Southwest Airlines is becoming bracketed by two very different parts of the US airline industry.  On one side, they have the SuperLegacy airlines who have all gone through bankruptcy (at least once) and each of these SuperLegacy airlines not only have workrules that approximate more closely to what Southwest has, so do the overall salaries.

Even employees of these SuperLegacy airlines seem to be seeing their morale improve slowly and steadily and more closely approximate that of Southwest.

Very soon, we’ll have The Big 4 in the airline industry.  Delta Airlines, American Airlines, United Airlines and Southwest Airlines.

In the middle, we have 2 airlines who are doing very lackluster business in jetBlue and Virgin America airlines.

Down at the bottom, Southwest is again bracketed by Ultra Low Cost Carriers.  These are, today, Spirit Airlines and Allegiant Air with Frontier Airlines coming online presently.  These carriers are the scavengers of the industry but have some tendencies to bring a Southwest Effect with them in some markets.

They are flying most routes infrequently but . . . that’s changing.  Spirit Airlines has found the industry landscape in the Dallas / Fort Worth area very inviting fare-wise and has started more and more regular flights on “dominated” routes.

Southwest is perceived as a “Low Cost Carrier” when . . . it really isn’t.  Not anymore.  The service level of Southwest is at or above that of the other SuperLegacy economy offerings today.  But people expect a lower price from Southwest because of that perception.

And they don’t get it very often.

Southwest is the low price option in the last 3 weeks leading up to a departure quite often.  Prior to that, they are often the overwhelmingly expensive option.

They are more full service than the full service airlines in that they offer free checked baggage and modern aircraft and a smile upon boarding.

But where do they go?  If they transform themselves into Just Another Airline, the other airlines will compete against them with an advantage. They have more differentiated service levels and more usable frequent flier programs and fleets that are being renewed as we speak.

If they try to be Really Low Cost Airline, the Ultra Low Cost Carriers will outbid them for passengers who are buying on price alone.

Southwest has the recipe for success in this area but it does not seem to recognize it.  By being Southwest instead of Just Another Airline or a Really Low Cost Airline, they beat both sides handily.  But that combination of being a people business acting in the interest of serving people and their needs seems to be getting in the way of leadership at Southwest succeeding.

Or, rather, making names for themselves.

Southwest has finally become a teenager and what’s worse, it doesn’t know what it wants to be when it grows up.  I expect this airline to grow rockier with time.

Filed under: Airline Service by ajax
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US Airways and American Airlines have received approval from the European Commission for their merger contingent on the combined airline giving up slots for a Philadelphia – London Heathrow route.

I previously stated that I thought the EC might want more and color me surprised that they do not.

This leaves things pretty much in the US Department of Justice’s hands for final approval although the Bankruptcy Court does have to also approve the bankruptcy plan.  The Bankruptcy Court approval is nearly pro-forma at this point as the two airlines have their ducks in a row and overwhelming support and approval from creditors.

The DoJ is taking its sweet time and while they cannot take forever, they do seem to be dangerously dragging this approval out.  Most likely due to pressure from Congressmen who don’t want to lose routes/airlines/jobs in their constituencies.

Filed under: Airline News, Mergers and Bankruptcy by ajax
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A developer wants to build 600+ homes right next to the eastern runways of DFW airport in the Dallas suburb of Irving.  Oh, and these homes are to be valued between $350K and $500K which is a *very* nice home in that area.  Extremely nice.   Here is the area:

What?  Is Irving stupid?  This shouldn’t have made it past the City of Irving planning commission and certainly shouldn’t be under review by the City Council of Irving at all.

As you can imagine, DFW airport is unamused by this idea and they should be.  When DFW was built, it was built in a location that was evenly located between Dallas and Fort Worth and where noise and impacts to homes would not occur.

Now, over the last 4 decades, that has changed.  But you can encroach on this airport which is arguably a huge economic driver for the region with homes and expect to later force regulations on the airport.

This is absolutely silly.

Why do I think that the City of Irving will come back on DFW about noise?  Because they’ve done it several times in the past.  As have cities such as Euless and Grapevine.  Cities that were largely unoccupied tracts of ranchland when the airport was built and which grew in large part due to the airport have regularly tried to stop the airport from operation and expansion many times.

As someone who lives in this area, I am unamused at cities causing this kind of trouble because the next thing that happens is these very same cities engaging in legal actions against the airport which cost me, as a regional taxpayer, considerable money.

No thanks.  And if you live in this area, I would suggest you get very vocal with your own local city council representative.

For reference on just how noisy this is, take a look at this video made by DFW airport:

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Delta Airlines has announced an hourly shuttle between Los Angeles and San Francisco with 14 hourly flights per day using the Embraer E-175 aircraft with 76 seats from partner Compass Airlines.

United Airlines owns that route presently and Southwest is exceptionally strong on that route as well.  Both airlines are popular with businessmen and Delta is proposing to step on the toes of both airlines with its own shuttle.

Calling it a shuttle is good marketing. It makes it sound like something that is easier, more friendly to the business traveler.

Will they succeed?  Lots have tried to do such things in that market and failed.  Delta is big enough and strong enough and settled enough to buy the business.  It’s clear that Delta does not respect its competitors in this area and that puts both United and Southwest in a tough spot.

War got declared and now both of those airlines have to respond or likely lose significant market share and, most importantly, significant revenue.   The truth is that 5 years ago, I would have predicted success at defending the market by both incumbents.  Today, I’m not sure United has the focus to go to work to defend itself and I’m not sure that Southwest has the fire in its belly to defend itself.  Southwest is getting complacent.

Only time will tell but it should be interesting to watch.

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And Part 2 of yesterday’s show, The Battle for Eastern Airlines. Enjoy.

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Here’s a very interesting show about Eastern Airlines and the strife it experienced between management and its labor unions.  Part 2 comes tomorrow.

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Imagine the enormous sigh of relief that will come from all quarters if the new CEO of American Airlines Group Doug Parker announces the suspension of the new AA livery in favor of something better.

The problem is, American Airlines can’t really stop it.  They have Airbus aircraft coming online that *must* be painted completely as they cannot be polished metal.

So I now dub the new American Airlines’ livery “Tom’s Revenge”

Filed under: Airline Fleets by ajax
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A number of parties have filed their objections to the bankruptcy plan for American Airlines and its merger with US Airways.  Most of these objections are pro forma so that the parties don’t lose standing going forward out of bankruptcy.  It’s necessary and not an obstacle to the merger whatsoever.

Some of the objections strike me as simply vindictive (Let’s wave at USAPA, the most dysfunctional pilots union in the US and that is saying something).  A few others strike me as people fighting a battle that was lost nearly 15 years ago (Hello ex-TWA pilots).  Why spend so much money on attorneys and courts when the case law is so badly against you?

What I am most struck by is how -non-constructive several creditor parties are in bankruptcies such as this.  This is, quite literally, the best deal *anyone* is ever going to get in an airline bankruptcy.  Everyone gets their money and gets to move on with life.

The destructive acts of small groups having major temper tantrums simply amaze me at times.  At other times, they remind me of Eastern Airlines and what Charley Bryan (head of the IAM at Eastern) did to that airline.

Filed under: Mergers and Bankruptcy by ajax
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There are news reports that Republic Holdings has entered into negotiations with third party to sell Frontier Airlines.  Frontier, as it exists today, is made up of Frontier Airlines as bought by Republic as well as Midwest Airlines also purchased by Republic.

The two purchases were an attempt by Republic CEO to diversity his company.  That attempt was arguably quite unsuccessful.

I never sensed that Republic knew what to do with both Frontier and Midwest.  There seemed to be a lack of ideas on how to make these airlines rev up and win for Republic and even basic marketing seemed to defeat them.

When Frontier was for sale, Republic bested Southwest Airlines in price for the airline and that never once felt very smart to me.  In hindsight, I think Southwest likely bid appropriately and when it lost, it did the right thing in walking away and looking for other opportunities.

Who is the buyer this time?  Who knows.  I would speculate that it could be an Ultra Low Cost Carrier such as Allegiant or Spirit and that wouldn’t necessarily be a bad thing.

It could be a mainstream airline but the only one I would learn towards in jetBlue.  It certainly isn’t going to be Virgin America although I’ve long harb0red the idea that jetBlue combined with Virgin America and Frontier Airlines c0uld, at once, become an airline that spanned the United States and even might win big.  But I appear to be the only one who thinks that.

Would Southwest buy the airline?  No, I don’t think so.  Frontier doesn’t offer opportunities that it offered several years ago.  Southwest is a very different airline today with very different needs.

Could it be any of the other legacy airlines?  US Airways?  American Airlines?  No, no way.  United Airlines?  No, that airline is too busy with solving its own problems.  Delta Airlines?  I don’t know why given that Delta has Frontier bracketed in all markets already.

The truth is that I don’t even see jetBlue as a big contender.  That airline has been stuck in a rut for several years and nothing has changed in its operations to make me think they are looking for a risky purchase.

I think Frontier is going to go to Allegiant Airlines.  Spirit Airlines has too much good organic growth going on today but Allegiant is looking to adopt the A320 series aircraft and Frontier offers some opportunities that are complementary more to Allegiant than Spirit.

Time will tell but I don’t see Frontier lasting very much longer as an independent airline.  It’s be sold or liquidate at this point and the reasons to buy that airline wane more each day.

Update:  (The above post was written on Monday, 7/29/2013 and scheduled)  There is some new information that investors and directors currently associated with Spirit Airlines are the buyers for Frontier.  These directors are William A. Franke and John R. Wilson.  Franke is the current Chairman of the Board for Spirit (Ben Baldanza is President & CEO) and John Wilson is a director whose term ends in 2014.

Bill Franke is a former Chairman and CEO of America West and current managing partner of Indigo Partners (a major investor of Spirit) and John Wilson is a principle at Indigo Partners with a background in finance at several airlines including America West Airlines.

Indigo is selling its shares in Spirit Airlines asap and these two are withdrawing from the board asap.  Do the math.  I was wrong, this isn’t Allegiant buying Frontier.

But . . . while Spirit Airlines and Allegiant Air are doing great as Ultra Low Cost Carriers . . . how many ULCC airlines can the US handle?  Frontier has a management team that has been positioning it as another ULCC (not very successfully in my opinion) and continuing that direction leaves me wondering why would you bother?

ULCCs aren’t stimulating more air travel at this point.  Their robbing some low hanging fruit from other airlines on routes that have high fares.  ULCCs don’t attract the attention of the SuperLegacy airlines because they don’t put frequencies up against the SuperLegacy airlines on routes.

Only time will tell but it does look like Indigo Partners will become the new owners of Frontier.

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And here goes British Airways putting something in everyone’s eyes.

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