Just  a couple of weeks ago, American Airlines applied to fly the Los Angeles – Shanghai route with the Department of Transportation.  The DoT responded with a resounding “Yes!” in just one week.  United Airlines asked for the same route on Tuesday and got a “Yes!” in just one day.  Both airlines plan to fly this route with 777 aircraft.

I’m somewhat surprised that United wanted LA to Shanghai instead of a route from something resembling a hub for them such as San Francisco.  Now we have the spector of two SuperLegacy airlines flying in competition with each other on the same route with the same equipment and a need to win that is pretty high.

Ultimately, I give advantage to American Airlines on this one simply because of better feed into Los Angeles.  I believed that the SuperLegacy airlines would ultimately start to poach on each other’s territory but I also believed that it would take a while for these airlines to digest their situations before making a move like that.  This may be a special case but it does make me wonder if competition is heating up.  Especially on international routes and in light of the great success that Delta has had in expanding their international route system.

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American Airlines has applied to fly non-stop between Los Angeles and Shanghai using their vaunted 777-200ER aircraft.  If permission is granted, it will be the only non-stop flight between the two cities.

I sound like a PR release.  Frankly, I hope AA gets the route and I do hope they actually arrange acceptable slots into Shanghai this time.  You may remember that AA ended up delaying the start of their Chicago-Beijing route because the slots they were given weren’t automatically changed to make them happy when they got closer to their first departure. 

I suspect AA is going to be applying for a lot of west coast to Asia routes in the near future.  The yield is good and so are the loads.  People to tend to fly their national airlines on such routes unlike those from the US to Europe.  It’s notable that this route would originate in one of their declared “core” cities, Los Angeles. 

Lately all the competition talk has been over New York City.  I think LA may end up 2011’s New York City when it comes to competition.  It’s one of the best cities to connect domestic flights to trans-Pacific flights and he who grabs the routes now is likely to keep them in the future.

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 USA Today had a story on how Delta is about to see several union votes in the coming months. Historically, Delta has been the one non-union legacy airline in the United States with just the pilots unionized.  Accordingly, Delta’s labor groups have enjoyed great flexibility and have avoided some of the rather harsh and (in my opinion) unfair treatment that many other groups at other airlines experience. 

Flight attendants at Delta don’t spend a decade unable to hold a line, for instance.  All employees have shared in the wealth of the airline in good times through both raises and stock plans.   As legacy airlines go, Delta is a pretty great place to work all in all.  No company is without its warts and no company avoids the odd period of poor management and Delta has both. 

Changes in labor union law for airlines have now made it a bit more advantageous to try to unionize groups one more time.  In the past, failure to vote (for any reason) was interpreted as a “no” vote.  Now, simple majority of those who did vote are all that is required to win a vote.  In the past, Delta flight attendants have rejected attempts to unionize both by explicitely voting no as well as just not voting.  Labor leaders think that this time, they can win.

And perhaps they can.  Delta now has Northwest Airlines’ 7000+ flight attendants under the same roof now and that is a very militant group.  It’s possible that combined with the rather stark minority of Delta flight attendants they could win this if anti-union flight attendants don’t explicitely vote “no” to this latest attempt.  Frankly, I don’t think this is as sure a thing as labor leaders seem to think.  Flight attendants may be many things but one thing they aren’t is stupid.  I think that instead of just not voting to say “no”, they’ll simply vote “no”.  They appear to remain in the majority right now and there is one thing that perhaps is being overlooked.

A lot of those Northwest FAs have now experienced the Delta Way.  They may be battle hardened and militant but I wonder how some may feel after spending some time in the Delta system and discovering a kinder, gentler company that rewards performance.  There may actually be some erosion in those ranks.

Make no mistake:  The risk for Delta is mighty here.  If there labor force becomes all union all the time, costs will go up considerably and for the world’s largest airline, that could reverse current profits pretty fast.  Those costs won’t go up just because of renegotiated labor contracts raising salaries either.  I’m certain the unions will introduce work rules that limit the flexibility that Delta current enjoys.  Limits equal higher costs. 

So far, Delta’s management is doing the right thing.  They’re making the argument that employees are treated exceptionally well at Delta and that changing something that has been very good for both parties can almost certainly result in something that is ultimately bad for both parties.  In fact, their arguments seem both articulate and intelligent and don’t appear to insult the intelligence of Delta employees nor do they appear to threaten either. 

Time will tell in this arena.  You can bet that both ContiUnited and American Airlines will be watching closely and even celebrating with glee if the worst happens.

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With the Southwest/Airtran merger announcement, there has been a lot of rampant speculation on what US Airways or American Airlines should do in the face of this industry consolidation.  Many see them about to come under pressure from financial markets and shareholders to find a pathway to play in this consolidation game. 

While you could argue that US Airways is at a disadvantage to any of the SuperLegacy airlines now, I don’t think that AA is so much at a disadvantage that they *must* do something.  In fact, their problem is that a merger doesn’t bring much to the table for them since they would be the surviving entity and they already have high costs.  US Airways is doing just fine for now and I think they can afford to be cagey for a while at the least.

The truth is, I think jetBlue will be under more pressure than any other airline.  Their growth is largely stalled right now and then continue to re-trench in existing markets.  They’re busy defending NYC, Boston and, to a lesser extent, the Northeast.   While I admire how jetBlue got its foothold by operating out of JFK airport, I also think that they’ve begun to forget just how much the Atlantic seaboard chews up airlines. 

Yes, they’ve got their nifty trans-continental routes to the west coast and they appear to do pretty good with those on some level.  What jetBlue doesn’t have is a clearly defined pathway forward.  What’s their stategy?  The status quo?  More and more trans-continental routes that don’t offer all that great aircraft utility?  More flights from the Northeast to Florida?  More flights from Florida to Caribbean leisure destinations?  None of that sounds very attractive.

Lest you think I’m speculating, read this story quoting CEO Dave Barger.   He states they’ll continue to focus on their “growth plan” for Boston and the Caribbean.  I’ll point out that Southwest Airlines is already a national airline with a hole in their network.  That changes with the addition of Airtran and they become *much* more competitive with jetBlue upon completion of the merger.  Yes, I think SWA will stumble some during integration but I do not think that will inhibit their ultimate success. 

Contrary to popular belief, there is some low hanging fruit out there for the right airline.  jetBlue has the right service product, labor costs and, frankly, network to go take advantage of that.  But there is no vision for that kind of growth.

I suspect one thing that is inhibiting such growth is aircraft financing.  It’s a tight credit market out there and good terms on aircraft aren’t nearly as easy to acquire as they once were.  However, there are airlines out there with plenty of the right equipment and who could possibly be bought for the right price. 

I think it’s jetBlue that finds itself under pressure for an acquisition and/or merger.  It can’t continue to grow in its existing markets.  There isn’t any room to grow without a bruising and expensive battle.  I think it is going to take new leadership at jetBlue.  Dave Barger does a great job of keeping operations going and maintaining the status quo but he has done a poor job of setting a vision for growth into new markets.  There is plenty of opportunity out there and many airlines are seeing it and executing a strategy for it.  That is going to put a lot of pressure on jetBlue in the next year or two to find a way to articulate what their next plan is.

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About 24 hours after the Southwest Airlines / Airtran announcement, rampant speculation on who American Airlines should partner with started up.  The truth is, while I can make an argument for them to merge/acquire US Airways, I think they’ll shy away from a merger.  If they do go shopping for an acquisition, I don’t think it will be oriented towards a real “merger” a la Delta/Northwest or ContiUnited. 

There are a couple of targets left.  Alaska Airlines strikes me as one that should interest Southwest, American Airlines and Delta.  I think it’s pretty hard to get a deal done with Delta because of regulatory issues particularly in the Seattle area.  I think it’s pretty hard to for AA to get a deal done with Alaska because both parties have high labor costs and AA just won’t know what to do with the rather unusual operations Alaska performs in Alaska. 

I don’t think anyone is going to buy jetBlue at present and jetBlue’s CEO says they’re going to grow organically.  I would be happy to see jetBlue just get outside of its NY/Florida comfort zone and stop treating the midwest like it has the plague.

Frontier could be an interesting proposition for jetBlue, I think.  Sadly, I also think that Republic Airways is going to hold on to Frontier for dear life given what’s going on in the regional airline world.  Nevertheless, I do think that jetBlue could harmonize Frontier’s service and routes to the jetBlue way and make something of that airline. 

US Airways?  Well, they are the somewhat pretty girl who never gets asked out anywhere except to make some other guy jealous.  Until they get their labor house in order, I think it’s going to stay that way.  Their executive corps, however, ought to be attractive to someone.  Despite all of US Airways weakenesses and their “East/West” style of ops, those guys make money.  There is a lot to be said for that. 

I think they are more attractive for bringing into a new alliance.  Currently, US Airways belongs to Star Alliance but ContiUnited kind of makes them look superfluous.  SkyTeam just doesn’t need them either.  Oneworld aka American Airlines/British Airways,  on the other hand, could perhaps take advantage of them.  The deal would have to be a bit sweet because US Airways, if nothing else, is enjoying a nice “under the radar” ride on Star Alliance right now. 

I can’t think of anyone who could find a use for Virgin America at this point except, well, the Virgin Group.  Even the Virgin Group seems to have a hard time seeing a real value for working with Virgin America.  If they had any money, I would point them to Frontier but I think Republic Airways would just laugh out loud.

The truth is, I think there is suddenly some opportunity out there to start a new airline.  I would look for weak airlines who have major hubs and very little competition.  Some place where business customers and leisure travelers alike are dissatisfied with their current offerings and restrictions.  Some place that has a history of embracing the airline industry and where you can hire experienced people to kick that venture off.  That would be a great place to start something new.  I wonder where such a place might be?

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American Airlines parent company, AMR, shares have dropped based on analysts projecting larger losses for the full year of 2010 than originally expected, reports Bloomberg BusinessWeek.

Yes, AA isn’t projecte to earn a profit this year.  They will, instead, improve their performance over last year.  Or, to put it bluntly, survive and hope.

No one who follows the airline industry thinks that airlines are a great way to earn money.  Investing in airline stocks can be because that is about buying low and selling high which continues to be possible in the airline sector for some unfathomable reason. 

Even though it’s possible, you have to wonder why anyone would purchase the stock of an airline that already is the size of a SuperLegacy when it comes to revenue and network but which consistently underperforms compared to any other airline it directly competes with.  Make all the execuses for AA you want in the area of labor costs, not going bankrupt, etc.  At the end of the day, they appear to be just very good at surviving.  There were a few other airlines that were rather good at surviving.

TWA and Pan American come to mind. 

Yes, AA has labor cost problems and an older fleet and those get in the way of earning those pesky profits.  As time goes by, it seems to me that AA has managed to be very good at holding onto large amounts of cash and manuevering from one crisis to another.  However, they don’t seem to ever really solve their problems, do they?  They’ve got labor negotiations that have gone on for 4+ years now.  The issues surrounding those labor negotiations were a known value all the way back in 2003.  They have a  fleet that most in the business would have pointed out the liabilities of all the way back in 1999. 

It’s not that AA executives are bad.  They aren’t.  But over time one has to question if they’re good enough for the way the airline world is operating today.  Is following the AA way a successful model for the future?  Is it wrong to expect them to earn a profit at least when their industry competitors are?  Even if it isn’t as much unit profit? 

How much longer do the AA board of directors and their shareholders wait for performance that at least indicates movement that at least generally points in the same direction as the industry?  I would argue that it’s time to wonder if it isn’t time to think out of the box before AA is managed right into a nasty little corner without any options.  It’s  at least time to perform a objective analysis of whether or not to stick with the current team.

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British Airways Business Class subsidiary, OpenSkies, is introducing a money back guarantee to encourage new people to try their services between Newark/Washington D.C. and Paris.  Since their internal customer satisfaction surveys indicated that more than 96% of respondents would recommend OpenSkies, this seems like a rather safe bet to be making.

Offering such a thing is a relatively unheard of act in the airline business and it is a hint at the fact that airlines still need to attract customers, particularly business customers, in a rather innovative way.  It’s a rather satisfying guarantee because by its very nature, it’s unusual.  I suspect it will get some people to notice them and, perhaps, pay attention to them.  Especially if current Oneworld members are permitted to earn frequent flier miles on these flights.  I presume this will be possible since OpenSkies participates in BA’s Executive Club program.

But at the end of the day, OpenSkies is a tiny airline serving just two routes and this money back guarantee is unlikely to spread among larger airlines.  If they were serving more routes, it is possible that other airlines would match it on some limited basis. 

What would be nicer to see among airlines is a money back guarantee on the so called “services” that are now requiring extra fees such as the baggage fees or priority seat fees, etc.  Sadly, there is no sign of that developing at any airline.

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When Delta decided to sell off several subsidiary regional airlines recently, we all noticed that Comair didn’t receive any takers.  It’s costs are higher and its equipment is more dated and now Comair is slimming down to reduce costs in the hope that it might become attractive enough to find a suitor.  Just the reduction in the CRJ100/200 fleet alone will save the airline considerable money but the workforce will be reduced as well.

Comair is unattractive because of its divergence from what legacy airlines need in a regional airline partner:  It isn’t so cheap anymore.  Comair is pretty old when you consider its life and various forms.  It’s had enough time to add on a senior workforce and its found itself boxed in with its equipment (partially because of what it invested in and partially because of scope clause limitations.)  It really tends to be more “legacy” than “regional” in its airline DNA these days.

And that sounds a lot like American Eagle.  American Eagle has an aging fleet, increasing labor costs and a workforce that is aging and gaining seniority rapidly.  So far, it remains profitable on some level but only because of its contract carriage on behalf of American Airlines.

What happens if American Airlines sells this airline and pursues contracts with other regional airline partners to lower its costs?  Suddenly American Eagle doesn’t look at all attractive given the kind of aircraft it is burdened with as well as its labor obligations.  Would American Eagle find a suitor?  Maybe but I somewhat doubt it at this point.  Regional airlines are consolidating and attempting to move upstream.  American Eagle doesn’t bring very much to the table and without those revenue guarantees from various airlines, it doesn’t look all that profitable either.

What I am beginning to wonder is whether or not we’re seeing the end of the first real cycle for regional airlines in the deregulated US market?  In other words, have regional airlines that have their roots in the 19080’s become marginalized by their growth in labor costs and fleet irrelevance much as the legacies found themselves suddenly experiencing in the late 80’s / early 90’s?  If so, that would indicate that new players will find it potentially profitable to enter the market with a young crew and a more modern and relevant fleet. 

If there are new entries, their barrier to entry will end up being scope clauses governing the size of jet that can be flown by a regional.  Some airlines have pretty restrictive scope clauses and some not so much.  Some of those restrictive scope clauses got amended as a result of bankruptcies and, notably, those that didn’t go through bankruptcy in the 2000’s (AA and Continental) have some of the most restrictive clauses.  

At the end of the day, it would appear that AA and Delta are unlikely to realize very much value from their “old” regional airline companies in a sale.  Any buyer with any experience at all is liable to realize that without some sort of guarantee of a revenue stream from the seller, these airlines (American Eagle and Comair) are unlikely to be positioned to earn very much profit going forward.  And who wants to buy a lame duck?

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American Airlines CEO Gerard Arpey has hinted that his company may well use their new 787s (when they arrive) for replacing 767’s and that they would make a good fit for flights between New York City and London.   This is in stark contrast to announcements we’ve heard from airlines such as Continental who are planning New Zealand and Africa flights with theirs.

There is no doubt that putting the newest aircraft and one with the amenities that the 787 promises on NYC-London routes certainly will serve the business class customer well.  However, many analysts have already speculated that the 767 may well continue to be an equal performer (or nearly so) on that kind of route.  The 787 is expected to realize its real benefits on routes in excess of 5000nm. 

AA already has a large fleet of 777-200ER aircraft configured for not that many more seats than their 787s and uses them on its long haul routes already.   Given that you would want to use those aircraft for those profitable routes, you have to find a place for the 787 and that means new routes and growth or replacement of existing airframes.  In this case, many of AA’s 767’s are rather old and a 787 replacement will still yield benefits that should be appreciable.

Nonetheless, it’s disappointing that AA’s hints point to replacements on existing routes rather than growth.  It is early days for that kind of speculation and that may well change.  Currently, AA doesn’t even have a new pilot agreement governing that aircraft as of yet.

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So, yesterday I ran across this story online by Bloomberg that you can read HERE.  The short version is that Tim Clark of Emirates denied that Emirates had any interest in purchasing a stake in American Airlines’ holding company, AMR.

Huh?

No, I don’t think they would be interested in that.  Why would a company like Emirates have any interest at all in purchasing a stake in an airline like AMR which has higher costs and which is partnered with the very airlines it competes against?

I suspect someone needed AMR stock to rise in the markets and started a rumour.  Now, a US Airways / AA partnership might just get some traction but I think we’re a good 9 to 12 months away from hearing about anything happening with US Airways.

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The Transport Workers Union of American Airlines has rejected 2 out of 3 contracts that were being voted on.  Only the “Technical Specialists” guys accepted theirs and before you think that’s something positive, let me point out that a total of 78 members voted on that particular contract.  Rejection by the other two groups also includes a strike authorization.

What that doesn’t mean is that there is going to be a strike.  First, an impasse has to be declared and that is probably, at minimum, months away.  The two parties will enter into negotiations again and we’ll see what happens after that.

Laura Glading, president of the Association of Professional Flight Attendants, decided to chime in applauding the contract rejection and describing the pathway to success as a “struggle” against American Airlines.  Frankly, I really don’t think using language from the 1930’s and adopting an extremely loud and hostile stance towards anyone is going to get anyone anywhere. 

Regardless, I think American has a problem.  Virtually all of the unions are nowhere near agreeing on a contract and even though none of these negotiations appears very close to being declared an impasse, it does present risk to AA as a going concern.  These negotiations will only get tougher if American begins to earn quarterly or full year profits.  A great any of these unions represent frontline employees and embittered or angered employees don’t make for a successful customer service product. 

Even with AA’s recent executive reorganization, I don’t see any positioning being done to get these contracts concluded so the airline can go forward.  Ironically, the one group that has some appearance of perhaps being ready to get  a deal done are the pilots who’ve been waiting the longest to get a deal done. 

Both sides could stand some new leadership.  Sadly, I don’t see much evidence that that is going to happen.

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British air traffic control is warning pilots of a vulture that can apparently fly at heights of 30,000 feet or more.  This bird has a 10 foot wing span and supposedly one was encountered by a commercial aircraft at 37,000 feet back in 1974.  The bird is an escapee from a breeding program in Britain. 

Airtran has decided to be another kind of vulture and raise their bag fees.  The increase is $5 more and while it’s cheaper than their home airport rival (or just about any other airline with a bag fee), boo to them.  This just strikes me as greedy more than anything else.

Still another kind of vulture has been operating in the airline world as well.  The Thief Vulture.  Last week, an American Airlines employee was arrested for stealing personal items on aircraft as well as for stealing AA property too.  The man was tracked down when police decided to track a stolen cell phone (Palm Pre) which lead them to his house.  They then discovered so many stolen items, they filled 3 pallets. 

In addition, a TSA screener from Seattle has pled guilty to stealing more than $20,000 worth of items from luggage he was supposed to be screening. 

The irritant about these last two vultures is this is exactly what airlines and the TSA deny happening all the time.  It does happen and it happens, I think, far more frequently than is ever admitted.  I’ve had my own bad encounter with TSA screeners trying to get me to hand over my wallet and then turn away from them.  Another friend recently had a few items stolen from his bag without response from the TSA despite the fact that the suitcase in question HAD A TSA APPROVED LOCK ON IT!  

These are some of the worst vultures around.

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According to the Wall Street Journal (and other publications), American Airlines is about to receive notice of a record setting $25 Million fine related to MD-80 (as well as other, smaller issues) maintenance violations in 2008.  Those violations, related to wiring in the nosewheel area, resulted in the temporary grounding of American Airlines’ fleet as well as other airlines also either having to scramble and make repairs or even ground their fleets.

During the Bush Administration, government oversight investigations reported that maintenance enforcement by the FAA was inconsistent and irregular and found that FAA oversight of Southwest Airlines was dysfunctional at best.  The problems and controversies resultings from maintenance irregularities has caused many to question both the airlines and the FAA having a too close relationship and under the new administration, a much more “by the book” enforcement policy was instituted.

AA, at one point, described the wiring irregularities as not being a safety issue and I have to disagree with that position.  It’s not often I do disagree with airlines perspective on such things but when an airworthiness directive is issued by the FAA and the manufacturer has already issued a maintenance directive, it’s a safety issue. 

Regardless of whether the FAA was doing a proper job in its inspections or not, the airlines still have a duty to implement those directives in a safe and timely manner.  In this case, that wasn’t done and even spot checks on aircraft at AA after the grounding revealed that many still did not have the procedure done properly. 

Even though the FAA is working to establish the appropriate relationships with airlines and even though their enforcement is more by the book, airlines’ responsibility for these safety and maintenance problems remains their responsibility.  This wasn’t a case of inspectors telling the airlines to not bother with the work and it doesn’t absolve AA or any other airline from its responsibility to follow the rules, regulations and law when it comes to safety and maintenance. 

Just because a police officer hasn’t stopped you and told you that your tires are too worn to drive doesn’t absolve you from your duty to ensure your tires are appropriate for driving, right? 

I don’t know if a $25 Million fine is appropriate or not.  It strikes me a bit high at first glance and I”m sure it will be negotiated.  But fines should have an impact and for a $23 Billion airline, it might take as much as $25 Million to make a point that lasts.  I’ll point out that such a fine could well be the line between profitability and losses.  That seems to strike a good zone for appropriate. 

Do I think passengers were in imminent danger?  Probably not but who knows?  Out of a fleet of more than 200 aircraft at AA alone, it’s quite possible that a wiring harness was about to become a danger to the aircraft.  It certainly isn’t inconceivable. 

And the costs to do these maintenance and safety procedures is, in part, the price an airline pays for operating a relatively old and relatively obsolete fleet. 

It is heartening to see the FAA appear to be far more interested in doing its job in the airline industry rather than acting almost subservient to the airlines.  I’m sure the airlines are finding this a novel experience but it is what should have been happening all along.

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American Airlines is introducing a new fee.  This time, a fee from $19 to $39 can you get you a seat up front in coach including bulkhead seats and it will allow you “group 1” boarding. 

Personally, I’m all for offering more varied product on aircraft.  That’s the one development among “debundling” that I am in favor of.  However, please offer me something of real value.  Frontier gets it.  United gets it.  Airtran gets it.  Even Southwest Airlines gets it. 

AA doesn’t get it.  A seat that has no more pitch or other benefits except that it is “up front” and I can potentially board earlier (and sit in an uncomfortable seat longer before take-off) isn’t more value.  If the seat comfort isn’t going to change, do I really care if it’s up front or in the back?  Well, maybe I do if I’m on a cranky old MD-80.  Does it afford me more opportunity for overhead space?  No, not really.  Despite reports to the contrary, it’s just not that hard to find overhead space.  Sure, the bins are more crowded but you can still access them. 

If anything, it’s the jokers who put their luggage up front and then take their seat in back that annoy me.

But I’ll gladly pay for more seat pitch and a generally more comfortable seat.  I’d gladly pay $20 / segment to gain 2 more inches of pitch alone.  And I can already get that on an airline of my choice in most cases.  For the prices AA is offering for this “service” you can more often than not get an Airtran business class upgrade.  You can get more seat pitch and more service on Frontier.  You can get more seat space on jetBlue.  Southwest Airlines’ fee for priority boarding affords me a real opportunity to choose one of the best seats in a 737 for a cheaper price and you can bet I’ll have bin space on the SWA flight no matter what since they aren’t fools and charge exorbitant fees for baggage checking.

Perhaps this might have some appeal to a business traveler but I don’t think such a fee is going to be reimbursed as an expense.  That certainly wouldn’t fly at my company, a major aerospace and defense firm. 

How about a $25 fee that A) gets you a exit aisle seat and B) *guarantees* your checked luggage arrives with you?  That might be particularly attractive to AA flyers.

At the end of the day, for any traveler except the most extravagant, it’s money that can be better spent elsewhere.  And if you are that extravagant, you’re probably getting an upgrade to first class anyway.

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The merger between TAM of Brazil and LAN of Chile offers some interesting possibilities for the new airline group that will be operating under separate names in South America.  One big question is which alliance will the group adopt.  Currently, TAM belongs to the Star Alliance and LAN is a member of Oneworld.  

This new airline will have a bit more bargaining power when it comes to alliances and they have a few choices to make going forward.  The first is to participate in both under the respective brands just as before.  I’m extremely doubtful that that will happen. 

The second is to pick an alliance between Star Alliance and Oneworld.  In this scenario, I would give Oneworld the upper hand simply because in this merger, LAN will control more and it is the Oneworld partner.  American Airlines won’t want to let them go since they fit nicely into the AA system.  In addition, TAM might offer Oneworld quite a bit of access to other parts of South America it really doesn’t have at this point.  However, the Star Alliance has a lot to lose and a lot to gain.  Especially with the Continental United merger going forward.  One could see the Star Alliance attempting to bring the LAN system over to the Star Alliance with some incentives.

Finally, there is SkyTeam who has a lousy representation in South America presently.  SkyTeam a la Delta lost a big fight on the trans-Pacific side when it failed to win over JAL.  A TAM/LAN entry into SkyTeam would be a huge win for that alliance and I suspect we might just see this dark horse try to bring them over to their side.  This is exactly the right time for SkyTeam to woo such a company because there will already be integration efforts going on between the two as they consumate their merger. 

In now way does this new merged company go ignored as a participant in an alliance.  I do think it will be a fight and I do think all 3 alliances will be offering significant incentives to win LATAM over.

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American Airlines is in discussions with its transatlantic Oneworld partners, British Airways and Iberia, to consolidate in Terminal 8 at JFK airport.   This would be a good counter-move to Delta’s intention to renovate and expand at the same airport.

It’s about market share in New York and now we find the SuperLegacy airlines moving to own the most they can in that market.  AA (Oneworld) and Delta (SkyTeam) at JFK and ContiUnited at Newark.  It’s a fight that is sure to get bloody over the next few years.

If AA can move to bring its partners under the same banner and make things even more convenient for connections, it may have a grip on JFK that resembles British Airways’ at Heathrow Airport in London. 

It also makes me wonder what ContiUnited might do at Newark.  While Continental plainly dominates at Newark Airport, it also presently stands to have the least pleasant facilities and since it’s new to the Star Alliance, it may take quite some time to bring its Star Alliance partners under its umbrella at Newark. 

While a number of Star Alliance carriers to have flights to Newark, a number don’t.  And things aren’t well organized at Newark for Star Alliance.  Will they be?  I don’t see how ContiUnited can afford *not* to get their act together at Newark to compete. 

Newark is actually a bit more convenient to Manhattan and that is, after all, where the high dollar traveler is going to or coming from.  It makes sense for the Star Alliance to cooperate and consolidate and ensure good feed to those international flights but they’re going to have to get some airlines to move over, I think.  Airlines such as ANA.  

Others, such as Lufthansa and SWISS and Singapore Airlines are all in Terminal B.  Continental has Terminals A and C.  What ContiUnited really needs is a revised Terminal C and/or a portion of B while giving up A to others. 

But will the other airlines cooperate?  Don’t bet on it.  Keeping Newark in disarray would be a good thing.

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I’ve been on vacation for the last week and a half but now I’m back and there are many things I want to comment on.   Instead of one subject, here are a few quick observations on recent airline news.

Mexicana:  Blaming labor is probably appropriate in some respects but this is an airline with other problems as well.  And let’s not forget that management allowed those salaries to climb as high as they did.  If the numbers being cited in media are anywhere near correct, salaries are outrageous and would have been ultimately untenable 8 years ago or more.  Is there a solution?  Only if labor unions are willing to negotiate new contracts that are probably 40 to 50 percent less than existing ones and only if another company is willing to come in and buy the airline.  Dubious on both points.

Frontier:  I see that Frontier Airlines is moving their Houston operations to Hobby Airport and this is probably smart.  They’ve already seen that they can compete with Southwest and it makes them more convenient for the HOU/DEN business traveler who is primarily concerned with oil.  It also makes me think of the current Love Field plan and just how restrictive it is for another airline to enter that market.  Dallas has hurt itself on that one but the hurt will only be realized in another 4 years.

JAL and American Airlines:  The Dallas Morning News Airline Biz Blog is reporting that JAL has sent 100 of its managers to American to learn, well, management.  AA is encouraging JAL to use the financial analysis systems that it uses and which were instrumental in weathering the financial storm.  While I agree that AA was more agile than many when it came to weathering that storm, they’re also somewhat boxed into a corner now too.  Delta would have taught them to suck it up, take the hit and get on with life instead of prolonging the status quo.

American Eagle:  There is now more talk of “spinning off” American Eagle from AMR and while that would put some money into AMR’s pockets (quite a bit, I suspect), it leaves both airlines with not a lot going for it.  American Eagle goes independent and has to fight for its contracts in a world of regional airlines that are becoming increasingly competitive with equipment that is largely dated and inefficient and a labor force that is pretty well paid compared to most.  American Airlines then has to find new partners (potentially) with lower costs but also with equipment to match existing scope clauses and the ability to work the American Way.  Keep American Eagle, it fits, it works and you don’t need that trouble right now.

Delays:  Here we are in August and, still, no real problems with tarmac delays.  Airlines seem to be able to restrain themselves and keep their ops going just fine.  Remember, the real problem occurs when customers start complaining about cancellations and that makes it news.  Right now, all seems to be going OK.  Let’s see how the Q3 financial numbers turn out too.

Filed under: Airline News by ajax
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It’s been a bit over a week since American Airlines, British Airways and Iberia (along with Finnair and Royal Jordanian) received anti-trust immunity approvals from both the EU and the DoT.  What it means is that each of those airlines will be able to cooperate closely with each other on a variety flights between the United States and Europe. 

What closely cooperate means is that these airlines will start marketing their respective flights between cities under the various brands but each airline will be responsible for certain flights.  For example, British Airways may begin operating more of the capacity between DFW and London while American Airlines retasks the aircraft they were using for some of those flights to other flights.  Iberia Airlines may begin operating the flight(s) between Miami and Spain.  BA, AA and IB will be selling seats on all of those flights as their own just as you already see done as codeshares.

The difference is that now these airlines will also begin cooperating on scheduling.  In other words, American Airlines might start scheduling its “feed” for a British Airways flight from DFW to London.  American Airlines might do the same for an Iberia flight from Miami to Spain.  On the other side of the ocean, British Airways might schedule its “feed” for London to Chicago to mate up with an AA flight.   These airlines will start acting almost as if they are one company so to speak.

Is that good or bad?  If you ask the airlines, the customer will get to see more choices to more destinations on Oneworld flights and that choice is good.  In most cases, it is good and air fares are likely to be unaffected on many routes because of competition from other alliances such as SkyTeam and Star Alliance. 

However, in some cases, I think this is bad.  For instance, American Airlines already effectively “owned” the DFW to London market and really the DFW to Europe market.  So much so that previously they weren’t allowed to code share with British Airways on such routes at all.  There is very little competition in the DFW market to Europe.  Some exists, yes, in the form of flights by KLM and Lufthansa to Amsterdam and Frankford respectively.  One flight each a day.  Now, with even closer cooperation allowed, I do fear that KLM and Lufthansa may find such flights simply uneconomical.  There is no real Star Alliance and/or SkyTeam presence at DFW anymore. 

In the short term, I do think there are markets that are going to see much higher air fares for non-stop flights to Europe.  As with all things, those higher air fares may one day drawn in more competition, though.  It is conceivable that if the fares rise considerably, another alliance may target such a market for competition.  For instance, the Star Alliance may decide that Dallas needs some competition and suddenly we may find ContiUnited or US Airways providing some feed to that destination in order for a European carrier such as Lufthansa to justify a route between Dallas and Germany. 

I think such developments are a good 5 years away at least.  Fundamentally, I think these alliances are bad for consumers and bad for the industry but they were instituted a long time ago and that genie is out of the bottle now.  Since it would be nearly impossible to break up those alliances, it is fair that Oneworld be permited to establish their own now.  SkyTeam pioneered such things and Star Alliance is also far ahead of the curve. 

Regrettably, now we have to manage competition between alliances rather than companies.  I think that is bad because those alliances potentially let airlines that would otherwise go out of business remain in the game longer.  We need to see this industry periodically purge itself of the weaker players.  If you think that didn’t happen under regulation, you’re wrong.  It did.  Airlines did file bankruptcy and if they didn’t, they were forced into mergers of convenience by the CAB.  In any case, the weaker players still went away.  All too often, we don’t allow that to happen anymore and that hurts us more than helps.

Filed under: Airline News, Airline Service, Airlines Alliances by ajax
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I know that these days it seems as if I’m at war with American Airlines but the truth is, they just keep running into walls.

ABC News has THIS story about a woman named Danielle Covarrubias who became pretty angry at American Airlines losing her bag.  However, when they also refused to refund her bag fee, she decided to sue American Airlines for $5 million.  The class action lawsuit was filed in Washington state, where Ms. Covarrubias lives.

But after a few days, it’s come to light that, according to American, Ms. Covarrubias wasn’t on the AA flight.  It was cancelled and she was re-booked onto another airline which lost her bag.  That was from Grand Rapids to Chicago.  No one disputes the bag was lost but it appears it was returned to her the following day.

AA says that they do allow a refund claim in these events as a part of a lost bag claim and it is unclear if Ms. Covarrubias filed such a claim.  Regardless, it points up what I’ve been saying for more than a year.  If you’re going to charge a bag fee, be prepared to deliver or refund that fee when you don’t deliver it on time or at all. 

Travelers are enraged and there is enough traction for a class action lawsuit such as this.  Even if this one doesn’t end up in court, I do believe there will be another that does.  When it does, the issue will be over whether or not an airline is entering into a contract to carry that bag with guarantees and I don’t think their fine print will save them.  There is plenty of law to show that there is an implied contract and that breaking the contract means you owe a refund of some sort.

Revenue from ancillary fees such as this looks great to airlines but they haven’t yet really felt the pain of what those fees imply.  To be honest, I’m a bit surprised that it has taken this long to see something like this. 

More important, it’s another case of airlines shooting themselves in the foot.  This problem was easy to solve and even easier to avoid.  Give a refund instantly when you lose or misplace a bag for which a customer has paid a fee. 

That much is a no-brainer.  It isn’t hard to empower an employee to do so.  You only have to ask 2 questions to arrive at an appropriate action:  1) Did the customer pay a checked bag fee and actually check a bag?  2) Did the bag arrive with the customer?   If the answers are Yes and No respectively, make that refund immediately.  Credit it back in exactly the same manner for which it was paid and do it instantly and with sincere regrets over the trouble caused. 

Denying that refund automatically is not only a bad PR strategy, it’s just simply wrong.  In this country, we do not expect people to pay for things they didn’t get.  Airlines are styling these fees as “services” and, in this case, service is exactly what the customer didn’t receive.

Filed under: Airline Fees, Airline News, Airline Service by ajax
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Air Berlin will be joining Oneworld sponsored by British Airways it has been announced.  I would like to announce something myself:

Huh?  Air Berlin?

Air Berlin is European continent based LCC carrier and while they get generally good marks as an LCC carrier, I’ve a hard time figuring out how their service product harmonizes with the rest of Oneworld.  Particularly with British Airways, American Airlines, QANTAS, Finnair and Cathay Pacific.  Is Oneworld just that eager to have more feed on the European continent?

Filed under: Airline News, Airlines Alliances by ajax
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