If you fly enough, you’ll have a bad experience on an airline.  It is inevitable and one bad experience does not describe an airline’s ability to delivery service.  Too many people judge airlines on one experience, in my opinion.

Social media can be similar.  One bad rant does not describe an airline.  However, one bad rant does have the potential to become the story.  Recognizing that, many airlines have adopted social media departments to help control the story.  I’m fine with that because why shouldn’t an airline be able to defend itself?

However, then there are the airlines who adopt social media solely to try to control the story and those airlines are missing the picture when it comes to social media.   Participating in the story is just one half of the objective to social media.  The other half is responding. 

In the social media sphere, it’s about quick and timely answers with real solutions.  Some airlines have figured that out, some haven’t.  Some airlines who have figured that out still slip and fall from time to time.  That’s the nature of the game in social media. 

It’s about risk.  Social media is about accepting a certain amount of risk in letting your social media department respond with a certain freedom accepting the idea that vetting an answer or only permitting non-responsive answers isn’t going to promote a good image.  Instead, airines who do this well accept the idea that you cannot always make a bad story go away even when you do answer appropriately.  Think Kevin Smith and Southwest Airlines.

Now we have This Rant about American Airlines.  American Airlines doesn’t possess the kind of corporate culture that succeeds in social media.  The first word of advice I would give them is that if you cannot empower your social media team to make something happen, stay out of social media.  Lame responses really are worse than no response and, what’s more, they give your competition an opportunity to poke at you. 

What this gentlemen describes, I’m sad to say, is far more common than it should be.  His experiences are exactly what I have experienced over and over again.  They are the reason why it is a better bet for me to fly SWA or Airtran or Continental with a connecting city than it is to get on AA to fly someplace non-stop.  The really insulting part of it is that if you are flying from an AA hub, you more than likely are paying a higher price for that non-stop flight. 

Furthermore, these kinds of experiences including the social media Twitter response point up to just how little AA does value its customers.

Filed under: Airline News, Airline Service, Airline Social Media by ajax
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They did it again.  AMR, parent company of American Airlines, has lost money for the 1st quarter of this year totaling $436 million.  Ironically, AA executives will likely earn bonus compensation this year because of the way their compensation deal is structured to offer shares in the event that the 10 major shrink to a lesser number.  They have.

1st Quarter Earnings reports will probably show just a few airlinese earning a profit:  Southwest, JetBlue and Alaska Airlines.  Losses will be blamed on higher fuel prices (they are) and airlines earning a profit will have that attributed to being a low cost carrier with lower costs.

That isn’t so true.  Southwest’s costs are less than, say, American Airlines but they are no longer the lowest in the business.  Alaska Airlines is certainly not a low cost carrier as they operate like a legacy airline and they are a legacy airline.  They have, however, been smart in renewing their fleet with very fuel efficient aircraft in contrast to the other legacy airlines who haven’t. 

There are a few lessons here:  Fuel is and will probably be the most volatile component in airline operations going forward.   Labor may not be the key driver in airline costs anymore.  Fuel efficiency is probably going to win over “cost of ownership” when it comes to the decision of buying new aircraft.  Delta’s model of retaining old aircraft may end up being a very poor strategy with volatile fuel prices.  Finally, good labor relations leads to good productivity and good productivity leads to profits.  All three of those airlines work hard to maintain good employee relations.

Back to AMR:  It’s unsurprising that the flight attendants are ranting at American Airlines for its poor performance.  Their methods are incendiary but their point should be taken:  This isn’t a leadership team that has performed.  Mitigating losses to a lower level isn’t performance.  Particularly when taken into account over the past 10 years. 

Arguing that the compensation paid to the executive team is necessary to attract competence is probably a valid point.  AA has often argued that it has to pay the salaries it pays in order to attract talent and keep it.  The question that, I think, has gone unasked is:  Is this really a top talent team? 

Can you really argue at this point that the executive team is full of top performers when the total losses over the past 10 years adds up to over $11 billion?  Pay the compensation, absolutely.  But perhaps it’s time to pay it to airline talent that have a better track record.

Remember that this is the team whose corner stone strategy includes waiting for other airlines to have the same labor costs as they do.

Filed under: Airline News by ajax
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AMR has said in today’s financial results call that it will order an additional 2 more 777-300ER aircraft from Boeing. 

Is American Airlines opening up piggy banks one at a time and counting their pennies and only ordering aircraft as it is sure it can pay for them?  This makes for 5 total aircraft ordered of the 777-300ER over the past 4 months.  The orders, so far, were initially for 2 with one added the following month and now an additional 2 more added.  Each of these aircraft will be delivered in the 2012-2013 time period.

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American Airlines and Japan Air Lines can now start cooperating over the Pacific and that can’t come too soon.  JAL is emerging from bankruptcy and while it has new financing, it still has a lot of work to do.  Combine the exit from bankruptcy with the recent earthquake/tsunami disaster and you’ve got an airline that has a lot of struggles ahead of it. 

American Airlines also is suffering.  Projected by some to have as much as $1billion in losses for 2011, AA needs to get some things right.  It’s now starting to benefit from its trans-Atlantic cooperation with British Airways, Iberia and other smaller Oneworld partners but only time will tell if that is truly successful.

Oneworld partner, International Consolidated Airlines Group (British Airways / Iberia Airlines) has also just expressed an interest in taking a stake in JAL when it is re-listed for stock exchanges.  This is Oneworld bringing the network closer together among partners.

AA and JAL can now cooperate similarly and both would be wise to consolidate some service between the US and Japan for the near future.  Rather than see a splashy introduction, I think we’ll see both of these airlines act as quickly and as seriously as they can to preserve their revenues on flights between the two countries.  This partnership is defensive rather than offensive in the manner of the trans-Atlantic pact.

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In the last few days, there have been a lot of airliner incidents reported in the media.  Southwest Airlines had one 737 experience decompression after a hole developed in a fuselage of a 737-300.  Another Southwest Airlines 737 diverted due to flight crew smelling smoke in the cabin.  To make matters worse, during inspections of 737-300s, Southwest discovered two more aircraft with sub-surface cracking in their fuselsages.  An American Airlines flight diverted after a few passengers and flight crew became dizzy and another AA aircraft, a 767, had to return to the airport after taking off because of a suspected tail strike on take-off.  A regional jet flew into a flock of birds and suffered major damage to its nose cone and body. 

It seems like there have been several other incidents over the past few weeks as well but are things suddenly unsafe?  No, not really.  I just named 4 flights out of several thousands that have taken place over the past few days.  Statistically speaking, they are insignificant.   One thing that drives reporting of these events is whether or not it is a slow news day.  Over the past few days, we’ve had little news to block out less significant reports related to airliners.   Japan and its disaster is settling down in the news and Libya news has settled a fair bit as well.  When things are quiet, airliner incidents get reported and the more prominent the airline is, the more its incidents get reported as well.

It’s safe, go fly.

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The Dallas Morning News Airline Biz Blog had THIS blog entry last week about analysts taking issue with American Airlines’ plans for 2011.  In short, American has already said they would trim their capacity growth by about 1 percent but Wall Street doesn’t think that is nearly enough.  Actually, I think Wall Street Analysts would prefer an aircraft not even take off unless every seat is filled.

I’ve been following the airline industry for a long while now.  I’ve been writing this blog for nearly 3 years and I cannot recall American really responding with liveliness to any economic change or crisis.   Delta, an airline that is bigger and less “integrated” so far, responds quickly and adjusts its system with great fidelity.  There are no half measures and the same is pretty true for most other US based airlines.

American plods along not earning money, not dealing with its labor problems and not really making any great adjustment to any of their plans.  When they do something, even rather small, we all tend to act surprised.  Recall that everyone was surprised and commenting about their announcement that they’ll add the 777-300ER to their fleet.  Even I was surprised and a bit excited.  Then about a week later, I realized we all got excited over a purchase of 2 aircraft.  Yes, a third order was added but so what?  This was a nothing move and a nothing announcement.

Analysts are tired of half measures coming from AA and they’re tired of the rather large losses coming from AA when behemoths such as Delta and United (also Super Legacy airlines) are earning profits.  Big profits.   Defenders of AA (usually from within AA itself) love to point out that they didn’t declare bankruptcy and “screw” their investors.  No, perhaps not but they aren’t doing their investors any good right now either. 

The truth is, AA resembles that person we all know who continues to live with a toothache instead of going to the dentist and doing something about it.   Those people are tiresome and they’re often unproductive because they live with their pain instead of moving it out of the way to make progress. 

Why?  I can’t say for certain.  The motives of the executive leadership of that airline are not visible to anyone.  We can’t see inside their heads but I can speculate.  First, the board of directors is virtually handpicked by CEO Gerard Arpey.  They are, for all intent and purpose, Arpey supporters much more than AA supporters. 

Second, being an executive at AA is a powerful position and maintaining the status quo is a far more successful strategy for maintaining that power.  Revolutionaries and evangelists are not tolerated at AA.  Success is defined by increments rather than wholesale directional changes even if those increments merely mean you lost less money than in the previous financial quarter.

Third, momentum is keeping AA going.  AA has done a great job of managing its finances.  How else could it loose hundreds of millions of dollars for years and keep on going.  The well can’t keep on going forever though and it would seem that the best time for a change in leadership would be now rather than 2 years from now with AA contemplating bankruptcy then.  You can only mortgage so much equipment to keep on going.  You can only issue so much debt to keep on going. 

At some point, you need to earn a profit.  Most airlines did that in 2010.  Most will in 2011.  AA did not in 2010 and will not in 2011.  Frankly, I’m surprised that analysts are roughing up AA even more at this point.

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A local friend made a comment to me about Delta Airlines and their mish-mash of a fleet vs Southwest Airlines and their one aircraft type fleet.  His comment was aimed at the success difference between the two.

Well, not so fast.  When you consider airlines 30 years ago and airlines of today, there is one thing that stands out.  Fleet size.  Today’s airlines such as Airtran and JetBlue would be behemoths in the market place in 1980 with 138 and 163 aircraft respectively. 

Let’s take a look at what truly large airlines have in fleet size.  Southwest Airlines, the 800lbs gorilla of LCC carriers, has 547 aircraft of which all are 737s, yes, but which is actually comprised of the 122 passenger -500 and the 137 passenger -300/-700. 

United Airlines and Delta Airlines both have over 700 aircraft and American Airlines presently has about 620 aircraft.  Each of those three carriers have a broad range of aircraft types, seating capacities and range capabilities.

A one type fleet works well for the smaller airlines because, yes, it does allow them to save money on maintenance and it keeps things simple when negotiating with unions about how much one is paid to fly what type for what distance.

But as you grow larger, it really is better to have some flexibility.  Even Southwest acknowledges that the Boeing 717 aircraft they’ll gain from Airtran (number over 80) should help quite a bit in matching the right aircraft to the right route.  They’ve gone farther than that, though, by ordering the 737-800, a larger aircraft than they’ve ever operated before. 

If Southwest expects to continue to grow, they’ll have to move into both larger and smaller markets than they have customarily entered in the first 40 years of their life.  The fleet types aren’t what will make their lives complex when it comes to the cost(s) of maintaining them.  What they will have to contend with is the idea that a pilot of a smaller aircraft should earn less than the pilot of a larger aircraft.  They’ll have to deal with scheduling flight attendant crews of two different sizes and that’s something they’ve never had to do before.  Fortunately, the range in size between the 717 and the 737-800 is not so great that they can’t argue that all their pilots should be paid the same (and I would agree.)  The truth is, while their fleet may be different, the missions aren’t that different in terms of distance, turnaround, etc. 

Delta is succeeding with a broad range of aircraft in ways not seen before.  Yes, they have added complexity but an airline big enough to operate more than 700 aircraft should be complex.  Could they simplify?  Certainly.  Should they?  I’m not so sure.  There can be disadvantages to dealing with one aircraft manufacturer instead of two in terms of the bulk of a fleet. 

Neither Boeing nor Airbus can really supply enough aircraft to Delta on a timeline that would make sense to replace, for instance, Delta’s 563 single aisle aircraft.   It would take 40 aircraft a year to replace that fleet over nearly 15 years.  Those manufacturers have to supply a number of other airlines as well. 

Boeing and Airbus can deliver about 32 to 38 aircraft a year in their 737/A320 families.  A Delta replacement order would conceivably consume more than one month’s production capacity in a calendar year and there are a whole lot more airlines out there of size than just Delta. 

By using both manufacturers, Delta would get more flexibility in deliveries and more reliability as well.  This is true for any airline of size.  In addition, by making each manufacturer compete for those orders, the airline is liable to receive a better price on each aircraft and when you are talking about 500+ aircraft, that could well mean savings reaching into the hundreds of millions of dollars.

The days of ordering “just Boeing” or “just Airbus” may well be over for any airline of significant size.  This may be true even for Southwest in the distant future.  Boeing and Airbus are unlikely to remain in the 100 to 130 seat category and will probably cede that to the next generation manufacturers such as Embraer and Bombardier.  That doesn’t mean an airline, even an LCC doesn’t need those aircraft, it does. 

It’s notable that JetBlue already has a two fleet strategy as well as Airtran and Frontier.  Southwest effectively has a two fleet strategy and probably needs 3 different sizes to work with going forward. 

Flexibility is the key.  Routes change over time.  Some routes yield more and more passengers while others are best demoted to smaller aircraft over time.   Southwest wouldn’t be flying 737s to places like Lubbock, Texas if it didn’t need a one-stop location to continue that flight to a larger city from the Dallas area.  Southwest flights to Lubbock and El Paso on 737s continue on to other cities such as Las Vegas, Phoenix and Los Angeles. 

But when the Wright Amendment goes away, the need to fly those one-stop flights goes away.  I actually look for Southwest to start evaluating aircraft such as the Embraer E170/190 series or Bombardier C900/1000 or CS Series in the next 5 to 8 years. 

You’ll find that the one fleet strategy is effective today only for airlines requiring a fleet to fly between mainline destinations.  Once they enter into smaller markets and larger markets, two or more types are not only required but justified.

Filed under: Airline Fleets by ajax
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British Airways, American Airlines and Iberia Airlines received trans-Atlantic anti-trust immunity to cooperate on routes between the United States and Europe late last year.  Since that time, all three have been maneuvering their operations to prepare for this cooperation.  Now it begins.

Previously, flights between JFK (New York city) and Heathrow (London) on AA and BA frequently left within minutes of each other.  Now, the two airlines will form a kind of “shuttle service” between New York City and London with departures from London to NYC in the afternoon leaving once every hour and flights from NYC to London leaving as frequently as every 20 minutes in the afternoon. 

Frequency is good.  Choice is good.  And I would be tempted to criticize that much frequency except that a quick check of schedules reveals that all of these aircraft are either BA 747-400s or AA 777-200s.   I do wonder if I haven’t identified where at least one British Airways A380 will fly routes.   It also makes me speculate that AA’s recent order of 777-300ERs might not be for quite as distant routes as we once thought. 

The airlines are also cooperating on other flights to between other cities.  Iberia will fly to California from Madrid.  Schedules between Miami and Spain will be coordinated going forward.  A check of flights between Dallas / Fort Worth and London Heathrow show 3 coordinated flights a day with 2 AA 777s and 1 BA 747.   There are 7 more connections (several at cheaper prices) available between those cities with stops in Chicago, Boston and Washington D.C.

Chicago to London flights as non-stops are a bit more frequent although all operated on 777s.  Chicago gets 6 evening departures to London and when you consider the connections that AA has in its Chicago hub, this should be good for everyone in Oneworld. 

I am struck by one thing now.  The biggest argument against such an alliance was the dominance both BA and AA would have between London and the United States.  Both were already dominant players by any measure.  The new schedule for these flights show real muscle flex and I wonder how any other airline competes against this partnership into London. 

This will be a very interesting alliance to watch for the next 2 years as it  grows and blossoms.  You have to wonder if Star Alliance and SkyTeam aren’t just a bit concerned at how this network unfolded on a global basis. 

One example:  QANTAS will soon be flying to DFW airport regularly from Australia.  It will be possible to leave Sydney, Australia on QANTAS at 1:25pm on a Monday, arrive at 1:50pm in DFW that same Monday ( I love how the international date line makes that possible) and then depart DFW at 6:05pm on British Airways to London Heathrow arriving at 9:00am the next morning.   Then one could hop a QANTAS flight from London Hearthrow at 12:00 noon and fly to Sydney, Australia via Singapore (fuel stop) arriving at 7:30pm the following day and thus completing a roundtrip flight on some of the longest flights in existence.

And you can book all of that through American Airlines’ website.  This is some real market power and it will be very interesting to see how people respond to the offerings these Oneworld partners will have arranged between themselves.

Filed under: Airline News, Airlines Alliances by ajax
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3/23/2011 Update:  Bill Hartzer has placed a comment to this blog asserting he’s real and thanking me for even more links.  He has so far not responded to my question(s) about how he came to assert control over this blog. 

This past weekend, I was thinking about social media and airlines a few days ago as a subject for a future blog post.  Then I remembered that AA had started a blog about 3 years ago and wondered what had happened with it.

You see, since it got “slow rolled” out about 3 years ago, I can’t remember seeing another thing about it.  So I did some searching and found THIS blog.  But that blog doesn’t resemble anything that a corporate giant such as AA should have (and did although it was originally pretty dry in design when done by AA) and so I dug some more.  In fact, it doesn’t resemble any of the screen shots of AA’s effort when it first got introduced.

I verified that my link was the same link that everyone else in the airline world wrote about and it was.  That’s the right link according to all the media who noticed its start in 2008.  However, the blog that is there now is definitely not being run by American Airlines.  Instead, it appears to be run by a man named Bill Hartzer who also has blogs on SEO and home furnishings.

American Airlines originally released the blog on Blogspot claiming that that route (via Blogspot) was both fast and that their customers were already consumers of Blogspot.  It wasn’t tied into the main AA website and from all of my searches, AA still has no real social media going on presently. 

This surprises me not at all since social media requires granting a certain freedom to those operating it that is counter to American Airlines’ corporate culture.  Southwest arguably has the best corporate airline blog but others are doing it and doing it pretty well in some cases.  I suspect blogs make AA executive leadership shiver.

I’ve sent email to Mr. Hartzer (of Mabank, TX) and American Airlines’ PR department but both have so far not answered my inquiries.  My guess is that Mr. Hartzer doesn’t want to get noticed by AA and AA is characteristically burying its head in the sand hoping no one asks the question again.

Mr. Hartzer appears to be one of those SEO gurus that likes to constantly set links to my blog to raise someone else’s search engine results.  They also love to automatically hit your blog with generic comments and links back to their sites they’re working to raise results in.  It’s all noise and bad noise at that. 

In fact, I take note that Mr. Hartzer fancies himself an experienced writer.  If you read his material, you’ll quickly realize that he may be experienced but he sure isn’t any good at it.   In fact, Mr. Hartzer says he’s created hundreds of websites but if you visit http://www.billhartzer.com, you’ll find that he never got very good at at that either.

Seriously, American Airlines, you let someone Bill Hartzer own you like that?  How the hell does a $24 Billion company lose control of something like that?

Filed under: Airline Social Media by ajax
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With the various mergers and consolidation that we’ve seen over the past 3 years, there is quite a bit of speculation as to who is next in the merger game in the United States.   The truth is, with the exception of some very small players, I see no opportunities.

Sun Country is actively looking for a purchaser and I think it will find one but it won’t be for Sun Country’s business nearly as much for Sun Country’s Minneapolis / St. Paul gate space and, perhaps, a few routes.  Two candidates as buyers come to mind in this area:  Southwest and Frontier.  Both should find the opportunities in MSP attractive and Southwest is liable to also be attracted to the staff and equipment Sun Country is flying.  Sun Country flies the 737-700 and -800 and getting their hands on the -800 of which there are 10 available could help SWA get a jump start on an aircraft it needs.

Frontier has a little bit less incentive for MSP.  The aircraft fleet doesn’t match and they already have hubs and/or focus cities bracketing MSP in Denver, Kansas City and Milwaukee.  But getting to compete against Delta in MSP where it is by far the dominant airline could be attractive to Frontier. 

As far as other airlines go, I just don’t see it for now.  Airtran will be going away this year.  JetBlue is doing OK and while I think it could stand to grow, nothing is available and an attractive fit in areas where it could grow.  There is the ever so slight chance that JetBlue could make a bid for Frontier but Frontier’s new management hasn’t had very long to make a go of it with that brand and it doesn’t seem like they would want to be consumed.

Alaska Airlines is very profitable and doing very well with its multiple relationships with various legacy and international airlines.  They could be attractive to purchase but I think they would seriously resist overtures unless the economics just made their shareholders rich. 

American Airlines has too many labor problems and is busy coordinating with its OneWorld partners at this time.  This is an airline whose house is not in order and whose leadership is not really interested in acquisitions and who is not very visionary to begin with.   Without new and radically different leadership, I presently see AA maintaining the status quo.

US Airways is pretty profitable and has their act together in many ways operationally speaking.  They, too, have labor problems but somehow management manages to sit back and let labor fight among themselves while earning profits.  This is another airline that could stand to grow and the most attractive place to grow would be internationally.  The bad news is that they don’t have any long haul aircraft on order except the A350 and that isn’t due for quite some time.  What’s worse, there is no internationally strong airline for them to target for another purchase.   Obtaining long haul aircraft isn’t financially easy to do presently due to constrained credit markets and the popularity of their choice in long haul equipment (the A330.) 

In addition, in light of the uncertainty that fuel prices and the economy present, I think that any growth that airlines choose to do will be slow, methodical and very cautious.  It will be organic and through upsizing aircraft rather than many new routes. 

The merger game of this decade is still undecided.  Certainly Delta appears to have done well although their profits still seem very dependent on fuel prices.  But United is far from complete and they’re already experiencing more problems than Delta ever did.  Southwest and Airtran are working hard to consummate their relationship but Southwest has stumbled as much as they have succeeded in the past 2 years.  There is nothing to say that SWA will execute their merger with Airtran smoothly so far.   We hope they will but we don’t know they will.

Look for it to be quiet in the merger and acquisition game for the next 12 to 24 months absent the possibility of a few small acquisitions.  I expect well see the alliances spark up a bit more in the near future, however.

Filed under: Airline News, Airlines Alliances by ajax
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Later today, I’m flying from Dallas to Chicago and this time I’m trying out Southwest Airlines’ service from Love Field to Midway Airport.  Both airports are the quintessential second airports for their respective cities and both have a strong Southwest history. 

Why this airline and these airports?  I’ve long advocated that you can enjoy a better, less expensive flight on Southwest that is essentially the same time elapsed “door to door” as a flight on a carrier such as American Airlines. 

So, I’ll be making a much quicker drive to Love Field airport where I’ll make a much quicker transit  through security to my gate.  I did pay the $10 Southwest Fee to early check in to improve my seating options (and it’s a fee that, for Southwest customers, does provide extra value).  My flight, however, is not non-stop.  I’ll be on a one-stop Southwest flight that pauses briefly in St. Louis.  Total programmed flight time?  2 hours, 55 minutes.

I paid $408 for this trip last Saturday compared to American Airlines fare for similar departure times on the same days of $659 and that does not include the fees for one checked bag that I’ll have to take with me.  All in, AA would have cost me (or, rather, my client) over $700. 

If I had taken AA, I would have had a much longer drive to DFW airport and a much more expensive one as well.  (One takes a tollway to DFW if one expects to get to DFW in a reasonable amount of time from where I live.)  The difference in time to get to each airport for me on a day where there are no traffic jams?  About 20 minutes less to access Love Field.

My Southwest flight time will be 2 hours, 55 minutes (if they’re on time) and a similar choice with American Airlines would be 2 hours, 30 minutes.  With the difference in drive time alone, I’ve just made up 20 minutes of a 25 minute difference.  When you account for the fact that I can arrive at Love Field with a bare minimum amount of time for passing through vs DFW airport where I would arrive about 15 minutes before my one hour deadline prior to flight time (because checking bags and passing through security at DFW can be easy or it can be real lengthy), I’ve just gained another 10 minutes. 

Since I”m arriving at Chicago Midway Airport, I’ll have a drive to my hotel in downtown Chicago that is nominally 6 miles shorter in distance and about 20 minutes quicker than if I arrived at Chicago O’Hare.  I’m now up by 30 minutes using Southwest.

At least in theory.

But let’s take a look at the contrasts in experiences I’m liable to enjoy between the two airlines.  On Southwest, I paid the $10 Early Bird Check-In fee so I’ll have a very high likelihood of obtaining a good, front of cabin seat on a 737-700.  It will be a fairly new aircraft and possibly a brand new aircraft.  It won’t be old and it won’t have old, worn out seats either.  I’ll enjoy 32″ to 33″ of seat pitch, most likely a friend flight attendant and no charge for a beverage.  Because of the nature of my trip, I have to check a bag and that comes free and on an airline with a good reputation for baggage handling and security.

If I had taken American Airlines on similar flight time, I would have enjoyed a 20+ year old MD-82.  Since I would have bought AA’s best economy price, I would have likely been at the back of the aircraft and sitting in old, worn out seating with 31″ of seat pitch.  My flight attendants would have most likely been cranky, older crew who have a reputation of taking out their job dissatisfaction on their customers.  (AA flight attendants can be good but in my experience the DFW and Chicago based crews are frequently hostile to customers.) 

My bag would be handled by an airline who had a less than positive reputation for baggage handling (and strangely I’ve had many bags delayed over the years on the DFW-ORD route) and only for a $25 fee each way.   If I had paid AA’s fee for priority boarding, I’d get earlier access to overhead bins but no options to sit in a preferred seat up front and an economy passenger on an AA MD-80 flight is going to have the options of “bad” and “worse” when it comes to seat assignments.

Savings in dollars:  About $300

Savings in time:  About 30 minutes door to door (if this works out as I expect).

What do I give up?  I don’t get frequent flier points on American Airlines.  Let me point out that my dollar savings alone just bought me a “free trip” if I wanted it.  Which would you rather have?  about 1600 frequent flier point or $300 in savings?  Which would you rather fly on?  An old MD-80 with old seats and a hostile flight crew or on a fairly new 737 with new seats and a friendly flight crew?

Once I complete this trip, I’ll write up what actually happened.

Filed under: Airline Fees, Airline Fleets, Airline Seating, Airline Service, Airports, Frequent Flier, Travel Hints by ajax
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WestJet of Canada and American Airlines have announced a codeshare deal where AA will put their flight numbers on up to 20 WestJet destinations in Canada not currently served by American Airlines.  This is in addition to WestJet’s brand new relationship with Delta which is an interline agreement.

WestJet was originally supposed to enter into a rather unique codeshare agreement with Southwest Airlines and Volaris (of Mexico) but chose to abandon the deal about 1 year ago when it decided that Southwest was taking too long to implement this and thought its fortunes were better served with another airline.

In many ways, WestJet is pursuing the Alaska Airlines model in being fairly agnostic as far as what airlines it will do a deal with.  The airline believes its future is better served with doing one-off deals with a variety of airlines rather than aligning itself with just one.   It isn’t an accident that WestJet’s CEO, Gregg Saretsky, is a former Alaska Airlines executive.

Curiously, WestJet is a Canadian low cost carrier that has based its operations on the 737-700 (with some -600 abnd -800 aircraft as well) and works much in the same model as Southwest.  It has two hubs, Toronto and Calgary, and pursues frequency on its trunk routes and serves a variety of small destinations throughout Canada as well.  They already fly to international destinations in the United States, the Caribbean and Mexico.  Also curious, this airline was founded with the help of David Neeleman while he waited out his non-compete clause with Southwest Airlines. 

WestJet has existing codeshare agreements with Cathay Pacific as well and interline agreements with British Airways, Air France, China Airlines and KLM. 

I can’t help but think that WestJet is the Canadian version of the airline that Southwest seeks to become and it would appear that WestJet is doing this with more agility and quicker execution than Southwest seems to be able to muster.

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Virgin Atlantic engaged an investment bank (Deutsch Bank) to advise on its possibilities going forward as an airline after British Airways merged with Iberia and finally consummated its close partnership deal with American Airlines.  The objective was to find a path going forward for the airline and determine if a sale was in order.

Since then, a number of airlines have paid attention to the possibilities.  It’s reported that Etihad is interested and that both Star Alliance and Sky Team may make overtures to the airline.  Delta was reportedly expressing an interest early on as well.

The latest rumour is that Air France and Delta want to explore a purchase of some kind.  Both airlines are industry dominant and both lack something that many other airlines (and airline alliances) have:  Great access to London.

In Europe, this access is pretty important going forward and in the United States, Delta could do with a bit more London Heathrow access as well.  Will they succeed?  That depends largely on just how interested Richard Branson is when it comes to a sale.  Make no mistake:  this will not be a partnership.  Neither airline can afford to spend time working with a niche airline without greater control over its destiny.

And Singapore Airlines also owns a 49% stake in the airline as well.  While they are rumoured to be interested in being rid of their investment, I suspect Singapore Airlines is more interested in yielding a profit from their investment and protecting their own position in Europe as well that of their alliance (Star Alliance.)  Such a sale to SkyTeam members could be very detrimental to Star Alliance in the long run.

Finally, this raises the question of what becomes of the other Virgin airlines?  Does the mother of the brand go away leaving these other players orphans?  Or is their a consolidated move to bring the brands along in some fashion?  If I were sitting at Virgin Blue or Virgin America, I would be concerned for the future of my brand.

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American Airlines has sued Travelport to get a permanent injunction forcing Travelport to show its fares without bias in the Galileo reservations system.  No doubt the small amount of success in forcing a stalemate with Sabre has caused American to think that it can achieve similar results with other global distribution systems.

Maybe. Maybe not.  Achieving some relief in court only lasts a short time.  At one point or another, AA has to either walk away from the GDS companies or it has to do a deal.  A deal won’t get done in court.  Doing a deal requires both parties to work things out and the fact that AA is suing is a signal to the GDS companies that they are having some effect on AA’s bottom line.  Continuing to show solidarity among themselves can only result in putting more pressure on AA than the GDS companies.

And just because you sued doesn’t mean you’ll win.  If AA loses the latest battle, they’ll be on even worse footing than before.  All of this over something that will save just tens of millions for an operation that is generating more than $23 billion in revenue.

If I were  a shareholder in AA, I would be much more interested in the company resolving labor issues and raising productivity which could generate hundreds of millions for the company.  I would want to see the company heavily engaged in hedging its fuel costs and making them more predictable which could save hundreds of millions of dollars.  I would want to see growth into profitable long haul routes which can only be done by working things out with pilots. 

I would not want to see a public fight with GDS systems who can have a real and measurable effect on AA’s ability to sell tickets.

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In the latest financial results, most underperforming airlines attributed their lack of success to rising costs and specifically fuel costs.  Fuel costs did rise but let’s return to early fall when airlines were gleefully setting expectations for the winter season. 

Many airlines were so confident that they actually raised prices and talked confidently of record profits.  The problem is, the traffic didn’t materialize in many cases and I would attribute that to the fact that demand for the winter/holiday season is very dependent on price.  A few airlines did see that and held their prices or even had some sales.  Notably, Southwest Airlines kept a close eye on their demand and lowered prices were necessary. 

But the development that no one has talked about much but which is showing up is a rise in capacity.  That rise in capacity isn’t showing up in great numbers with new routes or increased frequency nearly as much.  Instead, it is coming from an increase in the size of aircraft on some routes.  Airlines are upsizing some routes and also increasing capacity through the aircraft they’re adding to the fleet to replace older aircraft.

Delta, for instance, has retired its smallest DC-9s in favor of Airbus A319 equipment.  American Airlines is replacing MD-80s with 737-800s.  Southwest is adding 737-800s to its fleet in about 1.5 years.  US Airways is adding A321s to replace 737-400s.  At first glance, these “replacements” are perceived to be a 1 to 1 exchange but in reality they’re often as much as a 10% increase in capacity per aircraft. 

The creeping rise in capacity shows that the industry isn’t necessarily in agreement on capacity restraint going forward and that could foretell a collapse in prices as these airlines chase customers to fill their aircraft.  I don’t think we’ll see huge losses in the next year but I do think we’ll see an erosion of profitability.   The airlines who possess fleet flexibility should fare better than those who are largely locked into large blocks of fleet types.  Think Delta vs American Airlines. 

Mergers didn’t solve an excess of capacity.  Not really.  They did bring some costs down but neither of the two big mergers had much overlap and capacity was therefore not really reduced much in that sense.  Since there are no merger candidates with much overlap in existence right now, I don’t think this problem is going to go away very soon.  The real solution is to actually let an airline go out of business.  The only candidate for that is American Airlines and they have lots of maneuvering room left presently. 

Look for capacity to be a bigger talking point among financial analysts over the next 3 months and particularly at the end of the next financial quarter.

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I wonder if I am the only one grossly underwhelmed by airline performance in the 4th quarter.  American’s performance is, at this point, embarrasing to the company’s leadership in my opinion and they hold on, in my opinion, only because of an ever thinning smokescreen.   Delta only managed to eke out $19 million and for an airline that had charged through most of 2010 with impressive profits, you have to ask “why” it was so dismal.  Even if you allow for weather disruptions, it still kind of stinks.

ContiUnited (I’ll stop using that moniker one day soon) managed to beat expectations but still posted a significant loss and let’s not forget that both of these airlines were performing exceptionally well prior to the consummation of their merger.   Even Southwest remained guarded abouts its prospects going forward despite a reasonably decent fourth quarter result.

Are rising fuel costs a problem?  Certainly but they aren’t a problem anyone was unaware of.   The same is true of labor productivity.  These are pretty well known variables and if you don’t know how to manage those effectively at this point, it is time to leave the business.

When US Airways manages to stand out among our airlines given the inherent weakenesses they have in the US marketplace, you have to ask who isn’t doing their job, no?  Alaska Airlines even shined and that is an airline who has all the costs one would associate with any of the legacy US airlines. 

It certainly points out that mergers aren’t the solution to everything and capacity management doesn’t necessarily ensure profits.  In fact, I wonder if this excess of restraint isn’t effecting demand in general and driving customers to other options secondarily.   There is a reason why Southwest keeps running up its revenue score. 

At some point, you have to go out there on the playing field and compete.  Competing isn’t just offering the best price, it’s earning that customer for more than one particular flight.  With all that the airlines have implemented to enhance their revenues, are we finally seeing the results of that behaviour towards consumers?  I certainly think its a important part of the equation.

It’s time to put on the pads and get out on the field ready to play rough and compete.

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American Airlines and Sabre have decided to enjoy a truce while negotiating a new contract until this summer.  Is this war between AA and the GDS systems over?  No, not yet. 

I think AA needed some of the heat to die down in the public given their most recent financial results and this was a way of moving one of 3 major problems off to the back burner and getting their revenue stream back online with the largest GDS system.   They can continue to play chicken with Expedia and Orbitz in the meantime and see if they can get any traction at all. 

But it begs the question as to why AA is choosing to fight this right now when it so obviously has a large pile of other problems to solve first.   They are the only legacy/SuperLegacy airline to lose money for 2010 and while they have some promising developments in their favor, they continue to fall further behind other airlines when it comes to earning a profit. 

If you compare the problem of fees with respect to GDS systems vs the problem of labor unrest and productivity, I know which one I would want to get solved first.  I wonder when AA’s board of directors and shareholders begin to be unsatisfied with AA’s financial performance relative to the rest of the industry.

In another development, Virgin America has inked a deal with Sabre to provide reservations systems and to continue its GDS relationship going forward in a multi-year contract.  Several airlines have reaffirmed the GDS model (US Airways as well) and American continues to stand alone in this conflict although I do think Delta is paying close attention. 

One good thing that may come from this is the GDS providers doing a better job of accomodating the a la carte fee structures and upselling.  That would not be a bad thing.  In addition, it may well spur the GDS systems to invest in new technology that not only will accomodate future needs as well as lower fees.  That, too, would not be a bad thing. 

Right now, I would say the GDS systems have a slight upper hand in this fight.

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Sounds like a really dull airline, no?

That’s British Airways and Iberia Airlines under their merged company name.  British Airways and Iberia will continue to operate under separate brands while enjoying the synergies of a merged company in the background.

Willie Walsh becomes CEO of the combined company while Antonio Vázquez Romero sits as non-executive Chairman of the group.  Why isn’t Willie the top guy?  Because in this case, the CEO is who gets to run things.  Chairman just gets to run the board of directors.

The new company hit the stock exchanges yesterday with a new fleet of just in excess of 400 aircraft and anticipated annual revenues exceeding $19 Billion.  They’ll sit as the 3rd largest airline in Europe but let’s put things in perspective:  American Airlines has 620+ aircraft and $22 Billion.  However, IAG should earn a profit and AA has yet to show a profit despite most airlines of its size already doing so for 2010.

Look for the new company to start targeting other purchases.  Willie Walsh has already stated their intent to go on a shopping spree for other airlines.  Who is anybody’s guess but an international airline purchase is always difficult given ownership rules that generally exist from one country to another.

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Virgin America has had a great experience with its new flights between DFW and Los Angeles as well as San Francisco.  So much so, they’re adding one new frequency on each route by terminating its LAX – Toronto flights. 

This is what I mean by it being time to compete with American Airlines.  That big bully that everyone sees in the DFW area is a lot more vulnerable than it may look at first glance.  AA has fought back some on those routes but with VA’s load factors running in the 80 percents and their advance bookings running about 70 percent, it’s clear that a new, service oriented entrant can compete with AA.  Especially on routes that have been traditionally dominated by AA over the past 10+ years. 

Once VA gets these flights settled and tweaked and finds itself satisfied, look for new flights out of DFW.  I see opportunities for them on DFW to New York city, Boston and Seattle.  All three routes are the non-stop domain of AA and all three have relatively high fares.  Just like the DFW-LAX and DFW-SFO routes had.  Virgin has a presence in each of those cities which would make it easier to integrate routes from DFW to those destinations as well.

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American Airlines announced an order for (2) 777-300ER aircraft during their earnings call today and I don’t think anybody saw that coming.  It’s a notable order for several reasons.  First, it’s the first order by a US airline for that aircraft.  Second, it’s the first airliner for AA to add that is for growth rather than replacement.  Third, it’s a new engine type for AA since the -300ER uses GE90 engines instead of the Rolls Royce Trent engines that AA has on its -200ER aircraft.   Finally, AA plans to receive these in 2012 and that’s pretty quick. 

Although these aircraft come with slightly better range than the -200ER, I think these are about capacity growth on some particular long(ish) routes.  These could be for any of 4 basic areas:  DFW or Chicago to London (I doubt this), DFW or Chicago to India (maybe), DFW or Chicago to Japan or China and, finally, NYC or Miami to South America (I doubt this.  My bet is on flights to India, Japan or China with India or Japan being a higher probability.  Time will tell.

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