This news story HERE from Reuters indicates that United Airlines and Continental Airlines have agreed on stock pricing and the share price would seem to indicate that Continental got what it wanted. If true, that would seem to indicate that Continental is for most purposes running this show. I still wonder what becomes of John Tague at United.
One story coming out this week is about comments from WestJet executive John McCleod stating that WestJet would still like to get a deal done with Southwest on codesharing. Southwest terminated their original agreement a few weeks ago after WestJet supposedly asked for modifications that were untenable to Southwest and after WestJet’s new CEO, Greg Saretsky, indicated his preference for doing a codeshare with Delta. What muddied the waters even more was a comment last week from Richard Andersen of Delta during a financial analyst call about how they had executed a codeshare agreement with WestJet which was then “clarified” by Delta PR people. Delta PR people said they did not, in fact, have an agreement in place.
This sounds like a romance drama my 15 year old daughter would get caught up in.
I never thought WestJet’s moves over the past month made sense. It felt like WestJet considered itself bigger than it was and more of a player than it was. Let’s remember that WestJet is a Canadian airline operating in the Southwest LCC model. And even though it is Canada’s second largest airline, that ain’t saying much when you consider the population of Canada and the size of Air Canada as compared to airlines in the US. Canada is a country of 34 million people or roughly 1/10th of the population of the United States.
Southwest’s home state of Texas has a population of 24 million people.
Southwest, on the other hand, would be considered a major player on any continent. They carry a lot of people every day and they do it with high marks for service, reliability and value. And they’ve done it for nearly 40 years. They are also not complete strangers to codeshares and we have already seen what a life-giving experience it is for Southwest to participate in a codeshare with an airline. As an airline, they are definitely not participating in their first rodeo. They make their mistakes but they are definitely a world class competitor too.
I can only imagine that Delta (and the rest of SkyTeam) look at WestJet and wonder when it will grow up enough to have the training wheels removed from its bicycle. They play Texas Hold ‘Em poker for high stakes in the airline world and it’s kind of hard to believe that WestJet really thought they would be taken seriously by the likes of Delta, the world’s largest airline by any metric.
Could Southwest do a deal with them still? Yes, I think so. Southwest is friendly, a great place to work and it treats its staff well. It doesn’t like to be taken advantage of but the people running Southwest are businessmen and businesswomen at the end of the day. A deal still provides both partners with something good. But WestJet is going to have to decide who it wants to be a bride to and stick with it. I’d say the signal was sent but it wasn’t exactly loud enough or specific enough. I expect another overture by WestJet before Southwest turns its attention back to WestJet.
I want to go on record for coining a new phrase. A Super Legacy airline shall be known as an airline created from 2 or more legacy airlines. I used it HERE.
American Airlines is a pretty conservative organization. It doesn’t hire from outside the airline very often and it manages itself pretty closely. It is, in many ways, the IBM of the US Airline industry. Well, the IBM of the 1970’s anyway.
Mergers and acquisitions haven’t been a very successful pathway for American. One look at the TWA “merger” which was really a purchase and you’ll understand why. They tend to focus on their core strengths and it is particularly difficult for them to adopt new staff and destinations. Purchases, for them, seem to be more about keeping dominance in a particular area rather than growing their business.
When Delta and Northwest started off on their merger, it was easy to understand why AA was unruffled by the development. There was no assurance of success on any level be it financial or operational. Being the biggest isn’t AA’s game nearly as much as being the strongest and I’m sure their management corps looked at that merger and decided it wasn’t something to worry too much about.
But Delta has had better financial success than AA and it seems to be “right sizing” aircraft to routes and enjoying better yield and that has got to be attention getting on some level. It got Continental’s attention apparently. If the Continental / United deal does go through, I have to wonder who AA starts to look at. It’s one thing to have an aberration in Delta but it is a whole other bag of bananas to have Delta/Northwest and United/Continental next door to you.
So, is it US Airways? They aren’t just the logical choice because they’re the only legacy airline left. There is a certain sensibility to the idea. AA has no hubs out west (just a large presence at LA) and, in fact, has no dominance in any of the areas where US Airways does operate. Well, Philadelphia is close to Washington DC and NYC but it isn’t the DC or NYC market either. AA has no southeastern presence either. Miami is a hub but it isn’t an regional hub like Atlanta or Charlotte.
There isn’t much fleet compatibility there and I’m not sure there needs to be. Delta has shown that as long as you have an economy of scale in the aircraft type, you can have it in the fleet and use it to your advantage by rightsizing your aircraft to the route.
Labor problems? Well, AA is kind of used to labor problems and their labor unions are so strong that I kind of wonder if they wouldn’t smack all those US Airways EAST/WEST conflicts into shape. If nothing else, it would give the EAST/WEST unions something to unify over.
Say, did you know that US Airways CEO Doug Parker used to work for AA? His wife still does. Guess who US Airways’ President Scott Kirby used to work for? Sabre when it was a division of AMR, the holding company for AA. Two more of the executive team come from Northwest Airlines from an era when they really weren’t that different from AA culturally speaking.
Both airlines have a lot of debt. The US Airways team has actually proven itself to be pretty scrappy in many areas. They cleaned up the Philly problem from US Airways EAST, managed their finances carefully and have continued to be a player despite unresolved challenges. Neither has really made money though.
However, a real merger, not just a purchase and dissolution but a merger, has some potential even if AA’s team retains most of the control. It has some of the same potential that Delta / Northwest had and fewer of the risks that a United/Continental merger has. It helps the Oneworld alliance as well.
While I think AA could do it, I also think the chances for them to screw up a real merger are far higher than I would give many other airlines. I think they would approach it as a takeover and attempt to dominante everything. And as a result, I think we would see the hubs in Phoenix, Philadelphia and Charlotte slowly fade away over time with nothing much to show for its effort after 10 years.
The 3 hour rule officially starts on April 29th, this Thursday. The media is starting to bubble with lots of quotes from spokespeople at various Airlines and many of those quotes are about cancelled flights. There appear to be about 3 levels of fury in these quotes. Level 1 isn’t really fury more than it is resigned acceptance and is represented mostly by Southwest and American Airlines (which kind of surprises me).
Level 2 is what I’ve started thinking of as the “Happy Threat”. These airlines are announcing in cheery PR tones that they’ll “try hard” but it is likely that lots of flights might get cancelled. Then there is Level 3 which really isn’t from the PR department so much as the CEO (Can you say Jeff Smisek) who are basically attempting to make it out to be the FAA evil plan to wreak havoc on the airline system.
Here is what I think you’ll see happen on Thursday and Friday. The sounds of crickets chirping. This rule is only going to affect a small portion of flights over the course of a year and is likely to only affect a small-ish portion of flights on a day of catastrophic weather. It is notable that despite a pretty bad winter in the Northeast, the airlines dealt with it much better with proactive measures that, yes, included some cancellations but also included things like encouraging people to rebook and leave earlier and later or postponing their trips. The airlines did a great job of handling the weather delays this winter and let’s give them a small round of applause.
Should you be worried? Nope. Not right now. There is no sense in worrying about something that, statistically, is less likely to happen to you than a traffic accident. Worry when you’re approaching your travel date. Look at the weather expected from about 3 days out. If it looks a bit catastrophic in its potential, start looking into your options such as leaving a bit earlier (your airline may be happy to waive change fees to do so), leaving a bit later (why not book on a flight the day after the weather and be the first to have re-scheduled instead of the last?) and monitor the situation a couple of times a day until departure.
Even if you have no options, don’t panic. Just because the 3 hour rule is in effect doesn’t mean your flight is getting cancelled. It DOES NOT MEAN THIS. The overwhelming chances are that your flight will leave. This isn’t a rule that governs when you must board and take off. This rule governs the time it might be taking to transit from the gate to the runway and then takeoff. 3 hours is a *long* time to make that transit.
In addition, just because you are out there and about to take off but approaching the 3 hour limit doesn’t mean your flight is getting cancelled. If it is unsafe to return to the gate and disembark people, pilots can continue on. If air traffic control determines that it is unsafe for your aircraft to leave the line or that it will impact other aircraft too much, they can give a waiver for the 3 hour rule too. There are plenty of outs.
Seriously, this isn’t anything to get worked up about as a traveler for 99.5% of the time. It simply isn’t. And even if you are in the that 0.5% period, you still have a very small chance of seeing your flight outright cancelled. If you’re traveling on critical business and you really do need to get out, then watch the weather, check your options and, frankly, I’d suggest consider using the Cranky Concierge as a lifeline in the event you do get a cancellation.
Should you be worried with respect to the NYC area? Well, JFK does have that runway under construction and just about everyone thought the plans for mitigating against delays were a bit optimistic. Essentially, the two big players (American and jetBlue) agreed to retain a winter schedule until mid-summer. A better plan would have been to cut everyone’s slots by some percentage and then tell the airlines to plan a schedule around that. Adding a bit of safety margin into that by extending it to the end of July or first of August would be smarter still.
Are there going to be some extra delays and/or cancellations here? Yes, I think so. However, I don’t think the primary “cause” of those is going to be the 3 Hour rule. The primary cause will be an overscheduled airport missing a critical runway and airlines without a plan to realistically deal with that. The secondary cause may be the 3 hour rule.
Bottom line: Avoid departing JFK if you can. If you can’t, try scheduling for non-peak time departures (such as the morning instead of the afternoon or evening. Monitor the weather, have a backup plan, set up an account with the Cranky Concierge. Personally, I find it difficult to believe that the NYC traveler *must* go through JFK to go somewhere. I suppose there are a few limited circumstances requiring it but I’d look strongly at traveling via La Guardia or Newark instead of JFK when making plans.
This is *not* a time to be married to the idea of traveling on an airline because you like accruing their miles. Seriously, are miles that are worth probably no more than $20 for a trip of 1000 miles so important that it takes precedence over everything else? Is it not better to avoid incurring the expenses that a delay brings such as food, lodging, potentially lost baggage, etc?
It’s been reported that United Airlines and Continental are at an impasse in their merger talks over how shares of each company would be valued in a transaction. Essentially there are several ways a price can be set on a share and much of it depends on the day or date they agree upon. For more on that complexity, you can read THIS. The short story is that United favors a methodolgy to their advantage and Continental favors a methodology to theirs. No big surprise except that whatever is decided can affect the value of the deal to certain shareholders by millions.
Oddly enough, my concerns about this merger don’t get past the several other issues. Rumour has it that the agreement has Jeff Smisek (CEO of Continental) becoming CEO of the new company and Glenn Tilton becomes non-executive Chairman. The new company retains the United brand and remains in Chicago. My question is why?
United is an inferior brand to Continental among the favored high revenue passengers. It’s name recognition abroad isn’t so much greater than Continentals that that is a good reason. And why would anyone want the costs of being headquartered in Chicago? Continental has a nice HQ down in Houston where they control an airport and in a right to work state.
Most importantly, Continental has good relations with its labor unions and United has abysmal relations with its unions. Why would you want to preserve a status quo that sees United labor taking over with seething resentment?
The Delta / Northwest merger did result in a company that was valued more than its two separate companies. That new company has not yet made a profit. Bigger equals better has not really yet been proved in that merger and they managed to accomplish it by taking care of labor issues (or at the least the dealbreaker labor issue) first. And only then with the assistance of a pilot’s union chairman (Lee Moak) who “got it” when it came to what the airline industry is today.
There is no evidence that the labor unions of either company are going to be happy about this. How do you think Continental labor is going to feel about being taken over by the Bitter Unions of United? Not good I suspect. What is Continentals management team going to think of having to move to Chicago and deal with the mess that is United?
It almost seems as if Continental is suffering from an inferiority complex. There is no need for this merger on their part and there is no need to entangle themselves with a company that hasn’t got a single good thing going for it as it is. Yet they appear willing to submit themselves to a fading airline glory who hasn’t done much right in the past 20 years.
United’s shares are up since the merger rumours about it has started. Considerably up. Continental’s not so much. There is a message there. United’s owners see hope in a good company like Continental being mated up with their jalopy of an airline. Continental’s owners don’t seem all that thrilled with the idea. This isn’t potentially increasing the shareholder value for Continental’s shareholders. There is no guarantee that this marriage will result in a company valued more than its parts. There isn’t any concrete evidence that this will result in a profitable company. Isn’t time we be concerned a bit with airlines being profitable rather than shareholder value rising temporarily anyway?
I’d actually feel more positive about a merger if Continental took over US Airways instead. This potential merger just smells bad to me and it feels like no good can come from this.
During American Airlines earnings call yesterday, one financial analyst got a little rough with AA and, more specifically, Gerard Arpey and Tom Horton. By rough, I mean the question posed was “Is that all you got?” The Dallas Morning News Aviation Blog has a good description of the exchange HERE.
They make a good point. American Airlines has really been a disappointment for a decade and the leadership has frequently leaned on multi-year plans and talks of how well things are going and what can be expected from new deals and new alliances. Sometimes it is talk of how one time expenses got in the way of a profit, etc. At the end of the day, you really should deliver something now and then. I would point you to Continental as an excellent example of this.
American Airlines didn’t file bankruptcy. Everyone talks about how they did the right thing and didn’t file bankruptcy. The employees gave back 30% or more of their salary instead. Problem is, when your competition (United, US Airways, Northwest, Delta) does file bankruptcy and does lower its costs and does streamline its operations and does reinvigorate its workforce, they’ve got you boxed in. All the airlines in that list gained a permanent advantage over AA and regardless of the talk of “doing the right thing”, AA has a big disadvantage.
What’s really frustrating isn’t that disadvantage. What really irritates people is the leadership’s habit of deferring and delaying to another day many of the problems that do, at some point, need to be solved. It’s the risk created by ignoring, deferring or delaying the resolutions of these problems that makes one so irritated and, dare I say, now a bit unconfident about AA’s long term future?
They have an old, fuel inefficient, passenger inefficient fleet. Much of that renewal has been deferred resulting in a fleet of aircraft that is more maintenance intensive, which carries fewer passengers per segment and which burns more fuel doing it.
There isn’t a labor group at AA that isn’t spoiling for a fight at this point. The risk of one or another getting their way and having a strike is increasing month by month. For 4 years, we’ve seen AA labor groups have their contracts become amendable, negotiations begin and then . . . nothing. There is no sense of urgency on AA management’s part to have this settled.
These issues and more make it appear as if no one is really solving problems. They’re deferring them, delaying their resolution or, in some cases, just ignoring them but no one is showing up, raising their hand and saying “We solved this problem. It won’t be on our plate anymore going forward.”
The thing is, bankruptcy would have done that for them. There would have been final solutions and the airline would be coping with immediate problems instead of being bogged down with what is really nearly 20 years of baggage. My point is, I’m not sure bankruptcy *was* doing the right thing.
It’s OK to describe problem resolutions as ongoing for a year or two or maybe even three. It’s been going on a lot longer than that at AA and JP Morgan analyst Jamie Baker has noticed. And I think this is just the beginning.
The FAA has denied exemptions for their 3-Hour Rule at NYC area airports. They replied:
“Passengers on flights delayed on the tarmac have a right to know they will not be held aboard a plane indefinitely,” U.S. Transportation Secretary Ray LaHood said in the department’s announcement. “This is an important consumer protection, and we believe it should take effect as planned.”
” In denying the requests, the Department concluded that airlines could minimize tarmac delays by rerouting or rescheduling flights at JFK to allow the airport’s other three runways to absorb the extra traffic.”
“The Department also noted that it has the ability to take into account the impact of the runway closure and the harm to consumers when deciding whether to pursue enforcement action for failure to comply with the rule and the amount of a fine, if any, to seek as a result of non-compliance.” *
And that is really what I both expected and hoped for as a reply. I am certain the war of words is not over, however.
* These quotes are from the Dallas Morning News Aviation Blog entry which can be read HERE.
Airtran has expressed how happy it is that they did not win their fight to acquire Midwest Airlines a fwe years ago and notes that they are the dominant player in Milwaukee now. My feelings as well. It is sometimes difficult to grow a business because of the capital requirements but it’s also very, very hard to integrate two airlines and it rarely realizes the expected benefits often touted during merger talks.
Bob Fornaro, CEO of Airtran, has also expressed interest in what might be happening with industry consolidation through purchases and mergers and says they want to play a part. However, it isn’t the role you think. Airtran sees those developments as opportunities to pick up assets such as aircraft, slots and routes that may have to be divested as a result of a merger between two entities.
I’m pretty sure that Gary Kelly (CEO of Southwest) would add a “hell yes!” to that.
The airline industry has seen a lot of growth among the LCC carriers (and whatever you think, US Airways is *not* an LCC carrier despites its stock exchange identifier) and virtually all of that growth has been organic. These airlines do the work of identifying good business targets and building the business of the route properly. Each route between two cities is rally a “mini” business of the airline. To build that business requires investment, time and good analytical skills. Maintaining that business requires good analytical skills and agility.
Legacy carriers shun executives from LCC carriers. If I were to take over as CEO of a legacy carrier, I would head hunt avidly among the LCC carriers. Those are the industry executives with the talent and skills to run an airline today. Unfortunately, legacy carriers tend to promote within and stick with their legacy management corps.
The Dallas Morning News Aviation Blog has THIS story about Delta possibly deferring or cancelling its (inherited from Northwest) 787 orders for 18 aircraft (and 50 additional options.) And this kind of makes sense to me.
Northwest probably did need those 787 aircraft for its trans-pacific routes. Its 747 fleet was adequate for some routes but others just couldn’t stand a 747 and Northwest doesn’t have any 777 aircraft. The combined fleet of Delta and Northwest is a different matter, however.
If anything, I think Delta might have one long haul aircraft type too many. That said, they have 767 (Delta) and A330 (Northwest) aircraft for medium haul routes and configured so that each is nearly ideal for passenger density. They have the 777 (Delta) and the 747 (Northwest) for long haul, high density routes as well. Frankly, I think Delta might be better off adding the 777-300 to its fleet and retiring the 747 but that isn’t their plan. They are refurbishing the 747 aircraft and extending leases on them. Clearly Delta sees a profitable use for them at this time.
The 787 isn’t going to be a trans-Atlantic aircraft. Certainly not on the first routes for any airline. A new(ish) build 767-300 or A330-300 can do those routes just as economically. The 787 is better suited to routes like NYC to Tokyo or LA to Sydney or Atlanta to Rio de Janeiro or even the US to India. Delta has the right sized aircraft for those routes.
Delta can probably sell those orders profitably at this point. There are a number of airlines who don’t have new(ish) 767s or A330s and there are several more who need to downsize from a 747 or 777 on long haul routes. Airlines such as Continental and AA come to mind.
Mind you, the enthusiast in me wishes all US airlines flew the latest and great aircraft. The practical side of me says we’ll probably only see Continental take up its orders on schedule and even AA will likely take its time adding the 787.
It’s been several days of largely no air traffic across northern Europe and the natives are getting restless. Airline CEOs (Willie Walsh) are going on “test flights”, mammoth airlines (KLM) are sending up their cargo aircraft and the UK government is now sending naval ships to get Britons home.
Is it reasonable to have this ban? I really don’t know. I somehow think that there was an overabundance of caution deployed at the beginning and I do think that no country wants to be the one to blink on safety right now either. The log jam is not so much the ash in the air at this point as it is politics I suspect. You have all of western Europe wondering if they should or should not allow flights and everyone knows that if they do and an aircraft runs into trouble, all fingers will point at them.
The disappointing thing about this is that no science has been conducted (to the best of my research) to make a determination if things such as a flight ban are really warranted. No one is doing real atmospheric testing and tracking to make a rational decision on what might be the right thing to do. From what I can tell, no one even seems to be contemplating such a reasonable act and that’s disappointing for the consumers stranded across Europe.
Europe isn’t one country but we have a tendency to think of it as one country. It’s lots of countries each with its own political leadership, aviation agencies and airlines. I don’t think this is going to get sorted out for another 48 hours or more and even then we’re talking about 40% to 50% of the flights getting back on track to start with. This could take another 4 to 8 days afterwards to bring operations back on line completely. All of this is, of course, contingent on that Icelandic Sparkler not erupting with more fury too.
Don’t blame the volcano. Don’t blame the airlines. Blame the political leadership this time.
One friend called me this morning asking for guidance on him getting to Frankfurt leaving from DFW on Saturday. I certainly think his flight has a shot as of today. I think if we haven’t seen flights start to resume by Wednesday morning, it’s time for a backup plan. His backup is to fly to Madrid, catch a connection to Milan and then take a train to Frankfurt. Doable but that’s a long few days of traveling and no assurance of getting out when his business conference is over.
Senator Charles Schumer has obtained “commitments” to not charge fees for carry-on luggage from several major legacy airlines. Read HERE for the entire story.
There are a couple of things I notice. First and foremost is that each airline making the commitment (American Airlines, jetBlue, Delta Airlines, United Airlines and US Airways) each have significant operations at La Guardia or JFK Airports (or both.) Airports in the state of New York and both of which are within Senator Schumer’s power base.
Also notable is that Continental has been quiet. Continental’s operations for NYC are concentrated at Newark Airport located in New Jersey. Well, I also suspect that new Continental CEO Jeff Smisek is sensible enough to ignore the Senator.
Of course they made the commitment. It doesn’t fit within their business model and is impractical for them to try. It costs them nothing to make the commitment and get their name in the news much as Spirit has had theirs in the news since making the announcement that they would charge carry-on fees.
The only people benefitting from Senator Schumer’s diatribes is Spirit Airlines. I leave Senator Schumer out of that equation because the more he speaks, the more it becomes clear that he doesn’t know what he is talking about and that this is more about his name in the press that advocating something for his constituents.
Imagine the good that could be done if he shouted as loudly for redefining NYC’s air traffic area and getting better air traffic control systems in place.
Instead he leads the charge against an airline who has no New York bases and who flies just 14 flights from NYC (La Guardia) to destinations such as Detroit (2 flights), Fort Lauderdale (7 flights), Myrtle Beach (4 flights) and Atlanta (1 flight).
Hard to view them as a threat to NYC area consumers particularly since they offer flights on the NYC – FLL route as low as $60 each way with a checked bag fee of $19 and who *still* allows personal items free on board if they fit under the seat in front of them.
Let me point out that several airlines who he received commitments from charge *more* for checked baggage.
Southwest Airlines has announced that it is canceling its codeshare agreement with WestJet due to numerous and untenable changes requested by WestJet to the original agreement. Read the Dallas Morning News story HERE.
Why am I unsurprised?
It would appear that WestJet’s new leadership wants a new direction and, more important, wants to play with Delta. The upside to that is who wouldn’t want Delta feeding you traffic? Delta is huge and has a large network. The downside is that when you play with Delta, you are, by definition, the junior partner in such an arrangement. CEO Saretsky of WestJet and formerly of Alaska Airlines probably sees multiple codeshares with WestJet as being the best route going forward. Coincidentally, this is a strategy that Alaska Airlines has followed for many years.
Also, coincidentally, Alaska Airlines has recently made moves to be closer to Delta.
Is this good for WestJet? Actually, I really don’t think so. They had an opportunity to be an equal partner in a 3 way North American partnership that would have linked Canada, Mexico and the United States with 3 very good LCC carriers. Service types would match, service philosophies would match and each partner was potentially already prepared to cooperate on things more than just a codeshare. I’m sorry to see this happen as it would have been a great experiment and one I thought had lots of potential.
So, where does that leave SWA? Well, they aren’t saying much other than to just leave the door open to the possibilty of international flights which they’ve done for years now. It doesn’t really reveal anything. However, I suspect they’ve already made a subtantial investment in bringing this capability to their IT systems and they’ll probably pursue it to its conclusion if only to continue on with Volaris, their Mexican partner in this deal.
I think that SWA will pursue flights to Canada. It’s just too easy for them not to do so. The logistics are surmountable in this case. They may pursue the start of codeshare cooperation with Volaris to Mexico as their first goal but I suspect their very next goal will be flights to Canada and lots of them at that. In fact, Volaris can fly those US/Mex flights to SWA focus cities and let SWA carry traffic onward to Canadian destinations. There is a lot of Canadian / Mexican travel these days. I’m not sure if current treaties would allow codeshares via SWA between Canada and Mexico but I already see one way of getting around that.
One thing that does stand out is Southwest’s recurring statement about how “hard wired” they are for domestic travel. No one doubts that but they’ve been saying that for 2 years now. Most airlines would have gotten past that hurdle by now and it makes me wonder that SWA appears no closer to engaging in their Mexican codeshare yet. In fact, the WestJet codeshare was supposed to start first and even now SWA’s statements make it sound as if they’re just getting around to the challenge. Not good.
Also interesting is that, so far, I’ve not found any statements by WestJet on this new development. They are curiously quiet and I wonder about that.
In a BusinessWeek story today, which can be read HERE, I noticed a paragraph that gives some hint as to who wants to be in charge of the new airline if a merger agreement does come about. It says:
UAL, based in Chicago, and Tempe, Arizona-based US Airways are discussing an all-stock transaction to combine the companies, with the smaller US Airways being the acquirer, said the people familiar, who asked not to be identified because the talks are private. The merger would help United steer travelers to international flights from US Airways’ domestic routes, said one of the people.
That sounds like US Airways management being the “lead” group in a merger and, more importantly, Doug Parker as CEO. However, I don’t know where US Airways has the financial capability to be the surviving entity either. (Note: Just because US Airways is the surviving entity doesn’t mean that the name United Airlines goes away. They may well choose to keep that name.) In addition, where does that leave United President John Tague? He is arguably the executive who has best managed United and who is arguably the one to succeed Glenn Tilton as CEO.
Doug Parker and team have done a fairly admirable job in keeping US Airways afloat and viable but they still have unresolved issues with their labor unions at present. Such a merger would mean 3 different groups of pilots who would have fairly strong ideas on which union should represent them and how much they should be paid. The AmericaWest/US West group is the minority group at present but could potentially regain some leverage and power if they could agree with the United pilots. I find it hard to believe anyof the 3 groups would agree with another.
If they really wanted to do this, I suspect they’ll have to give up some substantive group of routes and, possibly, equipment to gain approval. The Washington D.C. area is the trouble point since US Airways has a strong position in Washington, Philadelphia and Charlotte and United has a strong position in Washington as well. I’ll bet Southwest could be interested in paying for routes into and out of Washington National airport but I’ll also bet that UA/US doesn’t want Southwest having a foothold there either.
None of this makes really good sense. If this is a real negotiation for a merger, I don’t see it happening without giving up lots of advantage in Washington which hurts the merger potential. If it is an attempt to bring someone like Continental to the table, I think Continental is smarter than that. That leaves American Airlines and they just don’t seem to like mergers like that. They don’t mind acquisitions but mergers aren’t their cup of tea. However, one could make a case for an AA/US merger that might actually have some benefits similar to the Delta/Northwest merger.
But I seriously doubt AA’s unions would cooperate with a merger like that.
Some analysts see Continental making a bid. I don’t. Merging with United doesn’t give them any advantage they don’t already have and saddles them with labor problems and a fleet that is aging and which doesn’t mix with Continental’s well at all. People keep pointing to United’s position on Asian routes but I would point out that if Continental had the equipment, they could probably siphon off United’s customers without buying the company. Coincidentally, Continental has early 787 positions that could allow them to do just that. I just don’t see Continental going for this.
I was thinking about the lack of empowerment and common sense in airlines (with one or two exceptions) these days and remembered something from this WIKI entry about Robert Six and Continental. I’ve also read it in Robert Serling’s book about Continental. The quote is:
According to Six biographer Robert Serling, quality was the watchword in every detail of Continental’s operations in the 1960s and 1970s.In one anecdotal indication of Six’s passion for premium customer service, every page of the airline’s Customer Service Manual was inscribed with these words: “Nothing in this manual supersedes common sense.”
Imagine that being in an airline manual today. Kind of hard isn’t it?
Midwest Airlines is off my deathwatch. Why? Because it is dead, Fred. Republic Airways has shocked no one by announcing that it will be the Frontier brand that will represent both Frontier and Midwest going forward. See news on the anouncement HERE.
No one will be really surprised by this because at the end of the day, two brands wasn’t going to work with one shared fleet and the Frontier brand is the stronger national brand. In addition, what national recognition Midwest did have has eroded tremendously in the past 2 years. Finally, Frontier was just the bigger airline.
Are the animal spokespersons sticking around? Yes. Not surprising since the person leading the branding now is the person who developed the aninal campaign for Frontier originally. The next new animal will be the badger, an animal icon for the state of Wiscosin.
Midwest? I am sorry the Midwest brand is gone now if only because Milwaukee is my birth town and I always felt that the people working for Midwest really did put something special into their airline. It wasn’t the cookie for me. It wasn’t the large seats. It was the nice people. When you called to make a reservation on Midwest, you got a very friendly and very knowledgeable person. That had a lot more value to me than a cookie.
Unfortunately, an airline based in Milwaukee isn’t a recipe for success. An airline based in Milwaukee and using Kansas City as a focus city isn’t a recipe for success either. I do wish Midwest had gone over to Airtran. While the brand would have been gone still, I believe the people working for Midwest would have been appreciated more.
With the Frontier brand sticking around, I do hope we’ll see a return to a more focused and innovative Frontier identify that, in my opinion, has been muddied quite a bit already. That Frontier was competing very well in Denver and could continue to compete well so long as we see its unique offerings come into focus again.
US Senator Charles Schumer is shouting out against fees for carry-on bags today and, if anything, he sounds sillier than Secretary LaHood. Senator Schumer is threatening to introduce legislation prohibiting charging fees for carry-on luggage. Read about it HERE.
Both of these gentlemen haven’t really studied up on what Spirit Airlines is doing and if they had, I suspect they would not have managed to stuff size 11 feet into their mouth. I would say more but I prefer to refer the Honorable Gentleman from New York to my post on Sunday shown HERE.
I read THIS about Transportation Secretary Ray LaHood being outraged at Spirit Airlines’ newly announced carry-on bag fees. It would appear that he thinks this should be stopped or mitigated by the government and says the FAA is looking into what it can do.
Well, those who know me know I am *not* a fan of bag fees in general and I’m certainly not anti-government either. In this case, Secretary LaHood is way off base. It is not the job of the FAA or the government in general to prevent these kinds of fees from being implemented. If these fees are as bad as some think (and I don’t think they are for this particular airline), the market should respond accordingly.
What is the government’s job is making sure that these de-bundled fee based services on various airlines is transparent and currently it is not. When a consumer is attempting to shop various options on traveling to a destination whether by most airlines’ websites or by an online agency (Orbitz, Travelocity, etc), they really only get to see the base fare plus taxes and fees. This is a lack of transparency in pricing because the various fees are being implemented in conjunction with other desired services and some, although not all, are not advertised in the price.
For instance, one does not see the convenience charge for using a credit card or the online booking fee that some charge. Others don’t see how much it costs to transport a checked bag or, now, a carry-on bag. If we’re going to have de-bundled fees for various “services” on airlines, I think it’s time we also be able to see the “all in” price of making that trip. In other words:
How much is that base airline fare?
How much are the taxes?
How much are the airport fees?
How much is the fuel surcharge (if any)?
How much does it cost to pay a checked bag fee at the time of ticket purchase?
How much does it cost to pay a checked bag fee at the gate?
What limits does this airline impose on both carry-on and checked baggage?
Can one pre-purchase a meal and, if so, how much is that?
There are many more questions that should be answered in advertising those fares so that there is transparency instead of “gotchas”. That is what should be imposed by the government. Mind you, when the government does begin to impose such rules, the airlines will scream, holler and stamp their feet that they can’t afford the infrastructure to do this. Sorry but if you’re going to have fees, you need to have the infrastructure to support a fair and transparent communication of what those fees are. That’s the job of the government.
Airlines would abhor such a thing because the very next development in online airline shopping will be websites that present the “all in” price for making a trip and that will make things hypercompetitive among airlines at present. All I can say is that life is hard in the big city.
There are other areas where transparency could and shood be better. Codeshares are one area of that. I don’t object to codeshares at all but I do object to the lack of transparency in how those codeshares are presented currently. What is presently being done is the equivalent of offering one brand of flavored rice at a price and then giving the consumer another brand of flavored rice after the purchase. Both brands may be great brands but what if you *really* wanted Rice-A-Roni instead of Lipton’s? An airline isn’t going to let you change your ticket upon discovering that you really aren’t flying on their airline for particular flight.
There has been a lot of laxness in allowing airlines to operate for 2 decades or more with this lack of transparency. The argument that it would take time and money to present this in a fashion much like we expect virtually every other retailer or service provider to do is cost prohibitive just doesn’t fly. Shame of the government for ignoring this for so long but shame on the airlines for doing it too. The FAA has long been under the influence of exceptionally airline friendly forces for an very long time and they, more than anyone else, permitted this to happen. I’m glad that Secretary LaHood wants to stop some of this abuse but I would suggest that he needs to be a little less media friendly in his words and a little more active in promoting fair for both airlines and consumers. This is one part of the house that is long overdue to be put back into order.
I”m a very experienced shopper for air fares and I’m exceptionally well acquainted with strategies to find a good fare and even I am finding it exceptionally difficult to do this in a manner that allows me to compare the cost of a trip in an apples to apples manner. It takes an exceptional amount of time to make an informed purchase for air travel and if it is that hard for me, how hard is it for just the average consumer?
I never want to let an airline have its cake and eat it too.
With the news that US Airways and United are in merger talks, the subject of mergers and industry consolidation among US airlines has been reheated to a high temperature again. For the past several years, there has been a lot of talk about the need for consolidation among airlines in the US in order to return to profitability and there are many advocates (such as Doug Parker and Glenn Tilton of US Airways and United respectively).
New fees seem to have brought in additional revenue but no one can seem to really claim that it has changed the equation for earning a profit for airlines. Advocates say these new fees are helping airlines find a path back to earning a profit and I certainly think that experimentation with these fees isn’t over.
Oil is always a frequent component of profitability. Soaring oil prices just two years ago nearly brought several airlines to their knees but also brought huge profits to other airlines who engage in hedging their fuel costs. I don’t think anyone would disagree that a more stable oil market would not only benefit the airlines but a lot of other industries. The wide oscillations of fuel prices have brought a big element of uncertainty to many parts of the economy.
I’m not sure consolidation is really the answer, however. Frankly, I think one big mistake of the 1990’s and 2000’s is that we have permitted airlines to go through bankruptcies (some multiple times) and reorganize themselves rather than being more insistent on a liquidation or two. It’s politically difficult to do so because liquidating a large legacy airline means tens of thousands of people suddenly becoming unemployed.
Yes, the airline industry is a network business to a large degree and network businesses can do better if they grow larger and capture more market share. I question how viable that is over the long term without restructuring other legacy costs as well. I think it is a nice, immediate answer and certainly offers short term (2 to 5 years) gains in share prices but there are other issues that need to be decided as well.
Seniority is king in the airline business and I’ve really come to believe that that is a huge obstacle to health for many airlines. Airlines have to compete on price in the market place but are not allowed to compete on salaries in the employment market place. Union contracts based on seniority are killing many airlines. Mind you, that isn’t to say that airline employees don’t have legitimate issues too, they do.
Airline employees are expected to quite literally work for poverty wages for years before starting to earn a real family supporting wage and then finally make it to a level for their last 10 or 15 years of work careers where they earn extremely generous wages for the exact same work that a junior level employee does for a salary that is unable to provide modest life. This disparity has to stop. Entry level wages should be higher and senior level wages should be lower. Airline crew should be able to move between airlines without having to re-set to the lowest wage scale again. We have enough airlines in this country that it is somewhat absurd to believe that a strike at one major airline threatens the national economy. It doesn’t. Airline employees deserve to be able to agree on a contract in a much more timely fashion. Failing to do this results in an even greater tenacious hold to seniority since it is the only thing that raises wages.
LCC airlines have managed to remain profitable and grow but only by keeping their business model flat with respect to equipment and staff. This allows them to keep productivity high and prevent creeping wages based on a structure that makes weight and distance the prime factor in pay. Actual work loads and skill sets are secondary in paying flight crew.
No, I’m not sure we need more consolidations and mergers and, frankly, I don’t think such things would substantially raise airfares given that LCC’s are pretty adept at spotting opportunities and entering markets. Virtually the only thing that keeps them from certain routes is legacy airlines holding monopolies on airport space or slots. Even then, those LCC’s are very good at looking for ways around those problems to gain a foothold. Notice how vigorously Delta and US Airways are trying to keep Southwest Airlines from gaining more slots in NYC?
