Airlines had a lot of challenges 2 years ago but none more challenging than the volatility and high prices  of oil.  That got a lot easier to deal with as the economies of the world melted down but the price of a barrel of oil is slowly rising again.

Oil went over $90 a barrel this week and it’s likely to go up a bit more.  Why?  Well, it isn’t because demand for it is increasing.  It’s because it is a popular speculation in the markets since it is dollar denominated (priced in dollars) and the US dollar has been pretty weak.  If you got a stack of dollars that, in the world market, is eroding in value, speculating oil (rising in price) can be a smart hedge against that loss of value.

Will it rise again to $140+ soon?  That’s anybody’s guess.  My guess is that it won’t go that high but I don’t think it is going to sink to $50 or $60 a barrel either.  Our world economies have stabilized in their fall but they aren’t necessarily robustly growing either.  Lots of countries have bought US debt and have a lot of dollars or dollars invested in that debt and they need to mitigate against the low value of the dollar to preserve their money. 

Oil speculation is starting to resemble speculation in gold and while I do think that we need to stabilize that market in the future, it requires the cooperation of *all* the major oil producing countries and that’s a tough thing to get. 

Airlines are, hopefully, already engaged in strategies to mitigate against fluctuating fuel prices through hedging.  They’ve got some profits coming in now and they can rebuild their cash holdings and start planning their fuel strategies with a more long term view.  Or, at the least, most of them can. 

Ultimately, oil prices will stabilize when the US (and the rest of the western nations) have stabilized their economies, their currencies and have a more solid foundation on which people can plan their investments.  The more uncertain the economies are, the more uncertain oil prices are going to be. 

The United States has largely stemmed its economic free fall and has even enjoyed some very modest gains in growth and unemployment.  The current administration hasn’t received the credit it deserves for reacting quickly and forcefully and without reserve.  Had they not done that, oil would have been much cheaper but only because we would be in a great depression and experiencing deflation and double digit unemployment. 

But this problem isn’t going to go away for at least 5 to 7 years.  Oil will be unstable and fluctuating for some time to come and airlines would be wise to deploy a long term strategy to cope with that.  Fuel hedges and renewing fuel inefficient fleets are the best way to go and waiting even a short while could end up costing airlines all their profits.

Filed under: Airline News by ajax
No Comments »

Unions attempting to organize Delta employees have been rejected over and over again and to the surprise of many.  While some elections have been somewhat close, the results were pretty clear in every case.  Despite new rules favoring organizers, unions have had no real traction at this airline.

Unions can claim intimidation all they want but that doesn’t really fly in the airline world, pun intended.  Airline employees are well accustomed to unions, even those at Delta, and I’m very skeptical that even Delta can intimidate employees away from asking for a union if they really want it. 

Furthermore, I think the idea that Delta offering criticism of these unions isn’t intimidation.  If the unions can call Delta management dirty names and criticize their performance, it’s only fair that Delta management be allowed to throw a little mud themselves.  It’s notable that one union thought it effective to liken Delta CEO Richard Anderson to Adolt Hitler and that just goes a bit too far.  Among US airline CEOs, Anderson is one of the best and certainly well respected. 

The truth is, the employee environment at Delta is working for both the employees and management for whatever reasons may exist.  A union is only going to add value when those employees feel they aren’t getting fair treatment at the table.  Obviously that condition doesn’t exist today.  Why pay union fees when you’re interests are being accounted for?

Union organizers would be better off waiting a few years rather than continuing to rabidly fight this battle.  In fact, unions carrying on with this are likely to put off employees rather than win them over at this point.  Witness the fact that Delta flight attendants are asking the AFA to leave them alone.  These people are annoyed now, not enchanted.

That isn’t to say that Delta management has a free hand now either.  It means they’ve won, for now but they’ve got to remain on their own best behaviour to keep these conditions.   Attempts to be arbitary in their treatment of these labor groups will result in a change of heart.  Right now, I think Delta management gets that and they’ll keep their eye on the ball.  Should that management corps turn over, it may become a different situation.

These unions would be better off attempting to organize some regional airlines that are non-union.  These are employee groups that may well see value in them and it’s a better place to start at this time.

Filed under: Airline News by ajax
1 Comment »

Imagine you are a company who specializes in painting aircraft.  Imagine just how exciting mergers like the Delta/Northwest and Continental/United mergers must be for your business outlook.

Filed under: Trivia by ajax
2 Comments »

Volaris starts up service between Guadalajara, Mexico and Chicago on December 13th and, yes, they’re serving Chicago Midway Airport.  This is clearly part of the interline/codeshare agreement they’ve been working on with Southwest Airlines. 

They’re currently offering service to Los Angeles, Oakland and San Jose and I’m sure you see a theme here, too.  They are all Southwest cities.   The initial announcement on the partnership between Southwest and Volaris included just those cities and connections being offered on Southwest’s website are for Western states primarily. 

This is a partnership that will get expanded upon quickly.  Just as I’m sure that Chicago is a part of the strategy, I think we’ll also see potential connections offered in cities such as Houston, San Antonio, Denver and maybe even Atlanta.  It’s a good fit and with Mexico regaining Category 1 status in its air system again, they can only work harder to make it worth each airlines’ effort.

This does highlight the fact that Southwest needs a reservations systems that dates at least from the 1990s.  As badly as they need it, I suspect that the Airtran system might just end up being the answer for Southwest.  It would likely be easier to transition to that system than it would be to spend time, money and effort studying all the possibilities or even building their own.  Until Southwest has this fixed, they don’t have much to offer international partners and, yet, the potential in this area is huge for Southwest.

Filed under: Airline News by ajax
No Comments »

Four months ago, Mexico got its air traffic system downgraded from a Category 1 to a Category 2 rating by the US FAA.  This came at the same time that Mexicana was melting down in a great fury and both events were an economic and psychological blow to Mexico.

Well, they just got upgraded back to Category 1 after just four months (nearly unprecedented) and with strong assistance from the FAA in the United States.  In fact, the FAA will continue providing assistance to ensure that Mexico maintains the changes it made and maintains it status, more importantly.

This is great for Mexico and it is a well executed response to this problem.  It’s also great for US airlines because when that status got downgraded, US airlines were suddenly no longer able to codeshare with Mexican airlines and that probably accelerated Mexicana’s demise, to tell the truth.  Now, airlines on both sides can engage in codesharing again (Hello Southwest and Volaris)  and the world airline alliances can get busy in Mexico once more. 

Mexico shouldn’t have let itself get lumped into the ranks of countries like Croatia and Nigeria and their lapse in oversight was a bad thing.  But instead of acting outraged, they got busy and to their credit, they fixed the problems with lightning speed.  Give them credit.

Filed under: Air Traffic Control, Airline News by ajax
No Comments »

KLM took on a bet with a group of Dutch Dance fanatics recently via Twitter.  If KLM could get enough reservations to fill a plane on the site http://www.fly2miami.nl/ before December 6th, KLM would agree to do a non-stop flight from Amsterdam to Miami for these folks.  It seems the Dutch Dance Scene really wanted to get to Miami because they filled the flight in less than 5 hours and they now have 351 reservations.  So it’s on.

Obviously this flight isn’t going to dramatically change KLM’s balance sheet but they get to do what is essentially a charter filled with non-refundable fares and make some money.  The Dutch Dance Scene gets to dance in Miami.  It’s win – win for both parties.

The power of social media has proven itself again and it’s a message that quite a few airlines in the United States could stand to listen to (do you hear me United/American/Delta?).

Filed under: Airline News, Trivia by ajax
2 Comments »

A French court has found both Continental (as a corporation) as well as a Continental mechanic guilty of involuntary manslaughter yesterday and it stinks on many different levels.

Even if we ignore the fact that all the French parties in this trial were acquitted while the only US based parties (Continental and the mechanic) were found guilty, it still stinks for air transportation.  This sets a bad precedent for future air disasters, particularly in France, since going forward there will be little if any incentive for any party to cooperate in an investigation. 

It’s a precendent that any airline has to pay attention to when it comes to operating on French territory now and in the future.  When you face criminal liability as an airline and when your employees are subject to that same liability, it has to make an airline think twice about operating flights within your country.   When your “verdict” is blatantly patriotic as this one is, you really send a signal to those airlines and it isn’t a welcoming one. 

There is now no good reason for any airline employee to cooperate with any investigation into an air disaster and frankly I think this even extends outside of French territory.  This will have implications even in the United States as far as attorneys are concerned and that’s wrong.  Investigating an air disaster is already a difficult and contentious process at best.  Subjecting *any* mistake at all made by an airline employee to criminal liability means that it is in all employees best interest to shut up and say nothing on the record.

Accident investigations frequently result in changes in how something is done when we reveal the mistakes or uknown factors involved and that’s good.  That’s the reason why air disasters, as a percentage of air travel, have decreased so much over the last 30 years.  This one decision sets that back decades.

But let’s not ignore the patriotism involved in this.  It’s a factor and anyone who doesn’t acknowledge that just isn’t using facts.  As in all things like this disaster, there were a number of factors involved in the final outcome.  To absolve anyone French from any responsibility badly damages the reputations of the French legal system, the French government, Air France and the governming authorities for air transportation in France.  How can you, as an individual or company, trust these entities in the future if you witness them throwing a US based company in front of a moving bus while saving themselves.

This kind of behaviour is the worst you can observe in France and I’ll point out that this kind of stuff isn’t limited to just France either.  France just happens to be very good at it and, maybe, better than most. 

If this is what we can expect from the French court systems and government, shouldn’t we consider this when it comes to EADS/Airbus’ particpation in the KC-X tanker contest?  What if they won this contest, performed poorly and then hid behind the French government to escape consequences?  We’ve just witnessed a willingness to preserve French interests over truth or facts so why should the US (or any other government) believe that fair treatment and real consequences are available under any conditions that threaten French national interests in the future?

Filed under: Airline News by ajax
1 Comment »

Southwest Airlines got final approval from its pilot union on an agreement to introduce the 737-800 into the fleet and Southwest did what we all expected Southwest to do:  They announced they’ll be buying the 737-800.

I’m sure we’ll see these aircraft first on flights into and out of slot controlled airports such as NYC La Guardia’s or Washington D.C.’s Reagan National.  The speculative part is Hawaii.  Yes, these aircraft will have the range but that’s just the first issue to overcome.  To fly to Hawaii, Southwest would also have to have these aircraft ETOPS certified.

ETOPS certification would have to be kept up on every aircraft or on a small subset of aircraft that would operate from the West Coast.  There is a certain complexity there that, to me, doesn’t smell like something Southwest would be immediately ready to accept.  They know the value of Hawaii already and I think they would like to fly there via a partner or by themselves again at some point but how soon?

Look for these aircraft to show up in about 1.5 years.  They’ll first deploy to the slot controlled airport routes.  Next, don’t be surprised to see Southwest introduce some trans-continental services with these aircraft.  I don’t think we’ll see a lot of trans-con flying but I think we might see a few select routes get developed with the -800.  If those go well and they like how those distances feel, we then might see SWA prepare to fly to Hawaii provided they can figure out how to maintain ETOPS on either the whole -800 fleet or a subset of that fleet.

In other words, Hawaii is probably at least 3 years away if not more.  SWA may well try to link up with another partner and that isn’t necessarily a bad idea.  However, I think the unions have made it clear that they want to keep the flying “in-house” going forward as much as possible.   With the Airtran merger still on its plate and the integration of the two airlines over the next 2 years, I think a more realistic time to see a flight to Hawaii might be in as much as 5 years.

Filed under: Airline News by ajax
No Comments »

It was recently discovered that Iran Air’s headquarters has the Star of David on top of its building and, as you might imagine, Iran is outraged to make this discovery.  You can see it HERE in this story.  Prior to the revolution in Iran in 1978, it was quite common for Israeli engineers to work in Iran. 

Israel even had a direct flight from Iran to Israel.  Engineers were hired to design and manage the construction of a great many public works buildings and they often performed other services.  Those whacky Israelis also had the habit of sticking the Star of David into difficult to spot places.  My father has a Iranian banknote from the 1970s that was printed by the Israelis.  The engraving for the background contains the Star of David.

You can also find this feature on top of a public building in a main square in Tehran that was also built by Israelis using Google Earth.

Filed under: Trivia by ajax
1 Comment »

Virgin America is set to start 2 flights a day between Dallas and Los Angeles and 2 flights a day between Dallas and San Francisco and it began this past Wednesday with a party.  As expected, American Airlines is already responding.  AA is boosting its frequencies by 2 flights a day and they’re offering extra frequent flier points for booking on their flights as well as prizes for selected travelers.

It’s a typical AA response and one they’ve used against other entrants onto what they regard as their turf.  But is it enough?

In the past, new entrants have typically offered a service product that is no better than their so the competition was based on price and frequency.  While frequency is likely going to be a selling point, I’m not sure it’s going to be as much a factor this time since VA has decided to schedule its flights in what appears to be perfect “business” times.  Their morning flight to Los Angeles departs at 7:00am and their evening flight at 4:35pm.  This offers good arrivals times into LA and good departure times from DFW airport.  Their flights departing DFW for San Francisco leave at 8:00am and 2:15pm and while I’m not a fan of the latter, the former fits nicely too.

This might end up more about service product this time and VA has a service product that beats AA hands down.  American offers you a choice of their clapped out MD-80s, 757s or the possibility of their new 737s.  However, those 737s are equipped with less comfortable seats, no in flight entertainment and WiFi on AA is spotty.  Virgin offers WiFi on all their aircraft, in flight entertainment on all their aircraft, more comfortable seats on all their aircraft and better food and drink for purchase. 

Business travelers, especially those whose company has shunted them to economy, would be wise to give this product a try.  Anyone traveling on these routes would be wise to support VA in its entrance to the DFW market because this is exactly the kind of competition that AA hasn’t had for years on its routes from Dallas.  VA picked two very good routes to enter as they had exceptionally high fares.  I just checked on fares to both LAX and SFO for next Wednesday and found a low fare of $129 each way ($250 RT) available for both routes and that compares to fares that were in excess of $400 round trip on American.

I have an interest in seeing Virgin succeed on these routes.  I live in the DFW area and I’ve spent nearly 10 years getting angrier and angrier over the exceptionally high fares that AA has enjoyed a variety of routes departing DFW.  I’ve become so upset at the treatment I’ve received on AA that I’ve actively sought connecting flights on other airlines to avoid American’s “service”.   This is exactly the kind of new entrant DFW needs and stands in stark contrast to the others that have come here such as Spirit Airlines. 

Virgin America’s CEO is David Cush, a former American Airlines veteran executive and he gets what it will take to survive the attack from American.  I’m cautiously optimistic that he’ll recognize that there are plenty of other opportunities in this market and executing on them now puts his airline in position to do well even against Southwest after the Wright Amendment is fully lifted.

For those of you chasing the frequent flier status game, take a look at this new airline coming to DFW.  You’ll get better treatment and more opportunities for comfort and service for simply paying a lower fare than you’ll ever get as an AAdvantage Gold or Platinum member on routes such as these.  Do you want status and an old aircraft or service and a new aircraft?

Filed under: Airline News by ajax
1 Comment »

American Airlines is switching its 2 flights per day from Springfield, IL to Chicago over to their DFW hub next April.  By doing so, AA will be eligible to dip into available grants setup to defer start up costs on new routes. 

One of the things that irritates me the most about how the US airline world has become distorted has to be how regional jets are used.  We don’t use them on regional routes.  Well, they’re still used on those routes but far more often we use them on long, ultra thin routes like Springfield, IL to DFW.  Or how about the time I flew from DFW to Cleveland on a Continental Express ERJ-140. 

The truth is, any flights from Springfield, IL should be going to regional hubs that are nearby.  We should see larger turbo-props flying passengers from Springfield to Chicago, St. Louis and Memphis.   I don’t know if Springfield can honestly justify the 6 flights per day it has to Chicago at this time but, if it can, I would argue that 1 or 2 of those flights is superfluous at best. 

Small airports like Springfield get access to all kinds of grants and other funding that permit them to attempt to attract new services and, hopefully, help grow their local economy.  But those grants are used to distort markets and encourage flights that would never exist if they had to be justified on the real market demand.   How is Springfield, Illinois truly better served by 2 flights per day to the DFW area for AA/Oneworld connections to the rest of the world when it can access pretty much the same parts of the world easier (and more economically) through Chicago?

The truth is, if you look at just a 350nm radius emanating from Springfield, you’ll find that the options on a regional basis to hubs and/or focus cities that actually have both political and business ties to Springfield, you realize just how insane it is to be flying a Springfield to Dallas route of 630nm using an ERJ-14X aircraft. 

Cities like Springfield should be cultivating multiple routes to multiple hubs/focus cities near them.  They should seek to offer broad based links to their entire region instead of a link to one part of their region (Chicago) and another link to an area entirely outside of their economic sphere (Dallas).    Using Springfield as an example and defining their “region” as being roughly 350nm diameter, they could target links to Chicago, Milwaukee, Detroit, Indianapolis, St. Louis, Kansas City, Minneapolis / St. Paul, Memphis, Nashville and even Cincinatti and Columbus. 

Grants and incentives have a tendency to drive decisions towards things that are clearly serving a narrow, immediate “want” rather than a broad based, market driven “need”.  I would far rather see grants help improve airports themselves and let the municipal, state and business leaders of a city make a business case to airlines for routes they need.  All too often, when I see a route like DFW-Springfield, I wonder what local business executive wants that route for his convenience and to what other businesses detriment is it being done?

Filed under: Airline News, Airports by ajax
3 Comments »

All Nippon Airlines (ANA) is lamenting the new delay on Boeing delivering the Dreamliner to one of its launch customers and I don’t blame them.  I don’t think anybody regrets ordering the 787 even at this point but I do marvel somewhat at the patience being displayed by several of the customers.  This was an aircraft that Boeing arguably needed in its product lineup several years ago.

These delays have added up to something well past 2 years now and we don’t know what else may show up causing further delays.  The most disturbing part of these delays, to me, are that many have been caused by quality control issues with manufacturing partners and with problems centered on systems that arguably should have been robustly tested and matured at this point. 

It begs the question as to what the hell were these partners doing during the long delays involving fasteners for instance.  Engines could have been tested more.  There was no high rate production impeding Alenia’s abilty to ensure strict quality control.  Even power panels could have been tested much more in a integrated systems environment.  

Additional testing would have greatly reduced risk in delivering this aircraft and I just don’t get the sense that there was a financial commitment to this.  Certainly quality control problems on horizontal stabilizers shouldn’t have been discovered after so many airframes had already been built. 

This smells like a former aerospace company that used to be based here in the United States:  McDonnell Douglas.  It’s notable that it is former MD people who are largely running the business today and the truly successfuly Boeing people are now elsewhere.   What Boeing needs is an Alan Mullaly and at this point, I don’t think one exists at Boeing anymore.  If he/she does, they’re being kept hidden well. 

Blaming these delays because this airliner is on “the bleeding edge” of technology really doesn’t quite pass the sniff test anymore.  That was OK in 2007 and 2008.  It was even somewhat acceptable in 2009.  But this 2010 and it is about to be 2011.  Agressive and thorough testing should have eliminated most of the risks that are being realized at this moment and that is very disappointing.

Filed under: Aircraft Development by ajax
No Comments »

It’s always fun to come up with contractions of names for airlines that merge.  My newest is Britberia Airlines, British Airways and Iberia Airlines.  Good news for those two:  they now have shareholder approval of their merger and expect to conclude the deal in January.  The new entity will be called International Airlines Group and it will manage both the British Airways and Iberia brands.  I wonder if someone at AA didn’t help with the new name as that is about as bland as one can get.

Willie Walsh, who will serve as over-arching chairman of this new group, says it’s been a good year for British Airways with this merger and their recent anti-trust approval to work with American Airlines.   While it may not have been their worst year, I don’t think it’s a “good” year.  They’ve still got a fight going on with their cabin crew union that really needs to get solved.

The new group still falls behind Lufthansa and AirFrance/KLM but it does make BA/IB a better player against those two but with a weakness or two as well:  They’re still dependent on a growth constrained hub at Heathrow airport and their ability to expand will lay with the Iberia hub in Madrid.  The other two SuperAirlines have got hubs in better places for more of Europe’s traffic.  Hubs in places like Paris, Amsterdam, Frankfurt, Berlin and Zurich.  They’re just more centrally located.

Walsh says future growth will be focused in Madrid but I don’t see how that helps BA in its home territory of the UK.  How is it more attractive to take a flight from Manchester to Madrid to go overseas to many places?  I think this union needs a northern European partner and I think they’ll seek one out once this merger is fully ironed out.  If not a European partner, then a different Ireland/UK hub is probably needed. 

Madrid and Spain seem logical for connections to Africa, South America and perhaps the middle East or even India.  The UK is a logical connection point for destinations within the UK, northern Europe and North America.  But growth is needed in the UK and Heathrow can’t continue to be the hub for all things BA.

Perhaps the Irish government will sell Aer Lingus to the group.  Dublin could be a nice gateway city for trans-atlantic flights and connections to airports throughout Ireland and the UK.

Filed under: Airline News by ajax
No Comments »