the various airlines.
I also suspect that this loss is only the beginning for 2010 since Lufthansa is faced with labor problems and hasn’t made the moves that other European airlines have made to cut costs and re-structure service offerings (a la British Airways.)
THIS newstory by the Boston Fox TV station is about a series of 5 transmissions made by a small boy in JFK”s tower a few days ago. The boy does *not* give taxi clearances or landing instructions or anything that would be deemed critical. He gives a few departure clearances and that’ s all.
Personally, while I agree that this wasn’t the wisest thing in the world and it certainly isn’t something you would want anyone to make a habit of but the boy gives them clearly and precisely and no harm or risk is involved. Frankly, the boy gives a more “clear” clearance than any of the ATC working in DFW Airport’s tower.
There has been a great deal of talk about Midwest Airlines and Republic Airways’ intention to consolidate that brand with its Frontier brand in the near future. Most notable is that few people seem to be decrying the loss of Midwest Airlines anymore. Certainly not like they were when Airtran attempted to take them over a few years ago.
Midwest ceased being an airline last year and became a brand only. When Frontier and Republic equipment began to fly its routes, the distinguishing features of that brand were eroded heavily. Now it’s basically a logo and a location and no one seems to care anymore and that means the brand has little, if any, value.
Will Frontier be the new brand? No one has really said much about what the plans are but there have been a few vague hints that it might be a new brand altogether. The fact that anybody is talking about this in vague public hints really shows just how much Sean Menke is already missed in getting this thing figured out.
Frontier has an excellent brand and one that could well work in Milwaukee just as good as it has in Denver. Frontier had better service differentiation and a better selection of products than Midwest ever hoped to have. It’s nationally known and folks in Denver have learned to be very loyal to it. Others could too.
A new brand is the mis-step that I think many are wondering about. You can only have so much of a “virtual” airline in operation until people begin to wonder who they’re flying with. Dilution of both brands in favor of a much more generic but new brand is not a good idea.
There are signs the industry is, perhaps, starting to slowly recover. That recovery is likely to be slow and painful and it isn’t the time to be trying to introduce yet another new airline brand to the country and compete against established airlines who are arguably better situated to compete already (SWA, Airtran).
Republic would be far better off to work on consolidating the operations between both Midwest and Frontier and standardizing on the Frontier brand which means getting the Frontier services onto all aircraft too. Marketing and sales then will have much better guidance on what they’re selling and who they are selling it to. No matter what the brand’s name, it’s time to get a cohesive marketing plan together and begin executing it on all fronts including online social media as well as local sales efforts. Wait too much longer and Frontier, as a brand, is liable to go the way of Midwest and I’ve already pointed out that that brand suddenly has no value to anyone anymore even in its home market.
Instead of mergers galore, I think what this industry really needs is growth.
To most people, that sounds crazy in light of the present economic situation in the industry. It depends on who I think should be growing, doesn’t it? We need to see more growth and expansion from airlines like SWA, Airtran and jetBlue. Heck, let’s throw Virgin America into that mix too. Those are the airlines that are going to drive service and price in this business for the foreseeable future.
Now, how they should grow is up for debate. Each of those airlines is pretty good at what it does and how it does it so trying to merge with an equal really isn’t a great idea. They shouldn’t dilute their corporate culture in favor of growth at any cost. However, that doesn’t mean you can’t pick up a deal here and there. Frontier was a perfect example of an airline that would have been a good buy for any one of those airlines. In hindsight, there should have been a bit more of a bidding war for Frontier.
There aren’t a whole lot of smaller airlines in this country. Frankly, I think Virgin America is more of a candidate to be taken over than to consume someone else. Sun Country Airlines still looks good to me, particularly for someone who wants an good entry into the Minneapolis / St. Paul Market. There was a time when it would be very unwise for most airlines to attempt to compete with Northwest Airlines in that market. Now that they are Delta, have 48 hubs and are headquartered in Atlanta, I suspect an airline could get an edge into that market.
But there are other growth opportunities out there. DFW has space to be a focus city for an airline. So does Houston. Las Vegas is no longer to be a hub for US Airways. St. Louis is an old city but it is still a city of industry with an airport that has nothing but crickets chirping in it. There are plenty of regions lacking in good competition still.
I don’t think a merger of legacy airlines will do anyone any good. Oh, it would take come capacity out of the system which would probably raise prices on *some* routes. I’m not sure if that is “good” for the consumer. It might create further dominance of a region or hub and I don’t see the benefit in that. The Delta/Northwest merger was one that worked because it labor issues were settled, there wasn’t a whole lot of overlap between the two companies routes and each company was accepting of the idea. Those circumstances don’t occur very often.
There has been quite a lot of talk in the media about mergers recently. Financial analysts are high on the idea and two airlines in particular have batted their eyes at potential suitors again.
The CFOs of both United Airlines and US Airways have made recently comments stating they see more consolidation needed in the US airline industry and both said their airlines remain open to the idea of merging with someone. No big surprise because both of those airlines are arguably the poorest performing legacy airlines in the US. It’s also no big surprise that financial analysts now want to see another merger because they’ve seen the financial response to the Delta/Northwest merger.
I don’t see it happening myself. Neither US Airways nor United Airlines happen to be particularly attractive properties for another airline for one. Neither American nor Continental really have anything to gain by mating up with those two for example. Well, Continental could benefit from UA’s Chicago hub and its international business. American already has a nicely balanced business and, more importantly, it needs to focus on its labor problems and get those solved first.
Continental has done better by managing itself and its employees carefully and really isn’t inclined to pick up one of the two airlines with some of the worst labor relations around. They’re kind of smart over at Continental. Now that they’re in the Star Alliance, they have the best of both worlds going for them.
So why don’t UA and US join together? Well, their hubs would fit together kind of nice and there would be some nice synergies to be realized in consoldating operations. Even their fleets kind of work together. However, UA is headed by Glenn Tilton who isn’t interested in giving up his position to someone else unless they, too, are an airline titan. He’d benefit from a merger personally but his ego doesn’t seem to want to let him have UA be the “consumed” airline. He wants to buy and consume someone else.
US Airways is being managed by Doug Parker who has plenty on his hands already with a pilot group that is so dysfunctional that it would make wife-beating appear respectable and his airline is short cash anyway. He’s got no money to buy anything with and his somewhat anemic route structure isn’t all that attractive to any other airline. No one wants his labor problems at all.
Besides, I”m not sure consolidation is what this industry needs. A liquidation could actually be the better answer. More on that tomorrow.
