Virgin Atlantic has remained steadfastly independent over the past 20 years despite emerging airline alliances forming around them left and right.  Richard Branson has been an outspoken critic of these alliances and managed to be a big player in keeping British Airways and American Airlines from partnering up for over 15 years.

That said, they’re starting to look awfully lonely on the playing field and even a bit anemic.  This strategy of going it alone has worked in the past but I’m not so sure it works for them in the future.  They need more “feed” for their flights and, frankly, they could stand to make it a bit more attractive to potential customers by offering more choices too.

Sir Richard, it’s time you start looking for some strategic alliances. 

Virgin Atlantic has even kind of failed at making strategic alliances with its own brands around the world.  They do not cooperate closely with Virgin Blue, V Australia or Virgin America (in the last case it was a condition upon granting permission for Virgin America to start up so we’ll give them that one.) 

But it’s time.  It’s time for more strategic alliances and there are opportunities out there.  SkyTeam might actually be an excellent fit for Virgin Atlantic since they have no real UK market penetration.  It might work even better if the airline group controlling Virgin Blue and V Australia brands were to join it as well.   Such an alliance would be well served in the US-UK market as well as throughout Europe and it would establish better competition in the US-Australia-New Zealand markets too. 

I’ll stand with Sir Richard on the fundamental wrongness of these alliances still.  However, it’s time to acknowledge that these alliances are here to stay and start finding a way to compete within their structures instead of hoping for another 2 column inches of press by objecting to them.

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It’s been a bit over a week since American Airlines, British Airways and Iberia (along with Finnair and Royal Jordanian) received anti-trust immunity approvals from both the EU and the DoT.  What it means is that each of those airlines will be able to cooperate closely with each other on a variety flights between the United States and Europe. 

What closely cooperate means is that these airlines will start marketing their respective flights between cities under the various brands but each airline will be responsible for certain flights.  For example, British Airways may begin operating more of the capacity between DFW and London while American Airlines retasks the aircraft they were using for some of those flights to other flights.  Iberia Airlines may begin operating the flight(s) between Miami and Spain.  BA, AA and IB will be selling seats on all of those flights as their own just as you already see done as codeshares.

The difference is that now these airlines will also begin cooperating on scheduling.  In other words, American Airlines might start scheduling its “feed” for a British Airways flight from DFW to London.  American Airlines might do the same for an Iberia flight from Miami to Spain.  On the other side of the ocean, British Airways might schedule its “feed” for London to Chicago to mate up with an AA flight.   These airlines will start acting almost as if they are one company so to speak.

Is that good or bad?  If you ask the airlines, the customer will get to see more choices to more destinations on Oneworld flights and that choice is good.  In most cases, it is good and air fares are likely to be unaffected on many routes because of competition from other alliances such as SkyTeam and Star Alliance. 

However, in some cases, I think this is bad.  For instance, American Airlines already effectively “owned” the DFW to London market and really the DFW to Europe market.  So much so that previously they weren’t allowed to code share with British Airways on such routes at all.  There is very little competition in the DFW market to Europe.  Some exists, yes, in the form of flights by KLM and Lufthansa to Amsterdam and Frankford respectively.  One flight each a day.  Now, with even closer cooperation allowed, I do fear that KLM and Lufthansa may find such flights simply uneconomical.  There is no real Star Alliance and/or SkyTeam presence at DFW anymore. 

In the short term, I do think there are markets that are going to see much higher air fares for non-stop flights to Europe.  As with all things, those higher air fares may one day drawn in more competition, though.  It is conceivable that if the fares rise considerably, another alliance may target such a market for competition.  For instance, the Star Alliance may decide that Dallas needs some competition and suddenly we may find ContiUnited or US Airways providing some feed to that destination in order for a European carrier such as Lufthansa to justify a route between Dallas and Germany. 

I think such developments are a good 5 years away at least.  Fundamentally, I think these alliances are bad for consumers and bad for the industry but they were instituted a long time ago and that genie is out of the bottle now.  Since it would be nearly impossible to break up those alliances, it is fair that Oneworld be permited to establish their own now.  SkyTeam pioneered such things and Star Alliance is also far ahead of the curve. 

Regrettably, now we have to manage competition between alliances rather than companies.  I think that is bad because those alliances potentially let airlines that would otherwise go out of business remain in the game longer.  We need to see this industry periodically purge itself of the weaker players.  If you think that didn’t happen under regulation, you’re wrong.  It did.  Airlines did file bankruptcy and if they didn’t, they were forced into mergers of convenience by the CAB.  In any case, the weaker players still went away.  All too often, we don’t allow that to happen anymore and that hurts us more than helps.

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I know that these days it seems as if I’m at war with American Airlines but the truth is, they just keep running into walls.

ABC News has THIS story about a woman named Danielle Covarrubias who became pretty angry at American Airlines losing her bag.  However, when they also refused to refund her bag fee, she decided to sue American Airlines for $5 million.  The class action lawsuit was filed in Washington state, where Ms. Covarrubias lives.

But after a few days, it’s come to light that, according to American, Ms. Covarrubias wasn’t on the AA flight.  It was cancelled and she was re-booked onto another airline which lost her bag.  That was from Grand Rapids to Chicago.  No one disputes the bag was lost but it appears it was returned to her the following day.

AA says that they do allow a refund claim in these events as a part of a lost bag claim and it is unclear if Ms. Covarrubias filed such a claim.  Regardless, it points up what I’ve been saying for more than a year.  If you’re going to charge a bag fee, be prepared to deliver or refund that fee when you don’t deliver it on time or at all. 

Travelers are enraged and there is enough traction for a class action lawsuit such as this.  Even if this one doesn’t end up in court, I do believe there will be another that does.  When it does, the issue will be over whether or not an airline is entering into a contract to carry that bag with guarantees and I don’t think their fine print will save them.  There is plenty of law to show that there is an implied contract and that breaking the contract means you owe a refund of some sort.

Revenue from ancillary fees such as this looks great to airlines but they haven’t yet really felt the pain of what those fees imply.  To be honest, I’m a bit surprised that it has taken this long to see something like this. 

More important, it’s another case of airlines shooting themselves in the foot.  This problem was easy to solve and even easier to avoid.  Give a refund instantly when you lose or misplace a bag for which a customer has paid a fee. 

That much is a no-brainer.  It isn’t hard to empower an employee to do so.  You only have to ask 2 questions to arrive at an appropriate action:  1) Did the customer pay a checked bag fee and actually check a bag?  2) Did the bag arrive with the customer?   If the answers are Yes and No respectively, make that refund immediately.  Credit it back in exactly the same manner for which it was paid and do it instantly and with sincere regrets over the trouble caused. 

Denying that refund automatically is not only a bad PR strategy, it’s just simply wrong.  In this country, we do not expect people to pay for things they didn’t get.  Airlines are styling these fees as “services” and, in this case, service is exactly what the customer didn’t receive.

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Air Berlin will be joining Oneworld sponsored by British Airways it has been announced.  I would like to announce something myself:

Huh?  Air Berlin?

Air Berlin is European continent based LCC carrier and while they get generally good marks as an LCC carrier, I’ve a hard time figuring out how their service product harmonizes with the rest of Oneworld.  Particularly with British Airways, American Airlines, QANTAS, Finnair and Cathay Pacific.  Is Oneworld just that eager to have more feed on the European continent?

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A few days ago, I found THIS little news story about Thomson Airways and what they may choose to do with their 787 aircraft as they come online into their fleet.  Briefly, Thomson says they may choose to introduce a direct, non-stop flight from the United Kingdom to Hawaii.  Thomson is the third largest UK airline and focuses primarily on the leisure market. 

It interests me because it is more evidence of the direction I think airlines will take as they bring into their fleets aircraft that are more and more capable of long, thin routes.  The Boeing 787 and Airbus A350 will be those aircraft primarily although this new direction really started with the 777-200LR. 

It is also why I think ultra-large, long range aircraft have a limited market going forward.  Aircraft such as the A380 and 747-8i have the capacity to carry 400+ people over distances as long as 8000 nautical miles.  However, what has never been fully acknowledged is that previous large capacity aircraft, primarily the 747-400, were used as much for the range, if not more, than their total capacity. 

As airlines begin to explore more and more direct routes that by-pass traditional hubs, the efficacy of using an aircraft to transport 400+ people from hub to hub begins to wane.  Airlines such as Delta Airlines are already using the 777-200LR to fly routes such as Atlanta-South Africa and American Airlines (and others) are using the 777-200ER to fly routes from North America to India direct.  Those routes previously had stops in Europe or North Africa.   Emirates, the largest user of the A380 and who will by far have the largest fleet of A380s, has a model based on their mega-hub in Dubai.  The question is, is it better for a North American passenger to fly to Chicago, New York City or Atlanta and then take a direct flight to their destination or is it better to fly to Emirates’ hub and then onward on another long haul flight to their destination.

I think the former is the more likely model, particularly for the United States and Europe.  Witness the announcement that Continental plans to fly their first 787s to Auckland, New Zealand and Africa from Houston.  Routes that previously never existed and which previously required a stop in Los Angeles or New York or a European hub. 

That doesn’t mean the A380 and/or the 747-8i doesn’t have a place in the market place.  To the contrary, I think we’ll see aircraft such those on extremely dense routes of medium distance that are hub to hub as well as capital city to capital city.  The first, most logical route is NYC to London but there are others as well.  For instance, California to Japan is another great use for them.  Australia to the United States is another logical use as long as the competitors on those routes remain relatively few.  That could change as more airlines obtain the 787. 

At the end of the day, both the Airbus A350 and 787 (and the 777 for some time to come) will be the real players in long haul fleets over the next 20 years.  It’s notable that the 787 is the first long haul widebody aircraft that has the flexibility and economics to become attractive to forming a Low Cost Carrier that flies international routes.

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A new executive team for the merged airlines Continental and United Airlines has been announced.  We already knew that Glenn Tilton was moving up to non-executive Chairman and Jeff Smisek would be CEO.  However, now we officially know the fate of John Tague.  His position of President is going to Jeff Smisek. 

John Tague is largely credited for the operational turnaround at United and appears to have done a great job while there.  I think it is a shame to see him going away and I do hope another airline out there scoops him up. 

You know, someone like American Airlines who could use a little Tagueness. 

Also going away is Kathryn Mikells, current United Airlines CFO and also somone who has gotten a lot of credit for getting United’s financial house in order. 

Frankly, it bothers me to see the two shining stars of United leaving.

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One thing coming out of the 2nd Quarter financials from several airlines is, once again, just how much baggage fees are adding to revenues and, more importantly, profit.  United President John Tague is expecting that this kind of ancillary fee could soon be adding a billion dollars more to revenue and that is from its current levels of $350 to $400 million.

Like them or not, those numbers are hard to ignore. 

It does make me wonder how Southwest Airlines will continue to defend its no baggage fees approach going forward.  Load factors on airlines are at astonishingly high levels and that means that Southwest isn’t necessarily siphoning off customers from airlines with those fees.

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and I don’t care.  The customer was flying standby and even if you’ve boarded, you are subject to the whims of anything when you fly standby.  Don’t want to be subject to that?  Don’t fly standby.

Here is the STORY on the Consumerist blog. 

I don’t care if it was a 14 year old fat kid or a 44 year old giant of a man.  Southwest shouldn’t be apologizing for removing a standby passenger from their flight regardless of their frequent flier status or “normal” procedures.  My opinion would be different if this person wasn’t flying standby, yes, but that isn’t the case here.  In fact, this strikes me as one more spoiled frequent flier lashing out because they didn’t get what they want.

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Coming out of the latest financial reports from Delta, several news outlets noticed that Delta has plans to continue to acquire used MD-90’s for their fleet.  Unlike almost any other airline, Delta has found a use for these aircraft that beats the economics of the 737-800. 

Surely the low acquisition costs and high reliability of these aircraft make a good case for their purchase.  The MD-90 is a half generation newer than the MD-80 aircraft flying out there and since most were produced in the mid to late 1990’s, they have plenty of life left in them to be used for an economical period of time.   It’s clear that Delta prefers to bridge the gap between the current offerings of Boeing and Airbus and what future aircraft that may come along late in the next decade.

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The Seattle Post Intelligencer has THIS story on a new 3 Hour Rule study done and it being condemned by the DoT.  Two “consultants” did a fast and dirty study on the 3 Hour Rule and its effects by using the first month’s data available (May 2010) to conclude that airlines were canceling flights to avoid risking fines.

I’ve said it BEFORE and I’ll say it again:  We have no meaninful data on this rule and its effects and it will take 12 to 24 months to have enough data on its effects. 

To do a quick and dirty study like that and make it public that quickly is bad statistical science and makes it and its authors (Darryl Jenkins and Joshua Marks) highly suspect.  I would like to know who is paying these “consultants” and what their credentials are.  You can see more HERE. 

These two people are describing themselves as a collaborative research program between the industry and Marks Aviation LLC.  In addition to a study that is bad statistical science, their website is bad too.  If one looks up Marks Aviation LLC on Google, one finds another really bad website you can see HERE. 

Perusing that awful piece of HTML, one discovers that Joshua Marks real claim to industry knowledge is some brief employment by MAXJet Airways.  While Josh claims a good education at Harvard, it would appear he’s been out of a job since 2008 (who hasn’t?) and I’m guessing Josh read somewhere that if you did trade studies, you bolstered your credibility while looking for a job.  Working for MAXJet Airways isn’t much to claim for experience considering its extremely limited operations, failed business model and its nose-dive into bankruptcy. 

All in all, I think Josh is trying to land a job and I think he’s trying to do it by stirring things up publicly so that he might get some attention from a real airline.  I’ve no objection to trying to get a job and I’ve no objection to “consulting” in the aviation industry while you look for one.  I have no objection to Josh even claiming some airline experience.  However, I object loudly to his “study” based on 1 month’s data and the first month at that.  Someone with a Harvard MBA really ought to know better.

As for Josh’s partner in this criminal study, Darryl Jenkins, well, his WEBSITE is bad too.  If Darryl was as credentialed and seasoned as he claims, he wouldn’t have put his name on such a bad study.  So that calls Darry’s credentials into question.  Older and wiser should know better.

Sorry folks, there isn’t anything to see here.  Just a bad wreck on the Airline expressway.

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Recently the FAA has required operators of 767 aircraft to inspect the engine pylons on their fleet because cracking was found on a few pylons in the American Airlines fleet recently.  A co-worker expressed concern about this because they will be flying an American 767 in a few weeks and asked about it. 

I would have absolutely no worries about flying on a 767 of any type despite this discovery.  As aircraft age, they do develop new trends in how their structures age.  While the pylons found had cracked, very few, so far, have been discovered to have actual cracks.  I have no doubt that there will be increased inspections on this area of the aircraft and if pylons are showing fatigue, they’ll be replaced immediately. 

Yes, it stirs up pictures of a certain DC-10 from the 1970’s in Chicago.  However, there are differences between the two aircraft.  First, the DC-10 cracks developed because of improper maintenace procedures.  The cracks found on the 767 result from simple metal fatigue.  How is that different?  In the latter case, the progression is much more preditable typically.  In the former situation, severe stress was being placed on parts and in areas where it wasn’t supposed to be.  It is kind of like feeling sore and tired and how you got that way. If you were beat up by someone, you’re sore and tired and you may have other injuries.  If you’re just old, it’s a natural consequence of age and something you can do something about but it doesn’t necessarily indicate catastrophe or other injuries either.

Yes, fly the 767 with confidence.  It’s an aircraft that will be around for some time to come.

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Continental Airlines and US Airways have gone from red to black in their latest 2nd quarter earnings reports and it’s a remarkable performance for both airlines.  Continental wobbled a bit in the 1st quarter but came back with a strong report of $233 million report and when you combine that with United Airlines earnings, you see a potential competitor to Delta that is the equal if not superior. 

Delta Airlines, American Airlines and the proposed ContiUnited merger all will result in airlines with revenues between $23 billion and $28 billion and it just strikese a yellow highlighter across American that it had a gap of over $400 million in profit this past quarter.

US Airways’ result, however, is even more impressive.  In fact, US Airways in general is becoming more and more impressive.  Operationally, they’re hitting high numbers on completing flights on time, losing baggage and just generally making people feel good about their choice.  This is not the airline you saw even 2 years ago and if I were asked about flying them today, I would highly recommend them at this point. 

US Airways came in with a net profit of $257 million this quarter and they did this with the least relevant hubs in the industry.  They did it despite the fact that after nearly 5 years their pilots still haven’t decided upon a union and negotiated a contract.  They did it despite becoming the third wheel among the Star Alliance’s US based partners.  They did it despite making Las Vegas, at best, a focus city instead of a hub. 

I would love to see some of that DNA move over to American and get things sorted for once.

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That’s a less than thrilling announcement.  To be fair, American Airlines has lost a great deal less money for Q2 this year than the previous year’s Q2.  This year’s Q2 loss is a bit over $10 million while last year’s was $390 million. 

The problem is that while this is an improvement, it also highlights just how far behind the curve AA is compared to its brother legacy airlines in the United States.  With Delta and United reporting huge profits for Q2 and Continental sure to follow with impressive numbers, American Airlines’ disadvantage is only highlighted. 

American blamed much of its Q2 losses on higher fuel prices.  The problem with that is that the fuel price to AA is essentially the same price it is to every airline in the United States.  The only mitigation for that is hedging and AA does engage in hedging.   So, higher fuel prices over this time last year isn’t really a very satisfying answer for what remains a result that is staggeringly far behind other US legacy airlines.

AA has attempted to mitigate that stark contrast by saying that, over time, other airlines’ costs will begin to approach AA’s again and the gap will narrow considerably.  Well, that sounds good but . . . that’s going to take years and years for that to happen.  What about investors today?  In addition, whether or not that gap narrows is contingent upon how each airline manages itself.  Is the airline doing mortal combat with its labor groups or is it finding common ground and securing productive contracts?   In other words, AA has good PR for that gap but it doesn’t have a substantive answer.

Or does it?  AA also just got DoT and EU anti-trust immunity to form closer partnerships with its Oneworld brothers, British Airways and Iberia Airlines.  In addition, it is on track to receive the same in a partnership with Japan Air Lines across the Pacific Ocean.  AA says that these partnerships could as much as $500 million in revenue by 2012.   That sounds like a lot until you realize that that is a 2+% revenue gain.  And that’s revenue, not profit. 

At the end of the day, we hear a lot about strategies AA has involving new partnerships and re-focusing on core cities.  We hear a lot of mitigation of cost gaps between AA and the rest of our legacy airlines.  We sometimes hear analysts praise AA for avoiding bankruptcy . . . usually right before the analyst highlights just how much that put AA at a disadvantage today. 

What we don’t hear about is substantive and real progress made towards reducing costs.  We hear noise and we see somewhat halfhearted attempts to paint a picture that something is being done but we haven’t heard about the real progress made towards not just containing costs but reducing them. 

At what point do analysts and investors require AA’s executive team to show them the money?

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United Airlines announced a second quarter profit of $273 million and that’s an impressive result.  If Continental’s come in as impressive as that, the heat will be on American Airlines in ways we can only imagine. 

Speaking of United and Continental . . . their respective pilot groups have come to an agreement on transition.  There is a transition agreement now in place for them but don’t think this means that the groups are near a final merge agreement.  The transition agreement just governs how the two airlines will operate with the pilots during the merger transition.  I suspect that obtaining a final agreement is still going to be a bit bloody.

BA cabin crew have rejected the latest British Airways offer for settlement.  After voting was completed, the latest offer was rejected by about 2/3’s of the labor group.   While that isn’t wholesale rejection, it’s significant enough to be a real problem.  The hold up is the restoration of flight benefits.  BA did finally agree to restore flight benefits to crew that had originally had them taken away for participating in the first round of strikes earlier this year.  However, they were restored with loss of seniority and that means they were restored as if these crew were entry level again.  This is an area that I’m afraid I side with the union on.  Those flight benefits shouldn’t have been taken away as a punitive measure and its the one big misstep by Willie Walsh.  The smart move would be to cave in, get another vote going and come to a final settlement. 

At the Farnborough International Airshow, single aisle aircraft orders are happening at a rapid clip.  Both lessors (GECAS, Air Lease Corp, etc) and airlines themselves (LAN, Flybe, etc) are ordering large amounts of aircraft for delivery over the next several years.  LAN has an agreement for up to 50 Airbus A320 class aircraft and Flybe has ordered 35 of the Embraer E-175 jets.  GECAS, GE’s leasing arm, has ordered 40 737-800 aircraft.  Still, I think this reflect the rather dismal orders placed last year more than it does resounding growth for the next few years.  In other words, I think a lot of these are replacement equipment rather than aircraft purchased for growth.

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to aggravate, irritate and disappoint customers one customer at a time.

One FlyingColors reader just let me know about yet another American Airlines blunder that occurred yesterday.  This same reader spurred this POST just weeks ago.  This time, the Dear Reader had scheduled a family trip to Connecticut and because he’s an AA Platinum member, he used his miles to get 3 First Class tickets for his wife and 2 daughters and decided to purchase a Coach ticket for himself on the assumption he could readily get an upgrade.

I know, you’re thinking this is about not getting an upgrade, aren’t you?  Wrong.  About a week and a half prior to departure, our Dear Reader tried to confirm their travel via AA online only to discover that, suddenly, his wife didn’t have an assigned seat.  Not only that, the online portal wouldn’t permit him to get another assignment for his wife.

Undaunted, Dear Reader phoned American Airlines at their AAdvantage phone number to get it taken care of.  Once he had a reservations agent on the line (after 15+ minutes of waiting), he was told by this agent that no seat would be assigned until the day of the return trip from Connecticut and would not discuss the reason why.  When probed for more information, the agent simply replied “I’m not at liberty to discuss this further with you.”  All done with a secretive and somewhat hostile tone.

That’s when Dear Reader called me and asked what I thought was going on.  After hearing his account of the cryptic dialog with  the agent, I responded it really could be anything but that it almost sounded like a security problem.  Dear Reader wanted to address that before the trip but I explained that likely no one would address the issue until they decided to address it with his wife.  Indeed, I also advised that it would likely turn out to be not a problem once they arrived and checked in for the flight.

Well, I was kind of right.  It wasn’t a security problem.  It was a First Class is oversold problem.  At check-in, they continued to decline to assign a seat to his wife and spent their time instead offering a rather generous $300 voucher and guaranteed space on the next available flight via Chicago (he was traveling from Connecticut to the DFW area.) 

However, since he was traveling with family and had committments to keep in the DFW area, they declined such a reward and waited.  Only after everyone else was boarded did they assign his wife a seat and they were able to return.   Dear Reader got to ride in Coach and get harrassed by amateur travelers but they got home.

Yes, his wife and kids were traveling on points.  So what?  That’s the reward for spending enough money and flying enough trips on AA to become an AA AAdvantage Platinum member.  Besides, those seats are so hard to come by that, if they do have them and they do guarantee them and issue a ticket, this is one problem that should *not* be presented to a Platinum member.   At the end of the day, American Airlines made up the game and set the rules, let’s not be sympathetic if it doesn’t work out to their AAdvantage.

What’s more, they created a hostile environment for the Dear Reader and his wife by implying it was so much more a problem than it was.  Ironically, if they had been told what the problem was, they would have readily re-booked the flight either for later in the day or the day later.  Yes, American, your customer could have been made happy by just *telling them* what the problem was.  Instead, you chose, once again, to act like information was a golden nugget to be hoarded and induced concern and worry over a flight. 

You did it to one of your best customers.  And people still ask me why I’ve chosen to take my business elsewhere.   Airlines won’t start improving their service and treatment of you, the customers, until you do start taking your business elsewhere.  Remember that.

So, I repeat once more:  Really American Airlines . . . is that the best you’ve got?

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Delta announced a 2nd quarter profit of $467  million.  That’s not an annual profit.  That’s a quarterly result and an impressive one at that.  That is coming from the merger of Delta and Northwest that formed a $28 Billion a year company less than 2 years ago. It’s notable that both Delta and Northwest managed to restructure their costs through bankruptcy reorganization. 

American Airlines, a company with revenues of nearly $24 Billion, is not expected to earn a profit this year.  This disparity really highlights the disadvantage American Airlines has with respect to costs and its failure to contain and restructure those costs even during the last 2 years of crisis in the airline industry.

And this is why ‘Continental and United want to merge so badly.  It shows a pathway to greater profitability and that’s something that has to exist in this industry going forward.  In fact, I find that Delta result so impressive, I really wonder if it won’t make LCC’s start looking at each other as well.

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There are several reports out now that Emirates Airlines is going to announce an order for 30 Boeing 777 aircraft at this year’s Farnborough International Airshow in the United Kingdom this week.  I’m sure that this will further strike fear in the hearts of airline executives and I’ll repeat THIS response.  Just because they order it doesn’t mean they’ll know what to do with it when the time comes.

Another interesting piece of news is that Air France has invited Airbus and Boeing to respond with a proposal for supplying as many as 100 widebody aircraft over the next decade.  The assumption is a mix of both the Airbus A350 and Boeing 787.  I suspect conventional wisdom will give Airbus the upper hand (we are talking about Air France based in France where Airbus aircraft like the A350 will be made and where the French insist on buying local) but I like Boeing chances for this.  Boeing could win this order by offering a mix of 787 and 777 aircraft with GE engines.  Air France already has a large fleet of 777 aircraft, experience with the GE engines and may well be attracted by the expected quick and relatively cheap transition for pilots to move between the two aircraft.

Steven Udvar Hazy has his new company, Air Lease Company, and reportedly will be at Farnborough on the hunt for building his new portfolio of lease aircraft.  While money is starting to flow back into the lease business, I do wonder if the game hasn’t changed since the early 2000’s.  Airlines have seen the benefits of owning their aircraft because in bad times, they can leverage those aircraft for more operating capital in those bad times.  In addition, I don’t think Airbus and Boeing are in the mood to offer huge discounts to the lessors anymore.  If Michael O’Leary of Ryanair can’t get a deal for 200+ aircraft, why should we think lessors will?

Randy Tinseth, VP of Marketing for Boeing, will be releasing Boeing’s most recent current market outlook at Farnborough and it’s quite a positive one.  Boeing sees a need for 30,900 new aircraft between now and 2029 of which they expect 21,000 to be single aisle airliners.  They’re forecast is based on a growth rate of 5+% per year in the airline industry and that’s based growth rates since 1978 deregulation in the US (which have averaged 5% per year.) 

What’s interesting to me is that they see the regional jet share of that outlook as being significantly less than in the past.  I think that depends on what you call a regional jet.  If you’re speaking of 50 or less seats, I agree.  If we’re talking about 75 to 110 seats, I’m not sure I do agree.  Indeed, I think that the 90 to 130 seat market is going to be very hot and I think that Boeing and Airbus ceding that market is a mistake.  Even car manufacturers have discovered that it’s wise to cultivate customers at the entry level as opposed to waiting 20 years for them to be able to afford your product.

Finally, I understand that Boeing’s 787, ZA003, has landed in the UK and that marks its first appearance in Europe.  FleetBuzzEditorial.Com got some photos of the 787 landing at Farnborough which can be seen HERE.  I still really dislike the demo interior they’ve installed in that aircraft.

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The Boeing 787’s introduction to a fleet is something that anyone who follows the aviation industry has been looking forward to.  It was greatly disappointing that it did not meet its first flight schedule originally but anyone who follows this business was hardly surprised. 

What was a bit surprising was a 2+ year delay in that first flight.  However, Boeing was pushing its limits when it came to both technology and vendors.  In many cases, both were factors in various delays.  Boeing was right to push its limits, however.  If Boeing expected to be an aviation leader, it needed to stretch itself and it quite rightly did so in this project.  In addition, it was right to push its outsourcing as well.  Boeing had already experienced good partnerships in outsourcing other airliners production work such as on the 777.

Even with all that has happened over the past 3 years in the 787 program, I still think Boeing was right to push its technology development for this aircraft.  It remains a revolution for aircraft and continues to promise a great deal for airlines who use it. 

However, perhaps Boeing pushed its vendor outsourcing too much.  Actually, we knew they did when they purchased some vendor operations for the 787 outright.  I think that, perhaps, Boeing didn’t have as much knowledge about outsourcing as it thought it did.  It was, perhaps, viewed more like outsourcing on defense projects where such projects are often pushing the limits in every direction and commercial viability isn’t necessarily a key driver and meeting requirements is.

The latest announced delay finally frustrates me.  The vague references to instrumentation and the fact that “test programs” experience unknowns just doesn’t fly anymore.  As someone who works for a major aerospace and defense company, I’ve seen good programs and I’ve seen bad.  This one is starting to stink from an execution point of view.

The truth is, a lot of risk could have been reduced in the test program using time before the first flight to ensure systems were extra mature.  To a degree, it’s clear that was done in some areas and completely neglected in others.   Issues with the horizontal stabilizer and how it was manufactured and/or installed should have been identified before first flight.  There was so much time to staff and plan the flight test program, it should be going *faster* than its schedule, not slower. 

In short, I don’t think Boeing has done nearly enough to reduce risk on this program.  They keep getting surprised by things that just point to a too lean program and not enough investment in retiring risk.  Airlines have a right to be frustrated at this point.  Boeing has yet to have gotten their production up to anything above low rate initial production and its delays to allow manufacturers to catch up is shameful at this point. 

Those partners have had 3 years to figure out how to ramp up production and prevent traveled work from happening.  Having to “pause” the production to prevent traveled work at this point ought to be resulting in at least a few project managers getting fired.   At this point, the only thing that should potentially delay entry into service is flight test revealing a near catastrophic development found only in real flight test.  Seriously, all the systems should have an exceptional maturity and all the vendors and manufacturers should be capable of spinning up production beyond 2 to 2.5 aircraft per month. 

Lean is good but this program’s project planning and execution stinks of being run on the absolute best case scenarios with very little provision for managing risk and retiring risk along the various waypoints of development in a sensible and, more importantly, responsible manner. 

This aircraft will be a successful one.  I firmly believe it remains a game changer for airlines.  However, I’m left with a sense that Boeing continues to treat this program as “just another program” instead of treating it with a sense of urgency and acting as if its future depends on it. 

The fact that there is as little outcry over these latest announcements demonstrates just how little  this industry has come to expect from Boeing and this program when it comes to doing what Boeing says it is going to do.

Filed under: Aircraft Development by ajax
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I like to watch the fare prices on various routes that I fly from time to time but none more so than the Dallas to Milwaukee run.  To me, it’s an example of what real competition can do and I’ve written about it before.  You can read my earlier post HERE.

Well, I took some time to see what was going on with that route now by sample fares and flights for mid-week departures between the two cities in August.  First, the good news:  Fares are holding steady at or about $170 for advance purchase tickets. 

Second, the better news:  Airtran is using the Boeing 717 on that route already.  No SkyWest CRJ-200 regional jets, we get the real Airtran on a real aircraft that is really pretty comfortable.  I figured Airtran would move in with the larger aircraft if only to put pressure on Midwest Express.

Now some bad news:  Airtran is only flying an early morning and late afternoon flight on the DFW to MKE run.  It’s worse on the MKE to DFW segment with a plain morning departure and late evening departure.  I’m guessing it’s the best they can do for now but they’re going to need at least one more flight to make that really work.  Their current offering via Atlanta is *not* what I meant by needing another flight either.

Midwest  aka Frontier aka Republic is hanging in there.  They have 3 flights using the E-170 Embraer jets and that’s really not a bad aircraft for that route.  With 2×2 seating and a bit bigger cabin, it works for what is essentially a long and thin domestic route.  Well, long-ish anyway.  The bad news is that Midwest  aka Frontier aka Republic has its first flight on the DFW-MKE run after 10am in the morning.  That’s about 2 hours later than necessary.

American Eagle is hanging in there.  This is a route that used to often cost as much as $300 round trip just 3 years ago and that was the best fare you could get.  Often the only tickets to be had were in excess of $500 and the only choice you had was to fly to Chicago and take the bus if you wanted to save money.   But here is the interesting part:  American Eagle has its 5 flights a day and I will say they’re well laid out in terms of departure and arrival times.  However, American Eagle is now using the CRJ700 on 3 of those five flights (the remaining two use the clapped out ERJ-140)  and their fares are as competive as anyone’s. 

And then there is Southwest.  Southwest’s cheapest fares are competitive with everyone else’s and continue to be one-stop flights with no plane changes.   Those flights are now running about 3 hours, 25 minutes however and that’s a bit longer than they were taking earlier this year.   The non-stop flights of the other airlines are doing it in 2 hours, 20 minutes.   Still, they are the bargain choice for 2 reasons.  First, Love Field is cheaper to fly from for more people in the DFW area in that its taxes and fees are slightly cheaper and the travel to Love Field and parking at Love Field is cheaper too.  Second, Southwest still isn’t charging for baggage.  That means for someone checking a bag, the savings could range from $35 to nearly $80 and that’s real savings. 

In practical terms, for me as a passenger to that destination, I probably could save as much as $50 each way in “real” savings by using Southwest.  And I’d do it in the aircraft that had the *most* seat pitch of those serving the routes.  That’s worth the extra hour of transit time on a leisure flight and might just be worth it on a business flight too. Why?  Because my door to door time in the Dallas area is likely to be about the same using Love Field or DFW.  I don’t have to drive as far to Love Field airport, take as long to park and/or transit into the terminal, check in quite as early or frenetically and that amounts to probably as much as an hour gained making the trip from the door of my house to the door of my family’s homes in the MKE area about the same no matter which airport and airline I take. 

But I can save about $100 round trip if I’m flying with checked baggage and that’s a deal. 

If Airtran wants to win Miwaukee, this is an important route for them to succeed on.  They’ve got the right equipment for the route now but they’re going to have to work on their frequencies and departure times a bit to really win.  Right now, their schedule looks like a compromise.

Midwest is probably continuing to do well but let’s see how they do when the brand changes to Frontier.  I’m not saying they’re out of the game.  To the contrary, this whole competition thing on this route could end up being Midwest/Frontier and American Eagle again in a year or two.  Midwest has good frequencies, good flight times (mostly) and good service.   However, Southwest will win this route, I think, when they can start flying it non-stop But that opportunity is still 3 1/2 years away.

Filed under: Airline Fees, Airline Fleets, Airline Service by ajax
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and I say “D’uh”. 

The GAO report on airline fees is, frankly, more concerned with lost tax revenue because of de-bundling of “services”.  Baggage fees as well as other fees aren’t subject to the excise tax that are paid on the fare price of the tickets.  I’m wholly unsurprised that this hole is being revealed and talked about and I do expect that we’ll see that situation “fixed” some time in the future although I would point out that the airline indudstry is already highly taxed and the decrease in revenue over the past 2 years likely has to do with depressed traffic levels far more than lost revenue on de-bundling.

However, it makes both a good and official observation that the systems for purchasing a ticket at this point are in disarray.  An area that I’ve already addressed once this week prior to the release of the GAO report.  I’ve wondered whether or not the systems currently in place are legal.  I suspect they are legal but I also suspect that they dance awfully close to the line when it comes to fair trade practices.

Regardless, this is an area where some regulation is appropriate.  Customers are at a great disadvantage because of they cannot identify *all* the fees they are potentially subject to when arranging for their trip.  Baggage fees are, in some cases, not revealed until after a purchase.  If they are revealed prior to the purchase, they’re revealed just before consummating the transaction and long after price comparisons have taken place for a trip. 

But it’s not just baggage fees.  It’s fees for assigning seats, for getting good seats, for making a reservation via phone vs the internet and many others.  Some regulation that enforces transparency for pricing and which allows the consumer to make a reasonable comparison in prices is appropriate in this case.  No, airlines don’t want that transparency because they know that if they can get you to the moment of truth, getting your credit card out for the purchase, they are almost certainly assured of the sale. 

But our government isn’t here to serve airlines purposes solely.  By all means, allow them to compete on price and I’m willing to concede the point on baggage fees at this point (which doesn’t mean I like 1st bag checked fees one bit at all).  However, enforce transparency so that the consumer can make an informed purchase. 

We require this when it comes to purchasing an automobile or an appliance or most anything else.  Why shouldn’t it be required for purchasing transportation?

Filed under: Airline News by ajax
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