The 787 has been delivered to several different customers now and it is worth looking at who has received their aircraft thus far:

• Air India (2)
• All Nippon Airways (14)
• Ethiopian Airlines (1)
• Japan Airlines (6)
• LAN (1)
• United Airlines (1)

And many are set to be delivered in the near future.  Airlines such as LOT, China Southern, QATAR and Hainan Airlines should all be receiving their first 787 aircraft as well.

Notice anything yet?  With the exception of United Airlines, all of these airlines are far away from the North American continent.  It exposes just how much US based airlines have *not* been thinking far ahead for the past decade.

And it shows just how far they have to go to catch up with the efficiencies that other airlines will be enjoying in the near future.  One has to ask oneself how it is that Air India has two 787s already and Delta, American Airlines and US Airways have . . . none.  With none on the horizon.

Yes, United Airlines will be receiving more and more as time goes by but they are the only ones for the near future.

Airlines have to be managed tactically (short term) at any one moment.  But they must be planned strategically and failing that, you’ll see their fortunes decline considerably at some point.

Filed under: Aircraft Development, Airline Fleets by ajax
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These days, it seems as though American Airlines and the Allied Pilots Association are in a contest to see who can be more dysfunctional.   After asking for a return to negotiations, American Airlines has made threats to seek a court injunction against the pilots for the work slow downs occurring among some pilots.

The Allied Pilots Association is doing its union thing saying “What, us?  No way!” and then refusing to return to negotiations because its feelings are hurt.  But then also publicly cautioning its pilots that if they are engaging in a work slow down, they really should cut it out.

A curse on both their houses.

AA should have kept its silence and gotten to the table to get a deal in place.  Instead, they lost confidence and sent their new HR VP to threaten and already furious labor group.  That isn’t leadership.  That’s accounting people doing the accounting thing.  Do readers think that someone such as Gordon Bethune would have made such a move?

The APA should have shown it was in control of its pilots and gotten the word out quietly to cut it out as this is a chance to get a deal in place.  Instead, they did their usual song and dance.  The APA board is particularly dysfunctional since its run really by pilots who act in self interest instead of the better interest of the entire group.  The union’s president, Keith Wilson, is doing his best imitation of Laura Glading at this point which may get him re-elected but won’t get his group a deal.  Do you think David Bates would have advocated for these silly moves?

Like I said:   A curse on both their houses.

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ABC News did a little experiment where they put a large sum of money and an iPad in an secured bag and then sent it through TSA security in 10 different cities.  In 9 of those cities, honesty was displayed.  In Orlando, their iPad was stolen.

Here is an ABC News link to see their video.

If anyone thinks is an exceptional circumstance . . . don’t kid yourself.

Items are lost due to TSA theft frequently and their response is *always* “Gee, sorry, you’re out of luck.”  Items are lost out of bags that are secured with TSA approved locks.  You know, the locks that the TSA is only supposed to be able to unlock?

But in the name of guarding against terrorism, they continue to get a pass from investigation and from Congress.  At this point, I regard the TSA as more “mafia” than protection.  They are a protection racket rather than security.

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The Fort Worth Star Telegram’s Sky Talk blog has a story about how Maxim Group analyst Ray Neidl sees a similarity in the behavior of American Airlines pilots and how Eastern Airlines pilots managed to drive their own company into the ground 20+ years ago.

While I agree with Neidl seeing similar behaviors that are similarly irrational, I don’t necessarily agree that the same outcome is likely.  Eastern Airlines pilots did what they did, in part, because it was very hard for airline labor not to believe that an airline such as Eastern would be allowed to go bankrupt and effectively liquidate itself.  This, despite seeing Braniff vanish just a few years before.  There was a belief, at that time, that management would cave in to labor or that Congress would intervene.  Neither happened.

Today, I think that AA pilots know a little better.  That said, things are already getting out of hand.  What pilots don’t appreciate is that their small individual actions have a massive combined effect.  The press on this issue is already exposing just how far this has gone and just how little room there is for it to go further.  Furthermore, I think we would have to see a greater indicator of irrational behavior on the part of the APA board and leadership before determining that the risk is realized and the threat of demise imminent.

I will, however, reserve my right to change my opinion based on union behaviors over the next few weeks.  If we see union leadership fail to reign in these behaviors, I’ll fully acknowledge the likelihood that the airline starts a downward spiral financially.

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It’s no surprise to anyone who lives in the Dallas / Fort Worth area that the local newspapers are awfully friendly towards its local airlines.  Both the Dallas Morning News and the Fort Worth Star Telegram tend to be very forgiving of American Airlines in particular but even Southwest Airlines gets a pass on occasion.   The area is dependent upon this industry in many ways and, to some degree, it’s OK.

One local reporter working for the Dallas Observer, Jim Schutze, is a man I respect quite a bit.  He worked for the Dallas Times Herald when it was in operation and then moved on to working as the Dallas bureau chief of the Houston Chronicle and writes for the Dallas Observer as well.  Schutze is a liberal and, in this town, liberals don’t get much play.  Balance between liberal and conservative viewpoints in the DFW area is a myth.  That said, Schutze is first and foremost a balanced reporter who exemplifies what journalism once was and rarely is today.

Schutze wrote THIS entry on his Dallas Observer blog regarding American Airlines and, curiously enough, Mitch Schnurman, a reporter for the Dallas Morning News and, until recently, the Fort Worth Star Telegram.  It was Schnurman who wrote scathing attacks on American Airlines management through the summer for the Star Telegram and caught national attention.

Schutze takes issue with the fact that in a recent Dallas Morning News column Schnurman took pilots to task this time for the AA operational slowdown without taking note that the pilot’s deed have resulted in a new development:  AA wants to go back to the bargaining table with the pilots.  He’s not wrong:  that is news.

Both are right.  The greater news was that AA is taking a beating and needs to come to a better agreement with its pilots.  But the pilots are, in fact, driving their company to the wall and that can only happen for so long before real and permanent damage gets done.

As I keep pointing out:  The pilots didn’t get their attitude today because they were treated appropriately by management.  Management didn’t lead them well at all.  However, you can only beat your own company up so long before not only does the board and creditors lose faith in the management, the public will lose faith in the airline.  When the public loses faith in the airline, that is a very, very dangerous thing.

Filed under: Airline News by ajax
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ANA airlines of Japan has upped its order for the 787 by 11 more aircraft.  The airline has exercised options for 11 more 787-9 aircraft based on its operational experience with the airliner to date.

Great news for Boeing as it is, I believe the first “top up” from an airline operating the 787 and given that it is ANA, it’s a great blessing for the aircraft.

I expect that we’ll see more airlines asking for more aircraft over the next 12 months with a strong focus on the 787-9 and a strong demand for an announced 787-10 (with appropriate range.)

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American Airlines has made a formal request of the Allied Pilots Association to return to the negotiating table.  We believe this is entirely due to the “work to rules” action that pilots are engaging in over the past few weeks at American Airlines.  Hey, when your on-time record plunges more than 20 percentage points in a month’s time, you’ve got to do something.

Frankly, I’m ambivalent about this.  On the one hand, it’s rewarding atrocious behavior designed to directly impact customers and thereby directly impact a company that continues to issue paychecks to these same pilots.

On the other hand, I  would point a finger at American Airlines and point out that while the company did try to make a deal, it wasn’t done out of sheer anger.  No one at AA understands that the rage among labor needs to be cooled.  This is a mistake that gets repeated over and over and over again in the airline world and I do not understand it.

Both parties have done very badly for their constituents and both need to clean up their behavior.  Neither will.

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Calgary based WestJet has done another code share deal with a major legacy airline.  This time, it’s with British Airways, a Oneworld alliance member.  British Airways passengers on BA flights to Toronto, Calgary and Vancouver will be able to connect on WestJet flights to final destinations.

WestJet’s code share partners are now:

• American Airlines (Oneworld)
• British Airways  (Oneworld)
• Cathay Pacific (Oneworld)
• China Eastern (SkyTeam)
• Delta Air Lines (SkyTeam)
• Japan Airlines (Oneworld)
• KLM (SkyTeam)
• Korean Air (SkyTeam)

WestJet appears to be very agnostic to alliances but hasn’t yet established any codeshare relationships with Star Alliance members to date.  Why?  Air Canada is in the Star Alliance.   They do, however, have interline agreements with a variety of Star Alliance members.

Curiously, WestJet has aggressively sought relationships with large, multi-national legacy airlines and it appears to be paying off for them and their partners.   This is a model that has worked well for Alaska Airlines and it’s notable that WestJet’s CEO, Gregg Saretsky, worked as a senior executive at Alaska Airlines prior to joining WestJet.

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Over the weekend, I was contacted by several people about the American Airlines “pilot strike”.  Yes, everyone was talking about the pilot “strike”.  No, I’m not kidding.

There is no pilot strike.  There is no APA union sanctionized work action going on right now.

But . . . there does appear to be an informal “work to rules” campaign going on right now if anecdotal reports are to be believed.   It appears to be focused on maintenance items and most particularly oriented towards equipment that nominally can be “MEL’d” (Minimum Equipment List) for continuing a flight.

It would appear that the mechanics are cooperating as well.  By that I mean the mechanics are dutifully investigating and writing up problems in a meticulous manner.  All of this is resulting in big delays within the American Airlines network and it appears to include American Eagle labor as well.

While it may not be organized by the union, I would expect AA to go to court and ask for a court order to the union to stop these actions.  US Airways suffered similar actions in Charlotte and Philadelphia about a year ago when US Airways (EAST) pilots decided to throw a temper tantrum at that airline.  US Airways went to court and got a court order issued to the union to stop that behavior.

In other news, another American Eagle flight was delayed for 4 hours when two flight attendants decided to have a public spat with each other and the captain of that flight decided the two couldn’t work together.  Whether or not the pilot was smiling as it all went on, we do not know.   It appears that one flight attendant called for their colleague to stop using their phone during taxi and everything went down hill from there.

This stuff is going to get worse, much worse, before it gets better.  Expect American Airlines to suffer increasing delays and cancelled flights over the next 2 to 3 months at the least.  Labor is unhappy and labor is making its unhappiness known in very troublesome ways.

This isn’t just because of bankruptcy or reduced benefits, it has much more to do with the open loathing labor has for AA executive staff with CEO Tom Horton being at the top of that list.  The hostility is raw and angry and unlikely to fade any time soon.

And I repeat again:  This is why I do not believe that American Airlines has its revenue problem solved for exiting bankruptcy.  All the corner strategies and alliances in the world cannot stop labor from sabotaging the company’s reputation.

Customers are getting angrier by the day and voicing that anger in very public ways.  I think we will see traffic erode on American Airlines over the next 3 to 4 months at minimum and possibly longer.  Once you lose those customers, it will be very, very hard to convince them to come back.  They are already abandoning AA as a travel option wherever possible according to anecdotal reports.

Filed under: Airline Service by ajax
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Spirit Airlines has launched two daily non-stop flights between Dallas / Fort Worth (DFW) and Houston (IAH) starting today.  The flights from DFW to IAH are an early morning and a early evening flight and I can see how those would be satisfying enough for the casual traveler that is Spirit’s target customer.  From IAH to DFW, there is a mid-morning and mid-evening flight that also appear to be fairly satisfying at this time.  Prices show to be Spirit’s typical ultra-low cost fares with some showing to be as little as $30 each way (without fees).

I think Spirit is targeting opportunity it sees in this market pretty smart.  Some of this is aimed at Southwest and it’s original customers who have seen SWA prices rise considerably over the past several years.  This won’t hurt Southwest because that airline is selling frequency and value now that earns a revenue that is consistent with its needs.

It’s more of a strike at American Airlines.  It hits at their airport and with times that actually fit OK into the day trippers that exist between those two airports but who don’t find Love Field (DAL) or Houston Hobby (HOU) convenient.

I expect we’ll see more and more flights from DFW to other Spirit destinations over the next 12 months and most will be aimed squarely at AA routes.

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Scott McCartney, Wall Street Journal blogger, is now advising readers to book away from American Airlines citing the fact that their operations are in a shambles and can’t be trusted.  American Airlines is reducing its schedule voluntarily for the next 2 months because pilots are retiring in higher than expected numbers and others are calling in sick at higher than expected rates.

Is there a sickout going on?  I suspect not.  I don’t even think there is a “work to rules” effort going on right now.  I think that pilots are just kind of *done* with their employer right now.  There is no reason to make the extra effort for their job at this point.  If someone feels like they may be about to get a cold, I think they’re just calling in sick as opposed to hoping for the best and making the flight anyway.

I think other pilots see the writing on the wall and realize that their retirement is going to be improved by hanging around this airline.  If they’re eligible, they’re leaving in many cases.

This is what I meant by American Airlines still having many, many problems with their service and operations in light of the rather hostile actions that have gone on between the company and its unions.  You can force the issues, fight in the court room and win the battles during bankruptcy but . . .

What do you have to succeed with even upon bankruptcy exit?  Not much.  Hostile workforces don’t help retain existing customers and attract new ones.   This is the revenue side many have spoken about and I continue to question AA’s premise that it can operate successfully on the revenue side upon bankruptcy exit.

All of the employees who are directly involved in serving AA customers are now royally pissed off at the company and its management and do not feel motivated to do anything to help this company succeed.  And I can’t say that that attitude is undeserved.

This isn’t all about what American Airlines has done over the past 10 months either.  It’s about how American has treated its employees for as many as 7 years.  It hasn’t negotiated in good faith and it hasn’t really tried to achieve equitable contracts and if it had, quite frankly, I’m not sure we would see American Airlines in bankruptcy today.

Yes, I think the unions have, over the years, made unrealistic demands and have even been led by contentious people but leadership starts at the executive level, not at the union leadership level.  It’s an executive team’s job to make that side of the company work and to preserve a harmonious and productive relationship with its work force.  That just hasn’t happened at all.

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Emirates CEO Tim Clark has revealed that Emirates is in talks with American Airlines to establish codeshares on flights and extend reciprocal frequent flier benefits.

And now I understand why QANTAS had the comfort level to do so itself.

For those of you wondering if this is a precursor to Emirates joining Oneworld, I think not.  Emirates does enjoy codesharing with many airlines and it will continue to do so with both legacy and newer full service airlines.  I do not believe they see value in joining an alliance because that would be more limiting to an airline with aspirations to be a truly global airline itself.

These codeshares are about providing feed to Emirates flights and providing follow-on connecting flights to its own customers.

The real question, in my mind, is this:  Will IAG (British Airways and Iberia) see this as inspiration to do a deal itself with someone like Emirates if not Emirates itself or will Willie Walsh (CEO of IAG) resist this to the end?  I suspect the latter will be true but I think the former would be better for IAG in the long run.

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QANTAS and Emirates have done a deal to work closely together on codeshares and flying between Australia and Europe.  This sees QANTAS backing away from a very long standing relationship with British Airways and a shift in using Singapore for QANTAS’ mid-point hub to Dubai.

This is a smart choice for QANTAS.  The tie-up doesn’t impact their operations at all and it allows QANTAS to use Emirates to distribute customers to Europe more efficiently while also providing the same service to London and the UK as well.

Emirates has eschewed the alliance game mostly but this is a very good move for Emirates as well.  Emirates will now have feed from a long established brand and it brings a greater legitimacy to Emirates.

But this hurts British Airways.  The partnership it has had with QANTAS has allowed the two airlines to survive on that long Kangaroo route between Australia and the United Kingdom.  Now BA must go it alone and that will be a tougher thing to achieve success on.

Oneworld will be impacted by this as well.  Part of me once thought that some sort of union between British Airways (IAG), QANTAS and American Airlines would have made for a very, very strong network.  Now, QANTAS is walking away from established behaviors and tradition towards doing business in a new way.  Quite rightly, too.

QANTAS will likely remain in Oneworld and you won’t see the cooperation between QANTAS and other partners fade away either.  But you won’t see any love between QANTAS and British Airways anymore either.

Frankly, I do wonder why QANTAS doesn’t just fly Australia to Dubai and let Emirates do all the work from Dubai onwards.  It’s a good fit that would actually allow QANTAS to get more use from its aircraft than flying ultra-long haul routes.

I do foresee one change for my own local area:  I think we’ll see an A380 flying the Dallas / Fort Worth to Australia route in the near future.  Say in one year or less.  I think this new Emirates union will free up aircraft and given the high demand that the DFW-Australia route has seen, QANTAS could use an A380 to fly SYD-DFW and DFW-SYD non-stop which would only help grow that route more by eliminating that nasty stop in Brisbane on the return portion.

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Curiously, I find myself  a bit impressed to learn that Singapore Airlines has received its 19th and final Airbus A380 now.  Singapore Airlines was one of the first airlines to order the A380 and other than Emirates, has the largest fleet of A380s for now.   I’m impressed because it does seem that Airbus has reached a bit of a milestone when it’s filled all existing orders for the A380 to an airline.

By all accounts, Singapore Airlines is very happy with its A380 aircraft and doesn’t miss the 747 whatsoever.  The 747-400 was largely replaced by the A380 and the 777-300ER.

The only other airline with a quantity of A380s similar to that is Emirates and it has 90 A380s on order rather than the 19 that Singapore Airlines has.

QANTAS has taken delivery of 12 A380s and won’t take delivery of 2 more until 2014 and after that the remaining 6 won’t be delivered until 2018.

Lufthansa now has 10 of 17 ordered and will receive the remaining 7 between now and 2015.

It is curious to me that no airline other than Emirates has more than 20 of these aircraft ordered.  Most orders are actually in the single digits or the very low double digits.   The top 5 orders for the A380 are:

• Emirates:  90 ordered, 23 delivered
• QANTAS:  20 ordered, 12 delivered
• Singapore:  19 ordered, 19 delivered
• Lufthansa:  17 ordered, 10 delivered
• Air France: 12 ordered, 8 delivered
• British Airways:  12 ordered, 0 delivered

The bottom 5 orders for the A380 are:

• China Southern:  5 ordered, 3 delivered (with a small amount of doubt about the remaining 2 to be delivered)
• Kingfisher:  5 ordered, 0 delivered (and no expectation that this order will ever be fulfilled)
• Transaero: 4 ordered, 0 delivered
• Air Austral: 2 ordered,
• Kingdom Holding Company:  1 ordered

One begins to wonder if the production rate for the A380 isn’t a bit aggressive if it only supports a tiny handful of prime customers and really only one “huge” customer (Emirates).

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Change or divorce in marriages is a traumatic time for all sides.  The relationship between AA pilots and AA management has been a classic co-dependent and hostile relationship for a pretty long time now.  Both sides have been doing the same thing over and over again expecting a different result.

What’s a good deal look like to AA pilots?

I think it’s divorce.  Right or wrong, I think the pilots see a relationship with their management that is so toxic that they just simply want out.  Since there is more of them than there are management, the pilots want management gone.  They want a fresh slate with someone new.

Its not entirely unreasonable for them to want this.  It has been a toxic relationship but . . . change doesn’t mean things get better either.  The desire to see someone, anyone else in leadership at AA could lead to driving change that is worse.

It seems to me that the leadership at the AA pilots union, the Allied Pilots Association, needs as much restructuring and change as the executive leadership at AA.

Frankly, not only am I not a fan of AA executive leadership, I’m in violent agreement that it needs to change.  It’s mediocre at best and pretty awful at its worst.

But it got there, in part, with help.  Unions at American Airlines drive their points with a baseline from the 1980s.  Sadly, the airline industry doesn’t operate in the 1980s and, frankly, the 1980s were not a healthy time for airlines anyway.

We think that everyone just wants more money.  I suspect that that isn’t entirely true.  For instance, I suspect that AA pilots would like to see less stagnancy in their positions at the airline.  I think they would like to see a better quality of life that allows them to work hard but also experience a life outside AA.  I think they would like to experience some new challenges and get to expand their world view as much as anyone else.

But it won’t happen without  a fundamental change in the leadership at the union.  That leadership has been so focused on taking power and using it to ding the AA executive leadership that it has lost sight of what is truly good for its membership.  There are no self-examining conversations about how to work in a change industry and achieve job satisfaction and reward.  I think David Bates, former APA President, tried to start that conversation but I think the structure of leadership at the APA made it impossible to do.  There was and is more reward for the Board of Directors to second guess and undermine the president of that union.

This isn’t just true for the APA.  I believe the APFA needs a similar change in structure and a similar conversation about how to achieve more job satisfaction and reward in a changed industry.

Until those conversations happen, it’s unlikely that anyone is going to be happy with any of the choices in leadership for AA at this point.

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American Airlines’ bankrtupcy judge has decided that AA can abrogate its agreement with its pilots and impose terms upon them.  Based on what I’ve read, AA could choose to impose its original Section 1113 terms or better terms, if it so chooses.  At this point, the pilots are left to the whims of American Airlines.  American Airlines has said it will announce its intentions in the near future.

On a related note, a spokesperson for the unsecured creditors committee has said that the creditors see it as absolutely necessary to have a long term pilot agreement in place to exit bankruptcy.  This makes things tricky for AA since it means that simply imposing terms and moving on isn’t satisfactory to the creditors.  A real, negotiated agreement is necessary.  AA doesn’t have much maneuvering room with its pilot union since they’ve rejected the last, best offer.

In addition, the pilots have strongly indicated that they simply do not wish to do a deal with the AA executive team at all.  Their vote on the last, best offer made that clear.  Enter US Airways.

US Airways probably can get an agreement in place in short order.   At least enough of an agreement to satisfy creditors.  Once again, US Airways is in a strong(er) position to negotiate a merger ultimately.  I think the only way the pilots will agree to something is if the company’s exit from bankruptcy doesn’t see CEO Tom Horton and his team in charge.

Why?  Because these pilots gave up 13.5% of the equity stake available in the reorganized company to make their disapproval vocally known.  That equity stake was a big deal politically and financially.  We’re also talking about a group of people who, in many respects, can afford to draw this out to AA’s disadvantage.

American Airlines can’t afford to be delayed in anything. It needs deals in place and a firm plan drawn up in order to exit bankruptcy.  It doesn’t have all the deals it needs and therefore can’t offer a firm plan either.

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The APA and American Airlines are facing off in bankruptcy court in New York City today.  The APA contends that the last, best final offer should be the baseline of the Section 1113 terms whereas AA thinks that the judge already addressed everything but 2 terms that are being revisited.

The judge did acknowledge that AA needed its savings in his last ruling and did seem to indicate that if AA fixed two minor issues, he would rule in their favor for Section 1113 terms.  Smart money says that AA will get what it wants this time.

But I am not so sure.  This judge hasn’t been inclined to be punitive in his rulings thus far and worked extra hard to see if AA could come to an agreement with all its unions.  If anything, he’s bent over backward trying to see to it that agreements with unions are in place and reasonable for both parties.

No doubt he may have been annoyed at the APA voting down the last, best offer but annoyance doesn’t have a place in the courtroom when it comes to judges and this judge seems to avoid it quite a bit.

The bankruptcy judge is also there to see to it that creditors are protected.  Reasonable union agreements protect creditors when an airline exits bankruptcy.  Unreasonable union agreements offer the potential for labor strife that adds risk to the exit.

I think there is a chance that the judge may try to see to it that the baseline of the pilot Section 1113 terms is, in fact, the last best offer.  Or something closely approximating that.

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