For the past few months, I’ve seen a number of “quality” ratings go out on airlines in the media.  The criteria of these various media outlets seems to be out of step with reality in the airline world and I want to talk about that for a minute.

First, any one airline experience is a highly subjective event.  Complaints about airlines are usually driven by 2 or more bad experiences on flights rather than one and keeping statistics on single events to drive an evaluation doesn’t necessarily reveal whether or not airlines are offering good service. 

Second, the criteria being used to “rate” an airline is often based on the luxuries offered such as in-flight entertainment, WiFi, food or business class seats.   Three of those 4 criteria are often based on price as a function of the kind of ticket a person bought. 

Third, the loyalty programs of airlines tend to skew ratings as well.  It’s amazing how many passengers will continue to rate an airline as “good” in return for those almighty miles.  A “free” ticket excuses a lot of discomfort and abuse. 

Why  not rate airlines on things like seat pitch available in economy seating?  And what about the costs to upgrade to a better seat and/or level of service?  Shouldn’t the ” a la carte” pricing scheme of airlines be included in such a rating? 

Imagine a rating system that offers negative points for less than 31″ of seat pitch, no points for 31″-32″ of seat pitch and positive points for anything 33″ or greater in seat pitch.  Let’s consider bag fees and offer negative points for anything costing over $25 or more for 1st bag checked, no points for $20 to $24 per bag and positive points for less than $20 per 1st bag checked.  You could do the same with food offerings as well. 

Let’s count things like baggage loss claims on annual basis and on time ratings as well.  Offer positive points for being in the top 3, no points from level 4 to level 6 and negative points for being below level 6.  Let’s evaluate how the airline accomodates passengers inside its hub terminals because airlines do have some control and influence over the environment they offer you in most cases. 

Why not include regional carriers in the evaluation of the legacy and SuperLegacy airlines?  They are, after all, selling you the ticket and their brand is what is being touted so shouldn’t those regional airline flights be included in evaluating the brand?

And let’s evaluate on the basis of economy, economy plus and business (and first class domestic) class.  First class, on an international basis, doesn’t really matter because I assure you that it will be top notch compared to any other service level you could experience.   On any given domestic flight, about 10 to 12 percent of the seats available are business/first class seats.  The rest are economy.  All too often we’re rating airlines on how well they’re treating the vast minority of passengers. 

And let’s leave loyalty programs out of it.  They cause passengers to act irrationally and only to the benefit of the airline. 

Wouldn’t it be nice to choose a flight based on such a rating system and the price for a fare?  You can bet that airlines would pay a lot more attention to the basics and a lot less attention to the 10% whose fares are generally being paid for by their business and who don’t have a financial stake in their choices.

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Southwest has been pretty candid with people attending the Southwest media day and has made a number of comments and announcements that offer more clarity than we’ve seen in a while.

First up:  Southwest and Volaris Airlines will begin interlining on December 1st.  This is quicker than I would have guessed based on the radio silence we’ve heard on this subject for months now.  It’s not a codeshare because you won’t be able to buy a Southwest ticket to fly on a Volaris flight.  You will, however, be able to seemlessly transition between a Southwest flight and a Volaris flight to Mexico.  You wouldn’t be able to do codeshares at present anyway since Mexico’s air traffic system got downgraded to a Category 2 recently. 

Southwest sees the seniority list integration between its pilots and Airtran pilots as their number one issue.  I agree.  The rational people out there would have you believe that Airtran pilots should be happy no matter what since it is almost guaranteed that they’ll get a pay raise with this merger.  Sadly, rational thought doesn’t enter into the equation when it comes to these discussions.  In addition, pay raises aren’t the only factor when it comes to seniority.  Seniority also determines the type of aircraft you’ll fly and where you’ll be based out of.   I doubt it will be a “date of hire” integration and I doubt it will be a mere stapling integration either.  There will probably be some sort of weighted integration and possibly jobs in the ATL area (and perhaps a few other bases) will be “fenced” off for Airtran pilots for a period of time. 

Southwest says it will be charging $5 for WiFi access on its aircraft.  This is pretty cheap compared to the fees for Aircell on other airlines.  Apparently Southwest has done their homework and determined that’s the sweet spot for maximizing “take” on each flight.  There will be no graduated fee for varying durations of flights.  Southwest doesn’t know what it will do with Airtran aircraft equipped with Aircell because they don’t know what those contracts look like yet and they won’t until the merger is consummated.  I suspect that Aircell will remain in place until those contracts expire and then they will be replaced with R0w44 systems to harmonize the fleet.  That would be a good news for Row44 who hasn’t gained much in the way of market share when compared to Aircell.

Finally, Southwest thinks Atlanta could quickly become its biggest city once it has finished its merger with Airtran.  Las Vegas currently is the largest but Southwest execs see lots of additional route opportunity in Atlanta already.  They’ve identified at least 2 dozen new destinations that could be served and Atlanta is already pretty big for Airtran.  Look for more frequency and a net gain on routes once Southwest really takes over.

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jetBlue has announced its intentions on flying from Long Beach, California to Anchorage, Alaska next summer and, yes, this probably has some people rubbing their eyes to see if they read this right.

It’s an odd choice in my opinion since flying to Alaska requires a bit more general pilot knowledge and jetBlue doesn’t have any other traffic there.  That means they have to establish themselves in the city even if with contractors and without more flights headed there, I don’t know why one would do it.

One possibility is that this is about aircraft utilization.  Alaska flights are one of those things where you can get away with strange(ish) flight departures and arrivals.  Alaskans don’t seem to mind odd times and I wonder if this isn’t a flight that will depart late afternoon, arrive in Alaska in the evening and then do a quick(ish) turnaround for a “redeye” back to Long Beach where it will likely be used to fly a different flight during the day.  The flights times would make it work.

It’s notable that right now, Alaska Airlines doesn’t have a non-stop between LA and Anchorage.  In fact, it appears no one does.  That might just make the whole effort worth it or it might point out that there is a reason why nobody is doing it.

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Delta Airlines has come to an agreement with Boeing on deferring its order for (18) 787 aircraft until the year 2020 or about 10 years from now.  Delta inherited the order when it merged with Northwest Airlines and there has been talk of this happening for over a year now.   It has also arranged to sell (4) 737-800 to third parties upon delivery from Boeing. 

Delta has new(ish) aircraft and it has really old aircraft.  What it doesn’t have is worn out aircraft that require replacement.  Not in the 787 category anyways. 

What’s going on?  Well, operating airliners is a funny thing.  You can buy new, operate new and sell relatively new.  Your costs to do that are generally worth it because you’re also getting a lot of efficiency and since the aircraft is new, maintenance is far cheaper.  Ryanair does this.  You can also hold on to old aircraft, refurbish them from time to time and while they aren’t very efficient with fuel, the capital costs to operate the aircraft are dirt cheap.   Northwest was in the habit of doing this with 40 year old DC-9 aircraft. 

Delta has been buying up used aircraft that fit its model such as the MD-90 and it is going to hold on to other aircraft that have lots of life in it.  Their 767 fleet will hold up for quite some time yet and there is some evidence that the 767 may be no more costly to operate on routes of about 5000nm or less than the 787 is.   In addition, they have a pretty young A330 fleet that was inherited from Northwest and it definitely won’t require replacement anytime soon either. 

Delta is clearly going to preserve its capital and work towards distributing profits from its revenue streams.  This hasn’t worked for airlines very well in the past but it is the stated intention of Delta CEO Richard Anderson.   Even it becomes necessary to change courses, they can.  Delta is a huge airline now and if it decides it wants to move up deliveries on aircraft or even just order more aircraft for timely delivery, Boeing and/or Airbus will happily accomodate them.  They have some flexibility here.

Is this the right move for every airline?  No, it isn’t.  Delta’s 767 fleet is pretty young with a considerable number of its 767 fleet having been delivered in the late 1990s and very early 2000s.  The A330 aircraft have all been delivered to the airline starting in 2003.  They don’t need to elbow their way to the front of the line to get their hands on aircraft. 

Is this the move for every airline?  No, it isn’t.  Other airlines have the bulk of their fleets being delivered in the 1980’s and early 1990’s and that means they are wearing out and do require replacement.   Each airline has to manage its money and its fleet and it can be a delicate dance.  In today’s airline world, flexibility is the key.

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British Airways has been working to resolve its labor trouble with the flight cabin crew union, Unite, for several months now.  It appears that both BA and United have finally come to enough of an agreement that a deal is on the table and it will be voted on.

The problem is, both parties here went a bit too far in these labor actions.  Unite went too far in trying to protect jobs by insisting on unproductive staff levels in the cabins.  BA went too far by punishing those who went out on strike.

Labor conflicts shouldn’t be treated as “personal” and when Willie Walsh & Co decided to punish those strikers by removing their travel benefits, that was over the line.  The strike was legal and you shouldn’t punish people for doing what was within their legal rights. 

In addition, remaining stubborn about restoring those benefits was just childish.  It’s insisting you were right when there is an opportunity to get what you originally wanted by just stopping your own foolishness. 

I’m actually somewhat skeptical that this vote on the deal will be approved.  BA has agreed to restore “90%” of the travel benefits and seniority would only be restored on the basis of “good behaviour” over 3 years.  That’s punitive and unnecessary.

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American Airlines remains the concern of every analyst when it comes to asking the question about its long term viability.  It isn’t that this airline is about to die, it’s that there remain so many things going against it still.

They have some of the highest if not the highest labor costs among the airlines and they have labor groups who are out to get what they had before the givebacks earlier in the decade.  What’s more, they don’t seem to have a coherent plan for dealing with that problem.

They have an aging fleet that puts them behind other airlines including the SuperLegacy airlines who did renew their fleet some over the last 7 years while American remained largely entrenched in the MD-80s until 2 years ago.  Even now, they’re a bit behind in keeping pace with the need for greater fuel efficiency.  It’s arguable that without the huge spike in oil prices a few years ago, American would still be sitting on their fuel hog MD-80s. 

They’ve been stymied on growth with other airlines “poaching” on their territories and others reducing their costs via bankruptcy and have only now started to, perhaps, grow their network organically. 

American did finally get their trans-Atlantic alliance with British Airways and Iberia Airlines.  Only time will show us if that alliance is worth it and while it may be worth something, American missed out on being able to take advantage of such a thing for more than decade by stubbornly clinging to the idea of mating up with BA. 

They also won their Japanese battle by keeping JAL in the OneWorld system and they’re on track to win immunity in a trans-Pacific alliance with them as well.  But JAL has a long way to go before it is a profitable and viable airline.  Delta and United, however, have good systems to Asia and a good network inside the Far East. 

I do like their interline agreements with jetBlue and WestJet and it would appear that someone at American is thinking “innovative” for once.  But will AA be patient enough for those to work and will they be entreprenurial enough to expand upon such concepts?  History says no but I say the decision on that can’t be made for at least a year.

This isn’t an airline that will go bankrupt in the next few years.  It is an airline that appears destined to remain very lackluster in comparison with basically all the other airlines in the United States.  And why would you invest in lackluster when you can have rock star in so many others?

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We’ve heard all about the soaring profits at airlines this past week but I wonder if many have noticed the other element in the news:  new flights being added at various legacy and SuperLegacy hubs. 

So far, these new flights have all the appearance of being targeted towards building core strengths at various hubs and focus cities.  American Airlines is building LAX (although mostly through American Eagle flights) for instance and United and American are starting long haul flights from LAX to Shanghai, too.

While we’ve seen very modest capacity growths in the first 2 quarters indicating that airlines were just (barely) keeping pace with demand, this most recent quarter finds announcements that indicate that everyone is trying to nudge themselves towards a bit more growth than before. 

Let me point out that even Southwest’s intentions on buying the 737-800 is a form of capacity growth.  They’ll use that aircraft on routes where there ability to fly frequency is constrained. 

The signs are there but it’s the 4th quarter results and announcements that should signal a trend.  We won’t really know where things are headed until announcements on intentions for next summer are made.

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Something light for a Sunday. . . new Air New Zealand videos.

Story Time

The Intimate Art of Touch

Happy Hour

Dan and Dolly

Crazy About Rugby

All Black Livery

Bare Essentials

Nothing To Hide

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I want to take a moment to mention The Crew Lounge, a group of flight attendants doing a weekly podcast on a variety of subjects.  Hosted by Sara of the Flying Pinto blog and Bobby from Up Up and a Gay blog, The Crew Lounge talk about subjects ranging from how to become a flight attendant, sultry encounters in the air and industry news both quirky and serious.

I’ve been following both of their blogs for a while and I had been aware of their podcast being done for several months but I had not taken the chance to listen until a few weeks ago.  I had to take a series of long car trips to South Texas and took their library of podcasts along with me.

Both my wife and I found them entertaining, informative but most of all very funny.  Both Sara and Bobby are clearly professionals who see this business with both an experienced eye as well as a sense of humour.

I’ll admit that after listening to 4 or 5 podcasts, I turned to my wife and said: “If these guys ever talked to me they’d want to kill me.”  Never before have I been so conscious of my own opinions on the airline world being a bit in conflict with someone else’s. 

They are a fresh breath of insight into what it takes to be on the front line in the airline world and worth taking the time to listen to them.  You can find The Crew Lounge HERE and I hope you’ll take a moment to listen to their show.

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Instead of engaging in analyst speak for the earnings results airlines are reporting this week and the next, let’s sum it up real quick:  Airlines are earning record profits this quarter (again) and American Airlines continues to appear the weak animal on the plains with not one but two lions starting to eye it. 

The “records” being set with these profits are a bit deceiving.  Delta has had record profits.  It’s also roughly twice the size it was before the economic crash.  United has record profits, ditto.  US Airways has record profits and, yes, they’re roughly twice the size they used to be too.  When Southwest adds Airtran to their company, we’ll likely see new record profits there too. 

What’s driving these profits?  Well, certainly some synergies from the mergers although I suspect they aren’t as great as they are touted to be when these airlines were lobbying for approval of their mergers.  US Airways doesn’t have all those synergies in their flight crews and they’re still performing impressively. 

Network?  Well, again, I think it certainly helps a bit.  I believe the larger networks are improving load factors somewhat and that’s good.  On the other hand, is it all about the network?  No, not really.  I refer you to the fact that US Airways has a lousy network and, again, they’re doing very, very well.

I think the continuing restraint on capacity growth is driving these profits.  That’s great and I am very impressed that the airlines have held themselves in check as well as they have.  It’s nice to see profits in this industry and there are a whole lot of people who need to be paid back for their investments.  This will help do that. 

The question is . . . Will it last?  I’m skeptical.  Very skeptical.  First, some of the load factors we are seeing as “averages” are astronomically high when considered against the past 30 year history of the business.  Even Southwest is enjoying exceptionally high load factors and their business model isn’t based on high load factors at all.  I don’t think such load factors are sustainable.  In fact, I think they are too high as an average for these legacy/SuperLegacy carriers. 

I think branded regional airlines and LCC carriers are going to see a lot of opportunity over the next few quarters to start whittling away at these profits.  Someone will blink and they will add capacity.  When one starts to grow their capacity, many will follow, at least on competitive routes, because self-restraint in this business is dependent upon everyone exercising some. 

If we do continue to see these profits for another year or two, I also think we’ll see new entrants into the market place.  The Sirens will be calling to investors and it will be an irrestible call. 

You can bet that each airline is analyzing their competitors right now and you can also bet that the question being asked is how can we grow or add capacity through better utilization of our fleet right now.  Tomorrow, the question will be about what they can add to their fleet to grow that capacity.  Those questions are being asked internally right now and I do think we’re looking at least a couple more financial quarters of self-discipline.  I also think someone will likely blink when they begin to plan and announce intentions for next year’s summer season.

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The Seattle Times is reporting that Turkish Airlines has indicated its interest in both the Boeing 747-8i and Airbus A380.  CEO Hamdi Topçu apparently has said they’ll decide before the year end on this order. 

Such an order strikes me as hubris for this airline.  Yes, they’ve done pretty well for the past few years and they aren’t a tiny airline but they aren’t so big that their network could possibly justify such a large aircraft in its fleet.   Despite their entrance into the Star Alliance, they’re still a 2nd tier player at best.  Even additional 777-300ER aircraft would cause me to raise my eyebrows questioning this. 

Much of their success has been witnessed over the past 3 years and, on the outside, that would appear to make them attractive going forward.  The truth is, as competition with European and Middle East carriers heats up, I think this erodes their growth.  Furthermore, Turkey’s current political climate makes it somewhat less certain as a place to do business for the near future. 

Bottom line:  I don’t think they’ll actually order the aircraft and, if they do order such large aircraft, I don’t think they’ll actually take delivery.

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American Airlines and WestJet Airlines have announced an interline agreement yesterday and, once again, I didn’t see this coming.  If anything, I would have expected this to develop between WestJet and Delta, not American Airlines. 

The agreement will allow customers to connect seemlessly (with one ticket) to 25 new Canadian destinations with American Airlines (and American Eagle) feeding that traffic to six gateway cities in Canada.  Presumably it will work both ways (Canada to the US) and it is notable that the press announcement mentions a “phase 2” which will feed traffic back and forth to WestJet flights from the US to Canada as well. 

This is a pretty good win for American.  It gives Oneworld (via AA) an entrance into Canada where they’ll compete against the Star Alliance and Air Canada.  It leaves Delta sitting out in the cold with no other airline in Canada for them to connect with.  That, alone, is a bold move.

It also kind of swats at Southwest and its original intentions on Canada via an earlier codeshare agreement it had with WestJet but which was terminated earlier this year after a disagreement with WestJet. 

That sound is the door slamming shut. 

This will sting other carriers in the US and it’ll force them to access Canada through a much more expensive pathway:  flying there themselves. 

With both this agreement and the earlier one AA did with jetBlue, it’s clear that there is some innovative thinking going on at American suddenly and now I wonder what comes next.  I’ve been pretty hard on AA this year but I have to say that I like this move and I think it will benefit them and WestJet a great deal.

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In the world of airline union labor leaders, there is one guy who has stood out among all the others.  Lee Moak of Delta Airlines.

Captain Moak, leader of the Delta Airlines’ pilots union when Delta merger with Northwest Airlines, has consistently shown that he understands the changing business model of the airline industry.  He has embraced the idea that mergers don’t have to be anti-union and was critical in the peaceful integration of pilot’s seniority lists during the Delta/Northwest merger.   An almost unheard of accomplishment.

Moak approaches his leadership as an obligation to engage with parties as opposed to the far more common tactic of confrontation.   He allows his actions to speak for him rather than rhetoric and that has allowed him to succeed where many others have simply maintained a status quo that hasnt been working for years.

Now he’ll head the national leadership of ALPA and this is good for a lot of airlines.  He’ll have the opportunity to set a different tone and, perhaps, mentor others into his engagement approach. 

When I say it’s good for airlines, I mean that it is good for both labor and management.  All too often, there is little engagement between those two parties and way too much conflict.  Talking is good and moving off rhetoric and talking points towards real compromise and finding solutions to new problems will be good for everyone. 

It should be very satisfying to see him lead ALPA and he’s a critical person to watch in this industry.

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Let’s talk about taxes and fees a little bit.  I’m not going to spend too much time on baggage fees and such because it’s a subject that has been already flogged enough for now.

What I want to talk about is how we, as a nation, have decided to treat the aviation industry and even the travel industry.  Currently, we treat them like chain smokers wanting to go to a bar in New York City.  In other words, we don’t welcome or foster either the travel industry or aviation industry.  We really don’t. 

It’s become popular to view certain industries as pariahs that should bear an ever increasing burden because at the end of the day, those same industries can’t fight that treatment and remain in business.  In the airline business, lawmakers realize that airlines have very few alternatives available to them when it comes to flying to a destination.  Yes, on occasion, there are 2 or more airports to choose from but those are generally controlled by the same government agencies. 

So what am I talking about?  Landing fees.  Because airlines recognizeably can’t avoid paying these fees and because they are incremental to adding costs to an airline fare, it’s popular to fund projects by simply raising these fees.   Occasionally these become so high that airlines go looking elsewhere for their revenue but it’s really quite unlikely to happen in most major cities that trunk routes are based upon.   Example:  Look at just how expensive it is to fly into Toronto.  It’s agregious in price but airlines continue to fly those routes although the rather high air fares that result certainly must contstrict the markets for those routes.

Airlines use airports and airports really are public assets and, yes, they should pay a reasonable fee to use those assets.  However, often airports are built and upgraded with these fees without ever asking the airlines if they’re interested in paying those increased fees for what are often very marginal improvements they get to experience.  Occasionally a really large airline strong arms an airport into funding improvements and new construction and that results in increased landing fees that negatively impact smaller airlines serving the airport with less frequency and who get to experience really none of the benefits.

The thing is . . . airports are economic engines that cities both need and should really want.  Artificially constricting service or growth at these airports has a severe impact on cities and metroplex areas.  Who wants to locate a corporate headquarters in a city that raises airfares through vanity projects that are funded via fees and taxes?  That has a real impact on a company’s travel budget.

In addition, it has become popular to add visitor taxes to things like hotels and car rentals that are insanely over the top in price.  In some cities, we now see taxes and fees making up as much as 40% of the cost to rent a room or a car.   That is abusing the good will of visitors to a city who are already injecting economic value with their visit.  Just because they don’t live in that area and can’t vote against such things doesn’t mean that we should get away with it either.

Transportation, tourism and particularly aviation are strong economic pumps for regions.  It is wrong to overly tax these just because you can get away with it.  It is akin to continually raising taxes on cigarettes just because users are largely addicted and they’ll pay almost any incremental increase in price to meet that addiction.  It would be far better to look upon these areas as opportunities to invest for the local and regional economies rather than an opportunity to rape and pillage visitors in support of the local and regional economies.

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Examiner.Com has a story about Delta wanting to hire an additional 1000 flight attendants starting in June 2011.  There are quite a few things that I think people ought to be ware in this story.  For instance, Delta has already received over 85,000 applications for these jobs.  For every one opening, 85 people are available to fill it. It’s a highly competitive field for jobs even in the best of times.

Flight attendant with 12 years of seniority at Delta who flies about 75 flight hours* a month earns roughly $41,000 a year.  In other words, a college graduate who wins this job can expect to earn that after 12 years of rather hard work.  These days, we don’t treat teachers that rough.

Want the better advantage in winning this job?  Then speaking Japanese, Mandarin Chinese, Dutch or Spanish will help a lot.   With the exception of Spanish, those aren’t language skills that are common or easy to acquire. 

In addition to that, only the candidates who are exceptionally personable, conscientious, and physically able are going to even get past a first group interview. 

While it’s more possible to hold some kind of line at Delta with junior seniority, there are some airlines where flight attendants fly reserve** for a decade or more before being able to hold a line***.   That means a decade of working the unknown every month. 

And that $41,000 per year is income that has to go towards paying for the expenses involved with working a job that requires one to be away overnight regularly and a job which does not supply even a meal despite being captured in the air sometimes for more than 12 hours per day.  So you get to earn that $41,000 / year after 12 years while your hungry and without snapping at pushy customers.

In the base salary, at most airlines anyway, you get to pay union dues.  Those dues pay for someone to represent you with the company in contract negotiations that involve your compensation for the future.  Contract negotiations that can go on for as much as 4 years but which average at least 2 years before a resolution is reached and voted on. 

Yes, people actually want these jobs.  Lots of people want them.  Yes, you get flight benefits but those flight benefits are traveling for free on space available basis.  Let me point out that load factors on aircraft are at historically high numbers.  In other words, the chances of getting to use that flight benefit are less than ever before.  It’s a benefit that has marginal value at best these days.

Yes, any job you choose should be done right and done cheerfully.  It is the job.  But before we cast stones, let’s remember just what comes with this job and be a bit more tolerant of those servicing us when we fly.

*  Flight hours aren’t how many hours flight crew work.  Flight hours are the hours you work (and get paid for) essentially from the time the door closes on an aircraft to the time it opens again.  A crew member who works 8 flight hours in a day may end up working a “real” 12+ hours in a day. 

** Flying reserve means that you are to make yourself available to fly a flight to replace another crew member with little notice.  Some forms of reserve require you to sit at the airport wait to be told where you are going with as little as 30 minutes notice.  Other forms require you to be at home, near a phone to take a flight with as little as 2 hours notice.

*** Holding a line means that a flight attendant gets to bid for a certain group of flights and have some knowledge of what they’ll be working for a month.  This changes from month to month and the best “groups” of flights are held by the most senior flight attendants.  It can take 25 or more years to be able to fly the best “groups” of flights. 

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Southwest Airlines has reached a tentative agreement with its pilots union that, if ratified by the pilots, will permit Southwest to choose to adopt the 737-800 into the fleet.  Southwest says it is still evaluating the choice and will make a decision soon. 

Some have speculated that doing this and adding Airtran into the mix would be unattractive to Southwest.  I say it that aircraft is coming and sooner than later.  Despite Southwest’s potential gains (via the merger) at airports where this aircraft would be most useful, it still has great potential for the airline in those markets and others including, perhaps, some routes that Southwest will harmonize between itself and Airtran in the future. 

Ultimately, this means Southwest is suddenly looking at operating 2 types and 3 classes of capacity in its system in the near future.  The Boeing 717 on the bottom end w/ 117 passengers and the Boeing 737-500 sitting there right next to it at 122 passengers is the first “class” of capacity.  The Boeing 737-700 at 137 passengers will remain the mainstay aircraft for mst routes and represents the second “class” of capacity.  Finally, the Boeing 737-800 will offer increased capacity at about 175 passengers. 

I wouldn’t expect the Boeing 737-800 fleet to be that large for a long time.  Look for a sub-fleet of these that will probably range from 40 to 60 unless and until Southwest decides the entire fleet needs to bump up in size.

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Just  a couple of weeks ago, American Airlines applied to fly the Los Angeles – Shanghai route with the Department of Transportation.  The DoT responded with a resounding “Yes!” in just one week.  United Airlines asked for the same route on Tuesday and got a “Yes!” in just one day.  Both airlines plan to fly this route with 777 aircraft.

I’m somewhat surprised that United wanted LA to Shanghai instead of a route from something resembling a hub for them such as San Francisco.  Now we have the spector of two SuperLegacy airlines flying in competition with each other on the same route with the same equipment and a need to win that is pretty high.

Ultimately, I give advantage to American Airlines on this one simply because of better feed into Los Angeles.  I believed that the SuperLegacy airlines would ultimately start to poach on each other’s territory but I also believed that it would take a while for these airlines to digest their situations before making a move like that.  This may be a special case but it does make me wonder if competition is heating up.  Especially on international routes and in light of the great success that Delta has had in expanding their international route system.

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The Department of Transportation continues to hoot about a reduction in “tarmac delays” and I want to reiterate that we don’t know anything yet.  The DoT claim of little or no additional cancellations is speculative really because . . . wait for it. . . we don’t have data on why a particular flight was cancelled.  Or, more accurately, we’re not specifically tracking flights that were cancelled because of the potential for long delay.  All we can go by is whether overall cancellations were up (in a year to year comparison by month) or down. 

The problem is that there are a number of other environmental and operational factors that will affect cancellations as well.  Did the airplane push back and find itself unable to start an engine when it neared take-off?  Did the flight get cancelled because a massive thunderstorm parked itself over the airport?  Did the airline simply run out of pilots to fly the flights?  Even if there was a cancellation because of a flight nearing a 3 hour limit, the chances are nearly certain that there were other concerns bringing it to that point in the first place.

With all of that said, I will say that it is pleasant to learn that there was just one 3 hour+ delay in August (by 20 minutes) and that no fines have been issued yet.  So much for those running around and talking about just how awful those fines will be when it comes to airlines finances.  In fact, when you read about the fines and see $27,500 per passenger, please keep in mind that that is the *maximum* fine that can be imposed.  Typically, the FAA imposes fines that come no where near what the maximums are.

In the end, let me repeat my mantra:   We are a long way away from being able to judge the harm or effectiveness of this rule.  We don’t know anything yet.  There are no trends and no one should be hooting or crying about it yet.  Shame on the FAA for continuing to call a victory over this.

Filed under: Airline News by ajax
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Airlines have spent a lot of time talking about how consolidation has helped the industry raise air fares and begin earning a profit.  It is constantly promoted as a very positive development and that is generally not refuted by anyone out there most of the time. 

But let’s take a look at the landscape and see what is going on.  In 2004, we had as major airlines the following:

1. American Airlines
2. United Airlines
3. Delta Airlines
4. Northwest Airlines
5. Continental Airlines
6. Southwest Airlines
7. Alaska Airlines
8. jetBlue Airlines
9. Airtran Airlines
10. America West Airlines
11. US Airways

These are in no particular order but each of the above could be described as viable operating entities that served large regions of the United States if not on a national basis.   Of the 11 listed, 5 were really completely national airlines, 3 were semi-national and 3 were regional. 

Now, if we consider recent mergers and the recently announced Southwest Airlines – Airtran merger, we have:

1. Delta Airlines
2. United Airlines
3. American Airlines
4. US Airways
5. Southwest Airlines
6. jetBlue
7. Alaska Airlines

Of these listed, 5 are national airlines (With Southwest moving from “semi national” to “national” in my opinion) and 2 which are really regional airlines primarily.  The 2 which I call “regional” do have flights outside of their core strengths but you can’t really call them even semi-national. 

I see 2 problems arising from this new landscape.  First, the top 3 airlines range in annual revenues between $23 Billion to $29 Billion.   US Airways had about $11 Billion in revenue, Southwest earned about $11 Billion and Airtran enjoyed roughly $2.5 Billion in revenue.  In other words, going forward US Airways and Southwest Airlines will be roughly half the size (in terms of revenue) that the top 3 enjoy.

Alaska Airlines, generally a good performer, earned about $3.5 Billion and jetBlue, also generally a good performer, earned $3.3 Billion.  They are each roughly 1/3 the size (in revenue) of the tier above them. 

My point is that there is a great inequality between the now extremely dominant SuperLegacy airlines and the tiers below them.  Between US Airways and Southwest, US Airways clearly remains an “at risk” airline due to the markets it continue to try to be dominant in.   Indeed, with the Southwest-Airtran merger, US Airways will see yet another market (Washington D.C.) finally being intruded upon by Southwest.

 There is little left to challenge the largest airlines in a region.  They will compete with themselves and it will take many years before you see Delta trying to encroach on American territory or United encroach on Delta territory.  Each of these SuperLegacy airlines needs to settle down.

My second point is barriers to entry.  Airlines have grown both in revenue and network so much now, there is a barrier to entry for new airlines or even existing airlines to enter new markets.  A 2nd tier airline has some chance of competing regionally but 3rd tier airlines are now faced with competing against SuperLegacies that can quite literally bury them with both capacity and staying power. 

In other words, going forward, it will be very difficult for airlines to be started that have any hope of competing in marketplaces because any marketplace that may have high air fares is also going to be dominated by SuperLegacy airlines that can fight off that competition with capacity and the ability (via revenues) to stay the long course with that strategy. 

Starting and operating an airline is a highly capital intensive affair.  It is possible to start an airline and build a network inside a region with fast growth.  jetBlue did it in a market that was highly competitive just 10 years ago.  However, while going from zero to 50 aircraft is somewhat doable still, growing beyond that is very expensive and difficult.  It’s hard to find investors willing to capitalize airlines with enough money to sustain that growth to a network that is served by 150 or more aircraft.

Furthermore, it’s difficult for airlines to make that leap from small to medium and keep their operations stable.  It often requires entire systems changes that stop growth and start a period of mediocrity that is often difficult to work past.   (Hello jetBlue)   In addition, it’s difficult to imagine the required resources to make the leap from medium to a truly national player because, so far, it really hasn’t been done except via mergers and that resulted in an airline (US Airways) that remains tied to cities that aren’t the most attractive for being a major player.  Just look at where US Airways isn’t a player such as New York City, Atlanta, DFW, Chicago, Denver, San Francisco (and arguably Los Angeles.) 

That means that SuperLegacies and major nationals are likely to go unchallenged for the foreseeable future.  Unchallenged airlines usually mean air fares that are high enough to slow economic growth in areas and service levels that will continue to be reduced over time.  It’s not good for customers and it isn’t good for the United States.

I wouldn’t argue that we need 6 SuperLegacy airlines (in terms of size) but I do think we need more national airlines (a la US Airways or Southwest) so that competitive pressure remains in place.  Even new regionals in the form of a jetBlue or Airtran would be good but . . .

How do they get started?  How do you make an argument to investors that capitalizing an airline with the intent of competing even on a regional level is a sound business investment at this point?  It was hard to do before the last 3 years but now it is almost ludicrous to enter a conference room an argue that you can sustain a bruising battle for market share on a profitable route with the remaining top 5 airlines.

In addition, we have tacitly endorsed airline systems that are inherently economically inefficient.  The hub and spoke systems just got a shot in the arm but they do not lend themselves to lean operations and high aircraft utilization.   But the sheer size of the networks we have agreed to now make it possible for those same inefficient operations to enjoy new life for a decade or longer now.

I do think airlines should enjoy profits.  I do not think they should enjoy profits just because they say they should.  The argument that airlines couldn’t enjoy profits in the US anymore without consolidation is refuted by the very performance of other airlines operating under a different model:  Southwest, jetBlue, and even Alaska Airlines and Airtran.  I just named 4 airlines who did enjoy profits on a pretty consistent basis over the last 10 years by not engaging in the SuperLegacy hub and spoke (only) operations systems.

I ask myself where innovation may come from to challenge existing airlines in the next 10 to 15 years and I presently don’t see any encouraging developments.  I don’t see any new David Neeleman’s looking at these conventional systems and thinking outside of the box when it comes to aircraft, routes or labor.   How does a brand new airline argue for competitive prices when shopping at Boeing or Airbus when compared to the SuperLegacies who can make a “top off” order larger than a new airlines’ initial order?

Airline fans can shout about the renewed prospects for earning money presently but I do wonder what we, as a country, have to shout about when we discover that lack of innovation in a few years.

Filed under: Airline History, Airline News, Airline Service, Airlines Alliances by ajax
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There are reasonably easy ways to find out the answer to this but I hope you’ll use your brain instead.

Twice a week a Russian made airliner transits across US airspace.  Usually it is a Tupolev Tu-204 aircraft.  It doesn’t come from Europe either.  Can you guess the country and airline operating it? 

Hint:  This airline also flies the Airbus A320 over the United States on a regular basis.

Filed under: Trivia by ajax
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