The City of Dallas’ transportation committee met, deliberated behind doors and then decided to push the Love Field Gate Issue up to the full city council yesterday.  I noticed that one particular person was involved in the hiring of L.E.K. Consulting to determine who should get the gates:  Aviation Director Mark Deubner

Deubner seems intent on making a hash of managing Dallas Love Field in ways that go beyond the norm for this day and age.  Deubner is the same person who made a hash of the negotiations surrounding the Braniff Maintenence and Operations building on Lemmon Avenue last year.   It’s become quite clear that Dallas Love Field won’t be thriving under this man’s direction.

I think that the City of Dallas getting involved in this issue is going to backfire on the city in ways that City Council Members can’t entirely imagine.  First and foremost, it’s unwise to interfere with the United States Justice Department and the disposition of antitrust issues.  Second, the City Council has no legal standing to determine who gets those gets short of crazy arriving on the door step.

And Virgin America getting those gates isn’t crazy.

If the cities of this country want to control their airports better and do more for their local citizens (aka The Consumers), then they need to stop making long term, exclusive leases on gate space.  Auction it off on short term leases or control it on a flight by flight basis.  Keep your flexibility and sell your city like nobody’s business.

But you don’t get to make deals and then revisit just part of them.  If the City of Dallas attempts to control who gets those gates under the present circumstances, they’ll be a part to several lawsuits in which the only sure loser will be the City of Dallas.  And it will cost the city millions of dollars with zero possibility of an outcome that benefits its citizens (aka The Consumers.)

In fact, when Aviation Director Mark Deubner hired L.E.K. Consulting, he exposed the city to a lawsuit right there.  He forced the city into taking a position by virtue of asking a consulting company to establish what was best for the city when the city didn’t have any business asking that question at this point.

So, now it is entirely possible that even if the Dallas City Council leaves the issue alone and permits the gates to be sub-leased, other airlines may well sue the city because it doesn’t fit anyone else’s notion of what should happen.

If Mark Deubner had left things alone and the City of Dallas had left things alone, they would have been fairly protected and any outcome would have at least benefited the citizens (aka The Consumers) marginally more than the present situation.  Neutrality was the smart play here.  And an abiding desire to interfere on the part of City Management has exposed Dallas to consequences that will cost a great deal of money.

Filed under: Airline News, Airports, Mergers and Bankruptcy by ajax
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City of Dallas consultants, L.E.K. Consultants, has come out saying that it’s Southwest Airlines who should get the 2 American Airlines gates at Love Field Airport.  Their rationale boils down to the idea that Southwest will drive the most passenger traffic for the city and that is therefore the most economically sound justification.

Their criticism of the Virgin America lease is that it removes some flights from DFW airport and transfers them to Love Field.

You can’t look at this picture statically.  Driving passenger traffic isn’t necessarily what’s best for consumers.  It may well seem good for the city but it won’t necessarily be good for consumers.

As foolish as I think some of the Justice Departments moves have been in the AA bankruptcy, they aren’t incorrect in the idea that these things should drive competition and benefit consumers.

The consultants seem to be squarely aimed at the idea that what’s good for a business will be good for consumers.  I would disagree with that.

What Dallas has needed most for a long time is competition on a variety of long haul domestic routes in and out of Dallas to a variety of destinations.  Southwest will provide some of that sorely needed competition on October 13th.  And they will provide it regardless of whether or not they get those gates.

Virgin America will provide some of that competition too although I would argue that we could use a more creative and extensive LCC than Virgin America.

What is most needed at Love Field is . . . wait for it. . . . more gates.  20 gates just isn’t enough.  Absent more gates, Southwest should be relieved of its burden to give up gates to get gates at DFW.  The competitve landscape has changed and, unfortunately, that change occurred before the end of the Wright Amendment on October 13th.

But 20 gates at Love Field isn’t enough.  Chicago Midway serving as an adjunct airport very similar to Love Field has 43 gates.  Would I suggest that Love Field should have that many?  No.

But the airport cannot serve any other airlines very effectively despite being open to do so at this time.  6 to 10 additional gates would make sense at the airport.

Barring that, Southwest should not be required to give up gates in order to use gates at DFW airport.  In making the deal to lift the Wright Amendment, the parties involved essentially constrained Southwest Airlines from growth in the DFW area.  In fact, the deal was designed to penalize Southwest if it wanted to grow by using DFW airport.

Isn’t it time to quit taking swipes at Southwest for not moving out of Love Field Airport more than 35 years ago when DFW was opened?  Southwest is a huge employer in this area and a huge tax contributor and excellent corporate citizen.  Why do we want to exact revenge against the very kind of company we should want in our community?

Filed under: Airline Service, Airports, Mergers and Bankruptcy by ajax
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Continental and United Airlines announced their merger in 2010 and here in Q1 of 2014, I think that their earnings are shameful.

That’s because they didn’t have any earnings in Q1.  Instead, they had $609 million in net losses.

It’s been 3 years since they were able to close on the merger and begin integration.  It’s been more than a year since they acknowledged that they had problems in their integration.  This picture isn’t getting better, it’s getting worse.

Jeff Smisek famously joked that by having Continental merge with United, he saved United from having to marry the ugly girl. The ugly girl was US Airways.

The ugly girl married American Airlines and reported a Q1 net income of $408 million.  With the ugly girl management (Doug Parker & Company) in charge and they’ve barely gone to work on AA operations.

Seems to me that marrying the ugly girl would have been the smart thing.

Everyone looked at US Airways and sneered.  Delta, Continental and even American Airlines.  But the ugly girl kept earning money.  Big money for an operation that was nominally second to every other legacy airline when it came to advantages.

Jeff Smisek worked so hard to avoid the ugly girl that he made a compromised deal and the merger of equals ultimately resulted in a merger where United effectively took over Continental.

Let’s be clear about something:  Continental Airlines, at that time, had a great and profitable operation.  United Airlines did not.

United needed someone to move it past the Tilton Era and into competition with Delta.  Continental didn’t want to lose in the merger game but it had options.  At the least, Continental didn’t need to be the most eager bride around. I always thought it prescient that Smisek saw Continental as the bride rather than as the groom.  Sometimes our statements speak volumes.

Three years later, United doesn’t have it’s act together and it shows zero signs of getting its act together. I fully expect Jeff Smisek and his team to start getting smacked around pretty badly by financial analysts.  Particularly since even Southwest Airlines who merged with AirTran at the same time has now found itself experiencing great joy in the financials game.  The airline with the highest costs (Southwest) is beating an airline with lower costs (United).  Badly.

What to do?

In an ideal world, Smisek would take stock of whose departments ain’t making it and hire new people.  Go hire the best and get them from whoever he can.  Pay them what they need to make a jump.  And do it now, not 6 months from now.

The ranks need to see a new sheriff in town (even if he looks like the old one) and the executive team needs to get the message that performance does, in fact, count.

United employees are, traditionally, their own worse enemy and they remain so today.  They will sink that airline to spite their own faces and the worst part of it is that they will take very good Continental employees down with them.

It will cost to fire some of that executive team.  It won’t cost nearly as much as keeping them on.  Right now, it’s costing $609 million a quarter.

Filed under: Airline News, Mergers and Bankruptcy by ajax
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Well, in an unofficial official announcement by Virgin America at Love Field Airport in Dallas, Virgin America says it will get the two gates at Love Field.  The airline says it has approval from the Justice Department and American Airlines and needs only to get approval from the City of Dallas.

And I think they will get such approval, too.  Strangely, the City of Dallas has never treated Southwest Airlines with the deference you might expect.  Furthermore, I have long thought that giving the gates to Southwest (legal or not) was probably a step too far in creating an airport monopoly for a single airline.

Is Virgin America the right candidate?  I kind of think not.

I think that they are supported by the Justice Department because they favor LCC carriers and Virgin America purports to be that.

I think they are supported by American Airlines because they are a weak(ish) competitor to American Airlines.

Virgin America will only offer flights that are long haul and to major destinations such as San Francisco, Los Angeles and New York.  They might get a few flights in to Chicago, a route so dominated by American Airlines that they have near hourly flights.

American likely saw Virgin as having the least impact to them in the market.  If that’s true, then it probably isn’t that good for consumers in the DFW area.

Virgin America will be good for people who want to fly to Los Angeles, San Francisco, New York, Washington D.C. and Chicago.   It’s notable that AA is the powerhouse on all of those routes while Southwest Airlines will be starting similar routes out of Love Field on October 13 of this year.

But the frequencies will be low enough that it is unlikely to have impact on fares, I think.  To the contrary, I think that this is great for Virgin America as they will experience high yields from these routes as a result of the other two airlines maintaining course.

And this decision could drive me to write yet one more article on why we should auction off gates and slots at airports that are constrained.

Filed under: Airline Service, Airports, Mergers and Bankruptcy by ajax
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There is the prospect of new found competition in the Dallas area when we see Southwest able to fly where it wants domestically starting October 13 of this year.

The problem is, the more I think these developments through, the more I think that we won’t see much of that competition in 2014.

Right now, Southwest is selling itself on convenience and doing well with that story.  I think they will sell their new routes as convenience based options and I’m sure I’m not the only one to notice that their route announcements are focused on the business traveler.

Repeat after me:  Business travelers value convenience over price.

Delta is also focused on the idea of serving Love Field by connecting to Delta’s hubs.  Frankly, I don’t see that being a very good strategy because . . . do you want to fly to Atlanta to connect somewhere else or do you want to fly Southwest or American Airlines and just get there.  Delta, I think, may well not even fly their intended routes.

American Airlines is in an odd place as well.  The airline must focus on integration intensively and can’t afford to pick a fight in Dallas right now.  While they exited bankruptcy in pretty good shape, there are some fences to mend in Dallas over service.  I think that 2014 and, possibly, 2015 will be spent on getting the airline’s act together.

Airlines have figured out that fighting for marketshare is a losing proposition for everyone involved.  Each CEO has made his mark (Gary Kelly, Richard Anderson and Doug Parker) by showing restraint.  That trend should continue for some time.

However, if Southwest is able to lure away the business traveler from the SuperLegacy airlines in the Dallas area on its new routes, I think all bets are off.  That is a target market worth fighting for.

But it will take time for Southwest to make its case to the traveler that it’s a worthwhile choice to fly from Dallas to Atlanta, New York, Baltimore, Chicago and elsewhere.  You have to get a passenger to try the service and Southwest cannot afford to make a mis-step with those passengers.  Service must be excellent and comfort must be of high value.  It will take time to get travelers to try them out on the new routes and Southwest has to figure out how to do that while its local competitor (American Airlines) deploys fresh new aircraft and fixes it service issues at its home hub at DFW.

Look for late 2015 to be the real moment of competition if there is any.

Filed under: Airline Service by ajax
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Airbus may be embracing the idea of creating an A330NEO offering for customers and it would appear to have some acceptance from some customers.  To date, Airbus’ official approach has been to discount the A330 and show it as a cost conscious solution for airlines when balanced against the Boeing 787 offerings.

While airlines such as Delta seem to embrace the idea, one wonders if the investment in an re-engined widebody really is wise at this point.   Airbus doesn’t have the answer to the 787 and it appears the A350-800 won’t be a future answer either.  A lower cost development of an A330NEO would appear to offering something that slots in between the A321 and the A350.

I honestly do not think so.

The 787 clearly was the right size in the -8 variant as many, many airlines adopted this aircraft right from the beginning.  The -9 variant is similarly widely accepted.  Those two, together, are what Airbus has to compete against with the A330 or an A330NEO.  In some missions, it may do OK but it won’t be the long term answer that an investment in a widebody asks for.

It would be foolish for Delta to drive a multi-billion dollar investment in an aircraft that Boeing has a better and just as tested answer for when such an airplane would be available.

It’s become clear that a certain generation of airliners are nearing their end now.  The 767/757 is clearly on a rapid decline with passenger airlines and the A330 will begin that decline shortly.  It’s not a new airliner and the A350 series should have been slotted to replace it better.

Instead, Airbus made the mistake of Bigger is Better.  It’s made that mistake twice now.  Upgauging its offerings made the -800 less attractive to airlines because of performance, not because it was the wrong size.  The truth is that Airbus needed an range that spanned probably 4 aircraft and that’s hard to do.

In the competitive lineup, Airbus needed:

• A350-700 | 787-8
• A350-800 | 787-9
• A350-900 | 787-10
• A350-1000 | 777-200ER
• A350-1100 | 777-300ER

There is no -700 or -1100 and the -800 is a bit heavy for the mission and no one wants it.  That leaves Airbus with (2) attractive medium sized widebody aircraft for customers and the A380.

That isn’t enough.  The A330 could be stop gap but it has to compete against a much more modern, efficient product lineup that Boeing will offer.  Look at Boeing’s potential now and over the next 10 years:

• 787-8
• 787-9
• 787-10 / 777-200ER/LR
• 777-300ER / 777-8
• 777-9

Boeing wins.  It’s got the right sized aircraft with the right efficiency for a 20+ year investment that ranges the entire sweet spot for widebody aircraft.  Even the “older” 777 models in that line-up purportedly “beat” the corresponding A350 models on the “total” package of performance.  At worst, they hold their own against the A350 and that’s still pretty good.

Airbus needed 2 widebody families.  It has one and I think cobbling together a stop-gap measure for one of those in a A330NEO model is unwise.  The widebody technologies are here and they are useful now.  To not use them in an airliner would be folly, in my opinion.  They are maturing every day in the 787-A350-777 developments being done and that means that airlines in general will want those technologies rather than designs that date back to the late 1980’s.

Filed under: Aircraft Development, Airline Fleets by ajax
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It might come as a surprise that you really can’t sue an airline in a state court.  For just about anything.

Instead, you have to file your lawsuit in Federal court which means you have to have a basis of your lawsuit that is founded on Federal law.  Since Federal law generally doesn’t address nuances (that’s generally left to states) and sets a high bar (because a lower bar is what States are for), lawsuits against airlines generally lose.

Oh, it’s quite possible to do a personal injury suit against an airline in Federal court when there is a crash.  But that has as much to do with the bad publicity as it does the law.

You see, airlines managed to have most issues against them (for all practical purposes, all issues) moved to Federal court by an act of Congress back when Deregulation was occurring.

This sets the bar very, very high for winning a lawsuit against an airline.  It is a very protected place to sit as an industry.

And unfair. You can sue Exxon wherever you want but you can’t sue American Airlines wherever you want.

As a result, airlines are able to write egregious contract terms and abuse passengers on a daily basis with the clear knowledge that virtually all passengers can’t sue them.  Imagine the change in attitude and service an airline might experience when it has to face a jury of its peers in East Texas after losing luggage, holding people hostage in an airplane and then arbitrarily cancelling their flight.

I honestly struggle to find the justification for airlines to have such a protected status in 2014.  Virtually all other service oriented industries manage to do just fine without such protections.

We shouldn’t forget the purpose of a civil lawsuit:  It’s to correct a wrong *and* take punitive action against an entity when it intentionally does that harm.  By design, this is to give incentive to companies (and individuals) to Be Nice and Behave.

Wouldn’t that be a near revolution in the airline industry?

Filed under: Airline Service, Deregulation, Trivia by ajax
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Emirates has announced it plans to serve Dallas with its flagship A380 on October 1st of this year.  The aircraft will replace a Boeing 777-200LR and will offer 223 more seats than the current 777.

Why?  Houston has service to the Middle East because of the oil business.  Dallas has it because of the IT business.

The Middle Eastern carriers are the airlines of choice for entire families from India and Pakistan when traveling between the United States and the Indian sub-continent.  Currently, many going to India actually travel down to Houston to fly home because the seat availability is better and the prices are cheaper.

Emirates knows it can reliably fill the A380 by lowering prices.

Quite frankly, I think this is being put into place today rather than next year or the following to ensure that a base of travelers is built up before American Airlines can deploy its 787 aircraft on a direct route to India.  (American’s 777 aircraft don’t quite have the range for the trip but the 787 will).

I think this is a powerful pre-emptive action on Emirates part to subdue QATAR, Etihad and American Airlines and it will likely work very well for them.

Filed under: Airline News by ajax
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