The National Mediation Board (responsible for governing union relationships with respect to airlines and railways) has issued a new ruling that could affect airlines and their union relationships dramatically.  In the past, a campaign for unionization had to claim a majority of votes from the entire pool of laborers.  By simply not voting, it was presumed that your vote was against unionization.  Now the majority need only be of those who actually voted.

Will it affect airlines?  In the short run, yes, I think so.  I thinkt here will be a strong push to organize unrepresented labor groups at a number of airlines including Delta, jetBlue and Airtran among others.  However, I also think that this will mean that union members will simply vote instead of choosing to abstain in the long run.  I do think we’ll see some new unions at airlines. 

Is it fair to airlines?  Not in my opinion.  These rules have become too onerous and one-sided in the airline business.   I also think this will harm labor groups at the airlines.  I believe that this development will also lead to the NMB requiring longer and longer labor negotiations before permitting a strike.  Some groups are in negotiations for as much as 4 years now and the problem with that is circumstances in the airline business can dramatically change in just months.  Imagine how different the landscape becomes over 4 years?

New rules are probably in order but the structuring of those rules should give each side opportunities and risks for coming to agreement.  I suspect that one thing that led to this rule change is the rash of mergers we’ve had over the past 10 years.  Legislators see airlines growing bigger and bigger which gives the impression that they also have more and more market power among labor.   That couldn’t be farther from the truth. 

If anything, this industry needs more deregulation with respect to labor rather than more.  Airlines should be less constrained by seniority and have access to at least a semi-free market for meeting their labor needs.   Likewise, labor groups should have access to timely negotiations and contract renewals. 

All in all, I see more barriers  (as a result of this rule)  to acting in an agile manner to quickly changing markets and that will be bad for both sides.

Filed under: Airline News by ajax
1 Comment »

Well, over New Jersey, actually.  He just lives there.

CNN had THIS report today about Continental Flight 9 from Newark, NJ to Japan having to return to Newark airport after developing hydraulic problems shortly after take off.  Because the aircraft was full of fuel for the long flight, fuel had to be dumped until the aircraft had a safe landing weight. 

An aircraft that can take-off with one weight can’t necessarily land with that same weight without risking damage (or worse) to the aircraft.  So fuel is dumped.  At least it is with large widebody aircraft such as the 777.  Otherwise the aircraft would have to stay airborn for 6 or more hours until it had burned off enough fuel.  The fuel vaporizes long before reaching the ground in almost all cases.  It’s regrettable but also unavoidable.

Filed under: Airline News, Trivia by ajax
No Comments »

I’ve always been fascinated by this aircraft, the Antonov 225.  Enjoy the video.

Filed under: Trivia by ajax
1 Comment »

Southwest Airlines reports that it flew slightly less passengers than this time last year but managed to earn 18 to 19% more in revenue for each mile a passenger flew.  In other words, Southwest is doing better due to higher fares and fees. 

But wait, Southwest doesn’t charge bag fees, right?  Well, it charges $50 for the third bag and it does have additional fees for extra services such as priority boarding. 

Southwest saw just a 0.6% decrease in the number of passengers which is way less than most airlines.  It saw a considerably higher amount of revenue which is way better than most airlines.   It would appear that their strategy of no bag fees may in fact be working very well for them.  It’s time for legacy airlines to quit saying they see no evidence that their passenger counts are eroding.

Filed under: Airline News by ajax
No Comments »

There is some new speculation and reports that Boeing is now leaning towards a new development aircraft to replace the 737 instead of a re-engine project.  See the Seattle Post Intelligencer blog post HERE.  The best of business cases for a re-engine project are usually fraught with risk and I’m sure that is no different in the case of this aircraft.   Although the 737 dates back to the late 1960’s, current versions date only from the 1990’s and continue to sell very well.

There are a few variables at play here.  First, Boeing doesn’t want to hurt its backlog of 737 orders and that’s understandable given the high profitability they provide.  Airbus is in the same position and neither company prefers to blink first.  On the other hand, if Boeing moves forward with a new design, it’s fairly certain that Airbus would blink rather quickly.

Airlines want new, more efficient aircraft and they would prefer a leap in efficiency equivalent to what was seen in the mid 1980’s with new models.  Newly developed aircraft at that time were  offering a 35 to 40% improvement in efficiency (cost per passenger seat mile) over the first generation of aircraft still flying.  They would like to see that leap again and, unfortunately, that’s unlikely. 

 The curve on engine and airframe technology advancements has reached a point where it is smoother and less steep.   Our knowledge of aerodynamics, engineering on airframes, new materials and, yes, engines, has become more stable.  There is less of a learning curve than there was with our first two generations of aircraft.  That means gains of 15 to 25% are probably what is achievable in the next round and that’s still very, very good.

Engine manufacturers are much more confident of their ability to deliver on their end than they were just 2 years ago.  Circumstances have changed and that leads to a company like Boeing examining the future and seeing less risk.  That’s a good thing.  At some point, the risk becomes appropriate and I think they’re approaching that point and realize it. 

Boeing has a great deal of new knowledge on using new materials and I suspect that their one challenge in using, say, CFRP for a B737 style aircraft is in figuring out how to scale it down.  Now that the 787 program is in production and testing, they likely see that it is a problem they can solve. 

Finally, making a move to build a new aircraft is timely for two reasons.  First, they’re development work on both the 787 and 747 is winding down.  New variants of the 787 will require a fraction of the development staff that the original design required.  They have resources that are freeing up and who could be put to use on new programs.   

Second, it would potentially put Airbus in a very constrained position.  Airbus is constrained on resources and money at present.  The A380 program is not earning them money and, if anything, is badly hurting their cash flow.  That program refuses to scale up into planned production and, what’s worse, airlines continue to defer their orders without ordering any additional aircraft. 

Airbus also is in the middle of developing the A350 and faces a number of technological challenges there, too.  They’re as new to the CFRP fuselage as Boeing is and it’s taking time to figure out how to build that aircraft right.  While production delays haven’t been announced, there isn’t an analyst out there who believes that this aircraft will show up on time and on budget.  It will most likely have as many challenges facing it as the 787 did and that means another program sucking up resources and money.

Finally, Airbus has problems with its military A400M aircraft development and a number of countries are very upset with Airbus performance there as well.  To add more fuel to the fire, Airbus/EADS will be attempting to win the KC-X tanker program at all costs and that requires still more resources that are in scarce supply. 

If Boeing announces a new build in the next year, it puts the fire to the feet of Airbus to come up with something in response and makes Airbus react to Boeing instead of the other way around.   Will they announce a new build?  Yes, I think in the next 12 to 18 months we’ll hear of the launch of a 737 replacement program probably taking something on the order of 5 years to complete.

Filed under: Airline Fleets by ajax
1 Comment »

I still don’t like this merger too much.  I like that the identify remains mostly Continental and I like the fact that the Continental management appears to be the group that will run the airline.  However, I see quite a few risks here.

1)  While I have more confidence in the Continental management team than United’s, I’ll point out that Jeff Smisek is still a somewhat untested airline CEO.  He’s had about 4 months in the job at Continental and he’s been pretty aggressive in just those 4 months.  So far, I think I would be a bit more comfortable with Larry Kellner in control.   He wasn’t quite so “in your face” but still managed to be very tough when it came to making decisions.

2)  Glenn Tilton appears to be given a nice cushy position as non-executive Chairman of the new company but I’m not so sure he won’t try to influence the direction of the company.  He was brought in to execute a bankruptcy and always appeared to want to sell the company and move on but his actions said a bit more.  Is he ready to take a back seat?  I’m not so sure he is.   This isn’t a man who is used to taking a back seat to anyone.

3)  Employees and labor.  United employees might have something to look forward to in a management team that acts like it wants to run an airline.  However, Continental employees appear to be having some trouble figuring out why this is good for them.  They had it good and now they can look forward to some rather bad karma and aggressive behaviour from their brothers and sisters at United. 

I also have trouble seeing United’s labor unions cooperating.  They’re pretty militant and often remind me of American Airlines’ labor group.  While Continental’s labor groups generally accept that it is a new world out there, United’s seem to want to return to the glory days of the mid 1990’s.   And who decides seniority integrations?  Better yet, is the bad example set by US Airways EAST/WEST groups going to set a precedent for becoming recalcitrant if they don’t like the decision?  Part of me believes that United’s labor groups will most likely attempt to shove their desires down Continental’s groups’ throats.

4)  Fleets in these airlines show some opportunities but they also show some risks.  In the Boeing area, there is some room to “harmonize” the fleets.  Both operate 767’s, for instance, but different variants.  That’s a good thing if the pilot and flight crews are able to agree on seniority lists and get on with things.  It’s a bad thing if you have to use one part of the company to operate one variant and another to operate another variant.  The same is true on the 777 and 757 fleets. 

Both have orders for 787 aircraft and I suspect those will remain on the books .  United ordered A350’s and I kind of think those orders might just go away.  It’s the domestic fleet I wonder about.  UAL uses primarily A320 series aircraft and CAL uses primarily 737 series aircraft.   Again, if the pilots and flight crew can get together on labor agreements and seniority, it would be good to settle on one type.  The two aircraft are so similar that it is silly to operate two different fleets serving the same purpose.  (This really isn’t the case in the Delta/Northwest situation where the fleets were dissimilar enough to offer some opportunity for “right sizing”.) 

5)  Regional airlines.  United has relied more and more on regional airlines to serve mainline routes.  Continental has used them much more in the model of a traditional feeder network and primarily because of scope clauses with their pilots.   There are more than 10 different regional airlines serving the two airlines.  They need to consolidate and, frankly, they should consider buying 2 or 3 of those regional airlines and harmonizing their services a bit more.  Right now, I see a mad scramble to keep a lot of different kinds of regional aircraft in service with the two and I think those regional airlines are going to do anything they can to keep their contracts.  Service will suffer with so much competition.

6)  Service products.  Continental has a nice, focused service product for two classes (economy and business) that has worked fantastically for them.  United has 3 or 4 depending on how you count them.   First, business, economy plus and economy.  How do you harmonize these service offerings and keep both frequent flier groups happy.  A lot of Continental OnePass members already feel a bit cheated with the entry into Star Alliance and what it entitled them to on United and US Airways.  Those travelers count and you have to find a way to keep them happy.  Whose program survives and, at the same time, how do you keep from diluting the program(s) by being all things to all people?

Call me crazy but if I had been Continental, I would have encouraged a US Airways / United merger just to watch that organization melt down while I made plans to capture their business the old fashioned way:  By competing with good service.

Filed under: Airline News by ajax
No Comments »

I just saw THIS Seattle Post-Intelligencer Blog entry with the photo of the proposed livery for UAL/CAL.  I have to say that it is a pretty handsome look.  Everything is Continental (including the typeface I believe) except the name.

Filed under: Airline News by ajax
No Comments »

Now, this morning, I’ve seen several reports that the new combined airline will use the Continental livery and logo but the United name.  If nothing else, at least I can look forward to not seeing that horrid United livery anymore.

Filed under: Airline News by ajax
No Comments »

There are now reports that the boards of both United Airlines and Continental Airlines have approved an agreement that sees UAL buying CAL for approximately its current market price of $3.2 billion.   It is an all stock deal where Continental shareholders will receive 1.05 shares of United for their Continental stock.

The Washington Post reports that the new company will have a 16 member board with 2 seats reserved for labor unions.   The combined companies will have employees number over 90,000 and a combined fleet of more than 690 aircraft.

Official announcement of the deal is said to come on Monday morning.

It’s basically the deal we’ve all been hearing about for 2 weeks now.  UAL buys CAL, the company uses the United name and the Continental executive team runs most of the show.  Read the CNN/Money Magazine article HERE.

Filed under: Airline News by ajax
No Comments »