We’ve read much about both Europe and the United States being snagged with huge airline delays and problems due to storms but one country took a slightly different tactic with their airlines this week.

Russian Prime Minister Vladmir Putin warned Russia’s airlines’ managers not to go on vacation while their flights were suffering delays and imposing hardships on its passengers.   Five of Russia’s airlines are being probed now:  S7, Transaero, UT Air, VIM, and Orenburg airlines all have to answer for the problems passengers have incurred.

Notably, OAO Aeroflot, largely owned by the Russian government, has escaped notice.

Most of the problems were experienced at Moscow’s Domodedovo Airport and Putin warned that officials should “”stop whining and start working.” 

I’m pretty sure that sent a chill through some people’s hearts.

Filed under: Airline Service, Airports by ajax
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There is probably no one more villified for the 1978 deregulation of airlines in the United States than Alfred E. Kahn.  The Cornell University professor died at age 93 this past monday.

What would probably surprise many, especially those born prior to the 1970’s, is that Kahn had no background in airlines.  Despite that handicap, he did actually learn the arcane language and strategies of airlines as Chairman of the Civil Aeronautics Board.  Mr. Kahn actually had to be pressured by both President Jimmy Carter and Vice President Walter Mondale before taking the job.

Prior to taking the job, airlines were just “marginal costs with wings” to him, said Kahn.

Was Kahn successful?  I would argue that he was although he left a gaping hole in what he architected that still plagues airlines today:  airlines were deregulated but their labor wasn’t.  Only the price side of the equation was ever really deregulated.  That’s caused more than 30 years of problems for airlines and it’s a problem that really is no closer to a solution than it was in 1978.  One only has to look at who enjoyed political power in 1978 to understand why.

You can read Alfred E. Kahn’s obituary in the New York Times.

Filed under: Airline History, Trivia by ajax
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ContiUnited Airlines has decided to add a “peak travel” surcharge adding $10 to each segment of a ticket and American Airlines raised the ante by raising fares about $22 which Delta Airlines matched.

Higher oil prices which lead to higher fuel prices is leading to this drive to earn more most likely.  However, it’s notable who is leading this rise in air fares.  It’s the SuperLegacy airlines and this points out just how much pricing power these folks potentially have. 

It’s unlikely that the LCC carriers will exploit these air fare increases immediately.  Everyone in this business needs to recover and rebuild their war chest.  Some have quite a bit on their plates already (Hello Southwest) and some are just battered from a few bad years (Hello jetBlue). 

I still think we’ll see serious fuel charges in the future and especially on international flights.  But all this potential for profit is going to do something else:  attract new entrants to the business.  And there are plenty of opportunities to compete against high fare SuperLegacy and Legacy airlines.  If these profits (via air fare increases) hang around for the next 6 to 12 months, I do think we’ll see someone announce the start of a new airline. 

In the meantime, the smart traveler will book early and book off-peak flights.

Filed under: Airline News by ajax
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Whenever a merger is announced between two airlines, one of the first things to be answered in the announcement is that no city is going to be hurt by this.  Obviously that is a politically driven statement because CongressCritters have a lot of power to make it difficult for airlines in a merger. 

The one thing about mergers is that absolutely flights will be combined wherever it makes sense.  Fuller aircraft make for vastly better profits.  But just because flights are reduced doesn’t mean that that is bad for a particular town or city.  A rationalized set of flights might reduce frequency a bit but result in a better, more comfortable aircraft serving the route. 

Hubs are different thing.  There is always the promise that hubs won’t be reduced but that’s a hard promise to keep sometimes.  You only need so many hubs serving so many regions.  In the case of ContiUnited, it seemed difficult to imagine that Cleveland would continue to exist as a hub in light of the fact that it was bounded by three better hubs:  Chicago, Newark and Washington D.C.

But, again, in this day and age that doesn’t necessarily mean that the city will suffer.  Now, other airlines often see opportunity in cities that are seeing their airport downsized as a hub.  A Southwest Airlines, for instance, may see high fares because of hub dominance and go in was another airline retreats and offer better fares and better flights to appropriate cities.

The Delta/Northwest merger has seen both Memphis and Cincinatti hubs being downsized and rationalized and that’s OK.  The good news is that there are number of strong(er) airlines who may be interested in offering smart services.

The ContiUnited merger had less overlap with just Cleveland appearing to be the ugly stepchild.  The smart thing for Cleveland to do is not fight to keep ContiUnited but fight for new airines to come into their markets.  Competition will lower their fares and a diversit of airlines will ensure a healthier business climate for its native businesses and industries. 

It seems safer to try to keep what you already have but it often smarter to fight to have change and experience better rewards with other airlines.

Filed under: Airline Service, Airports by ajax
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We just saw what an impending storm can cause when it comes to flight cancellations.  One thing that people often wonder at is the reason their flight was cancelled when it isn’t snowing yet in their departure city.

In fact, people are often left wondering what happened to their flight when it isn’t even forecast to snow in their departure city.

It has to do with with an airline’s network.  An airline may have to cancel a flight in one city because the aircraft is stuck in another city due to weather.  That’s really a common occurrence. 

Sometimes an impending storm results in an airline cancelling flights in advance of the arrival of a snow storm.  There are a lot of valid reasons for doing this.  It may be unwise to send a flight out to a city where the airline doesn’t customarily overnight aircraft.  Doing so potentially leaves the aircraft and its flight crew orphaned in an unknown city and unusable when weather does clear.

Since storms, particularly snow storms, can leave an airline’s network destroyed, it is attractive to the airline to keep its aircraft at its hub(s) so that when the storm does clear, it has the equipment to get people on their way immediately. 

Another reason is that snow storms approach a lot of cities with a great deal of uncertainty.  It’s poor safety to send aircraft to a city prior to a potential snow storm because that storm may arrive early causing the aircraft to divert or hazard a landing in poor conditions. 

Flight cancellations are painful not because of the immediate inconvenience.  They are painful because airlines often are incapable of taking care of a customer for days afterwards.  That may be unacceptable.  There isn’t anything that an airline is going to do about it unless forced to.  The best alternative is to really weigh consequences of sticking to your travel plans.

Most airlines welcome a change to an earlier flight and offer the ability to do so without penalty in these situations.  Take advantage of that.  Sometimes no matter how much you want to go, you can’t.  Skip your trip if you can get a refund and many airlines will offer such a thing during bad storms. Flex a little and avoid being that person stuck in an airport for 4 days clinging to the idea of taking a flight somewhere.

Filed under: Airline News, Airline Service, Airports, Travel Hints by ajax
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When slots to fly from the United States to Tokyo’s Haneda airport, there was a mad rush to be awarded one or more by almost all the major airlines.  Access to Haneda airport is seen as very valuable to an airline since it is much closer to central Tokyo.

American Airlines won one of those slots to fly from New York City to Tokyo and had originally scheduled their flights to start in late January.  Now, American Airlines is asking for a “modest” extension to March.  Why?  Because business is slow for January.

I’ve always had a problem with airlines winning these opportunities and then later deciding to defer service to a more convenient time.  When these proposals are made, a great deal of justification for the award takes place in the form of arguing that traffic exists to sustain that service.  The demand is there and the airline promises essentially that it will offer the best service possible.

If that was true enough to win the award, then it’s true enough to fly the route when you originally schedule it.  If an airline cannot deliver on its promises in its proposal, that slot should be given to someone who will execute on that route.  While I agree that this really is a very modest delay being requested, it is contingent on the idea that business will pick up and nothing guarantees that it will.  It is all predicated on assuptions that may or may not be true.

An award for a route should require that an airline deliver on its promises or suffer the penalty of winning the award.

Filed under: Airline News, Airline Service by ajax
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A 50 year old anonymous airline pilot decided to video what passes for security at SFO airport and post it on YouTube.  He (rightly) pointed out that what passes for security for ground personnel at the airport (and not just this airport) isn’t what you might expect it to be.   See the video below (and I apologize for the commercial):

Watch Video Here

In response to this, federal air marshals and sheriffs showed up at his home to confiscate his federally authorized handgun (the pilot is a deputized federal air marshal).  The pilot believes this was done as retribution.  The pilot videotaped this visit as well but I can find no copy of it so far on the internet. 

To anyone who understands airports, this comes as no surprise and its one great reason why I call the security done by the TSA theater.  It is very much a weak spot and very much a hole that people are, at best, cursorily screened can bypass security with evil intent.

Filed under: Airports by ajax
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American Airlines was allowed to cancel its contracts with Orbitz by a Chicago based judge 3 days ago.  Orbitz and AA have had a dispute going on for several months now.  American Airlines wants to supply a direct connection to travel agencies and travel agencies want to use global distribution systems such as SABRE and Travelport’s Worldspan.  American says that their direct connection is cheaper and faster.

Both travel agencies and airlines will be watching how this dispute plays out.  American has tried before to be a leader in air fares with big consequences.  They attempted to rationalize fares in the early 1990’s with disastrous results that lead to AA returning to fare structures like its competitors again.

If AA is successful, count on other airlines following its lead.  However, success isn’t just winning in a courtroom and denying fares to Orbitz.  Success comes from AA not suffering a revenue drop from pulling its fares from Orbitz.  It’s quite possible that consumers won’t notice that AA’s fares are missing on Orbitz and they’ll book with other airlines.  If AA can’t maintain its sales, it may be forced to work with Orbitz again. 

If American is able to maintain its revenue and execute this plan against other online travel agencies such as Expedia and Travelocity, we’ll likely see other airlines folllow in AA’s footsteps.  My own take is that this is a risky move for AA since air fares are largely a commodity in the marketplace that are bought on price primarily.  This may give other airlines an opportunity to game the situation and raise air fares and benefit more from those air fare increases than AA can.

In a move that certainly surprised me, Expedia decided to “de-preference” American in a show of support of Orbitz.  Expedia has adjusted its system to show AA at the end of list of available airlines and no longer will show its fares.  This move was done to support Orbitz and out of concern of what AA will do when its contract with AA comes to an end in several weeks. 

“American Airlines has shown it only intends to do business with travel agencies through a new model that is anti-consumer and anti-choice.

“We believe American Airlines’ proposed direct connect model will result in higher costs and reduced transparency for consumers, making it difficult to compare AA ticket prices and options with offerings by other airlines.

“American Airlines’ direct connect model is of questionable, if any, benefit to travelers, costly to build and maintain and would compromise travel agents’ ability to provide travelers with the best selection.”

That’s going to hurt AA but I also think that AA may engage Expedia legally to stop that behaviour in the near term while it concludes its fight with Orbitz.  There is a signal here:  Airlines aren’t the only ones who have figured out how to work together to sustain their business models.

I think that AA is throwing its weight around like it continues to be the big dog among airlines.  In actual fact, they are the #3 airline by revenues in the US and they are the least profitable of the legacy and SuperLegacy airlines.  This isn’t a position of strength particularly when you consider the pressure AA is feeling to improve its profitability.

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Over the past week, I’ve seen several more examples of TSA Security Theater make the news.  First up is the businessman who managed to accidentally carry his personal handgun through security and onto an aircraft where he discovered his mistake during the flight.  To the man’s credit, he reported it upon arrival at his destination.  One has to ask how any TSA agent misses a handgun inside someone’s carryone baggage going through a scanner.

Then there was the small child who was frisked in Salt Lake City, Utah and who had to remove his shirt.  Originally, the reason cited was that he set off the scanner.  Later, it was revealed that it was because he was wearing “bulky” clothing.  One has to ask how a sweat shirt qualifies as bulky clothing. 

Finally, it was reported in the news that a TSA agent who was stealing laptops in Philadelphia has received probation for his offense.  The agent was reported by a baggage handler who saw this man hiding these items.  The irony of a baggage handler reporting theft is left to the reader. 

These aren’t minor, one time occurences.  They’re endemic to the security situation at most airports and representative of just how incompetently our security is being handled.  The government and, more specifically, the Department of Homeland Security has presented the new body scanners and thorough friskings (aka sexual assaults) as necessary to the security of air travel.

There are too many incidents of incompetence and dishonesty on the part of the TSA to see the new procedures as anything but additional layers of inconvenience that, considering who is performing the work, adds nothing to real security.  People have been trying to carry weapons onboard aircraft to commit serious crimes for nearly as long as airlines have been in existence.  After the spate of hijackings in the 1960’s and 1970’s, we introduced baggage scanning and metal detectors.  However, despite being given nearly 40 years to perfect the detection of a handgun, they still get through alarmingly easy at times.

Instead of ensuring that people actually do feel safer, our security apparatus has managed to make people feel even more annoyed at the idea of travel and that is saying something in this day and age.  If anything, we’ve gone from mere annoyance at our security theater to being often humiliated through the process. 

More machines and more procedures isn’t going to make us safer.  Having honest, vigilant and intelligent people run our security processes will.  Instead, we’ve created a new civil service job that pays poorly and attracts the barely qualified instead of the best of the best.   There is no esprit de corps inside the TSA and there is no honor in the job.  All too often we see these agents performing their roles with contempt for the very people they’re supposedly protecting.   Contempt that is justified with “terrorism” as a watchword.

It’s tolerated because the situation is presented in a manner in which people see no alternative.  When you have to travel 500 or more miles, there are few realistic options other than air travel for most people.  What is more insulting is that we have tacitly agreed to let the US government present the idea of air travel as a “privilege” rather than a “right” contingent upon you agreeing to let them do whatever they want to do in the name of security. 

I don’t think any rational person objects to real security work being performed at airports, including me.  What we do object to is the placebo approach to security veiled with threats and intimidation and conditional upon giving up constitutional rights such as the 4th Amendment. 

But as this holiday season goes on, people continue to be bullied, humiliated, insulted and intimidated all for the privilege of getting on an airplane to travel for pleasure or business.

Filed under: Airports, security by ajax
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Continental Airlines recently introduced a new feature for its fares called “Fare Lock” which will allow a customer to “lock in” a fare for 72 hours or 7 days (depending on fee and your needs) so you can think about your purchase.  In this age of airline business, I never thought I would see a fee I liked but I like this one.

The fee is reasonable at $5 to $9 and win-win for both parties, in my opinion.  There is value added for the consumer and the airline gets just a little bit more information to be used for its revenue forecasting and analysis.  Now, you are buying insurance with the very company that can manipulate fares but if you think Continental is going to manipulate those fares just for you, you’re kidding yourself.  This is a convenience fee when it comes to fares and it allows you to lock in the fare while you consider both your travel requirements as well as other fares. 

It’s a fee that I would and will use myself. 

One thing I find curious, however, is that this is a Continental fee and not a ContiUnited fee.  I would have expected the announcement to come from both sides of the house and it didn’t.  This leads me to believe that United’s system might not be able to accomodate such a fee or that this is experimental and Continental was deemed to have the best customer base for trying it out.

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Southwest got a big hand in the New York City market when it was able to lease slots at Newark Liberty International Airport as a result of the Continental/United merger.  Their original announcement had them flying to Chicago and St. Louis and those were good starts. 

Now Southwest has announced additional destinations from Newark and they include Houston, Phoenix, Denver and Baltimore.  Newark has suddenly become the more important airport for SWA as a result, too.

Those destinations will allow them to fly to their focus cities and it’s notable that 3 of the 5 initial destinations are fairly long haul flights for SWA.  Newark will be the real focus city for SWA rather than La Guardia and here is why:  they’ve already got a bigger toehold and that is going to make it a more and more cost efficient operation but, more importantly, they aren’t range restricted at Newark like flights from La Guardia are. 

Newark lets them connect people to focus cities better and grow the business.  Expect some flights to Atlanta in the future.  Airtran had them and gave them up but that doesn’t mean they aren’t worth it for SWA.  Airtran had just a small handful to Atlanta and mostly on their 717s.  Southwest can increase that frequency and with larger aircraft (come 2012) too.

Will SWA languish at La Guardia?  No but they’ll grow much more slowly and organically because those slots are valuable and they’ll cost a lot for SWA to acquire.  But having Newark in the area lets them form a good NYC base and get the economy scale they need.

Filed under: Airline News by ajax
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Dominick Gates from the Seattle Times has an interesting story on Boeing’s 787 woes and, frankly, describes them as being in a worse state than I think is generally known.

Read the ARTICLE.

Filed under: Aircraft Development by ajax
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Southwest has indicated its readiness to investigate different fleet types in the future to meet its needs and the driver for this is fuel costs.  Their famous adherence to the 737 was more appropriate even 20 years ago but in this age, they have a large enough fleet and a large enough network to justify multiple types. 

Sticking to one fleet type has its benefits but those benefits don’t grow large when the fleet size expands past a certain point.  There is all kinds of debate on how many aircraft you have to have to make it efficient but I would say that for Southwest, a minimum of 60 to 80 aircraft is probably a sweet spot right now.  Big enough to make maintenance and handling optimum and big enough to offer flexibility through the network.

Does this mean SWA is going to add more fleet types?  No, not necessarily.  It means that it is time for them to put together a different fleet plan for the future.  If there is one thing I’m certain of, it is that SWA will have 737s for a long, long time.  The real question is . . . what kind of 737s?

In addition, SWA still does quite a bit of regional flying on mainline equipment that was efficient with 737s 20 years ago but isn’t nearly so today.  One great example of that is the flights from Dallas to places such as Lubbock and Midland and even Little Rock.  It might be beneficial for Southwest to identify a new fleet type that is smaller (in the 100 seat range) for maintaining frequency to those destinations but also offering better fuel economy and cost of ownership.   And they’ve got choices.

One thing is sure, however:  Should SWA pursue a smaller aircraft to standardize on, it won’t be a Boeing or Airbus.  They’ve got the 717 coming into the fleet via their Airtran merger and they’ll likely play with that aircraft for several years.  However, a 717/737-500 replacement won’t be a Boeing/Airbus aircraft.  It will be one of the semi-mainline regional jets being offered by the likes of Embraer and Bombardier most likely.  And it will be an aircraft that can be punished with high utilization rates.  On the surface, the Embraer E-190 series looks like the best bet to me.

I think their larger, single aisle aircraft will continue to be Boeings and I think that, for the near future, those will be 737s.  It is an almost foregone conclusion that they’ll also be pressuring Boeing for a new 737 replacement more and more over the next 2 years.  That replacement aircraft is liable to start with roughly the size of a 737-800 and have several larger types above it.  Southwest will likely choose to purchase several of the sub-types to meet their needs on various different routes that have wildly different constraints. 

This is about fuel efficiency and keeping down the trip costs.  Southwest has never had amazing load factors but the kind of load factors they’re experiencing today are historically high and they are unlikely to fall much in the future.  They need a larger aircraft than the 737-700 in the future. 

In the near future, they’ve got enough differences to work with.  This kind of talk is about pushing manufacturers to start considering what to offer airlines such as SWA in the longer term.

Filed under: Airline Fleets by ajax
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United Airlines CEO Jeff Smisek says that there are too many seats chasing passengers on routes between the United States and Australia presently.  United has had a presence for over 25 years on those routes and its staying power comes from its corporate contracts and loyalty program but it is being challenged presently by lower fares from new entrants on those routes (Delta and V Australia) as well by the fact that its 747 aircraft have a less attractive IFE solution than others.

One of the great ironies for long haul routes such as these is that they have, for the last 40 years, been largely dominated by large widebody aircraft.  Most commonly, the 747.  Filling those aircraft day in and day out is a challenge and one reason why really only two airlines have traditionally succeeded on those routes.  New entrants or weak players usually leave the market because there really are too many seats chasing too few passengers, particularly in hard times.

Right now, QANTAS and United have 747s and A380s on that route.  Delta is using a 777-200LR and V Australia has 777-300s working the route.  Delta is probably right sized but they’ll have to remain committed to the market as a long term investment in order to succeed.  I understand why they want to cooperate with V Australia and I’m not sure that’s a bad thing for either airline but it appears that is going to take some time to work out.

United and QANTAS both are the dominant players but I wonder if they’ll remain so over the long term if Delta and V Australia hold their ground.  It’s anybody’s guess.  It does occur to me that we are about to see aircraft that would allow new entrants to make money on that route and, at the same time, be right sized for the route.  That would be the 787 and A350 aircraft. 

If those two aircraft permit the same profit margins that the larger aircraft offer, not only will those new entrants stick around but we might see more.  Delta isn’t going to have the 787 for 10 years or more.  United will have some and QANTAS should receive some too. 

Right now, the most practical approach is for airlines to depart the west coast of the United States using large widebody long haul aircraft.  What if United was able to start flying from the interior of the United States using 787s (which they are due to receive relatively soon)?  It’s doable and it might be practical. 

This is another great example of why larger and bigger isn’t always better.  The 787 and A350 are going to offer possibilities for long, thinner routes that will ultimately fracture those large capacity trunk routes flown by the 747 and A380 right now.

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Southwest made its intention to purchase the 737-800 official a few days ago and while no one is surprised, it is gratifying to hear it has been made official.  This will be a good choice for SWA going forward and it would appear that their first deliveries in 2012 will be 20+ of the -800.  Gary Kelly has said that that is too small a fleet and indicated that about 80 in the fleet would be about right.  These new aircraft will be replacements for SWA’s older 737-300 aircraft rather than in addition to them.  However, the greater size of the 737-800 means that there will be significant capacity growth in 2012.

Interestingly enough, SWA started advertising for an ETOPS manager several days ago and *lots* of people noticed that.  ETOPS will be necessary for SWA to serve Hawaii.  Just a month ago, I wrote about SWA and Hawaii HERE.  Apparently all of the deliveries in 2012 will be ETOPS equipped aircraft so I think that my thoughts on SWA starting a Hawaii route in 4 to 5 years from now is a touch off the mark.

Instead, I’d say we’ll probably be looking at SWA starting routes to Hawaii in at little as 3 years.  They still have to get the aircraft and they still have to learn how to maintain that ETOPS fleet and they also have to figure out how to do the flights and from what cities should they be flown. 

Gary Kelly, CEO of Southwest, also made an interesting comment or two about the 737 and a new engine option and/or replacement for that aircraft.  Kelly rightly points out that Boeing is talking about having something for its customers in 10 years and comments that: “When you talk about something that’s 10 years from now, that’s not a solution, that’s an idea.” 

I couldn’t agree more. 

The Airbus A320NEO isn’t going to be a 737 killer by any stretch.  In that respect, Boeing doesn’t have much to worry about.  But Gary Kelly is right, Boeing hasn’t got anything on the table.  The next generation 737s started to roll out of the factory in 1996 and that isn’t all that long ago if we were talking about a new aircraft.  But the next generation 737 line weren’t “new” aircraft.  They were evolutions of the original designs. 

It’s true that engine technology is needed but nobody is really driving that technology all that much so far.  Both Airbus and Boeing continue to look at new engines as more an annoyance than a need.   The A320NEO isn’t a Boeing 737 killer but a new single aisle short to medium haul aircraft from Boeing is most definitely an A320NEO killer. 

It concerns me that all we’ve heard from Boeing is that their customers aren’t asking for new engines because it’s clear that airlines aren’t asking just for new engines but new airplanes.  And Boeing is behaving a bit too arrogant with respect to their customer base in my opinion.  I wasn’t much of a fan of the Bombardier CS300 so far but now I kind of hope it makes it and it’s a bit of a Boeing killer. 

If Southwest wants a new, efficient (as possible) airliner, it’s time to get to work.  Because of Southwest wants it, I guarantee you that every large operator of the 737 wants it too.  With fuel prices as high as they are and due to be higher in the future, even a 10 to 15 percent efficiency gain is something an airline can’t afford to ignore or defer.

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The Wall Street Journal is reporting that Delta is considering new moves when it comes to pricing in order to bolster their profits even more in the coming years.   Instead of another fee, this time it’ll be a surcharge.

A fuel surcharge, to be exact.  Delta wants to explore having fuel surcharges for both international and domestic trips.   It’s notable that Delta’s CEO Richard Anderson has plans to achieve a 10% profit margin for his company in the coming years which would be nearly unheard of. 

Fuel surcharges are in use in many other parts of the world today and they are used commonly in Europe.  It’s no surprise that many European airlines also earn a decent profit and did so even when the chips were down in their economies just a year ago.

But does that make it right?

Well, first of all, I think a 10% profit margin is actually unhealthy for the airline economy, at least in the United States.  It sounds rather reasonable but in most competitive marketplaces, a 10% profit margin for that kind of service isn’t really common. 

Second, companies tend to get addicted to fuel surcharges.  They are the airlines way of grabbing more money in lieu of getting more productive as times passes by.  A surcharge also levels the playing field among airlines and why should an airline who properly manages it fuel hedges not benefit more than airline who chooses to simply pass the penalty on to the passengers?

I think airlines would love to introduce fuel charges and I think if they could get away with it with respect to the FAA, they would all introduce surcharges instantly.  It would resemble the Great Baggage Fee rush we saw 2 years ago.  The problem is, this is just one more pricing complexity to be introduced for the consumer when it comes to choosing an airline flight. 

The typical consumer will have to find a price for a flight, weigh the option on baggage fees and then determine if the fuel surcharge raises the cost of that flight above an alternative flight.  Since an airline flight involves traveling from one place to another, I’ve got a better idea.

How about we start recognizing that some baggage is part of the bargain and how about we recognize that fuel prices (and their fluctuations) are also a part of running an airline business and get back to offering a *real* price for a trip instead of surprising consumers (and annoying them) on every trip?

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USA Today’s Today in the Sky had THIS story about US and European airlines no longer being the biggest airlines.   The criteria is based on market capitalization and it said:

Citing the airlines’ market capitalization values, IATA says they are Air China ($20 billion), Singapore Airlines ($14 billion), Hong Kong’s Cathay Pacific ($12 billion), China Southern ($11 billion) and LATAM ($11 billion). LATAM is the holding group for the recently announced merger that would combine Chile’s LAN and Brazil’s TAM airlines.

Let’s take a look at this.  First, it’s notable that none of these airlines (with the possible exception of Singapore Airlines) plays in very competitive home markets and all (except for Singapore Airlines) receive forms of market protection and support from their home governments.  Further, each of these is able to buy aircraft and finance these purchases through low cost financing being provided by import-export banks.   Finally, all of them benefit from relatively inexpensive labor compared to other parts of the world. 

Market capitalization really doesn’t mean much in terms of size except for how people are valuing the company.  It is the value of a share of stock in the market place times the number of shares out standing and often market caps are distorted by individual owner perceptions of the company and the market it plays in.

Some like to measure airlines by fleet size or the number of markets it flies to but each of those measures can be distorted too.  Are we to equate a fleet of 250 regional jets with a fleet of 250 mainline aircraft?  Similarly, is an airline that flies to 50 markets with one flight a day going to be the same as an airline that flies to those same 50 markets 5 times a day?

A far better measure would be revenue passenger miles.  That is the number of passengers times the number of miles the airline flew those passengers.  In other parts of the world, the measure is revenue passenger kilometers but it is the same measurement. 

By that measurement, European and US airlines continue to dominate the world’s airlines.  They also enjoy a wider mix in their fleets and tend to travel to far many more markets as well.  They are airlines that are typically broad based in everything that they do. 

These airlines, however, don’t enjoy the same market caps because their governments have engineered open skies agreements with most other places or at least liberal travel treaties.  They see far more competition compared to these other airlines and most do not benefit from low cost financing for their fleets either. 

Do we really want to believe that Air China is capable of buying and operating Delta Airlines?  It isn’t.  Even Singapore Airlines would be challenged by owning and operating a US or European Airline.  It is a bad idea to compare airline size and speculate about the future on the basis of what an airline is being valued at in the marketplace.

Filed under: Airline Fleets, Airline News, Airline Service by ajax
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There are new laws requiring that airlines identify flights they are selling space on which aren’t actually their airline.  In other words, if an airline like Continental has a commuter airline operating flights on its behalf, it’s supposed to identify this fact on the first page showing the flight for booking. 

Does it matter?  Well, the original implication was about safety which I always thought silly.  Regional airlines really are not worse or better than mainline airlines when it comes to safety.  Or, rather, let’s say that in the United States, the difference is statistically insignificant.  Fly with confidence in that respect.

I think the greater implication is that people should know what they’re buying and I don’t disagree with that.  However, it has been possible to identify what you’re buying for a long time.  It’s just that it is difficult to “read” unless you learn some things about airlines.  In almost all cases, the aircraft type alone identifies a flight on a commuter airline. 

I think that consumers should be told what they’re getting but that isn’t going to be truly transparent until we classify things into groups.  For instance, if we classified all aircraft with 100 seats or less as “regional” aircraft, we would have some good assurance of the aircraft type.  Or would we?  An Embraer 170 has near 737-like qualities but just 70 seats.  However, an ERJ-145 has about 50 seats that are torture. 

I think things should be identifiable but I do also think that consumers need to educate themselves as well.  The problem is, there is no central location for consumers to educate themselves or use as reference material.  Wouldn’t it be nice to be able to look up a typical 757 or A320 and see what you can expect from such an aircraft versus a typical Dash 8 or Embraer 190?  Economy seating and its general pros and cons should be explained as should what to expect for a typical meal service or drink service on both mainline and “regional” routes. 

But I don’t think the airlines should have to spoon feed you the information so that everyone is 100% positively clear on what they’re getting into.  There is some burden on the consumer to at least make a cursory effort at understanding what you’re buying.  You would do the same thing for a $400 television so why can’t you do it for a $400 airplane ticket?

Filed under: Airline Seating, Airline Service by ajax
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The Dallas Morning News Airline Biz Blog has this comment from US Airways President Scott Kirby where he asserts that a la carte fees will represent 100% of their profit for their fiscal year.  He cites those fees as making a huge difference in US Airways and the airline industry as a whole.

The part I object to is characterizing those fees as “new” revenue”.  Those services have always been provided and they’ve always had a cost and that cost has always been a part of pricing.  The difference is in the unbundling and that doesn’t make it “new revenue.  It makes it more identifiable but I question whether airline profits we are seeing now are truly a result of a la carte fees. 

You see, I keep looking at the airlines who essentially have no fees or minimal fees and those airlines continue to be rated best for service and enjoy some of the highest profits in the business. 

More likely, airline profits are coming much more from capacity restraint and let’s not kid ourselves, there was a huge amount of capacity removed from the market(s) at the start of this crisis and it continues to be closely managed by airlines so far.  So much so that most airlines are seeing historically high load factors on their flights.  Load factors that arguably cannot be sustained forever. 

Why?  Because an 85% load factor indicates that you’re actually leaving money on the table in the form of passengers who are not flying because A) the prices are too high or B) they cannot get on the flights they need to be on.  Airlines know this and while they’re enjoying the profits, someone will blink eventually. 

Most likely, airlines such as Southwest or jetBlue will start to add capacity and growth to their systems to take advantage of those deferring travel presently and that will force legacy and SuperLegacy airlines to reconsider their capacity management. 

Consolidation has made that capacity restraint easier for now but that won’t last and I still see one airline who arguably could either be removed from the market or who will go through bankruptcy organization and then the game changes again.  That’s American Airlines, by the way. 

This business is highly cyclical and we’re just seeing the beginning of the top end of a cycle.  Don’t kid yourself into believing that airlines have finally figured out how to manage themselves in this market.

Filed under: Airline News by ajax
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Milwaukee has had 14 consecutive months of record traffic and if you ever doubted whether or not airline competition in a market is good, you should get over that.

Airtran, Frontier and Southwest have all been battling it out there and it has been good for passengers and businesses alike.  Yes, there is such a thing as too much competition but in this case we’ll see Southwest rationalize with Airtran and Milwaukee will continue to benefit from two airlines who want their business.

Markets with healthy traffic are always marked by health competition.  Witness what it is like in NYC, Los Angeles, Chicago and even Atlanta.  Now consider what it is like in places like DFW, Cleveland, Houston and Cincinatti. 

I’ve no objection to airlines earning a profit and you shouldn’t either.  But strong competition keeps airlines lean and well managed.  It’s notable that American Airlines probably experiences the least competition overall among the SuperLegacy airlines and is also the least healthy.

Filed under: Airline News by ajax
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