The Pension Benefit Guaranty Corp has been particularly visible since American Airlines filed for bankruptcy reorganization. Nothing scares PBGC more than an airline in bankruptcy. Why? Because that’s how airlines have dumped their pension obligations. PBGC now holds those liabilities and it really doesn’t want any more coming their way.
American Airlines’ obligations scare PBGC (who is already underfunded) and so PBGC has been shrill in its warnings to AA in the media that they should keep their obligations and work things out with employees. AA almost seems to be toying with them when it made a token payment into its pensions after bankruptcy filing. The truth is, I feel almost certain that AA will dump its obligations. I think they’ll find any argument necessary to justify this and I think PBGC sees the writing on the wall.
AA has been rather disingenuous with its own PR on the subject. For instance, their claim is that “most” employees would see no loss of benefits. That turned out not to be quite true. In fact, about 13% of the work force at AA would see a loss of benefits and the group that takes the substantial hit are the pilots. Truth be told, I’m kind of on the pilots side on this issue.
Why? Because the seniority system force them to put all their eggs in one basket when it comes to retirement. Because of that system, they have no backup plan and a significant reduction in benefits really does hurt them when compared to the investment they’ve made in making a career at the company. But its those pilots pensions that AA wants out from under the most.
As much as I do feel for labor groups who would lose if AA dropped the pensions and as much as I wish for it to not happen, I think it will. In fact, I think we’ll see that move in a very short time now.
Quite a few cities are getting surprised by who is going to retain Southwest Airlines service and who isn’t. The analysis by most is that it’s all about whether or not the city is big enough to retain service by Southwest’s standards and while that’s true on the surface, there is more to the story.
It’s about who’s running the airport and who is running the city. If the city has an airport board and director who knows how to make a business case to an airine, Southwest will listen. If those people know how to supply valid data to Southwest, the airline will listen.
It’s also about what city is willing to partner up with Southwest and even encourage local business to use Southwest for mainline service.
But even then, Southwest is smart enough to look at what it can change in the existing airline model for a city. A great example is Wichita, KS. Southwest knows that it can provide service to other Southwest cities that make far more sense for travelers from Wichita than the current Airtran service from Wichita to Atlanta.
Yes, it’s about the money but it is also about who wants to get or keep Southwest service and make the business case. A good airport board and airport business director can make all the difference.
Spirit Airlines got a bit nasty this time with their web based advertising when they put up a message to anyone visiting their website that said:
“New government regulations require us to HIDE taxes in your fares. This is not consumer friendly or in your best interest. It’s wrong and you shouldn’t stand for it.”
It’s dark, ominous and just kind of mean spirited. The truth is, consumers have made it crystal clear for years and years that they want the base, all in price for their air fare. If Spirit thinks this will win over customers to their side in a public spat, I’m pretty sure they’re wrong this time.
Spirit has had a tendency to be rather brazen with their advertising and, frankly, while I think it’s in bad taste, it’s certainly their choice and it certainly never has been publicly inappropriate. Nor is their latest message. They are free to criticize but I think they made a mistake in their calculations this time.
Spirit wants to continue advertising fares that make it seem that someone can travel a thousand miles for $9. Well, you can’t and never you could. Their own somewhat deceptive practices have been eliminated and Spirit has no way to up the ante this time.
Fly ’em if you want. I may even one day board their aircraft but don’t kid yourself into thinking they are the champion of the consumer. Just take a look at their a la carte pricing.
Earth is receiving a flash flood of charged plasma particles as the result of a solar storm that has erupted. Virtually all on earth really will remain unaffected by it but the airline industry actually has to pay attention.
Airlines will route their flights further south from the North Pole (on arctic routes) for instance. This will help reduce radiation exposure at altitude and potentially ensure that airliners remain in communication with the appropriate authorities.
The frequencies used on polar routes as well as on long trans-oceanic routes are High Frequency (HF) and these frequencies are most commonly affected by solar storms. However, that’s not the only thing that can be affected. It’s not unknown for satellites to be knocked out of communication due to such storms and even GPS positioning can be affected. It’s a known threat and one airlines know how to plan around.
Airlines will fly their aircraft at lower altitudes in some cases and even route their flights on southerly, longer routes to avoid the North Pole which is where much of the plasma particles enter the earth’s atmosphere. Are you in danger? Absolutely not. In fact, the radiation exposure concerns rest primarily on flight crews who are already exposed to more radiation as a function of their jobs at 30,000+ feet of altitude.
At this point, we hear of Delta, TPG and US Airways all doing their work on investigating an acquisition and/or merger of American Airlines. While many think Delta is credible with significant carve outs of the AA system, I do not. It isn’t just about competition on routes, it’s about size becoming so much larger that pricing power comes along with it in the markets. A realistic combination of Delta and AA would realize a company that is 1.5 times larger than the next largest airline and massively larger than virtually any other airline in the world. That kind of dominance can influence much more than just the price on a particular route and I don’t think the US government or the EU is interested in seeing that kind of pricing power.
As for TPG, I think they’ll play things very close to the vest and keep their intentions unknown until the last possible moment. I do think we’ll see them look for partners in such an acquisition. I also think that TPG might do what’s best for the company in the sense that they’ll oust management and directors who have long term tenure and who aren’t advocating for change and new leadership. American needs more revolution than evolution and I think TPG knows that.
US Airways has the best management team for American Airlines, in my opinion. That team knows how to fix things operationally and knows how to extract profits and revenue from sub-par conditions. That said, I think the prospect of merging those two companies given the labor problems on both sides is a bit daunting. Such an integration needs to be able to take full benefit from all the synergies a merger offers and having not one, not two but three pilot groups at odds with each other would not be healthy. The same would be true for flight attendants. I struggle to imagine how even the US Airways team makes that work well.
At the end of the day, I think every party will move slowly and wait to see how things develop with American Airlines. What they win in terms of concessions in bankruptcy will determine just how attractive an acquisiton they may be. Right now, I continue to think that the most likely outcome is American Airlines as a stand-alone company. Why? The cash holdings they have allow everyone to maintain the status quo at this moment. AA has no need to go to anyone hat in hand to ask for DIP financing.
Southwest Airlines has decided to change its seating on its Boeing aircraft to a thinner, lighter seat that permits an additional 6 seats on its airplanes. Now, instead of 137 seats on its 737-700, they will have 143 seats. I’m sure the “upgrade” will occur on its soon to arrive 737-800 aircraft as well.
It’s a reasonable move on the part of SWA. First, most trips on SWA are less than 2 hours in length which means even a slightly less comfortable seat is OK and probably doesn’t impact the customer much at all. And we don’t know that the seats are less comfortable. The truth is, the modern seating being offered for airliners looks uncomfortable but usually ends up retaining the same comfort levels. This new seat doesn’t require SWA to reduce its seat pitch and that’s a good thing from my perspective.
The additional 6 seats potentially offer more profit for Southwest and it could use more profit. While they continue to be the most consistently profitable airline, their costs are now in line with legacy airlines (mostly) and adding more profit to each full flight helps offset those costs. Based on my own flights with Southwest, those 6 extra seats will contribute heavily to their bottom line as it has become rare for me to see a flight less than completely full. In addition, Southwest’s load factors have soared over the past few years when they have traditionally been substantially less than legacy airlines. Again, more seats helps here.
Southwest is also making its moves to integrate the Airtran system into the SWA system. We’re now seeing Southwest announcing flights into Airtran cities on routes that are either the same or nearly the same as what Airtran had. There are no surprises so far and I do think that Southwest is moving methodically along in its plans now that it has seniority agreements in place for both pilots and flight attendants from Airtran. Southwest says it will take several years to integrate. I think that Southwest will build steam quickly and end up integrating the substantial bulk of the two airlines faster than expected. All indications point to Southwest growing quickly comfortable with the Airtran system and as they do grow more comfortable, decision making will happen more rapidly.
I also notice that Southwest is already getting aggressive on flying to Mexico using Airtan. They’ve applied to serve new routes from several cities in the US and its notable that these routes do not seem to link up with Volaris routes in Mexico so far. In other words, it appears that Southwest is keeping Volaris on board with existing services but exploring direct travel into Mexico via Airtran. This isn’t out of character for Southwest, they like to experiment when opportunities arise to do so with little risk.
I do think that Southwest needs to decide how it wants to do foreign travel. Will it be with partners or will it do it on itself? Now that it has the international expertise of Airtran in its back pocket, I think they may be more interested in doing this themselves. It is notable to me that despite the “codeshare” its doing with Volaris, Southwest hasn’t really worked too hard to expand it or promote it on a national basis. That makes me wonder if both parties are less than satisfied with the relationship so far.
Regional airlines actually operate in a more competitive environment today than legacy carriers and the differences in their labor and capital costs can be quite significant. What’s worse, many of those airlines are stuck holding on to 1st generation 50 seat airliners that don’t make economic sense against today’s cost of fuel.
Some regional airlines that were (or are) associated with legacy carriers such as American Eagle and Comair have now taken on labor rates that are closer to today’s legacy carrier labor rates with a labor force that is significantly more senior than was ever planned for. In addition, these airlines are most often flying the least cost effective aircraft today.
Other regional airlines such as Republic Airways and Pinnacle have massive debt from acquisitions that can’t be serviced very well in light of what they’re able to earn from serving legacy carriers. All of these airlines face bankruptcy or worse in the next 2 years.
The regional airline world could use some consolidation and while it’s seen some, more would help both rationalize their fleets as well as reduce competition to get those legacy airline routes.
However, the real problem these regional airlines have is the same problem others till have. Scope clauses. These scope clauses that exist today are choking off flying at legacy carriers and forcing these same legacy carriers to continue unprofitable flying through regional airlines. Regional airlines who hold on to these 50 seat jet fleets have aging equipment that can’t be replaced with more fuel efficient airliners and at the same time also have no real substantial value in the used market.
I expect we’ll see some regionals go into bankruptcy reorganization and others to aggressively consolidate their businesses. Regional airlines will need to capture some negotiating power with legacy airlines in order to restore some assured profitability to their business. Frankly, I expect we’ll see some move to show a more disciplined approach to soliciting and maintaining business with legacy airlines and it will be similar to the capacity discipline that we’re currently seeing from legacy airlines.
I’ve often wondered if tomorrow’s legacy airline might look like an airline serving many masters on the same route. In other words, imagine a regional airline servicing two (or more) legacy airlines on the same route with the same aircraft but with each “owning” a portion of the seats available on the airline. It would end the brand consistency that legacy airlines enjoy on regional routes, yes, but I’m not sure there was much consistency in the first place. Why wouldn’t it be better and more efficient for that regional airline to fly one Embraer 175 into a city and fill it with passengers for a number of airlines rather than just one? In a sense, Alaska Airlines already serves this purpose in its agreements with a number of legacy airlines and it works well.
Airlines now have to fully disclose the “all in” price of fares when advertising them (although a la carte items such as baggage fees don’t have to be disclosed. As you can imagine, airlines hate this. They fear the consumer will perceive the prices now advertised as a massive increase in air fares.
It’s possible that the leisure traveler might but I think airlines aren’t giving consumers enough credit for intelligence. Shopping for air fares has been convuluted at best and consumers know this already. Making the full cost including taxes and fees a requirement for advertising lets the consumer know the true cost of their trip and given the cost of flying these days, making such a purchase is no trivial decision.
When I see airlines saying things like Mcdonald’s doesn’t have to reveal the full cost of a Big Mac, I get frustrated. It isn’t the same thing and air fares shouldn’t be compared to the price of a Big Mac. In many cases, a family traveling can be spending the equivalent of a new sofa on their air fares and that’s a big purchase for most.
Southwest Airlines has managed to earn better than expected profits in the quarterly earnings announcement but that comes primarily from fuel hedging contracts. Profits from actual airline revenues are a bit down from last year and this is largely due to rising fuel costs from increased oil prices.
That said, last year was Southwest’s 39th consecutive profitable year and that, my friends, is really unheard of in the airline industry.
Southwest is going to push hard to manage their capacity and remain rational players in the marketplace with respect to their competitors. By manage capacity, I mean that they’ll hold it steady for this year and probably next year with some growth, perhaps, in 2014. Obviously that plan will change if demand significantly changes.
There are a few things that Southwest will be doing to remain competitive against other major US airlines. First, they’ll work hard to remain the most productive work force in the business. Given that their workforce takes pride in this, that really shouldn’t be tough for them to maintain. Second, they’ll work on taking advantage of fuel economy both in their flight planning as well as by buying more new aircraft. I suspect that Southwest will not hold on to aircraft quite so long as they have in the past but, rather, cycle newer aircraft with upgrade engines and performance packages into their fleet.
Finally, I look for SWA to start looking for some low hanging fruit on revenues out there. I believe that they will be looking at opportunities in smaller communities and I believe they’ll take a long, hard look at operating a single fleet type aircraft to service what I like to call 3rd tier cities and towns. These are the Wichitas, Lubbocks and Knoxville’s of the country. Whether its done with smaller jets a la Embraers or Bombardiers or with turboprops such as the Q400 or ATR, I do believe they’ll do a trade study to determine if they can be players on that level with the same great Southwest service and reliability.
Virgin America has decided it will fly from both Los Angeles and San Francisco to Philadelphia as its next routes. Philadelphia isn’t the coveted route into Newark that Virgin America wants so much but these routes do fit into its value proposition quite nicely.
Virgin America’s value comes into play the most when the flights are longer. Why? Because passengers value the inflight entertainment, inflight internet and on-demand food service on a flight where the duration is longer rather than a shorter hop.
Philadelphia makes for a good fit and I do think we’ll continue to see routes added that are of this nature over time. In my mind, Virgin America’s service works better on flights of a duration that is greater than 2.5 hours. I also expect we’ll see more mid-continent routes over time as well. However, many of those mid-continent routes stretch to the East Coast and that means acquiring slots at many airports that are very, very hard to come by.
It’s possible that airlines will have some opportunity to acquire those slots as a function of American Airlines’ bankruptcy. The problem is that those slots are extremely expensive to acquire. We certainly saw that on the recent sale of slots (ex-Delta/US Airways) from both the NYC area and Washington D.C. National airports. Airlines such as JetBlue were willing to bid exorbitant prices to get them.
Airlines need those slots and most particularly Southwest Airlines and Virgin America. The question is, will they be willing to invest the money to win them? Southwest has the cash but likes a value purchase. Virgin America doesn’t have large cash reserves and has to focus on earning a profit some time soon.
WestJet Airlines of Canada is considering the startup of a turboprop regional airline to run as a sister company to serve destinations that WestJet cannot serve today with its single fleet of 737 aircraft. WestJet pretty much serves all the destinations it can with its current fleet and future growth in Canada will require a different, smaller aircraft.
Currently, many small towns and cities in Canada that can’t be economically served by a 737 are served by Air Canada and its regional airline, Chorus, with turboprops. Fares on those routes are high and WestJet thinks it can lower prices and capture market share.
The likely airliner to be chosen would be the Bombardier Q400 if only because of Canadian ties but I also think it would be a smart choice and it would mirror the kind of success that Horizon is having with the same airliner.
This would be an approach that I’ve long favored for Southwest Airlines. The Q400 has the perfect economics for serving those small communities and the speed necessary to be useful on stage lengths under 500nm. Most flights to such small cities are far less.
It’s true that I’m an ardent fan of using the turboprop for this service and I think legacy airlines are ignoring the economics at their own peril. An LCC carrier that operates a single fleet of Q400 aircraft for serving the smallest of cities and larger towns is quite likely to be able to earn large profits even in competition with major legacy airlines. This same strategy would work perfectly for Southwest Airlines on flights to cities in the Texas regional area such as Lubbock, Amarillo, Corpus Christi and the like. Frequency could go up and costs would go down.
The question is, will labor at such airlines tolerate the startup of such an airline? Part of me says yes, part of me says no. If there is a clear growth path for pilots to enter the business in the turboprop world and upgrade to the 737 at such companies such as WestJet and SWA, I think they might be willing to accept lower salaries for such flying. If it keeps flying “in the family”, I think they may accept it. But it has to be sold right and done with some good guarantees on its implications for existing flights using mainline aircraft.
There have been two airlines hamstrung by scope clauses in particular over the past 10 years. First, American Airlines which has been restrained significantly by its pilots with respect to what kind of flying its subisidiary American Eagle can do. Second, Continental Airlines pilots held a death grip on the company by keeping a 50 seat maximum scope clause in place as well.
Now, with American Airlines bankruptcy filing and the combination of United Airlines and Continental Airlines, scope clauses are going to be massively changed. The United-Continental merger was, in many respects, an opportunity to redefine that scope and there is no doubt in my mind that the parts of United being retained are in part to bolster the case for supporting the loose scope clause that United enjoys over the tight scope clause that Continental suffered under.
Seniority integration between UA and CO is a hot button and CO pilots don’t want to give up the scope clause. UA pilots kind of like the way that scope clause looks and so are working with CO pilots to stir up trouble. Ultimately, a single contract will likely continue to enjoy a loose scope clause if it isn’t even looser as a result of the merger. In other words, expect a whole lot of flying for United to be done by regional airlines that isn’t very “regional” in nature. That’s good news for regional airlines . . . perhaps.
At American Airlines, you can bet that they’ll work very hard to eliminate scope clauses limiting flying and they’ll work even harder to lower pay rates for smaller aircraft due to enter the fleet such as the A319. Pilots won’t have much choice but to accept those changes or they’ll face an airline unable to survive or so massively cut down in size, layoffs will be plenty. They’ll want to preserve jobs at the expense of controlling scope, is my guess.
With these changes in scope clauses, the competitive landscape for regional airlines will change. American Eagle will likely go from being not much threat to being quite a bit of threat. Pinnacle may well file for bankruptcy and, if it does, it will lower its costs and shed unproductive fleet quite a bit. I think there will be plenty of flying available for them to bid for but I think it will be at costs significantly lower than what they’ve been enjoying.
That begs the question of whether or not regional airline flying can survive much. I don’t think regional airlines will go away but I do think we might see more consolidation before things are over. One thing that has prevented a fair bit of consolidation is the patchwork roadmap of scope clauses that have choked airlines so much over the past 10 years. With those gone, reasons for maintaining so many regional airlines kind of evaporate. Some will die, some will be bought and some will grow.
Whether or not it regional airlines can fly profitably is yet to be seen. Legacy and SuperLegacy airlines still need the regional airlines and they’ll need them more going forward if they’re to find the network feed necessary for their hubs. But given the restructuring they’ve all gone through, will they need to farm it out or might it be more attractive to keep it “in the family” going forward. If I were a CEO for a regional airline, I would be predicting a very stressful 3 years ahead of me.
It has been announced by the Wichita, Kansas chamber of commerce that Southwest Airlines has indicated to them that Wichita, KS would retain service. Currently, Wichita has flights connecting it to Atlanta via Airtran and it will likely retain those flights through most, if not all, of 2012. The flights will be converted to Southwest service by 2013.
There was quite a bit of speculation that Southwest would remove Wichita from the schedule like it has several other smaller cities. I wasn’t convinced as Wichita fit kind of well into the existing Southwest system which has significant flights to Kansas City, Denver, Oklahomta City and Dallas which are all at least somewhat economically tied to Wichita. Certainly more so than Atlanta is.
In addition, flying to Atlanta didn’t necessarily provide connection opportunities to those cities that are economically tied to Wichita. Southwest can provide those connections and that has real value for Wichita and Southwest. For instance, let’s say Southwest does provide service and starts flying from Wichita to Kansas City instead of Atlanta. From that gateway city, people of Wichita can access the entire Southwest system (including Atlanta and Florida) without feeling like they’re criss-crossing the country to do so.
I expect that Southwest will connect Wichita to either Kansas City, Denver or Oklahoma City. Kansas City and Oklahoma City are very short stage lengths and Denver is right in the sweet spot for Southwest typical route length.
Aspire Aviation has revealed that Boeing has issued an RFP to GE and Rolls-Royce (with speculation that Pratt & Whitney got included) for a next generation engine for the 777-8X/9X development. The target appears to be about 100,000lbs of thrust (and I’m sure Boeing would like to hear about a growth path to that as well.)
With the combination of new technologies for the fuselage, composite wings that are likely a bit larger and a lower fuel consumption, these new aircraft would definitely be A350 beaters in every category. The current 777 lineup performs well against the performance definitions for the A350-900 and based on comments from A350-1000 customers, the 777-300ER probably isn’t equaled on long haul routes.
A revised 777 that upgrades the -200LR with more seats and as much range, capacity and cargo capacity would clearly be of interest to many airlines. A -300ER that also increases its capacity with equal or better range would also be of great interest to many. Boeing has rightly identified that its the -300ER that is likely the sweet spot in size (or a little larger) for most airlines requiring a high capacity/long range airliners for routes.
The A380 will be around for a long time. It won’t be a big seller over the next decade and will only ever be a success if there is enough growth on long haul trunk routes to require that aircraft. The 747-8i remains an interim solution from Boeing and it still hasn’t garnered much interest from airines. In fact, many airlines have downsized from the 747-400 in favor of the 777-300ER.
Trunk routes will remain but there will be fewer of real importance and requiring a VLA. The 787, A350 and 777 all permit airlines to fly more point to point routes and earn profits. Ultra long haul flights are likely to remain more in the style of “long and thin” than “long and fat”. After all, just how many people are likely to fly from Houston to Auckland, New Zealand even with network feed? Answer: Not enough to require a 777 or 747 for quite some time.
I do think Boeing has the right idea in offering a revised 777 instead of an all new design in this category. The 777 still incorporates some fairly cutting edge technology and with a revised composite wing alone could probably continue as a category winner.
The Texas Pacific Group, now known as TPG Capital, was formed by David Bonderman and other partners in the early 1990s. One of its first investments was in Continental Airlines which became very profitable for the group.
Question: What airline did David Bonderman invest in early 1990’s and remains its chairman today?
There are rumours that Delta Airlines and Texas Pacific Group (who has extensive airline experience) are working on offers to purchase AMR, holding company of American Airlines. Rumours that are reported in the Wall Street Journal.
It’s possible that Delta is preparing an offer but I remain fairly skeptical that they are serious about this since such a purchase would form a SuperSuper Legacy airline that would far exceed any other airline in size. Furthermore, I’m not sure I see how Delta benefits as much from AA’s network given its already extensive network within the United States.
Internationally, Delta already flies to more diverse international destinations and doesn’t need anything AA has to offer in terms of access. It certainly doesn’t need or want access to the Oneworld partnership either.
Regardless, I’ll concede that it is possible that Delta is doing work to see if it thinks it can buy AMR. I also believe that anti-trust attorneys will point out that the likelihood of such a purchase is only made possible if Delta were prepared to give up substantial market presence in some key cities. Cities such as New York City, for instance. Giving away that piece of the pie would greatly reduce the value that AA offers an airline such as Delta. Furthermore, it doesn’t enhance competition or the consumer experience one iota. I don’t see it happening for Delta.
TPG, however, does feel a bit more viable. It was formed by David Bonderman who had great success with its Continental Airlines buyout although it also didn’t do too well with its passive investment in Midwest Airlines. It’s one of the few investment companies that sees potential in airlines and who has made significant attempts to enter back into that business.
Why would TPG want an American Airlines? Because it can do what the present AMR board of directors cannot: change the leadership, change the business model and potentially earn a good return on investment. The AMR board would have to admit it was wrong about a lot of things in order to reverse course and make such changes. That’s unlikely.
If that is TPG’s analysis, they’re likely not wrong. The scale of operations that American Airlines has is opportunity alone. The new fleet coming on board for the next 10 years is also similarly good. AA also has a good network that could earn significantly better revenue that it does now. What it takes to do that is bright and shiny new executive leadership. TPG can lure such leadership.
The main issue for TPG, I think, is can it swing the purchase alone or does it need a partner? I suspect it needs a partner and partners dilute the vision quite often. If TPG is able to find partner(s) and it’s able to be the managing partner, I would say such a purchase has some fair opportunity of being a successful investment.
I also expect that the present AMR executive leadership and board of directors will resist such a purchase adamantly.
When airlines began to use 757 aircraft for flights between the US Northeast and Europe, it was innovative to say the least. Using the aircraft’s 4000nm range, it became possible to serve those long, thin routes with non-stop flights that haven’t been possible with a single aisle airliner since the 707 and DC-8.
757s are aging aircraft now and even with winglets, some airlines are seeing the time come for them to retire these planes. Many speculate that Airbus or Boeing will develop some derivative of the 737 or A320 to replace the 757 on those routes and while it is something that I think airlines would have some interest in, it’s highly unlikely to happen. Despite how much new life the 757 found on those routes, it’s still a very small subset of 757 flights.
Even today, most 757 flights are in the domestic United States and even the trans-continental flights are a subset of all 757 flights. In point of fact, most 757 flights are not trans-Atlantic or trans-continental in nature. The trick with those long flights is to have an aircraft with enough power to carry not just passengers but a good load of cargo and a more ideal aircraft would have closer to 5000nm of range as well.
Once you find the engines (which need to be in the 40Klbs of thrust range), you still have to build an aircraft that can economically carry 180 to 200 passengers and a full load of cargo 4500nm to 5000nm. In point of fact, that starts to sound an awful lot like the 767. And it’s notable that the 767 is still being produced.
I would argue that the airliner that airlines might buy is a 767-200LR that is lightened and which has more efficient engines. Engines that, say, would look something like a downrated GEnX engine. Perhaps an engine derivative of those now being used on the 747.
I don’t think we’ll ever see an airliner like the 757 again. It was always a bit of a misfit in the airline world in that it was designed in the 1970s and had to succeed in the 1980s and 1990s. Its sweet spot was just a bit too high performance for most routes that airlines needed it for. It succeeded as a design and in production but it was not nearly as successful as the 727 or 767.
But I do wonder what a lightened 767 with modern, efficient engines would do for airlines on those trans-Atlantic routes. Or on routes from North America to South America. Or on US mainland to Hawaii routes. There might be just enough use for Boeing to do one more derivative of that airframe and get something out of it. It wouldn’t be impossible to see such an airliner becoming a KC-46B tanker model as well.
US Airways and its pilots have come to an agreement to drop the lawsuit that US Airways filed against its union for a work slowdown. A permanent injunction will be entered into the record, US Airways will be the “winner” and both sides pay their own legal costs.
Color me wholly unsurprised. This was a bad move on the part of the pilots union as there was already precedent in courts going against them and it wasn’t a good way to get the company’s attention.
Instead, the union should be working to unify its membership and get them on an integrated seniority list and then a new agreement with the airline. These pilots have been working off two different seniority lists and without a new negotiated agreement since 2005. That’s 6 years of bickering that admittedly, has benefitted US Airways in that it has kept pilots wages relatively lower than its competitors.
The dysfunction shown by US Airways pilots has stunned me at times. Particularly that of the “East” pilots (aka former US Airways pilots and not America West pilots). First rejecting an ALPA negotiated integration and then forming a new union that could be under the control of the “East” pilots, no one has benefited from this behaviour.
Furthermore, it’s hurt the company as well. Until its labor problems are smoothed, US Airways doesn’t look like a good merger partner to anyone else. After all, who wants to have three different pilots agreements and a labor group that has to be operated like three different airlines?
This is a great video shot at Dusseldorf Airport during a stormy day. The landings are impressive and, at the same time, show just how touchy such a landing can be. What is more surprising is just how quickly the airliners have to “crab into” the wind after takeoff (seen towards the end of the video.)
The Dallas Morning News Airline Biz Blog has THIS entry about a reader question regarding American Airlines’ management and its board of directors. Journalist Terry Maxon explains that AA’s board of directors is full of people with a long tenure and who are reluctant to “fire” the management as it would reflect upon them.
I don’t disagree with his analysis whatsoever. To the contrary, it is the conundrum that many companies face in AA’s situation. However, let’s refer to the definition of insanity for a moment: Doing the same thing over and over again and expecting different results.
No one representing the shareholders (aka the board) is challenging the management (aka the CEO) to do better and to do things differently. Yet, that’s exactly what American Airlines is in need of. A better plan than a focus on its existing hubs that are under attack by leaner and meaner Super Legacy airlines. It’s also in need of a management team that has a better chance of earning the trust of the employees.
The truth is, Tom Horton may or may not be the right guy. We really don’t know that yet. What we do know is that Tom Horton and the rest of the team are a part of a team that has existed at American Airlines in one form or another since the late 1990s. That would be the team that has not succeeded in any real and measurable way but which has managed to simply maintain the status quo far longer than anyone imagined.
There are a number of talented CEOs out there and available to run an airline such as American Airlines. I’ve already more than once expressed my thoughts that the executive team at US Airways could, in my opinion, do wonders for American Airlines. But there are others who understand that the game has changed and that the game requires an entirely different thinking to succeed in what is by any standard a very anemic economy.
American has got one chance with this bankruptcy reorganization. It’s not just about lowering costs (although that is a significant part of things). It’s also about improving revenues and improving the profits as a result of those revenues and that’s something that hasn’t been going on at American Airlines for some time.
Improving revenues is going to be done with more innovation in things like cabin service, routes and partnerships. It may even improve with more de-bundling of services and different seating. To get that innovation in place and earning money as American exits bankruptcy is going to require someone working on that now.
Instead, the perception is that American Airlines is actually focusing on who it is going to pay for aircraft and who it is going to leave with empty hands as a function of removing aircraft from its fleet.
In addition, to succeed, the employees will require more motivation and leadership than they’ve seen in the last 15 years. It won’t be easy for the airline to succeed existing bankruptcy without employees who are motivated to see it succeed. Leadership and management aren’t the same thing. The executive team is actually very, very good at financial management. But it is very, very poor at leadership.
