According to the Wall Street Journal Middle Seat blog, American Airlines has decided to match the bag fees recently implemented by Delta and Continental.  You can read more HERE.

 

So, at present, Delta (including Northwest), American Airlines, Continental, United and US Airways are now all charging $25 for the first bag and $35 for the second bag with some of the airlines offering “discounts” if you perform your “bag fee purchase” online.   That would imply that they each see this price for checked bags being a bit more elastic than one would have thought.    Or, at the least, they see it as elastic as long as they all go for the same increases much as the case is with air fare increases. 

 

So far, no low cost carrier has adopted this pricing model or even raised their checked bag fees.  I suspect they won’t either as it gives them an opportunity to show themselves as the good guy while gaining some incremental revenue. 

 

If this rise in fees sticks for the next 1 or 2 quarters, I do think it will put tremendous pressure on Southwest Airlines to institute their own version of bag fees, at least by institutional investors and analysts.  So far, Southwest and its CEO Gary Kelly have resisted these calls to add checked bag fees and, so far, they believe it is resulting in incremental revenue from passengers switching to Southwest to avoid fees.  Since CEO Kelly (and Southwest as a whole) is not one to shade the truth, I’ll continue to believe these claims. 

 

However, with other LCC carriers such as Airtran and Virgin America and even jetBlue (on the 2nd bag) have added fees and do report significantly improved revenues from that, I would imagine that the call for Southwest to add these fees will be defeaning particularly when Southwest could implement a jetBlue or Airtran style program and see improvements to their quarterly results which haven’t been too impressive in the last year. 

 

It is sad but I don’t believe we’ve seen the last of these increases.  I do think that some airline will probe the upper limits of these fees just a bit more yet.  I do think that Southwest will resist the call to add these fees for at least another 6 months but if there hasn’t been some kind of collapse in the price of these fees by then, I would not be surprised to learn that Southwest has begun to make changes to their infrastucture to implement them.   I think the first sign will be the withdrawal of their “no fees for checked bags” advertising.

Filed under: Airline Fees, Airline News by ajax
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There have been a few attempts to create long haul, low cost carriers over the past several decades.  Laker Airways and People Express were two examples of that from years past.  Neither succeeded in the long run due to competition but also because long haul flights are a different creature.

 

Now I’m beginning to think someone could do it.  It would require a few very special adjustments to make it successful and those adjustments would be a real challenge to accomodate but, yes, I think someone could do it.

 

Michael O’Leary of Ryanair has talked of doing this but his concept, at least how he has laid it out, is fraught with peril since it is based on a Ryanair strategy. 

 

Long haul flights really only work between two large population centers because they do depend a lot on airport infrastructure and originating traffic in those areas.   They are international and that requires airports that can accomodate customs and immigration facilities and airports that have runways that are long enough for long haul aircraft. 

 

They also can’t depart and arrive at just any time.  Not to be attractive anyway.  So schedules are much more important and frequency isn’t necessarily the key as much as finding routes that offer high aircraft utilization. 

 

Until recently, they also required really large aircraft such as the 747 or DC-10/MD-11 to lower the costs per available seat.   Filling those aircraft day in and day out is difficult on a point to point basis if you don’t have really large population centers to feed those aircraft.

 

Things have kind of changed though.  For one, there are aircraft that might be suited to such operations which offer very low CASM (cost available seat mile) but which aren’t so big that they become difficult to fill.  I’m thinking of the Boeing 787 and 777 and the Airbus A330 and A350. 

 

These aircraft are capable of long haul flight, offer enough capacity and the kind of operating costs that might just make such a venture possible.   In particular, the 787-8 and A330 make this look real attractive. 

 

The one twist that I think you would need is partnerships to feed these flights at major cities that would serve as the departure points for such flights.  In the past, I would be skeptical of this being possible.  Now, not so much.  Southwest Airlines is forging partnerships with LCC carriers in Canada and Mexico (WestJet and Volaris) and its just the kind of partnership that a long haul LCC venture could use.

 

Imagine an LCC carrier using the A330 or 787-8 flying routes such as DFW-London or Chicago-London or NYC-London.  Or even Portland, OR to Amsterdam or Denver to Germany.   Maybe even Salt Lake City to Japan. 

 

The best aircraft would be the 787-8.  It would accomodate medium to long haul flights perfectly with low enough CASMs for virtually any city pair.  Its expected to be more low maintenance than any other aircraft of its kind.  It could become the 737 of long haul quite easily. 

 

If you had partnerships with LCC carriers on both sides to feed connecting traffic (something else that Southwest has done a time or two with its relationships with ATA and Icelandair (which was actually an interline agreement), you might be able to do it. 

 

Imagine Southwest Airlines feeding such an LCC in places such as Denver, Baltimore, Pittsburgh,  Portland or Seattle and Ryanair feeding such a venture at airports such as Dublin, London-Standsted or Frankfurt-Hahn.  Or, perhaps, Airtran feeding such an airline from Atlanta to Rio de Janeiro with Azul providing the feed in Brazil. 

 

This new LCC would have to be the “codeshare” on the domestic/regional flights and its own entity on the long haul international portion.  Domestic/regional partners would benefit from the additional regional traffic but really should not be selling tickets from Kansas City to Rio de Janeiro via Atlanta.  It goes against their models.  These partnerships should be about each sticking to their models but providing some interlining between the two. 

 

Oddly enough, I see airlines in two parts of the world being able to do this.  The United States would be ideal because a US based long haul LCC carrier can reach around the world from the US borders.  The other area would be one based in the Middle East such as Dubai which could also reach around the world. 

 

With Open Skies agreements falling into place left and right, the right aircraft being available now and LCC IT infrastructures becoming flexible enough to enter into this kind of partnership, it might just be possible in the near future.

Filed under: Airline Service by ajax
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Yesterday on my post about flights between Dallas / Fort Worth and Milwaukee, the surprise of that investigation was that Southwest Airlines was most probably the best choice based on cost (price + baggage fees + convenience from doorway to doorway) and service (mainline aircraft and service product). 

 

Well, that got me to wondering about other routes out of the DFW area that I’m generally interested in.  So, I checked on flights between Dallas and Portland, Oregon, another city I have an interest in.   Southwest offers a number of two stop connections between the two destinations at competitive prices but your travel duration on those would be excruciating. 

 

However, Southwest *does* offer a couple of flights each day that are one stop – no plane change flights.  And guess what?  They’re pretty reasonable in flight duration.  Again, I cannot tell where that one stop is but it must be mostly right along the flight path.  Best of all, their price is about as good as I’ve seen in a long time at an advance purchase fare of $129 each way.  Again, considering that Southwest doesn’t charge for baggage and is more convenient in the Dallas area, this is the best deal all in all. 

 

American Airlines offers 5 non-stop flights a day (all 4 hour long flights using MD-82 aircraft) for the same nominal price and charges for baggage. 

 

And I have to tell you, I think I’d rather fly Southwest even with one stop.  AA’s MD-80 aircraft are woefully worn out, uncomfortable  and their crews are surly at best.  Southwest offers me a more comfortable seat, most likely a newer aircraft and certainly a better maintained cabin and a service staff that was happy to get out of bed that day and go to work. 

 

So, what does this mean?  Well, it’s hard for me to research every route that SW and AA might compete on but it looks as if Southwest might be getting aggressive with American on a lot of routes that AA has been dominating with almost zero competition for a long time.   Southwest is doing it by offering direct, one stop, no plane change flights and they look pretty good to me. 

 

If you live in an area served by Southwest, it may very well pay dividends to take the extra moment to see what they’re offering on your chosen route.  Just remember that you won’t pay baggage (or non-alcohoic beverage) fees and you will fly on mainline aircraft with friendly service staff.  That has a value in and of itself.

 

In way, it is a shame that Southwest continues to refuse to list itself with online travel agencies like Expedia and Travelocity as I think they would compare so favorably against legacy airlines that it might well be worth it.

 

Now I’ll stop acting like a Southwest commercial.

Filed under: Airline Service, Travel Hints by ajax
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I follow this city pair pretty closely because Milwaukee is my birthplace and I continue to have a lot family there and because I’ve never really understood why this route has so often been the ugly step-child given the demand between the two cities. 

 

I took a look at what service airlines were offering (non-stop) between the two cities and thought I would give a summary since its so reflective of what is going on in Milwaukee in general.  Just to keep things interesting, I looked at flights in mid-April.

 

American Airlines will have 5 flights spanning each day starting early in the morning and ending each evening.   Every one of those flights is an Embraer ERJ-140/145 aircraft flown by American Eagle.  American is competitive on price and even currently the low fare leader this far out but only by quite literally a few dollars. 

 

Airtran has its flights for April now.  They have 2 flights a day with one morning and one evening departure and both are very convenient to both business and leisure travelers.  These flights will be on CRJ-200 equipment flown by Skywest Airlines.  I still expect that these will quickly transition to Boeing 717 aircraft if Airtran finds this a popular route segment.   Oddly enough, Airtran’s offerings are just over $100 more than what AA is offering. 

 

Midwest Airlines has 4 flights spread over the day and all at convenient times ranging from early in the morning to the evenings.   These flights are competitive with AA and are currently flown on Republic Airways E-170/190 aircraft, certainly the best equipment on that route presently. 

 

Frontier Airlines now has codeshares on every Midwest Airlines flights and at the same prices.  So, if you want to fly Frontier, uh, I guess you can.  At the end of the day, it is neither Frontier nor Midwest Airlines (although the aircraft are painted in Midwest colors), it’s really Republic Airways. 

 

That makes 11 physical flights and 15 flight offerings on 4 airlines between the cities for non-stop flights. 

 

Now, here is the interesting development.  Southwest Airlines will be offering direct flights (one stop, no plane change) between Milwaukee and Dallas come April.  So far, I cannot discern where that aircraft stops along the way but it has to be on the way.  Perhaps Kansas City or St. Louis because the duration of those direct flights is only 3.5 hours which is nominally one hour longer than the non-stop offerings but if you allow 40 minutes to land, disembark passengers, embark passengers and take off again, it cannot be a long or bothersome stop. 

 

An hour longer seems like a lot, maybe, but you get to fly it on a mainline aircraft (Boeing 737) and on airline that does *not* charge luggage fees.  You also fly into Love Field airport instead of DFW which means (for many) a much more convenient airport to fly to and from. 

 

Best of all, Southwest is highly competitive on price.  AA remains slightly cheaper but advance purchase fares mean that Southwest is nominally a few dollars more, potentially as quick (doorway to doorway) and on a more comfortable airline with friendlier service and no baggage fees.   This may be the best deal offered if their flight times work for you.

Filed under: Airline Service by ajax
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Delta Airlines chose to announce they are increasing their checked baggage fees.  If you pay online, your fee goes from $15 for the first bag to $23 for the first bag.  The second bag checked rises from $25 to $32 (paid online).   Continental matched those fees almost immediately.  While it seems exorbitant to me, I wonder if anyone will really notice right now.

 

I suspect Delta did this simply because they have pricing power at most of their hubs (ATL, MSP, DTW, SLC, CVG, MEM) and because they don’t think it is going to affect the consumer’s decision about which airline to fly in most cases.  Delta doesn’t get a lot of LCC competition at its hubs except for ATL and there seems to be a unspoken agreement with Airtran not to get too ugly there.  Besides, Airtran has checked baggage fees too. 

 

The thing is, most online sites that offer booking for airlines in the US do not mention baggage fees when displaying prices for routes.  Delta will continue to appear to be very competitive on routes while likely adding additional incremental revenue through the “gotcha” approach.   Quite honestly, I suspect they’ll get away with it.  At least until there is a healthy recovery in the airline industry and that is likely 18 to 24 months away still.  Maybe more.

 

Will others match it?  I suspect that American Airlines might.   There is no precise harmony among airlines on these fees, not yet anyway.  Continental already had pretty high fees at $18 and $27 for online checked fees (with a $2 and $3 surcharge at the airport).  AA is at $20 and $30 respectively whether you check online or at the airport.  US Airways is at $20 / $30 for online (with a $5 surcharge for checking at the airport.)  United is $15 and $25 for online checking.

 

By contrast, Southwest Airlines has no fees up to the 3rd bag, jetBlue offers the first bag free and $30 fee for the second while Airtran charges $15 for the first and $25 for the second.  In other words, these fees are all over the place.  The truth is, as competitive as airfares are on many routes, these fees can change the equation pretty dramatically in some cases since those fees are for each way on a round trip flight. 

 

These fees have added dramatic amounts of revenue to airlines’ bottom line and I don’t see them going away at all.   I don’t think the fees among legacy airlines will harmonize much at all until and if online travel sites begin showing an “all in” pricing when comparing fares.  Even with such comparisons, I don’t think the fees go away so much as they just begin to merge together among the airlines. 

 

Will anyone else raise their fees?  Well, maybe.  I’m sure it will be tempting to do so among all the legacy airlines.  One or two may even try to raise the ante some.  I kind of  think both United and American Airlines will try some kind of new mix in the future.   I don’t see the LCC carriers playing around with their fees much if at all.  They have the revenue and now this may be their chance to follow Southwest’s strategy in a modified form by advertising lower checked baggage fees. 

 

I don’t think Southwest will change its attitude on these fees based on this new development.  Their strategy appears to be working for them and they don’t have a history of following the pack when something works.   That said, I’m sure it is something they’ll re-examine from time to time and it doesn’t mean they won’t add fees at some point in the future.  Right now, they appear to be capturing customers with their ‘no fees” approach and their aggressive advertising seems to have caught some attention. 

 

As much as I hate these fees for the 1st bag checked, I hate that airlines and travel websites  have done really little to truly show the “all in” price for these trips.  It makes things just that much more murky for the consumer and that is a bad thing.   However, the best thing you can do is learn the fees for the airlines you may be shopping for a trip and do the math yourself.  You’ll be frustrated by it and no doubt resent it but there isn’t a ready made solution at this time. 

 

Frankly, these developments are just one more reason why I wonder about Southwest re-joining the travel agency world.   The world has changed since they left it and, quite honestly, I think they could re-structure their IT infrastructure and re-join those agencies with little incremental costs involved.  At that point, they become the no brainer for many consumers from my view.  Even as aware as I am of airline options and even being located in the DFW area, even I tend to forget about Southwest as an option sometimes. 

 

One strategy for learning these fees is to visit LuggageLimits.Com (also linked in my sidebar).

Filed under: Airline Fees, Airline News, Travel Hints by ajax
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Today, part 2 in my views on whether or not we’ll see a real “Ryanair” style airline here in the United States.

 

Watch what you fly here.  The most recent LCC entrants here have bought Airbus.  No real surprise as Airbus likes to make a heck of a deal on an aircraft for new airlines in the hopes they’ll have the “in” for future orders if that airline succeeds.  

 

Boeing isn’t too interested in that.  They want to see a solid business plan and a real possibility of success.  What’s more, big orders aren’t the enticement they once were for Boeing.  Boeing got burned on a few of those deals with Ryanair being the most notable since it allowed Ryanair to buy aircraft, fly them for a couple of years and sell them at a profit.  Boeing isn’t going to let that happen again any time soon.

 

Is Airbus the right aircraft?  Yes.  No.  Maybe.  I kind of think not.  I think it is well suited to the jetBlue and Virgin America airlines of this country because they can support that upgraded service product nicely.   That said, those airlines would have done just as well with Boeing aircraft.  In fact, jetBlue went with Airbus because Boeing refused to offer a decent price for a decent order.  

 

But Airbus doesn’t strike me as quite the right choice for an LCC.  They’re a bit higher off the ground, have a little worse operational dispatch rate and don’t always have the best range vs weight ration for certain routes.   Yes, they’re a family of aircraft that offers a range of size that captain can fly across the type range. 

 

Boeing seems better.  Supported here in the United States, you have better access to mechanics, parts and plenty of maintenance contractors to keep you going.  They’re a little bit closer to the ground, a little easier to turn around and have a little bit better dispatch rate.  In addition, their range of capacities is a little bit better for routes and virtually every model has trans-continental capability now without being weight restricted. 

 

The model I would look long and hard at isn’t either of those.  I think a new LCC carrier trying to emulate Ryanair ought to take a serious look at the Embraer 170/190 aircraft.  They’re cheaper to operate and can carry a full load of passengers and baggage although little cargo (which isn’t an LCC’s concern anyway.)  They offer a family of sizes, have a good dispatch rate, offer quick turn arounds, great range, good comfort and great potential for routes requiring frequency and low costs.  It is no wonder that David Neeleman chose them for his new airline, Azul, in Brazil.

 

But you can go used in the US and do pretty well too.  Allegiant Airlines buys used MD-82/83/87 aircraft, for instance.  They MD-80’s are overbuilt, cheap to buy and still pretty cheap to operate.  They have range, good dispatch rates, ease of maintenance and they’re abundant on the used market.   The same is true of older Boeing 737 models (pre Next Generation models) and those are becoming to cheap to purchase as well. 

 

In the end, an LCC needs an aircraft type that is relatively easy to expand into a fleet, keep one class of pilots flying it and which has a ready source of aircraft to augment and/or replace the fleet with. 

 

One type, many sizes should be the rule.   Ryanair uses one size, the Boeing 737-800 and Southwest basically uses one size, the Boeing 737-700 but they can afford to do so.  A new LCC needs operational flexibility and being prepared to use the three basic sizes of either type would be a good thing. 

 

But you can split your types too.  Airtran did this successfully by entering the world with DC-9s, transitioning to Boeing 717s and then growing in capacity by bringing on the Boeing 737.   That worked because while they needed two different pilot groups, the pilot groups could be kept “rational” with the same pay rates.   jetBlue split their types between the Airbus and the Embraer(190) and split their pilot groups pay rates too.  There was risk involved in that but jetBlue avoided that by offering pay rates on the Embraer that were as generous as that being offered other pilots flying mainline aircraft at other airlines. 

 

Find airports that welcome you and that have demand to locations you can serve.  Sounds easy but it isn’t.  In the US, airports tend to be wedded to airlines that have served them for decades.   When DFW opened, it was served by a number of major airlines and each terminal served one or more airline.  Now, DFW has been taken over by American Airlines (nearly 4 of 5 terminals) and does little to serve the needs of airlines who aren’t AA. 

 

Airports need to figure out that putting all their eggs in one basket with a major, hubbed airline isn’t a good strategy in the long run.  Once those airlines have that dominance, they use it to beat airports down on fees and coerce airports into paying for infrastructure the airlines then get to own.  It doesn’t benefit the local economy to have one dominant airline as prices rise and service falls.  This isn’t just true for DFW either.  When airports begin to aggressively pursue new entrants, everyone will win.

 

New and existing LCC entrants need to make a better argument too.  All too often, LCC’s tend to fear competing in those markets dominated by a major legacy carrier and that’s a mistake.  Airtran wasn’t afraid to go up against Delta and it paid off.  jetBlue wasn’t afraid to compete in one the most competitive markets in the world (NYC) and against some of the biggest airlines.  In the past, there weren’t good examples of what an LCC can do for both an airport and a metropolitan area.  Now there is and new LCCs in particular need to use that to their advantage. 

 

Treat your staff well.   Airlines sell a service product and while you may get customers on price, you’ll keep them with service.   Offering strategies to your crews that permit you high productivity and your crew a living wage along with a good working conditions can only lead to your success.   Treat them like commodities and you’ll fail.  Southwest, Ryanair, jetBlue and Airtran get this.  Skybus and Mesa Airlines don’t.  Look at who is making money. 

 

Quality of life is just as important to airline crew and staff as wages.  Airlines that offer good quality life tend to have happy crew flying their flights and treating their customers right.  At the end of the day, it is a lot cheaper to keep a customer than it is to find new ones every week. 

 

Will we ever see a close replica of Ryanair’s model here on a national basis?  Yes, I think so.  Right now, no.  The market is too crowded but that will change again and new airlines will be started again.   US attitudes towards fees and advertising are changing, although slowly.  

 

First we need to see a major airline liquidate or merge with another to reduce capacity some more.  Then we need to see an uptick in the economy that induces people to spend some money on travel again (both leisure and business travel.)   There needs to be a glut of aircraft useable for such a venture (and that’s happening already) and airports need to figure out that it is in their best interest to find space for these new entrants.  That really hasn’t started to happen yet but it may yet still happen.

Filed under: Airline History, Airline Service by ajax
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Ryanair is certainly the darling of LCC carriers and, to a certain degree, they even kind of outshine Southwest Airlines.  Lots of people look at the US market and wonder about having a Ryanair-style carrier here.  Skybus Airlines (read more about them HERE) was supposed to be the one but tanked miserably and by every appearance, the only people who didn’t expect them to fail miserably was their executive staff.

 

Could such a carrier exist here?  Sure they could.  In fact, I think it already does in the form of Allegiant Airlines (find out more about them HERE.)  Allegiant is all about flying routes point to point using secondary or even tertiary airports and providing extreme low cost prices which are augmented by fees galore.  And they make a considerable profit doing so.

 

What does it really take to be a Low Cost Carrier in the United States?  First, let’s really define what that is.  Interestingly enough, US Airways uses LCC as its trading identifier on the stock markets.  Is it a LCC carrier?  Not by any definition.  jetBlue and Virgin America both style themselves as LCC carriers but, let’s face it, while they offer great value, neither are a Ryanair style LCC.

 

Southwest Airlines and Airtran Airlines are probably both the best examples of true low cost carriers operating nationally here in the United States.  Allegiant certainly is but they’re still focused much more on the leisure markets and many of the routes they serve compete with quite literally no one. 

 

Skybus failed for a few reasons.  First, they picked a hub that defied rational thought in Columbus, Ohio.  As you can imagine, there isn’t a whole lot of traffic trying to leave or get there.  Hubs don’t work well for LCC carriers.   Focus cities do but not hubs.   If you want to make money as any kind of airline, you had best be offering flights between two places people want to go. 

 

Second, you have to pick between offering frequency and relative value or absolute lowest cost and infrequent service.  You can’t be all things to all people.   Skybus kind of offered high frequency and absolute lowest cost and hoped it would stimulate new traffic.  The problem is, there is only so many people who want to fly between Columbus, Ohio and Greensboro, NC.   You really can’t do that route once or twice a day every day of the week.  Not at any price.  Not with large, mainline aircraft anyway. 

 

Third, just because you can fly to a secondary or tertiary airport doesn’t mean people will go to that airport to use your airline at any price.  Case in point, Bellingham, WA and Skybus again.   Bellingham, Washington is a long way away from most anyone in the Seattle-Tacoma area.   It’s 90 miles from downtown Seattle, 122 miles from Tacoma and it is a tortuous drive in traffic for anyone in that metro area.  Bellingham is convenient to, say, Vancouver, British Columbia but that means crossing a border.   In the case of the SEA-TAC area, you need to be flying from their main airport.   And the lesson is that you have to look long and hard at each area you’re serving. 

 

LCC carriers have succeeded in flying from secondary, smaller airports such as Love Field (Dallas) and Midway Airport (Chicago) and even Long Beach (LA area) because those airports remain highly accessible to a large number of people.  And as both Southwest and Airtran will tell you, sometimes if you want to enter a market, you have to bite the bullet and fly where people want to go.   I take note that since Airtran has decided to defend itself against Allegiant, even Allegiant figured out it needed to change airports in the Orlando area to remain competitive. 

 

Choose your fees and advertising carefully.  The United States is a different place than Europe.  Advertising that is racy or in bad taste doesn’t go well here under the best of circumstances.  It doesn’t matter if you think it should or not.  It just happens to be that way and a new airline is going to change the moral outlook of this country.   Oh, yes, Spirit Airlines has gotten away with it now and then but they remain a minor player and it has possibly turned off as many people as its turned on. 

 

An a la carte fee system (a la Ryanair) is something that this country is completely unfamiliar with when it comes to airlines.  Now, that is changing and it will likely change more but it is an evolutionary thing, not revolutionary and some fees are going to make customers feel burned no matter what.   Skybus’ Ryanair-like approach to charging a fee for even looking in their direction was offensive to customers here in the US particularly when, at that time, no one else had even really dabbled in it.

 

While I do think more a la carte offerings will and should be instituted among airlines, it will be done differently here.  Luggage fees have generated a massive amount of resentment with customers and while they have generated significant additional revenue for major airlines, it has also caused many customers to more carefully consider their options.  Southwest has bucked that luggage fee trend and the results are showing. 

 

There is place for an airline that charges for checked luggage, beverages, meals, blankets and airport check-in.  But the amounts of those fees still have to have some value.  Particularly when legacy airlines already have those fees as well.  Charge more for checked baggage than American Airlines and you run the real risk of turning people off.   We’re really not a true a la carte culture here.

 

Be careful of your publicity.  Ryanair’s CEO, Michael O’Leary, gets away with outrageous statements and even expressing a certain outright hostility to his own customers.   That works in Europe and, in particular, within the UK and Ireland.  Those are cultures who know how to take such statements with a bit more of a wink and a smile.  Here in the United States, it’s a flat turn off.  Our culture is based more on politeness and friendliness.  Bark at your customers or even insult them and they will walk elsewhere. 

 

Tomorrow, Part 2 of this post.

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Since Virgin America began operations, I’ve been watching for something sensible to happen.  There have been a few developments that make sense. 

 

In addition to VA’s initial trans-continental routes, they began to add some West Coast service to places such as San Diego, Las Vegas and Seattle.  This let me increase aircraft utilization since those routes from San Francisco and Los Angeles weren’t 6+ hours but, rather, 2 hour (or less) hops.  And having a bit of network to feed into those trans-con flights made sense too. 

 

But this put them into competition with a few very well established airlines as well.  United, Southwest, jetBlue and Alaska Airlines all operate on the West Coast very effectively and on the same routes. 

 

Alaska Airlines, a legacy airline with a very good full service product started to jump on the anti-VA bandwagon and issued a number of objections to their “US Owned” status to the DOT.  Most likely because VA had a product that competed very well against their full service business class product and that was a major source of revenue.   Alaska Airlines had a lot to lose on some of those routes in particular.  Strangely, United remained pretty quiet and probably because their frequent flier program kept their business customer pretty loyal.

 

Speaking of frequent flier programs, that was another area that Virgin America was a bit lax in and that kind of surprised me too.  They had 2 extra years to develop a strong program and have the infrastructure in place to support it.  It was something that, in my mind, would have made sense since the business customer likes such programs and they had a good trans-continental service product to attract those people.  Instead, it was rolled out a tad late and still lacks much of a partnership with anyone. 

 

Although VA positions itself as a low cost carrier, it really offers a 2 class service product that is comparable to any legacy airline and, in many cases, it is a service product that is much better. 

 

Aircraft are equipped with a two class cabin (first and coach) called, oddly enough, First Class and Main Cabin.  There is a Main Cabin Select product but that’s really access to Main Cabin seats that have a bit more legroom (exit aisles and bulkhead seats) with some of the First Class service product (meals, beverages and premium tv channels are free).  It’s an economy plus plus or semi-business class product. 

 

I believe all airlines could stand to offer more service products through their cabins and this was an area that I thought VA was kind of smart in.  I still think a lot of airlines could stand to differentiate even more but I liked what VA had there.   It was more “business” than “coach” than a lot of airlines’ economy plus products and even competed very well against a similar offering from jetBlue.

 

jetBlue really took things to aother level with their LiveTV offering on their aircraft.  Virgin America took it to yet another level by offering a full entertainment system (including TV) that even allowed shopping and the ability to order food and drink from a menu, thus eliminating the traditional beverage and meal cart services.   The system, called Red, worked pretty well although some reviews had it not always working or in need or a re-boot from time to time.  Such systems do take time to work out bugs and time for staff to learn to work with. 

 

VA also got aggressive and was the first US airline to offer GoGo inflight Wifi on its aircraft.  With accomodations like power ports at each seat and the existing entertainment offerings, this was likely adding whipped cream to the ice cream.  All of their aircraft are equipped with it and Virgin says they’re doing OK with it.  Probably more so than some airlines. 

 

All of these offerings cost a lot of money to both purchase and maintain and VA continued to see red ink as time passed by.  (It is difficult to get a very good picture of VA’s finances because it continues to be a private company instead of a public corporation.)   At one point, rumors that its US investors wanted out spread around and Alaska Airlines filed yet another objection to VA with the DOT who, recently, yet again ruled that VA was more than sufficiently US controlled.  (Read THISfor more info.)   CEO David Cush did continue to speak publicly that their revenues were improving monthly and that he did think VA was edging closer to an operating profit.

 

In fact, VA did manage to eek out a small third quarter operating profit as reported in December which, frankly, surprised a lot of people.  I know I was.  It was a 59% improvement (according to VA) over the previous year’s third quarter and they managed to make it happen in what has been arguably one of the worst economic climates for airlines ever.  This got my attention.  Frankly, the climate hasn’t been good for VA since they started to improvement during those times is impressive, to me anyway.

 

Virgin America is also a bit unusual for the airline industry in that it has a number of women in senior leadership positions.  Their SVP for Inflight Services, VP – Marketing, SVP-CFO and VP – Planning & Sales are all women. 

 

Also curious is the rather interesting Canadian influence in their leadership.  The Chairman of Virgin America is Canadian Don Carty, former Chairmen and CEO of American Airlines.    Frances Fiorello, SVP – Inflight Services has had a long career with Candian airlines such as Canadian Pacific, Canadien Airlines and Air Canada.   Bob Weatherly, SVP of Flight Operations, has a similar Canadian history. 

 

And then there is the American Airlines connection which kind of puzzles me at times.  Don Carty, David Cush, Diana Walke,  and Ross Bonanno each have a history with AA.  Virtually all their senior leadership has extensive with experience with previous airlines.  In fact, after looking into their biographies, it made me realize just how VA might be managing to make it despite all predictions against them. 

 

It’s a strong team with a strong background in successful airlines that, for the most part, have reputations for good cost control and good service products. 

 

Virgin America has been on my death watch for at least a year.  Now, a lot of my inclination towards that has been based on routes.  Yes, they’ve grown and, yes, they’ve added routes.  But they don’t seem to want to really compete except where there is really low hanging fruit against their service product. 

 

They recently opened up routes between, of all places, Fort Lauderdale and Los Angeles and San Francisco.  Obviously they saw some opportunity there but I don’t get what the attraction is in adding those two routes before a lot of other opportunities.

 

VA doesn’t have an East Coast network at all.  They have destinations in NYC, Boston and Washington, D.C. (in addition to the Fort Lauderdale routes) and that’s OK.  Competing on the East Coast is brutal and those three main destinations have enough originating traffic in them that they don’t necessarily need network traffic feeding in on the West Coast yet.

 

David Cush has, at times, talked of adding routes from the West Coast to Chicago but he wants O’Hare airport and claims there are no gates to be had.  This isn’t exactly true.  There are gates but VA doesn’t want to pay the price to get entry to them.   There were, at one point, gates available at Chicago’s Midway airport but VA doesn’t like that idea either. 

 

More recently, Mr. Cush dropped hints of adding a route possibly to Austin or Dallas / Fort Worth.  Most agree that Austin might happen (there is a strong tech connection between Austin and the West Coast) but doubt the DFW possibility. 

 

You see, my problem is that VA seems to be ignoring the possibities in the middle of the country.  With their service product, they could compete very well against AA on routes between DFW and San Diego and Los Angeles.  They could compete well with AA and United on routes between Chicago and Los Angeles and San Francisco.   There is a strong connection between Denver and Los Angeles and despite the back alley fight going on in Denver, it has possibilities. 

 

They’ve by-passed Portland, Oregon which has strong ties to both LA, Seattle and San Francisco and Alaska Airlines, who owns a lot of that traffic has already proven to be susceptible to VA’s service product.

 

Indeed, if you look at their route map right now, they have every appearance of avoiding any destination that is a real hub for a legacy airline. 

 

I can’t think of a market that is more need of a real competitor in service product to destinations on the West Coast than DFW.   Completely dominated by American Airlines, the service product and prices to West Coast destinations is weak and expensive respectively.  Atlanta could stand a bit of competition on routes to the West Coast too.   The same is true for Miami, Minneapolis / St. Paul, St. Louis, Detroit, Kansas City, Cleveland and maybe even Philadelphia and Baltimore. 

 

It’s always a nice strategy to enter airports where the barriers to entry are easy and cheap when you’re getting started.  But VA is more than 2 years old and clearly has a product that, like jetBlue, can compete against major airlines and win.   In any of the major hubs I”ve named above, they are dominated by one or two airlines on those West Coast routes that are flying old aircraft with little new service product and who have much higher costs than VA.  It isn’t going to get easier to compete with these guys with time. 

 

That’s why a part of me continues to view VA with skepticism.  New airlines don’t win by being afraid to compete.   Airtran and jetBlue are perfect examples of airlines who were willing to go up against major legacy airlines and beat them on both price *and* service.   Airlines who weave and duck from their opponents tend to lose.  Skybus was a great example of that. 

 

There are often moments that are ripe for smaller businesses to make a commitment to going against their major competitors and, if you wait too long, those moments go away and never come back.  I’m starting to sense that Virgin America is beginning to lose those moments. 

 

Would I fly VA?  Sure.  I’d love to enjoy their service product.  However, they fly nowhere I want to travel so it is going to be a long time, if ever, that I get to try them.  Would I suggest them?  Absolutely.  At least for now.  They aren’t going to go bankrupt any time soon.  They’ve managed to get past that infancy stage now and kudos to them.  They offer some fantastic prices on their routes and I doubt anyone would be disappointed by flying them.

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Now that it is 2010, what can we expect?

 

Unlike this time last year, probably not much.  There was some momentum for change last year that really doesn’t exist this year.   Airlines will continue to fight to hold their own in the marketplace and with the reduction in capacities, even the worst of the lot will likely cling to life this year.

 

North America:

 

Major airlines of North America have made all the changes they can and all are managing their businesses and cash very closely right now.  I don’t expect much, if any, change to develop in the next 12 months but let’s take a look anyway.

 

American Airlines has some labor issues to address but with the current economic climate, they have been getting away with their efforts to defer those issues.  Labor unions would like to push a few issues with American but they’re smart enough to realize that now isn’t the time.   Most likely they’ll continue their face saving efforts at making a point with their members but I don’t expect any real labor action at this airline this year.  Perhaps, if things get better, we’ll see some movement in the 4th quarter.

 

United Airlines, my least favorite legacy airline, has similar issues that American has with labor but, again, those labor issues aren’t likely to see much movement either.   I suspect that United will continue to move more of their flights over to regional airline partners because its worked (for now) and their customers will find themselves on more and more regional jets.  Since price is the prime driver for customers right now, they’ll accept that move and hate the flights as much as they always have.

 

Delta/Northwest should see more of its operatioins combined and, possibly, a unified single operating certificate by the end of the year.  That doesn’t mean much for their customers since Northwest aircraft are being painted into Delta colors at a furious rate.  The service product is already being harmonized to a fair degree and it’s a good one already. 

 

I don’t see any major aircraft purchases and I remain interested in whether or not they’ll keep their 787 orders.  There has been rumour and innuendo that they won’t but I kind of think they will keep them.  Their 767 fleet is old (except for the 767-400) and I can’t think of a reason why you wouldn’t want to have the 787 begin filling the role of those aircraft.  I’ve wondered if their hints aren’t just an opportunity to get Boeing to get interested in offering a better deal for more aircraft. 

 

US Airways needs two things in this next year.  First, they need their pilots to get together and start operating as a single group.  As dangerous as it is to try to interfere with a union group, I wonder if US Airways won’t wade into the problem in an attempt to have a final resolution.  Certainly they could argue that they’ve been patient enough. 

 

They also need to manage their cash very, very closely.  Cash is blood to an airline and US Airways has a bit of risk in this department.  Should cash holdings be depleted more, they’ll have to start seeking that merger partner again and no one appears interested in marrying with them.  This is another reason it needs resolution for its labor problems.   That said, I don’t see US Airways disappearing or filing for bankruptcy again. 

 

Continental Airlines has felt the hurt this past year and its unlikely to feel much better this year.  Their business model depended a bit more on business class travel and the economy hurt that demand the most.  That said, I can’t imagine a better group of managers for keeping that airline on track through the rest of the downturn.  Things will hurt and belts will be tightened a bit more but I don’t see the service product changing.   When the economic downturn does really turn the corner, Continental will be better placed to succeed than many. 

 

Despite their recent move to the Star Alliance, I do *not* see Continental getting any closer to United Airlines whatsoever.

 

Low Cost Carriers / Regionals:

 

Southwest Airlines continues to manage itself to the tune of its own drummer and the results of their long(er) term thinking are showing left and right.   They’ve managed to make solid overtures to business clientele in areas that, I suspect, count more day in and day out.  

 

I don’t see a merger partner in the future for them except,  possibly, for Sun Country Airlines.  For some reason, I see this as a real winner for Southwest in that it gives them space and routes in Minneapolis / St. Paul, a labor group that is accustomed to delivering Southwest style service and which can be harmonized into the Southwest labor groups relatively easy.  There is no rumour of this purchase but Sun Country has its own problems and it’s a match that fits the Southwest acquisition model. 

 

I think Southwest will remain persistent in its Denver expansion and will work hard to create a network in the upper midwest states of Wisconsin, Minnesota, Illinois and Missouri.   The wild card, in my mind, is the Washington D.C.  area and the NYC/Boston areas.   Shuttle type service is what Southwest knows very well and I wonder if they won’t try very hard to organically grow their flights in these areas.  If so, Southwest needs to find an “in” at Washington Reagan airport.  To do this, they would need to buy a shuttle operation from US Airways and/or Delta.  Perhaps US Airways will be interested in such a sale if their cash holdings erode more. 

 

Frontier/Midwest/Republic:   I don’t know what happens here.  Midwest really isn’t an airline anymore.  It really isn’t even a brand anymore.  It’s a name for selling tickets.  Frontier remains an airline and a brand and Republic seems to want to continue caring for both.  Since Republic is managed by very smart people, I kind of think that they may look for a way to wind down the Midwest name over the next 12 to 18 months and make Frontier the primary airline.   A tasty cookie isn’t a good reason to keep the Midwest name around.

 

Airtran deserves some applause.  This airline has managed to grow itself some, find new markets and earn some money during one of the worst downturns in the airline industry.  

 

Their move into Milwaukee has succeeded and promises to continue to succeed.  Milwaukee is a loyal city, to be sure, but it is a city that appreciates value even more.  Airtran has managed to offer great value, good service and appeal to a city that just a couple of years ago was kind of anti-Airtran.   The one obstacle in their way is the arrival of Southwest, another airline very good at offering value and appealing to the Milwaukee kind of customer.   I think Airtran has the upper hand but they are by no means the sure winner in this market.  Southwest may be able to beat them with frequency.

 

Virgin America keeps showing up and usually right after I become convinced they’ll disappear.  I still don’t know what this airline does best and I still don’t see them as being a scrappy enough operation to fight their way into the cities it needs to be in.   Virgin continues to dance around Chicago (claiming they can’t get space but if they wanted it bad enough, they could).  Their product would servce cities such as Dalllas, Denver, Houston, Chicago, Atlanta, Baltimore, Philadelphia, and, perhaps, Cleveland/Cincinatti very well.  

 

Instead, they added flights from the west coast to Fort Lauderdale and talk about adding service to a Texas city such as Austin.  This is too timid.  The CEO, David Cush, seems afraid to compete against his old employer (AA) and that is a shame since they have a very competitive and attractive trans-continental product.   I would speculate on VA being bought by another airline but . . . why?  They just don’t have much there and seem to have little interest in exploiting real advantages that they do have.   Maybe they’ll just run out of money and get shut down.

 

Alaska Airlines has felt the heat from Virgin America but they continue to do pretty well with their little airline and they continue to do it without being aligned with a major.  I don’t see much changing for Alaska Airlines.  They’ll continue to be a scrappy airline with good service to a limited number of destinations.  And, somehow, that seems OK when it comes to Alaska.

 

Next up, the world.

Filed under: Airline Service by ajax
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Due to the building midestern winter storm that is already gaining strength, airlines are, once again, waiving change fees to diminish the impact of looming cancellations and delays. 

 

For a list of airlines and details on their current policies, visit USA Today’s Today in the Sky blog HERE.

 

If you have any flexibility at all, consider attempting to depart on your flight early or, perhaps, re-routing yourself through a connection in a city likely to be unaffected by the weather.  Considering the current weather picture and current forecast, hub cities such as DFW, Houston, Atlanta, Phoenix, and Denver. 

 

Hub cities such as Denver, Chicago, Minneapolis, Detroit, Cincinatti, and Cleveland are all likely to be affected at least somewhat by the looming weather over the next few days.   Based on that, airlines likely to be most affected might be  Delta / Northwest Airlines (Minneapolis, Detroit), United Airlines (Chicago and Denver), American Airlines (Chicago), Airtran (Milwaukee), Southwest (Minnesota, Wisconsin, Illinois, Colorado, Michigan), and Continental (Cleveland).

 

Hint:  If you are a member of a frequent flier program, see if there is a dedicated phone number you can call.

 

Hint:  Make sure your cellular phone is charged and you have your charger in your carry on luggage.

 

Hint:  If you have a laptop computer, consider traveling with it in your carry on luggage.

 

Hint:  If you are seeking to re-route yourself, explore options among codeshare partners with your airline when speaking to a reservations agent.

 

Hint:  If you must board and travel on a flight in a city being affected by the storm, purchase some snacks and water in the terminal to take on the aircraft with you.

 

You can review all travel hints by clicking HERE.

Filed under: Airline News, Travel Hints by ajax
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At the first of the year, I wrote 3 blog posts shown HERE, HERE and HERE.  It was really just my random speculation on what to expect over the next 12 months.  Well, now it’s December of 2009.  Let’s see how I did.

 

Boeing 787:  I guessed at an April 2009 first flight.  It still hasn’t flown although speculation has it flying this month either by December 14th or December 22nd. 

 

Airbus A380:  I guessed they would make their goal of producing 21 aircraft this year.  As of November 30th, 2009, Airbus says they have delivered 7 A380 aircraft this year.  Ouch.  This is a program that is in financial trouble.  No, I don’t think it will be cancelled.  Not yet but please don’t try to tell me this program will make a profit. 

 

My deathwatch had Midwest Airlines going away most likely by a sale.  That did happen and while the airline has essentially evaporated (from its original form), it does remain as a brand being run by Republic Airways.  

 

I speculated that Frontier Airlines would be bought out of bankruptcy but I guessed that jetBlue would be the buyer.  In fact, Southwest Airlines and Republic Airways were the suitors and Republic won.

 

I thought that United Airlines and US Airways would announce a new merger with Continental a dark horse candidate for buying United.  In fact, Continental became a member of the Star Alliance and firmed its relationship up with United but wisely kept its distance otherwise. 

 

I said that Southwest Airlines would maintain its status quo but that Gary Kelly would be under fire from both employees and outsiders and he was.  However, that view is already being reversed again by Southwest’s resurgent strength in the business.

 

I thought that the Middle Eastern airlines such as Emirates, Etihad and Qatar wouldn’t see a bankruptcy or merger but would slow their growth and aircraft deliveries.  That, in fact, has happened and now we see Emirates working hard to distance itself from Dubai World’s financial woes.

 

China:  I said deferred orders.  Pretty much what happened.

 

The Far East:  I said airlines from that region would maintain their status quo, probably would not defer orders and might make new orders to replace existing equipment for greater effiency.  Again, pretty much what happened.

 

Australia:  I saw QANTAS slowing growth, deferring some orders and fighting hard against new entrants.  Again, that’s pretty much what happened.  I also saw two weak competitors on the US-Australia routes:  United and V Australia.  That is pretty much what is happening although V Australia has been pretty smart in working into a relationship with Delta where it appears the two airlines will cooperate with codeshares.  United remains alone and with weakening demand.

 

South America:  I said the Argentine government would take Aerolineas Argentinas back from Grupo Marsans and the airline itself would muddle along or contract rather severely in some areas.  Bingo.  Exactly what happened.  I also predicted Azul would become the jetBlue of Brazil and its not hard to guess that that airline is pummeling its competitors.  A future prediction was for the airline to fly internationally in 2014 with Airbus equipment.  We’ll see.

 

Africa:  I saw Delta continuing to pursue flights to major African cities (true) and SAA (South African Airways) issuing a small RFP for 777 aircraft to replace its rather inefficient A340 aircraft (didn’t happen.)

 

India:  I thought Jet Airways and Kingfisher might merge with the name Jet Airways being retained.  In fact, both airlines continue to exist but both are suffering severe financial problems, deferring aircraft deliveries and generally flailing about trying to find a way to continue.   One of these airlines will still ultimately have to exit the market and I continue to think it will be Kingfisher.  They have the wrong aircraft and the wrong aircraft on order.  However, Jet Airways is suffering badly from labor actions among its employees. 

 

United States:  I picked United to fail.  It hasn’t happened and while they continue to live, their cash holdings are being reduced, they still have severe labor issues, their service product continues to suffer and I still think they should be the ones to disappear.  I also thought Glenn Tilton would be ousted and, possibly, replaced by Doug Steenland.  That didn’t happen but John Tague has been groomed as Tilton’s replacement.  I still think Tilton should go if United can’t fail.

 

Europe:  I thought we would hear of a surprise from Lufthansa.  I didn’t like their purchase of SWISS and I didn’t like their flying the A340 in competition against the 777 being flown by many of their direct competitors.  They’re still here, still making money and they bought BMI.  I still think we’ll here of misfortune from them but apparently it will take a while longer. 

 

Random Speculations:

• I thought Southwest might add another aircraft type.  It didn’t happen but I think their interest got perked up when they looked at buying Frontier and saw the economics on the Q400.
• I thought Delta might order more Airbus A330 aircraft.  Instead, Delta is parking them in the desert for the winter season.
• I speculated that both China and Japan would defer or drop their regional jet programs.  That didn’t happen but the Chinese jet program appears to be a bad aircraft and unlikely to be used by anyone except Chinese airlines forced to buy it.
• I thought Bombardier would see a major order (20+) for their Q400 series aircraft from a US customer.  Horizon Airlines did up their orders  for 10 more but there were no other significant orders. 
• Airtran to form a small midwestern hub.  Yup, that happened.  In Milwaukee where they’ve taken over from Midwest Airlines and now face Midwest (brand owned by Republic) and Southwest Airlines entry into the market.  I think Airtran will hold on here and continue to develop business.
• Last, I hoped that jetBlue or Virgin America would enter the DFW market.  Virgin’s CEO, David Cush (formerly of American Airlines) did recently speculate about adding flights to either DFW or Austin.   I suspect they’ll choose Austin and DFW will remain a fortress for AA.

 

That’ s it for my 2009 predictions.  I’ll make more at the start of 2010.  On the whole, I probably did as well as anyone in making predictions in this business.

Filed under: Airline Fleets, Airline Service, Death Watch by ajax
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Well, actually, the one thing that is certain about Southwest Airlines is that it continues to surprise everyone on a regular basis.  Almost always in a positive way. 

 

It wasn’t that long ago that quite a few people were very critical of Southwest and its CEO, Gary Kelly, for not being a lemming and following industry trends such as charging checked luggage, changing a ticket or even beverages.   Indeed, I’ve seen a number of posts on various airline websites offering glum predictions for both Southwest and Mr. Kelly.   It has grown a bit quiet in the past month, though.

 

Bucking trends and doing it their way is Southwest’s model.  It’s worked for them throughout the history of the company and while, yes, it is true that they’ve made a few mistakes here and there, they’ve also seen great success year in and year out.   By sticking to their plan for attracting customers on the basis of offering their base product at a great value and with no extra charges, they seem to be gaining quite a bit of steam.   The Associated Press is reporting that Southwest has announced a significant uptick in traffic and revenues for the last month.  Again.

 

Throughout the first part of the year and even through the summer, pundits and financial analysts have hammered Southwest for sticking to its strategy and Mr. Kelly has steadfastly reaffirmed that they’ll be sticking to their plan and that they are starting to see positive results from that plan.  I think those results are in and this is good for Southwest for a few reasons.

 

First and foremost, that uptick in traffic has to contain quite a few new customers for Southwest.  Customers that have either never tried Southwest or who tried it so long ago that they are, for all intents, new customers.  And I suspect people are discovering that it isn’t your father’s Southwest Airlines from the 70’s and 80’s and it is a great value for all kinds of travelers.   For the customer looking for a reliable airline with a good record of both safety and on-time arrivals a swell as a convenient schedule, Southwest is an excellent answer.  They’ve got good, new aircraft with comfortable seats (still some of the most comfortable in my opinion) with friendly staff.  That’s what people want. 

 

It’s good for Gary Kelly too.  He’s coming into his own as the leader of Southwest and, to his credit, he has shown little inclination to engage in change for change’s sake and he’s demonstrated quiet confidence both in himself and the direction of his company.  I have no doubt that he’s earning even greater respect from his employees as well as his shareholders.

 

Sure, Southwest has made a few mistakes.  Most notably their fuel hedges have been a liability a few times in the past 18 months and, of course, there was that little Frontier Airlines fiasco last summer.  One thing that bothered me about their attempt to win Frontier Airlines was that it was *too* much of an amateur performance for the Southwest executive team.   That team is not a bunch of huckleberries.  They are a very saavy group of managers that would be an enormous credit to any airline in the world.  In hindsight, I wonder if the Frontier purchase attempt wasn’t just an attempt to get a great bargain with the approach of “it isn’t a deal if it isn’t a deal”.   Certainly you didn’t see Southwest walking away hurt or pouting.  Instead, they continued on with their business and never looked back.

 

One minor prediction:  I would be wholly unsurprised to learn that Southwest either adjusts or deletes their new priority boarding option.  Overwhelming conclusions to date are that it doesn’t really net you all that much advantage with the way it is presently structured.   I suspect a fee change (lower) or a rules change may come along after another 6 to 12 months of it being deployed.

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That isn’t a big surprise to most readers of this blog and one very good reason why I’ve said little about the event.  Despite the long program delays and disappointing news of certain developments about this aircraft, I remain extremely excited about this aircraft.   Perhaps for different reasons than most, though.

 

Mainstream press continues to speak about the 787’s increased comfort potential for the passenger and sometimes mentions the efficiency the aircraft will offer airlines.  All that is true but it excites me for different and more specific reasons. 

 

First and foremost, it is the first truly new aircraft to come from Boeing since the 777 made it’s first flight in 1994.   Since then, there have been improved variants of the 737, 767 and 777 introduced but this is the first “from scratch” aircraft to show up in 15 years from Boeing.  That is exciting to me.

 

One of the most disappointing results from the Boeing / McDonnell Douglas merger is that, in many respects, Boeing was taken over by McDonnell Douglas managers rather than the other way around despite the fact that, for all intents and purposes, it was really a Boeing takeover of McDonnell Douglas.   Since that merger, Boeing has been much more intently focused on developing its defense businesses almost at the expense of investing in Boeing Commercial Aircraft.   That has been disappointing and a bit perplexing to me given Boeing’s ability to build fantastic aircraft for the commercial world.

 

So I hope that this aircraft, the 787, represents a return to innovation and development for Boeing Commercial Aircraft.   I hope that a new, younger group of managers is being born from this program that will lead Boeing’s development of new aircraft such as a 737 replacement, a 757/767 replacement and, yes, a new 777/747 replacement too.   But I remain concerned if for no other reason than Boeing seems to be ignoring new competition from Bombardier and EMBRAER who are now challenging the 100 to 130 seat domestic segment in the US and elsewhere.   If Bombardier can build its new C-Series aircraft with union labor in Canada, Boeing should be more than capable of developing a new family of aircraft to compete against those two companies.

 

While the first flight is truly on track to happen in the next two weeks, the burning anticipation of that first flight has, if anything, died down in many respects.  Those who have followed it tortuous path to first flight recognize that it isn’t the first flight that means anything now.  The aircraft is so mature in its development that we know it will not only fly but fly very successfully.  We know that the major teething problems are almost certainly over now.   There isn’t any need to speculate on its performance on a first flight and really nothing to wonder about for its testing over the next 12 months.

 

The real anticipation comes from seeing it perform with an airline.  We want to see it enter an airline’s fleet and see how it performs during real world use.   We want to see if airline CEOs proclaim it the game changer we all ferverently hope it is.  We even just want to see what the airlines’ liveries will really look like on it.  The real next “moment of truth” for the 787 is when it enters a fleet in its new livery.  The launch customer is All Nippon Airways (ANA) and we should see ANA put the 787 into service sometime in late 2010.

 

The 787 should see service with a US airline in late 2010 or early 2011 and it will be Delta Airlines who has the honor by virtue of inheriting Northwest Airlines’ orders.   I suspect we’ll see Delta order more shortly after the 787 begins operating in its fleet.  Continental Airlines will put the 787 into service a short while later.

 

This is the most anticipated large volume aircraft to be designed and built since the 1960’s.  That’s exciting. 

 

What’s also exciting is what this aircraft means to Boeing and its future development projects.   Will these same technologies be used on a 737/757 replacement?   Is it conceivable that they’ll be used for a Very Large Aircraft to replace the 777?  Both are possibilities.   Detractors say there isn’t as much “gain” to be had in using carbon fibre based fuselages for a 737 replacement with respect to efficiency and that is probably true.

 

However, these new techologies may mean that Boeing can produce the 737 replacement even faster.  The composite carbon fibre fuselages may mean less maintenance and longer maintenance intervals for airlines like Southwest and Ryanair.   The new engines coming into development will demand some changes too.  Larger by-pass ratio engines or, if developed, open rotor engines means more clearance will be needed between the wing and the ground.   The next aircraft will  have to stand taller and that might mean a little more time spent on ground handling.  

 

The next generation engines and Boeing decision to produce an “electric” airliner may see those approaches used in the 737 replacement.  Have we reached a point in reliability that we can expect these new systems to survive the punishing schedules of a domestic airline?  I think so but the 787 is the aircraft that must support that supposition. 

 

The 787 won’t be exciting because of what it potentially offers the customer in comforts.   Yes, no matter what we’ll have larger windows and a little bit more fresh air and pressurization in the cabin but if you think you’ll be getting more spacious seat pitch, you’ll be disappointed.   This new aircraft will be as packed as any in service now.   Overhead bins will still be crowded. 

 

My birthday is December 12th.  There is speculation that the 787 may fly as early as December 14th.  That’s close enough that I find myself kind of hoping that Boeing might pull a fast one and send it up into the sky 2 days early.  It would be exciting to have an airliner born on my birthdate.

Filed under: Aircraft Development, Airline Fleets by ajax
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What if you have to re-schedule your travel while in the middle of it?  Any regular flier dreads any changes to their flight schedules before leaving on their trip but needing to make a change in the middle of a trip is positively terrifying.

 

But should it be?  Perhaps not.  Legacy airlines are charging exorbitant fees to change flights with some reaching $150 just for the privilege of ringing the airline and asking to return a day later or two days earlier.   On American Airlines (and most legacy airlines are similar), if you change your ticket, you’ll be liable for the new one way fare plus a change fee ($150 in most cases for domestic travel) which, if you bought a non-refundable advance fare, could be exorbitant.    But you do you have options if you are willing to work a bit.

 

Recently, a friend traveled to the Northeastern US for Thanksgiving.  While visiting family, one of his parents was injured and he decided he should stay over a while longer to help out.  Changing his ticket cost him a small fortune and, unfortunately, he didn’t think to look outside the box.   If he had abandoned that ticket and simply shopped for a new ticket on Airtran, jetBlue or even Southwest Airlines, he would have saved hundreds of dollars.  Ironically, there were sudden last minute fare sales for immediate travel instituted on the very day he chose re-ticket.  

 

Flexibility, as always, is the key.  Yes, you may have to accept 1 or more connections or even explore ticketing on two different airlines but the savings is often far greater than what your time is worth.  If you feel intimdated by having to do battle with the airlines or pressured by the need to resolve the issue quickly, I highly recommend trying the Cranky Concierge service that I’ve blogged about HERE.    Airline geeks are creative thinkers and the fee you’ll pay Cranky for thinking for you will be paid for in huge savings in most cases.    What could take you 3 or 4 hours to explore (even if you’re relatively sophisticated at searching for airline fares) can be solved by someone like him in a matter of an hour or less in many cases.

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The Dallas Morning News Airline Biz Blog is reporting that Airtran is arranging for commuter airline SkyWest to fly new routes on behalf of Airtran from Milwaukee, WI to several destinations including Dallas / Fort Worth and Washington D.C.

 

SkyWest will be using 50 seat Bombardier CRJ-200 aircraft for these flights and that interests me for a few reasons.  Due to long time personal connections to Milwaukee and living in Dallas for the past 40 years, I’ve long monitored what various airlines offer between the two cities.  Strangely, it’s a city pair that does have a lot of traffic but it has never been served very well by any one airline.

 

I suspect the establishment of this route is really for a few reasons.  One, it allows Airtran to compete with the current “dominant” player on the route which is American Airlines.    American Airlines at one time had as many as 5 frequencies on the route until the current economic decline.  Presently, they are serving it with 3 flights a day using Embraer ERJ-145 aircraft.    The flights haven’t been well served that aircraft because the flight duration exposes a lot of discomfort for the passenger during the 2.5 hour flight.  In addition, it has often been necessary to deny boarding to passengers due to weight and balance issues for making the flight.   The airplane often cannot carry a full load and enough fuel for the flight.

 

But American’s only real competition for non-stop flights has been Midwest Airlines.   Midwest has flown about 4 frequencies per day using the Boeing 717 and now the Embraer E-190.   Anyone who has flown Midwest on that route knows that that is a very comfortable flight and generally staffed with much nicer people.  Midwest has a loyal following on that route and I suspect Airtran wants to try to eat into it using price. 

 

Finally, by offering the non-stop flights, Airtran gets to tweak the nose of its newest competitor in Milwaukee, Southwest Airlines.   By starting this route now, Airtran has an opportunity to grow the business and offer a competitive distinction between themselves and Southwest in the Milwaukee market.  Southwest Airlines cannot fly that route as a non-stop yet because of restrictions placed on it due to their using Love Field airport in Dallas instead of DFW. 

 

Airtran is likely to be very successful on that route because American Airlines has never treated it as anything but an unloved step-child and much of the traffic between the two cities is O&D rather than follow on traffic.   American may retain some passengers for follow-on travel to regional destinations around Texas but I suspect that will be done by using 2 flights a day in the near future. 

 

In addition, Airtran has managed to endear itself to Milwaukee despite the ugly picture painted about themselves when they were attempting to take over Midwest Airlines.   Locals in Milwaukee like them and have found them to be a real alternative to Midwest Airlines both on price as well as quality. 

 

I think Airtran will manage to grow this route (as well as the others being served by SkyWest) and ultimately take them over with their Boeing 717 aircraft in the future.    Airtran will likely erode AA’s traffic first and then take over some of Midwest’s loads on price allowing them to ultimately become the dominant player in that city pair.  It’s doable using a CRJ-200 for now and upgradeable to a Boeing 717 pretty quickly in the future.

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Almost everyone who follows the airline business and the airlines themselves continue to insist that people buy overwhelmingly on price and there is quite a bit of evidence to support that general feeling.    The best example is that among legacy carriers serving a particular non-stop route, when one airlines lowers their price, the other airlines can and do see a drop in their bookings for that route if they don’t match that price.

 

There is a lot of truth that individual routes can be seen as nearly perfect competitive environments.  Any airline executive worth his salt will tell you that when an airline opens up a city pair, they look upon it as growing another business.  Each route is a “business” to be developed and nurtured and maintained.

 

Legacy airlines are the masters of being all things to all people.  Low cost carriers are the masters of high frequency/low cost models.  Leisure airlines have learned how to serve market with low frequency but high value.  

 

But what do most people want?  That isn’t ever as clear as people want to believe.  The dynamics between two cities change over time and adjusting to those changes is essential to maintaining that “business”. 

 

My father, once a very senior airline executive, told a story to me long ago that I’ve never forgotten.  His airline, Braniff, served the Dallas / NYC route with a daily late afternoon flight that for years was a huge money maker because it was flown primarily by businessmen.  In the mid-1970’s, they noticed that traffic on that route began to erode ever so slightly and even a small erosion worried an airline even back then.   Then he happened to take the flight to do some financial business in NYC on behalf of the airline and he realized the problem.

 

Business between the two cities had begun to change.  Traditional businessmen such as bankers or leaders of large corporations had continued to fly that flight because their model was to go to NYC the night before, conduct some business until 2 or 3 in the afternoon and then fly home to be in their own homes by mid-evening.   But entrepreneurship had begun to flower and more and more businessmen/entrepreneurs saw that as a waste of time for such a trip.  They wanted to work until late afternoon and fly home as late as possible in order to maximize their time there.

 

So Braniff added a second flight in the early evening that allowed businessmen to work until 4:30pm, go to the airport and catch the 7:30pm flight home which put them back in Dallas late at night but which met their needs to stay as long as possible to maximize their work.   As a consequence, both flights began to do much better because even the entrepreneurs could recognize that when their work was done, it was time to go home and if it was done at 2pm, they went to the airport and caught the early flight home.  Traditional businessmen began to be expected to be more efficient and when they couldn’t leave at 2pm, they knew they had another option for later in the day.  Braniff began to own that route again.  Frequency was the answer.

 

I would argue that when two or more airlines “own” a route, service is often going to be the discriminator.  But what form of service will be necessary?  Is it options in seating that allow a traveler to have more legroom?  Is it more frequency?  Is it some form of a meal?  Is it WiFi or video on demand?

 

For 30 years airlines have worked to harmonize their fleets, reduce the different number of equipment types and flatten their service offerings to the lowest common denominator.  Particularly the legacy airlines.  But for the past 10 years, we’ve seen new airlines offering more segmented choices on each flight and those airlines are the ones who continue to earn a profit, experience growth and satisfy shareholders.

 

There have been some half hearted experiments with increased choice and segmentation.  Delta had Song airlines offering more entertainment and a brighter, cheerier environment.  United had Ted airlines which was economy oriented.   But I suspect that it wasn’t necessary to change the brand so much as it indicated a need to offer more choice on the aircraft.

 

I think in the future we’re going to see more choices in seating on airlines.   The low cost only passenger wants price above anything else.  The business traveler needs an economy choice (to satisfy their company’s desire to economize) that offers a little more room.  I think we’ll see different seat pitches offered and different service choices (a la Frontier) offered as well.  This is an area where Frontier has pioneered change and seen positive results.  Same for jetBlue.  Those airlines continue to earn an operating profit and grow.

 

Legacy airlines are going to have to be more flexible in fleet, fleet configuration and they’ll even have to consider offering things like meals and entertainment.  There already is a move to do this among certain airlines.  Continental is adding LiveTV to their fleet.  Delta/Northwest has recognized that having a varied fleet allows them to “tune” their service to the demands and continue to earn a profit. 

 

When an airline can adjust capacity on a route by season, month or time of day, it can continue to make money.  When it has just two choices of aircraft to use on a route and both have more capacity than needed, they start to lose money.  (Hello AA.)

 

I think that one day one legacy airline will have the guts to start advertising in markets that speaks to “real world” experience on their line versus the airline that “owns” the city.   For instance, I think Continental could come into the Dallas market and already argue that yes, you have to connect in Houston to go to NYC but if you do, more often than not you’ll get there in the same time with better service than flying American Airlines who has an untrustworthy on-time record and who treats their passengers to old aircraft and little or no service.   Someone will have the guts to start trying to change the perceived value of travel.

 

The truth is that there is a great difference between legacy airlines on any two city pairs.  The key is to identify that difference and communicate it to the traveler.  Right now, that really doesn’t happen.   An airline such as Continental shouldn’t attempt to compete with AA on price alone.  They should offer the real differences such as a meal on flights of 3 hours or more, LiveTV, equipment that is as much as 10 years newer or more than AA and a staff that enjoys doing its job.    They should offer incentives for changing airlines and trying them once such as a guaranteed business class seat for the price of AA’s economy seat. 

 

It will happen in some form.  It has to.  The newer airlines such as Frontier, Airtran, jetBlue and Virgin America have all proved that offering more choice on the aircraft works.  Even Southwest has recognized that it has to offer more choice in order to retain their very valuable business traveler.   What’s more important is that even some passengers who buy on price alone have realized that the incremental extra cost of one or two of those “extras” is worth it once again.

Filed under: Airline Fleets, Airline Service by ajax
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The Fort Worth Star Telegram’s aviation Blog, Sky Talk, writes about Delta beginning service from Dallas Love Field Airport to its Memphis, TN hub today.   The flights will be flown by Delta’s regional jet provider, Pinnacle Airlines, under the Delta Connection name.    They will start 3 daily flights on July 6 and use CRJ200 aircraft which are exempt under the Wrigth Amendment and Wright Agreement since they have less than 56 seats. 

 

It’s an interesting move for Delta and I do wonder how they identified that segment being of good potential.  Since it is a Delta hub (ex Northwest Airlines), it can provide connections to a wide variety of destinations but I’m not sure if the destinations are where the typical Dallas business traveler wants to go.

 

One thing is for sure.  If history is anything to go by, American Airlines may already be re-thinking its withdrawal from Love Field and trying to identify how to answer this challenge to its turf. 

 

I do wonder whose gates Delta is going to use.  Currently, AA and Continental hold the only usable gates in addition to Southwest’s.   Delta has not identified which gates it will use so far and American Airlines has said it has not negotiated any sub-leases either.  Continental perhaps?

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USA Today’s Today in the Sky Blog is reporting that Alaska Airlines has announced that it will begin charging a 1st bag checked fee on July 7th.  This announcement comes after reporting more losses for this past quarter. 

 

I remain adamantly against the 1st bag checked fees being charged but must admit that if an airline was going to do one, it should do one in the manner of Alaska Airlines.  Alaska Airlines is going to offer a guarantee that your bag will be at the carousel within 25 minutes of arrival or you receive $25 or 2500 frequent flier points. 

 

This allows Alaska Airlines to compete better against legacy airlines by bringing their bag fees inline with the rest of them but offer greater value in the process.  This is a guarantee that I suspect will net a real response for Alaska.   No other bag check fee offers such a guarantee at present.  To the contrary, all other airlines charging such fees continue to do so in light of rather severe delays and losses for baggage. 

 

This addition also finds Southwest Airlines, last of the real majors and borderline legacy airline, the lone standout for baggage fees.  Gary Kelly, CEO of SWA, was even badgered by financial analysts during a recent conference call to discuss the most recent quarterly reports to consider adding such fees.  Kelly has steadfastly refused so far claiming that Southwest sees this move as being a strong negative among its customer base.  I actually agree since their customers remain some of the most price sensitive in the market.

 

It also stands in contrast to Delta Airlines’ recent announcement of a $50 first bag checked fee for international flights.   A move that I predict will ultimately be rescinded due to competition from both US and foreign based international carriers.

 

The question is whether or not other airlines currently charging such fees will be willing to offer similar guarantees.  Since so few compete with Alaska Airlines right now, I suspect it will be resisted as competition.  However, I also believe that one or more legacy airlines in the US will now begin considering the introduction of such a guarantee in order to bolster their position against their competitors.  My pick?  Delta Airlines or Continental Airlines.

 

Delta has an executive team that is  well aware that the a la carte pricing model is successful but they are also the most cognizant of presenting real value for their product.  Continental Airlines could steal a lot of press and thunder by making such a guarantee and it would also align them more close to Alaska Airlines, an existing Continental code share partner.

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The Dallas Morning News Aviation Blog is reporting Southwest’s new announced NYC-La Guardia Airport Schedule.   As expected, there are no real surprises as to where they are flying and how often.  The only surprise is that they figured out how to add an eight slot pair to the seven they purchased for $7.5 million.

 

Simple.  They scheduled a flight *before* daily slot controls come into effect and one flight *after* daily slot controls end each day.  Southwest is already crowing that they are beginning to figure out how to game the system.  I wouldn’t necessarily pat myself on the back yet if I were them.

 

Where are they flying?  Chicago and Baltimore just as every person expected.  Both cities present opportunities for traffic originating in those cities as well as connecting traffic from still more cities.  However, Dallas does not find itself in a convenient position for traveling to La Guardia.  Under the present Wright Amendment rules, it will take 2 stops to get to New York City.  First, you have to fly from Dallas to a Wright Amendment destination (one of the contiguous states next to Texas or one of the legislated destinations such as Kansas City) and then from one of those cities, you’ll have to travel to Chicago or Baltimore where you will connect again to go onwards to New York City.

 

I don’t expect a lot of traffic originating from Dallas to NYC.  Not until the Wright Amendment expires and allows Southwest to operate like any other carrier in the United States. 

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Southwest Airlines has added a new city to their route structure.  Minneapolis / St. Paul, initially having just one destination on Southwest to Chicago, will soon link up with Southwest large station in Denver.  It was announced on Southwest’s Blog, Nuts About Southwest, just yesterday and was woven into a brief April Fool’s day prank.

 

I would expect more cities over the next few months.  Connections to Detroit, Indianpolis, St. Louis are all possibilities.

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