So, yesterday I ran across this story online by Bloomberg that you can read HERE. The short version is that Tim Clark of Emirates denied that Emirates had any interest in purchasing a stake in American Airlines’ holding company, AMR.
Huh?
No, I don’t think they would be interested in that. Why would a company like Emirates have any interest at all in purchasing a stake in an airline like AMR which has higher costs and which is partnered with the very airlines it competes against?
I suspect someone needed AMR stock to rise in the markets and started a rumour. Now, a US Airways / AA partnership might just get some traction but I think we’re a good 9 to 12 months away from hearing about anything happening with US Airways.
Mexicana Airlines ceased all operations after spending a few weeks trying to restructure and begin to figure a way out of bankruptcy. It doesn’t really come as a giant surprise that one of the world’s oldest airlines stopped operating. Unexplicably, Mexicana had stopped selling seats on their flights but kept operating them which left quite a few of us baffled.
Mexicana’s management blames high oil prices, labor and the swine flu outbreak and certainly all three contributed to the problems the airline had. However, oil isn’t so high and swine flu really stopped being an issue on most people’s minds by late last year. Labor is the real problem.
I often wonder why it is so hard for labor unions, particularly the kind that Mexicana has had to endure, really don’t seem to be able to grasp that even though an airline made your paycheck for several years, labor costs like that are unsustainable by anyone at the end. Airlines can often wheeze through such things for years but there is always a reckoning and it always seems to shock unions when it results in a shutdown. In fact, they always appear to refuse to believe it in some respects.
The maneuverings we saw around Mexicana for the last few weeks were somewhat pathetic to me. New investors thought they saw an opportunity and moved in but, like many who do so, I think they suddenly learned just how cash intensive an airline is and wisely decided to put a stop to the burn quickly.
Will we see this airline rise again? I sincerely doubt that Mexicana or its subsidiary companies will raise their wings again in their current form. It’s possible someone will buy the brand and start an airline under the Mexicana name but it won’t be the Mexicana that just crashed and burned.
It won’t be a foreign carrier coming to save them. Mexico’s ownership laws forbid foreign ownership of their carriers above 25% and I think that’s a shame. Someone like LAN or Avianca-TACA might have been willing to come in and invest, restructure and operate a viable entity. Sadly, Mexico is more archaic than many Latin American countries these days when it comes to aviation and I sincerely doubt that Mexico’s government is going to move quickly to liberalize their ownership laws.
So, I think this is goodbye to Mexicana. At least to this Mexicana. To me, it’s a shame. I’ve always liked their image and aircraft and kind of thought of them as the Braniff of Mexico. Their colorful 727’s of the 70’s and 80’s were second only to Braniff’s and I simply also feel fond towards an airline that has a history dating back to the 1920’s and which was once connected to Juan Trippe and Pan Am.
As part of the deal to allow Continental and United Airlines merge, the two airlines will be required to open up some space at Newark Liberty International Airport and guess who’s leasing the take-off and landing spots?
Southwest Airlines.
I think this is smart of ContiUnited. They could have found any number of airlines that would be acceptable to the Department of Justice and Department of Transportation but that would mean allowing an airline with potentially even lower costs gaining a foothold.
Instead, they did a deal with an airline that, on some level, allows them to compete. Both airlines have experience competing with Southwest in various markets and both have managed to co-exist with Southwest without being driven out of markets. In other words, I think they realized the devil they knew was a whole lot better than the devils they don’t.
For Southwest, I think this is great. They get enough slots to do 18 daily roundtrips from an airport that arguably is more convenient to Manhattan and they get to build on their operations in the area by operating from 2 of the 3 major airports in the NYC area. (3 of 4 if you count Long Island’s Islip airport.)
No announcement was made on what flights SWA might operate from Newark but I have a few guesses. They could connect to Dulles or Baltimore’s BWI for one. I’m sure we’ll see some flights between Chicago’s Midway and Newark. I wouldn’t be too surprised to see a flight or 3 to Houston, believe it or not.
One thing is for sure, they won’t be flights on leisure routes.
When they’re able to, I would expect a few flights from the NYC to Dallas area and Newark would be a great airport operate those flights to and from. In the meantime, I would not be one bit surprised to see SWA re-jigger their route system to offer a few one-stop flights between the two cities. St. Louis or Kansas City could be choices for that.
Why do they only give up slots in Newark? Continental and United have very little route overlap and the one airport that the two had dominance at was Newark. Actually, Continental had overwhelming dominance at Newark but when you added in United’s flights to major markets, it crossed the line. This is good news for ContiUnited and expect their merger to close in late November or early December pending approval from a few other agencies.
In the meantime, someone please hand Senator Oberstar from Minnesota a roll of Tums, please.
Regardless of whether or not a new 787 delivery delay affects Boeing’s financial guidance, this is a huge disappointment. Not just for fans of the airline industry either.
These days, we tend to see companies as cold and calculating and making business decisions based on logic rather than emotion. It’s a part of our culture to view particularly large companies like Boeing in just that manner. It is also a strong habit among the financial industry to view and analyze things on that level and that’s not entirely unjustified.
However, companies are run by human beings. Human beings do react emotionally to developments whether in their personal lives or within their business. Think I’m wrong? Go walk around a company on the day of a big layoff.
This latest delay is going to emotionally disappoint quite a number of people in the airline industry. It’s going to disappoint decision makers within the airlines themselves and it’s going to disappoint lessors too. These repeated disappointments are going to be the stuff that goes into books about Boeing and the airline industry 10, 20 and 30 years from now. It’s going to be described as the often delayed, highly problematic 787 program and the only thing we don’t know yet is whether or not the 787 is actually the success we think it is.
That kind of stuff gets remembered not just by today’s decision makers but by tomorrow’s decision makers. The junior managers who may well be the VP of Operations or VP of Maintenance at an airline and an influential person on future aircraft purchases.
Boeing isn’t the only game in town and there is bad news knocking on the door, too. The threat isn’t Airbus. Boeing knows how to compete with Airbus. The threat comes from the aerospace capabilities being developed by Bombardier, Embraer, Mitsubishi and others. Regional jet aircraft now, yes, but they’re acquiring intellectual capital that will permit them to build them bigger and bigger. That’s the threat.
And Boeing keeps giving airlines a reason to continue to look at the other guys and wonder.
You see, Boeing keeps setting a schedule and assuring everyone that they have plenty of safety margin built into these schedules to account for risk. And then those schedules slip again. Credibility on this program and, frankly, future programs, is swirling downwards in the toilet.
At some point, you have to be a company who keeps its word. You have to see the leaders of that company decide to make something happen *despite* the risks and problems encountered. It seems that about 8 months ago, Boeing’s leadership and particularly the leadership of the 787 program should have declared both internally and externally that this is it. No matter what it takes, this program will be kept on schedule from here on out.
But that didn’t happen.
This isn’t a slight schedule slip. First deliveries were going to happen early to mid Q4. Then they unofficially slipped to late Q4. With the latest announcement, no one really credibly expects deliveries until early Q2 despite Boeing saying it will be a Q1 2011 delivery. The truth is, none of us know when this aircraft will be delivered. The people backing that schedule just haven’t made things happen.
My own prediction: At the earliest it will be early Q2. It’s just a guess.
But at this point my guess is as good as Boeing’s.
With the latest mergers acquisitions of the past few years such as Delta/Northwest, Lufthansa and its European purchases, Continental/United and now TAM/LAN, a new discussion on multi-national airlines has emerged. Many are predicting that airline mergers that cross borders such as a US airline merging with a European airline is the next wave. Airlines see more synergies and more savings available to them and, more importantly, an even bigger network to take advantage of.
A number of countries as well as the IATA are advocating that countries such as the US (but certainly not limited to it) drop their laws permitting, at best, only 49% ownership by a foreign carrier. I’m not so sure that is a good idea.
Advocating that bigger is always better has a flaw in it. It might only be better for airlines. It might not be better for consumers or their respective governments. With the current alliances we have, we’re already seeing strong dominance by airlines on many routes. Yes, competition still exists on most routes but that isn’t true on every route. With the new anti-trust agreement between American Airlines, British Airways and Iberia (as well as smaller Oneworld partners), one alliance now completely dominates the DFW-London route. They have pricing power over that route at a level that is rarely seen. And there are others that are trending towards that development. Take a look at who dominates Atlanta-Paris, for instance.
I don’t think we’re ready for that yet. I think we need 10 to 15 years before we can see how this latest round of growth affects consumers. If these new SuperLegacy airlines start competing with each other at hubs that were previously dominated by one airline, perhaps more mergers would work. If, however, airlines continue to treat each others hubs as “home turf” not to be invaded, I would be skeptical of the benefits to the consumes from multi-national mergers.
In fact, I think our current state is probably just about right for the world markets at present. Consumers are being served pretty well in areas such as price and service. At the end of the day, it’s important to remember that airlines are publicly traded businesses that do have a duty to serve the public as well as earn profits for their shareholders. We offer the ability to organize that way in return for obtaining benefits to the consumers.
In addition, I think foreign ownership of airlines still has national security questions that need to be answered. In times of conflict, airlines are often involved as both cargo and transport service providers to a nation’s military. Having the interests of the airline aligned with national interests a la corporate ownership still seems like an important strategic objective.
What happens if Air France buys Delta and then a US conflict arises where we need transport capability but France decides that it is against their interests to serve that role and forbids Air France from providing that capability? That potential question is a troublesome one for any nation with a national airline system today. Preserving our national interests when it comes to these mergers is, I think, a very important objective.
We need to time to let things settle into a new market pattern and we need time to answer these strategic questions as well. Until we can see things more clearly, I think it would be best for countries to limit their foreign ownership to less than complete control of one of their airlines.
The Transport Workers Union of American Airlines has rejected 2 out of 3 contracts that were being voted on. Only the “Technical Specialists” guys accepted theirs and before you think that’s something positive, let me point out that a total of 78 members voted on that particular contract. Rejection by the other two groups also includes a strike authorization.
What that doesn’t mean is that there is going to be a strike. First, an impasse has to be declared and that is probably, at minimum, months away. The two parties will enter into negotiations again and we’ll see what happens after that.
Laura Glading, president of the Association of Professional Flight Attendants, decided to chime in applauding the contract rejection and describing the pathway to success as a “struggle” against American Airlines. Frankly, I really don’t think using language from the 1930’s and adopting an extremely loud and hostile stance towards anyone is going to get anyone anywhere.
Regardless, I think American has a problem. Virtually all of the unions are nowhere near agreeing on a contract and even though none of these negotiations appears very close to being declared an impasse, it does present risk to AA as a going concern. These negotiations will only get tougher if American begins to earn quarterly or full year profits. A great any of these unions represent frontline employees and embittered or angered employees don’t make for a successful customer service product.
Even with AA’s recent executive reorganization, I don’t see any positioning being done to get these contracts concluded so the airline can go forward. Ironically, the one group that has some appearance of perhaps being ready to get a deal done are the pilots who’ve been waiting the longest to get a deal done.
Both sides could stand some new leadership. Sadly, I don’t see much evidence that that is going to happen.
The Southwest Airlines Flight Attendants say that they don’t want to obstruct SWA from getting a larger 737 at all in response to speculation that this internal debate at SWA went public in order to force the hands of the Flight Attendants union.
Instead, they simply point out that adding another aircraft, according to their current agreement, opens that same agreement up to renegotiation on issues such as pay and working conditions.
Huh?
I don’t see any reassurances that they are for or against this still. Instead, I see language that I would interpret to mean that they see an opportunity to renegotiate their contract earlier than the first date it becomes amendable. It would appear that this remains a potential obstruction, to me anyway. At the least, it appears opportunistic.
One thing to come out last year during SWA’s attempt to purchase Frontier as well as during its controversy on codeshares with WestJet and Volaris was that SWA employees wanted to see more flying ( and more employment opportunities as a result of that additional flying) on their metal, not another company’s.
This addition to the fleet of the 737-800 does just that for the Flight Attendants with absolutely no change in their working conditions on a per person basis.
That would lead me to believe that SWA Flight Attendants do, in fact, present a possible obstacle to the addition of a new 737 type to their fleet. And until they speak more clearly on their intent, I think they continue to present the most risk to this decision.
British air traffic control is warning pilots of a vulture that can apparently fly at heights of 30,000 feet or more. This bird has a 10 foot wing span and supposedly one was encountered by a commercial aircraft at 37,000 feet back in 1974. The bird is an escapee from a breeding program in Britain.
Airtran has decided to be another kind of vulture and raise their bag fees. The increase is $5 more and while it’s cheaper than their home airport rival (or just about any other airline with a bag fee), boo to them. This just strikes me as greedy more than anything else.
Still another kind of vulture has been operating in the airline world as well. The Thief Vulture. Last week, an American Airlines employee was arrested for stealing personal items on aircraft as well as for stealing AA property too. The man was tracked down when police decided to track a stolen cell phone (Palm Pre) which lead them to his house. They then discovered so many stolen items, they filled 3 pallets.
In addition, a TSA screener from Seattle has pled guilty to stealing more than $20,000 worth of items from luggage he was supposed to be screening.
The irritant about these last two vultures is this is exactly what airlines and the TSA deny happening all the time. It does happen and it happens, I think, far more frequently than is ever admitted. I’ve had my own bad encounter with TSA screeners trying to get me to hand over my wallet and then turn away from them. Another friend recently had a few items stolen from his bag without response from the TSA despite the fact that the suitcase in question HAD A TSA APPROVED LOCK ON IT!
The airline industry is a funny place to work. Once you’ve worked inside it or lived inside it, it gets into your blood. It’s hard to walk away from because airlines really are families and one doesn’t walk away from a family very often. Even the industry is a family. Two people from different airlines might disagree vociferously on something inside the industry but if an outsider offers a different criticism, you’ll see those two band together like brothers to fight back. Sound familiar?
Despite the fact that we know most consumers buy on price, there is a strong brand liability that exists out there too. A customer might choose to fly American Airlines to Europe but if he or she is a Continental fan, you can bet they’ll have nothing but criticisms and comparisons to what they think Continental is. That customer loyalty, I think, derives from an attraction to the company DNA that was established over 40 years or more.
American Airlines was always a bit more of a no nonsense airline that appealed to the conservative businessman. Delta was about southern hospitality. Northwest Airlines was attractive to that stoic Midwesterner since it mirrored their values. Continental was always a bit of flash and upstart which attracted the entrepreneur. Braniff was somewhat similar although there was a certain Texas adventurer to it. TWA was Hollywood and Pan Am was blue blood. Those airline personalities attracted similar people and although that has been diluted to a fair degree today, that DNA is still there.
I have to admit that I marveled at how readily people accepted the Delta / Northwest merger. It was, in my mind, a clash of cultures. It was as if the Southern Dandy went to Minnesota and married a solid, conservative blonde Swede. Part of me expected neither family to accept the marriage. Yet, they made it work. They not only made it work, they made it look like true love. I was, and continue to be, impressed. Now and then there is a marriage that works out like that.
But, historically, mergers among airlines don’t often work out like that. There are still former Republic Airlines employees who will give you a bit of an earful over Northwest Airlines purchase of Republic. Until TWA’s demise, there were Ozark employees who would still privately confess great irritation at TWA purchasing their home. Look into Delta and you’ll find Western Airlines employees who feel the same. It’s usually more a marriage of convenience than a marriage of love.
Now we have Continental and United marrying. United, arguably the oldest legacy airline of the United States and certainly of blue blood in the US, is marrying Continental Airlines, a western frontier upstart of a far greater checkered past. Continental employees are chagrined because they see themselves as proud and independent and the airline who survived the worst and came out of that as one of the best airlines in the world. United Airlines employees are feeling a sense of loss because despite the fact that their name and headquarters exist, Continental is really the daddy in this union and that just doesn’t seem right to them. That became clear when John Tague didn’t make the cut in the marriage. Nor did several other prominent and, quite frankly, strong performing United executives. It might be United’s name but it’s Continental’s leadership that is going to go forward.
Continental employees wonder why they need United given their success for the past 15 years. What does United bring to the table that they don’t already have? United employees speculate that these upstarts are going to be overwhelmed faced with the prospect of running a “real” airline. The truth is, neither concern is really valid.
Customers seem to sense the same issues and certainly the home cities of each airlines’ headquarters. It’s a problem for this merger. Not an insurmountable problem and I do believe that once the merger is consummated and has time to settle, many of those fears really will go away.
What airline is a United customer going to be flying after this merger is done? What airline is a Continental frequent flier going to be a member of when it’s done? I’ll wager that the average customer just can’t answer that based on the way things have gone so far. I’m a relatively dispassionate observer to this and I can’t answer that question.
The problem is that people can sense this fear and they’re reacting to it on many different levels. It’s a fear that is almost palpable at this point and I think that comes from the somewhat mixed message that the new “brand” is sending. People see a Continental airplane with a United name and I think that strikes them as an attempt to be all things to all people. Notice that Delta and Northwest avoided that mixed message.
You can change the typeface of the name United but you can’t change the mixed message. Brett Snyder of the Cranky Flier is quoted HERE in the Chicago Tribune as saying:
“I’m a huge fan of making a clean break, unless you’re planning on replicating the service. . . ” and “”I don’t know how you meet expectations from both sides when you’re not really making a clear brand statement.”
Bingo. He’s dead right. Expectations aren’t getting met on either side. This is much more an old school airline merger. I actually agree that a new brand would have been a far better approach. Even adopting an old brand that neither had history with would have been better if it set expectations for both sides. Imagine the reaction if this new union decided to call themselves TWA or Braniff or even National.
Even a new brand incorporating some elements from both would have sent a better message. What if they called themselves Flagship Airlines with a new logo designed to evoke the service they intended to deliver? It would have delivered a much more clear message either way.
Here is an interesting observation: Both airlines do have some distant genetic heritage in common. Walter Varney who founded airlines that were direct ancestors of both United and Continental. I’m not proposing the name Varney Airlines but I do wonder if there isn’t something in that history that would lend itself to a good name.
The problem is that it’s hard to walk away from the legacies each brand offer. There are decades of branding invested in the names United and Continental. There are decades of history behind each name and decades of family history in each name. Even airline executives have some sort of emotional attachment to their airline and they aren’t immune to being influenced by that despite the belief they are cold blooded people focused on profits. They just aren’t. Not even Glenn Tilton who has relatively little history working in the airline industry.
They problem inside each airline is that the employees haven’t been given something to rally around. How does a Continental employee rally around the idea that their company is losing its headquarters and name? How does a United employee get excited about seeing his proud airline re-badged in the image of Continental? A new name would have evoked some rebellion but it would have sent a message about this being a marriage of equals and I think employees and customers might have been vocal about the change but I also think they would have come to accept it relatively quick. . . especially if the new name was a good one that evoked something real.
You couldn’t introduce a name like “Acura” or “Lexus” or “Lucent”. That’s why adopting the name of a no longer existing airline might have been better. It would have given an instant history and acceptance to the name and, yet, signaled a new start. There are lot of defunct names out there to rally around. And there are a lot of possibilities when it comes to new names.
It’s not that I don’t think that this merger will succeed. I do think it will succeed. I just don’t think it will go very smoothly and I don’t think people will adjust to it very easily for the next 5 or 6 years. That leaves them at a disadvantage to Delta and American Airlines.
The next best thing CEO Jeff Smisek could do is get that entire fleet painted in the new colors faster than anyone could believe possible. Get those operations consolidated quickly and get the customer facing side of the company unified in appearance asap. Get something out there that people both inside and out of the company can rally around and accept. Get the Continental executives up to Chicago as soon as the day of the legal merger and by up to Chicago, I mean have them living there on day one, not commuting. That’s an important overture to make to the United employees. Similarly, embed your best Continental managers into United hubs and so that the Continental employees see their influence day to day and don’t feel abandoned.
This merger is a long way from being done smoothly. The two entities have to make nice with their union employees and get them to agree on a transition to one contract and none of those employees have a reason to buy into this so far. One thing is certain: If the employees don’t buy into this merger and cooperate, this will be a long and painful merger resulting in a huge loss of opportunity in the market place. The synergies won’t be realized and the financial markets will voice their disapproval fairly quick, too.
Branding is more than just communicating with a customer. It’s a united front (no pun intended) for employees to work under and without a strong brand to connect to, those employees won’t know who they’re fighting for.
Since I started writing this blog, I’ve come to one thought many times: Airlines, at least most of them, work very hard these days at trying to be all things to all people. The reason for this is that the airline business, particularly in the United States, is all about market share.
In other words, to be viable as an airline, particularly a larger airline, you have to have a pretty significant chunk of market share for a set of routes. Without that share, you won’t average a load factor that earns you a profit. In fact, it isn’t just about market share of a particular segment. If you dominate solely in leisure travel, you’ll struggle to survive much less make a profit. Even Southwest Airlines has learned the value of the business traveler.
But is that the right direction going forward? Some variation of that is probably going to remain the truth for some time. However, I do wonder if airlines aren’t harming themselves by trying too hard to be all things to all people.
When it comes to domestic service, I do think it would be wise for more airlines to emulate United’s 3 class domestic service of First / Economy Plus / Economy. Offering more value for more money is a strategy that plainly works although I also understand the perceived risk involved with that. You can’t easily change the configuration of an aircraft to meet changing seasonal demand for a particular product. This is an area where aircraft manufacturers could do some work.
However, at the international level, I think many US legacy airlines are trying too hard to be all things to all people. I’ve always admired Continental’s approach with their BusinessFirst and Economy products. BusinessFirst is business class and, let’s face it, that’s what is going to sell at the front of the aircraft day in and day out when compared to first class. I think the new ContiUnited (I must come up with a new moniker for that) would be wise to adopt the Continental model BusinessFirst and the United Economy Plus/Economy model. It’s 3 classes of seating but really 2 classes of service.
Airlines seem to be overstressing themselves in other places as well when it comes to trying to appeal to everyone. When you’re trying to market to the leisure crowd, the business crowd and the uber-rich crowd, your message gets muddy. Can you identify who does what best for which crowd in objective or subjective terms?
You have far less of a problem with that in other parts of the world. If you want best price in Britain, you’re likely going to fly Ryanair or EasyJet. If you want a more business oriented service, you’re likely going to pick British Airways. It’s notable that BMI has more of an American approach and they don’t do so well. Ryanair specializes in delivering the best price possible and has focused on that goal relentlessly. British Airways specializes in service and image and focuses on that goal pretty well despite current problems and criticisms.
We could stand to see a bit more focus out of our airlines. Isn’t it interesting that when airlines set up “specialty” brands in-house, they usually did pretty well and only went away when the competition in that specialty went away? I think there is a lesson there. Does every flight need to meet every need?
I think the key to becoming more adept at specializing in customer needs, we need aircraft that are more easily configurable for particular demands. It’s interesting to me that business class in Europe is often coach seating with the middle seat “blocked” from use. Sometimes that same middle seat can be folded down into a “service” area for the aisle and window seats. What if an airline or seat manufacturer came up with a product that allowed configuration of seat pitch in a manner of minutes with the addition of a row or two of seats in less than half an hour?
There is nothing wrong with segmenting service for various needs and charging for it. No objects to those pricing models. The issue with “fees” is charging for something that had no charge until recently and acting like you are doing someone a favor. Airlines could create a great deal more value in their product with more specialization towards particular customer needs and wants.
After 40 years, I think coming up with seating that is configurable “on the fly” shouldn’t necessarily be quite the challenge it’s made out to be. The industry should be able to meet this challenge and I think when they do, they may find a way to more reliable profitability.
According to the Wall Street Journal (and other publications), American Airlines is about to receive notice of a record setting $25 Million fine related to MD-80 (as well as other, smaller issues) maintenance violations in 2008. Those violations, related to wiring in the nosewheel area, resulted in the temporary grounding of American Airlines’ fleet as well as other airlines also either having to scramble and make repairs or even ground their fleets.
During the Bush Administration, government oversight investigations reported that maintenance enforcement by the FAA was inconsistent and irregular and found that FAA oversight of Southwest Airlines was dysfunctional at best. The problems and controversies resultings from maintenance irregularities has caused many to question both the airlines and the FAA having a too close relationship and under the new administration, a much more “by the book” enforcement policy was instituted.
AA, at one point, described the wiring irregularities as not being a safety issue and I have to disagree with that position. It’s not often I do disagree with airlines perspective on such things but when an airworthiness directive is issued by the FAA and the manufacturer has already issued a maintenance directive, it’s a safety issue.
Regardless of whether the FAA was doing a proper job in its inspections or not, the airlines still have a duty to implement those directives in a safe and timely manner. In this case, that wasn’t done and even spot checks on aircraft at AA after the grounding revealed that many still did not have the procedure done properly.
Even though the FAA is working to establish the appropriate relationships with airlines and even though their enforcement is more by the book, airlines’ responsibility for these safety and maintenance problems remains their responsibility. This wasn’t a case of inspectors telling the airlines to not bother with the work and it doesn’t absolve AA or any other airline from its responsibility to follow the rules, regulations and law when it comes to safety and maintenance.
Just because a police officer hasn’t stopped you and told you that your tires are too worn to drive doesn’t absolve you from your duty to ensure your tires are appropriate for driving, right?
I don’t know if a $25 Million fine is appropriate or not. It strikes me a bit high at first glance and I”m sure it will be negotiated. But fines should have an impact and for a $23 Billion airline, it might take as much as $25 Million to make a point that lasts. I’ll point out that such a fine could well be the line between profitability and losses. That seems to strike a good zone for appropriate.
Do I think passengers were in imminent danger? Probably not but who knows? Out of a fleet of more than 200 aircraft at AA alone, it’s quite possible that a wiring harness was about to become a danger to the aircraft. It certainly isn’t inconceivable.
And the costs to do these maintenance and safety procedures is, in part, the price an airline pays for operating a relatively old and relatively obsolete fleet.
It is heartening to see the FAA appear to be far more interested in doing its job in the airline industry rather than acting almost subservient to the airlines. I’m sure the airlines are finding this a novel experience but it is what should have been happening all along.
American Airlines is introducing a new fee. This time, a fee from $19 to $39 can you get you a seat up front in coach including bulkhead seats and it will allow you “group 1” boarding.
Personally, I’m all for offering more varied product on aircraft. That’s the one development among “debundling” that I am in favor of. However, please offer me something of real value. Frontier gets it. United gets it. Airtran gets it. Even Southwest Airlines gets it.
AA doesn’t get it. A seat that has no more pitch or other benefits except that it is “up front” and I can potentially board earlier (and sit in an uncomfortable seat longer before take-off) isn’t more value. If the seat comfort isn’t going to change, do I really care if it’s up front or in the back? Well, maybe I do if I’m on a cranky old MD-80. Does it afford me more opportunity for overhead space? No, not really. Despite reports to the contrary, it’s just not that hard to find overhead space. Sure, the bins are more crowded but you can still access them.
If anything, it’s the jokers who put their luggage up front and then take their seat in back that annoy me.
But I’ll gladly pay for more seat pitch and a generally more comfortable seat. I’d gladly pay $20 / segment to gain 2 more inches of pitch alone. And I can already get that on an airline of my choice in most cases. For the prices AA is offering for this “service” you can more often than not get an Airtran business class upgrade. You can get more seat pitch and more service on Frontier. You can get more seat space on jetBlue. Southwest Airlines’ fee for priority boarding affords me a real opportunity to choose one of the best seats in a 737 for a cheaper price and you can bet I’ll have bin space on the SWA flight no matter what since they aren’t fools and charge exorbitant fees for baggage checking.
Perhaps this might have some appeal to a business traveler but I don’t think such a fee is going to be reimbursed as an expense. That certainly wouldn’t fly at my company, a major aerospace and defense firm.
How about a $25 fee that A) gets you a exit aisle seat and B) *guarantees* your checked luggage arrives with you? That might be particularly attractive to AA flyers.
At the end of the day, for any traveler except the most extravagant, it’s money that can be better spent elsewhere. And if you are that extravagant, you’re probably getting an upgrade to first class anyway.
Often when I’m at an airport, I wonder who it is that is going into that expensive luggage shop or fashion store at an airport and buying something so expensive they can afford to stay in business. I also wonder if that really is the best use of space in an airport. I suppose if someone is willing to pay for the space, it must be on some level.
One of the most frustrating parts of being inside a terminal is the prices at newstands. It’s the land of the $1.50 candy bar and the $10 magazine. Want a bottle of water? No problem, please pay $3.00. Food isn’t much better and while it is a tad more expensive, it’s often much worse than that you can access from the same restaurant outside the airport.
Well, things should be more expensive at an airport. Space for shops and restaurants is much more expensive than most places and the logistics of stocking them is much more difficult at most airports. I’m OK with a bit more expensive for the real estate.
But why don’t we have better solutions to hold prices down a bit? Ever seen a vending kiosk like what they have in Japan? The things you can get in a vending machine in Japan are stunning. I wouldn’t be surprised to learn one day that you can buy a Smart Car in a Japanese vending machine. Why aren’t airports looking at solutions like this? Do we really care if a person rings up our magazine or candy bar or sewing kit or sinus medicine? I don’t. To the contrary, let me slide my credit card through a swipe and get what I want and be on my way.
You can stock vending machines more densely than what most newstands stock merchandise and, hey, you don’t have to pay for nearly as many staff to keep them stocked. You can also warehouse much of your stock off property and have a person or person(s) re-stocking the machines even several times a day.
Restaurants and food in general are a different thing. The problem here is that large companies bid for a multi-year contract to provide food services under a variety of brands. For instance, ARAMark is one such company. They license the brand but staff and operate the restaurants on their own. In many cases, the quality control that one sees exercised at that brand’s restaurants away from the airport is far superior to what one encounters at the airport.
Visit a Starbucks at the airport and you’ll see what I mean. That isn’t a Starbuck’s employee and he/she isn’t trained to the same standard and isn’t even necessarily kept in that position day in and day out so they learn the business properly. Often it’s someone with cursory training making bad coffee beverages that cost 30% more than what you find at a typical Starbucks.
This old and archaic system is, in my opinion, due for an overhaul. These contracts net the companies huge profits (almost guaranteed even) and those companies, in turn, fork over large chunks of cash to the airport agencies as well. Why aren’t we allowing a variety of companies to bid for individual space to operate their brands with the same level of quality found elsewhere?
I don’t think food and beverage prices would drop. Not at all, really. However, I do think choice and quality would go up considerably. Why should we believe that Starbucks or McDonald’s or anyone else would be so afraid of airport operations? These companies have already dealt with difficult logistics and proven themselves more than capable of earning a profit.
And if they don’t, they’ll go out of business and someone else may try their hand at operating a different business. Choice is up at many airports and the offerings often far outnumber what we used to see in the 80’s and 90’s but quality is down, at least in my experience, and regional offerings have been squeezed out of airports altogether. Wouldn’t it be nice to be able to get good regional BBQ in Atlanta at the airport? Or how about a great hot dog at JFK? Or Chicago deep dish pizza in O’Hare?
Airports seem to be falling farther and farther behind and I think that has mostly to do with food service contracts that often last as long as 10 years. Let’s get some more competitive bidding in place and break up the consortiums while inviting some regional diversity at these airports.
The merger between TAM of Brazil and LAN of Chile offers some interesting possibilities for the new airline group that will be operating under separate names in South America. One big question is which alliance will the group adopt. Currently, TAM belongs to the Star Alliance and LAN is a member of Oneworld.
This new airline will have a bit more bargaining power when it comes to alliances and they have a few choices to make going forward. The first is to participate in both under the respective brands just as before. I’m extremely doubtful that that will happen.
The second is to pick an alliance between Star Alliance and Oneworld. In this scenario, I would give Oneworld the upper hand simply because in this merger, LAN will control more and it is the Oneworld partner. American Airlines won’t want to let them go since they fit nicely into the AA system. In addition, TAM might offer Oneworld quite a bit of access to other parts of South America it really doesn’t have at this point. However, the Star Alliance has a lot to lose and a lot to gain. Especially with the Continental United merger going forward. One could see the Star Alliance attempting to bring the LAN system over to the Star Alliance with some incentives.
Finally, there is SkyTeam who has a lousy representation in South America presently. SkyTeam a la Delta lost a big fight on the trans-Pacific side when it failed to win over JAL. A TAM/LAN entry into SkyTeam would be a huge win for that alliance and I suspect we might just see this dark horse try to bring them over to their side. This is exactly the right time for SkyTeam to woo such a company because there will already be integration efforts going on between the two as they consumate their merger.
In now way does this new merged company go ignored as a participant in an alliance. I do think it will be a fight and I do think all 3 alliances will be offering significant incentives to win LATAM over.
American Airlines is in discussions with its transatlantic Oneworld partners, British Airways and Iberia, to consolidate in Terminal 8 at JFK airport. This would be a good counter-move to Delta’s intention to renovate and expand at the same airport.
It’s about market share in New York and now we find the SuperLegacy airlines moving to own the most they can in that market. AA (Oneworld) and Delta (SkyTeam) at JFK and ContiUnited at Newark. It’s a fight that is sure to get bloody over the next few years.
If AA can move to bring its partners under the same banner and make things even more convenient for connections, it may have a grip on JFK that resembles British Airways’ at Heathrow Airport in London.
It also makes me wonder what ContiUnited might do at Newark. While Continental plainly dominates at Newark Airport, it also presently stands to have the least pleasant facilities and since it’s new to the Star Alliance, it may take quite some time to bring its Star Alliance partners under its umbrella at Newark.
While a number of Star Alliance carriers to have flights to Newark, a number don’t. And things aren’t well organized at Newark for Star Alliance. Will they be? I don’t see how ContiUnited can afford *not* to get their act together at Newark to compete.
Newark is actually a bit more convenient to Manhattan and that is, after all, where the high dollar traveler is going to or coming from. It makes sense for the Star Alliance to cooperate and consolidate and ensure good feed to those international flights but they’re going to have to get some airlines to move over, I think. Airlines such as ANA.
Others, such as Lufthansa and SWISS and Singapore Airlines are all in Terminal B. Continental has Terminals A and C. What ContiUnited really needs is a revised Terminal C and/or a portion of B while giving up A to others.
But will the other airlines cooperate? Don’t bet on it. Keeping Newark in disarray would be a good thing.
Southwest Airlines admits it is considering adding a bigger 737 to its fleet and its the 737-800 that it is interested in. The 737-800 would give the airline more revenue opportunity used in and out of airports that have slot restrictions such as La Guardia or on routes with ever increasing density but where frequency isn’t justified.
Current SWA aircraft, the 737-300 and 737-700 carry 137 passengers and a 737-800 would probably carry about 175 people in a Southwest configuration. That’s an additional a potential increase of 38 passengers for those critical routes with costs that wouldn’t be all that much more than their current costs. A little bit more fuel and an additional flight attendant is all that is really required. That spells more profit.
And I like the idea. Frankly, I think Southwest could stand to add all 3 models of 737 to their fleet and I think they ought to seriously examine the potential of Hawaii and trans-continental flights. But, then, I also think they could stand to look at smaller aircraft for regional routes with high frequency too. It’s going to be the only way they can continue growth in the future.
However, don’t go thinking you’re going to see a 737-800 in SWA colours next year either. Southwest likes to mull decisions like this for quite a while and it would require negotiating amendments to their union contracts with the pilots and flight attendants at minimum.
Take note here, SWA pilots and FA’s, here is your chance to be industry game changers again. Pilots, you shouldn’t ask for a dime more to fly these aircraft. They require no extra effort on your part and it keeps the flying in your house, not SWA codeshare partners’. Flight Attendants, the same goes for you. The passenger count per flight attendant actually *drops* by two passengers with these aircraft. Be game players and make this happen. It costs neither union anything to make this work and most likely will add profitability to the company as well as future stability to your jobs.
This really is win-win. Get greedy and it is the beginning of a long end to SWA.
If SWA does adopt this idea, expect aircraft in the fleet 12 to 24 months after the decision is announced.
In a month, Frontier will have withdrawn the remaining Bombardier Q400 aircraft from the Lynx fleet and I continue to think that my have been a mistake.
Lynx routes will be operated by Republic Airlines E170 jet aircraft. I get that “pure jets” remain somewhat attractive but I think the Q400 will have been shown to have earned more profit on those same routes. I get that Republic needed to find a use for some of their aircraft, too, but I continue to believe that retaining the Q400 would have proven profitable.
Yes, I’m repeating myself. It was a small fleet but a fleet that fit extremely well. In addition, the Lynx outfit was one of the things that really caught Southwest Airlines’ eyes during bidding this time last year. If you’re catching SWA’s eyes, you *must* have something going for you.
It’s interesting to me that despite the emphasis on finding lower costs, so many airlines continue to ignore the turbo-prop. Yes, Continental has it for its regional flights on a large(ish) scale but that’s about it if you ignore Horizon Airlines.
The fact that Alaska/Horizon Airlines is making pretty good money from them and on segments that, frankly, are a bit long for the Q400, should be signaling something to other airlines. But those airlines remain tone deaf and I think that’s a shame.
I look at the flights that American Eagle flies regionally from DFW and it makes me cringe to see those old ERJ-140 aircraft going to Texas and Oklahoma and Lousiana destinations that could be served so much more efficiently with a Q400 or ATR-72. The same is true for the Chicago area.
I honestly believe that the airlines are the only ones afraid of these aircraft, not the customers. Imagine how much more competive one might be using them, however. Low fares are the key, not a jet engine.
The Virgins of Sir Richard Branson are now growing a little closer together.
Now a member of one frequent flier program can earn their miles/points on other Virgin branded flights and will soon be able to redeem miles for flights on various Virgin brands too. The only question is why did it take this long?
Virgin Atlantic appears to be set to be the “leader” of this consortium and well it should be. With the various Virgin brands in place around the world, one would think this kind of linkup would have been fully integrated a long time ago. Yes, Virgin America has been leery of being too closely associated with Virgin Atlantic but I think we can be done with that silliness now.
There are some synergies going on that, I think, could not only be expanded upon but which could lead to more growth for all. Codeshares are one thing, I say start the Virgin Alliance and get cracking on linking up to the rest of the world. Can’t you just see the marketing? “Do you want to be a Virgin?”
The fact that Delta is courting Virgin Blue for codeshares in Australia is proof enough that that the Virgin products are good enough but they aren’t being tied together very well. This latest announce is a good step towards fixing that.
Sir Richard Branson has pointed out the challenges in competing on a route like DFW-London against British Airways and American Airlines, the two airlines who own that route and have done so for a long time. He’s right. Even when they were supposedly not cooperating, that route was “owned” by BA and AA alone. Not only does that remain so but now the two airlines can cooperate on the route.
But now Virgin America is going to fly to DFW. Imagine what happens if Virgin America is able to add a few more flights to DFW from other destinations. Suddenly, there might be enough feed for a Virgin Atlantic flight. Especially one utilizing an A330 or 787.
The Virgins need to cooperate and work with each other. They’ve got a great brand to work with, especially in English speaking countries, and it’s the best choice in fighting back against the alliances. The latest mergers and new alliance anti-trust agreements now should make it possible for the Virgins to argue on their behalf for close cooperation, something they’ve been somewhat reluctant to do for fear of anti-trust issues.
Virgin Atlantic needs to grow, as well. It’s time for them to push past their traditional routes and that’s going to require some different aircraft. Sir Richard Branson’s Airbus strategy hasn’t worked well for that airline and the 747 fleet is starting to get a touch old. 4 Engines 4 Long Haul sounded great but wasn’t the way to go. It’s time for Virgin Atlantic to start purchasing a 787/777 or A330/A350 fleet not just for economy but for flexibility.
Flexibility in that fleet should open up some opportunities for Virgin Atlantic worldwide.
Southwest Airlines’ CEO, Gary Kelly, claims they have managed to shift $1billion in revenue away from the rest of the industry as a result of their bag fee policy, often from leisure travelers. Their Q2 results show revenue up by $1billion compared to the previous year and while not all of that is from a shift in choice by customers, that’s a powerful number.
It does prove that people are paying attention to those fees and I think over time people will become more and more sophisticated in making a choice based on those fees. It really offers SWA three advantages. First, it makes them more competitive against legacy carriers in many instances. Second, SWA doesn’t incur the ill will of customers by charging those fees. Third, it is getting people to try Southwest and discover that it really isn’t the “bus” it used to be when it comes to air travel.
Even my own mother had certain long standing prejudices against them based on experiences more than two decades old. Recently, she’s tried them again and discovered that not only is the service product pleasant, Southwest has some of the most generous economy seating available today. That discovery has found her searching out SWA fares to destinations more and more instead of her general choice (Delta Airlines.) How many other people are making that discovery and changing buying habits?
Yes, people remain angry over these charges but they’re also becoming smarter about their choices and that doesn’t bode well for legacy airlines.
Yes, Southwest may be capturing more of the least profitable passengers to fill their aircraft. In fact, one look at Southwest’s load factors tells us they’re doing just that. Given a choice between retaining a business class traveler and a leisure traveler, most legacy airlines are going to try to preserve the former. However, when their load factors begin to drop and SWA’s doesn’t, there will be yet another new signal for these carriers that the bag fees may be doing more long term damage than is worth the near term gain.
