Virgin America has a net loss of $671 million.  It’s a great airline and certainly the one that everyone said they wanted but . . . it ain’t making money.

And it should be by now.  Virgin America never quite seems to close the revenue gap despite promises that that will happen.  Yes, they have succeeded on many routes and, yes, they are popular with the business traveler who has tried them but . . .

Virgin America doesn’t offer the business traveler what he wants:  Frequent flier miles that go someplace they want to go.

The true business flyer already can access great service and comfortable seats.  They get upgraded on the legacy airlines and sniff at the lowly economy fliers who trudge past them.  They don’t *need* more service.  It’s a nice to have when it comes to Virgin America for these travelers but not a must have.

What the legacy airlines have that Virgin doesn’t is frequent flier miles that give these people the chance to fly their family to great destinations for vacation.  Virgin America doesn’t.  Unless you want to go from San Francisco to New York City.  Not many do.

As much as I want to support Virgin America as a contender, there comes a time when such an airline needs to go away.  I believe that time might be arriving since they have no (announced) plan to improve revenues and profits.  Their advantage is evaporating quickly against legacy airlines and despite their low costs, they can’t even beat Alaska Airlines.

Who should buy them?  You know, a great businessman such as David Neeleman could put JetBlue, Virgin America and Frontier together and create a national airline.  I’m just pointing out the opportunities here since each airline uses the same aircraft type (Virgin and Frontier use the CFM powered version while JetBlue uses the IAE powered version) and which would suddenly have focus cities that cover the East Coast, West Coast and even part of the Midwest.

It’s not a foolish idea.  There are synergies there that would serve all three airlines.  Each has some valuable slots at slot controlled airports. And a 3 way combination isn’t entirely unprecedented in this industry either.

Use JetBlue’s reservations and IT infrastructure.  Use Virgin America’s A320 orders for expansion and use Frontier’s assets to build a real Midwest operation.

But it would take a very visionary airline industry leader.  Someone who has started successful airlines and who is brave enough to take advantage of opportunities and who knows how to compete with major legacy airlines.  Someone who, you know, is driven and leads well.  A guy who speaks both English and Portuguese.

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United Airlines is in discussions with Airbus about the A350-1000 as a replacement for aging 747 and 777 aircraft in the United fleet.  A significant portion of the United 777 fleet is comprised of very early build 777 aircraft (-200 series) and their 747s are particularly old as well.

United already has 787 aircraft on order (both on the Continental and United airlines sides of the house) as well as the A350-900.  While Continental executives are largely in charge of the airline today, I would suggest that Boeing pay attention.

It would be tempting to say that this is United rattling Boeing’s cage to get going on the 777-X.  I would agree that it has the secondary purpose of that but I also think United wants to know what it can get its hands on fairly quickly to replace a fleet of fuel inefficient aircraft that will begin to cripple profitability in a few years.

We’re not talking about replacing already old aircraft today, we are talking about replacing them in the 2018 to 2022 time period.  By then, these aircraft will be extremely fuel inefficient compared to other US fleets and time is of the essence.

When your capital costs for such an airliner are greater than $200 million for a single aircraft in that class, you want to buy the very most efficient aircraft you can get.  You want the best technologies because 20 years later, that is what you’ll be stuck with.

Whether Boeing thinks the current 777 lineup is still competitive on a spreadsheet, it is ignoring that it isn’t competitive in perception.  I’ll put it simply:

A350-1000:  New, efficient, modern, new

777-300ER:  Older, somewhat efficient, somewhat modern, not new.

Boeing needs the 777-X and it needs it today and airlines are signaling to Boeing that if Boeing doesn’t build it, they’ll buy it from someone else.

Curiously, Boeing already got this message handed to them over the A320NEO.  You would think that they had learned their lesson (again) and would be paying attention to airlines over the jumbo issue.  US Airlines can’t afford to be just loyal to Boeing anymore.  They must buy the best of the best and Airbus is the equal of Boeing in all categories.

If Boeing wants to sell some aircraft, it’s time to get authorization to offer and build a new range of 777 aircraft for its customers.  Customers who’ve plainly said “If you build it, we’ll buy it.  If you don’t, we’ll buy it from someone else.”

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AMR has reported a net loss of $291 million for September which includes $160 million in special bankruptcy charges.  This means that American Airlines had a significant loss for September regardless.  And I would remind readers of the artificially low costs AA is experiencing right now as well.

Yes, this absolutely had to do with the pilots conniption with the company but I assure you that the pilots didn’t do $131 million in damages with their behavior either.  That would be so spectacular as to cause the airline to head immediately to court for relief.   Furthermore, the pilot problem is at the least 50% of AA’s fault in the first place.

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Over the last 40 years, a lot of criticism has been made of Southwest at various times and Southwest has managed to prove people wrong about its decisions over and over again.  For instance, analysts are just screaming for Southwest to put baggage fees into place and Southwest just as adamantly refuses to do so.

I’m a fan of Southwest for many reasons.  First and foremost for their track record in delivering annuals  profits.  They work hard to do this and should be admired and appreciated for it.  The truth is, I think their stock gets short shrift over and over again on this point alone.  It’s as if everyone has been waiting 40 years to pounce on a failure of theirs.

I think they’ve been very smart to keep baggage fees out of their system.  It’s a key discriminator at this point and by now they have enough hard fact to back up this decision.  People need to give this a rest.

They are starting to take flack for their fare prices going up and up but I don’t think that this is deserved.  Southwest is as good at revenue management as anyone else and better than most.  And even though it hits me in the pocketbook, fares *should* go up some.

They take hits for their high(er) labor costs now.  Yes, their labor is paid very, very well.  Their labor also delivers very, very well.  Yes, their pilots earn exceptional salaries but they also work like mad to earn it.  This is a group that actually fights to take on more flights rather than fewer each month.  When the company needs operational efficiency, they deliver in a variety of forms.  Peace and efficiency from a labor group is a vastly underrated value in my opinion.  j

They do have hubs although they are referred to as focus cities.  They aren’t traditional hubs and Southwest works a hub like no one else.  They deliver more people through their gate space than is generally imagined possible.  They skillfully schedule flights through these hubs to not only make connections possible but also to offer many, many one-stop, no plane change flights between some rather unusual city pairs.  And do it so well that they can deliver a total travel time that meets (and sometimes exceeds) the performance of non-stop flights on other airlines.

But I am unimpressed with two aspects of Southwest Airlines.

I’ve said it before and I’ll say it again:  Where the hell is an upgraded IT system?  An airline of the size and scope that SWA is should not be using a relic reservations system that has Braniff International’s original COWBOY system at its core.  It was a great move on SWA’s part to buy it and incorporate it in the 1980’s.  That was truly a smart way to go.  It was fine that they kept building on top of it all through the 90’s and even in the early 2000’s.

It’s appalling that Southwest hasn’t fixed this glaring problem in the last 5 years.  The airline has changed and the airline industry has changed.  Southwest hasn’t changed its IT systems to meet those challenges well.  It’s long overdue.  My greatest fear is that they are working on this internally, too. Building a strong, world class reservations system for an airline of its size is no trivial task and should have been outsourced to someone who had a system on the shelf.   Given the state of reservations systems in general, it defies my imagination why SWA wouldn’t have bought into one of the strong legacy systems and moved on with other tasks.  SABRE or SHARES could have done the job and done it at a fair price.

I also don’t like the feelings I get with SWA’s merger integration.  I don’t get a sense of urgency on SWA’s part to get this done.  Certainly not when SWA is predicting that merger integration won’t be complete until 2015.  The minimum time it would be for that is 27 months from now.  It’s likely to take as much as 36 more months and only if the airline manages to get the Airtran system talking to the SWA system.

I have an ugly feeling that SWA is going to use the Airtran reservations system as its “international” reservations system, too.

I think the merger integration has distracted the airline from looking at growth opportunities elsewhere.  Yes, the airline grew with the addition of Airtran.  It’s now contracting considerably and it bothers me that we don’t see Southwest making any growth moves at present.  More than anything, I get a sense that SWA is creeping into conservatism just because the entire industry is as well.

Where is the next big purchase of slots at Newark or La Guardia or Washington National?

What preparations are being made to exploit Dallas Love Field in 2014 when the Wright Amendment goes away?

We saw a move in Houston to create an opportunity for international destinations in Central America and then. . . everything went silent.

I honestly think SWA needs more help in their merger integration.  In particular so that they can get their creative executives back to work on developing more growth and more profits.

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The other night I was doing some searching of area north and west of DFW and came across something that has to be a bit unusual.   A photo of an aircraft.  Actually, it shows as 2 aircraft but I suspect it’s one captured in two different frames.  It is, I believe, an American Airlines MD-82.

You can see it HERE (I hope.)

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When the new American Airlines Boeing 777-300ER was spotted at Boeing, everyone was a touch surprised to see it painted in grey with some preparation for a different scheme shown in how the tail was painted.  Current speculation is that AA will introduce a new livery with this aircraft although it might simply be a one-off design.

American Airlines is, of course, famous for its polished aluminum aircraft although that livery has been modified here and there over the years.  When the A300 came onboard, it was originally painted grey since Airbus aircraft nominally can’t be polished and left bare.  MD-80s ultimate saw their tail surfaces painted grey although originally they were polished as well.

Some think this 777 may just be a Oneworld paint scheme but it doesn’t follow what has been done with Oneworld aircraft so far.

I think it’s a new livery but if I’m a creditor of American Airlines, I would be pretty annoyed at discovering this.  Changing liveries is costly and with the future of AA much in doubt, it would be wiser to pause on a livery re-design until other issues are settled.

Yes, American does need a new livery because it is taking on new Airbus A320 series aircraft that must be painted and the 787 cannot be polished either.  More important, AA’s current livery is just . . . old and dated.

AA has lately been throwing out lots of change into the media.  Changes in seating, changes in first class experiences and just change.  Much of it scheduled years away.  Clearly it’s designed to create some excitement about the brand again but it seems slow and uncoordinated and against the best interests of a bankruptcy exit.   None of it fundamentally improves AA’s revenue plan so far either.

Enthusiasts will be excited and that includes me since a livery change is rare for most airlines and rarer still for American Airlines.

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I believe the non-disclosure agreement that US Airways enjoys with American Airlines expires at the end of this month.  Am I the only one looking forward to that media storm?

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Singapore Airlines has made a deal with Airbus to buy 5 more A380 aircraft that is contingent upon Airbus taking their current A340-500 aircraft back for resale.  It’s a good, smart deal for Singapore and not really a surprise.

Singapore probably could use a few more A380s for 747 replacement and growth.  But those A340-500 aircraft are fuel hogs compared to anything else in their fleet.  It was time for them to go.

Since they’re  leaving, so are the Singapore routes from Singapore to LA and New York City.  The longest aircraft routes on record today will be no more and that leaves the Sydney-Dallas route as being the top leader.   Those routes were prestige routes that never really earned much money and less so today.  If Singapore truly wanted to continue them, they could have added 777-200LR aircraft to that route and flown more people for less costs.

In a way, it’s kind of a quiet ending to what was originally an exciting aircraft.  Admittedly, the A340 got eclipsed by the 777-200LR pretty quickly but it was a very impressive aircraft for range when it arrived and really made people think when it began serving routes that were really about halfway across the face of the earth.

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Terry Maxon of the Dallas Morning News has a summary of 3rd Quarter Earnings that brings clear light to how airlines have done these past 3 months.  Before going further, let me say that both companies and pundits like to exclude special items from their analysis of earnings.  It is the airlines’ way of saying “Yeah But!”

Yeah, but if we had not screwed up on our hedges, we would have made this much.  Yeah, but if we had not had to pay off a bunch of senior employees to leave, we would have made this much.

I don’t like Yeah Buts.  Special items occur every month, every quarter and every year.  More so than ever before.  It’s time to accept that it is what it is regardless of how special items affect performance.   Now on to a few observations:

Delta Airlines is doing exactly what CEO Richard Anderson said was necessary in the airline industry.  They are raising their margins considerably to truly cover their capital costs as well as their operating costs.  Well done.  Very, very well done. Admittedly, they are farthest down the road in the New World Order of consolidation but it is a consummate performance nonetheless.

Alaska Airlines:  Ditto!  They are playing their game perfectly right now.

Hawaiian Airlines:  Again, well done and particularly so in light of where their market was just a few short years ago when it comes to competition.  Yes, they face less complex challenges than continental US airlines but they still are performing well.

US Airways:  I’ve already said it once this week.  These guys know how to run an airline and earn a profit even under trying circumstances.  They make a better case for merger with their financial results than any PR machine could make publicly in the news.

United Airlines:  It’s time for these guys to get a little more on the ball.  One begins to sense a certain lag in realizing their synergies and having a seamless system.  Special items shouldn’t be killing your entire net income at this point.

JetBlue:  Nice job but kind of a yawn.  We’ve been seeing roughly the same level of performance for years with no substantial growth whatsoever.  I’d rather have Alaska Airlines than JetBlue at this point.

Southwest:  I think their recent performance reflects their merger.  What I think hasn’t been brought up but should be is that their merger isn’t exactly brand new at this point and the lag is primarily due to how ill equipped they were to absorb another airline with respect to their systems.  Consider this:  SWA has made noise about how their IT systems impact their ability to do business with the rest of the world for a bit over 5 years.  They are operationally seeking to do business with the rest of the world in many different ways and they are certainly changing the way they operate to be more in line with a legacy airline.  SO WHY HASN’T THE IT PROBLEM BEEN ADDRESSED AGGRESSIVELY AT THIS POINT?

American Airlines:  B’ah.  Even with artificially contained costs and a fairly friendly bankruptcy judge, they continue to lose money.  What’s the definition of insanity?  Doing the same thing over and over again expecting a different result?

Summary:  It’s no surprise that the two top performers are also partners and close ones at that.  These are airlines that know what they’re doing and who exercise strict discipline in operating their airlines.  Yes, I’m talking about Alaska Airlines and Delta.

No one is talking about growth, everyone is talking about capacity restraints and raising margins.  Well, all except American Airlines.  That alone speaks volumes.

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US Airways has, again, reported record net income for its 3rd quarter and, once again, has made a better argument for a merger than any of the posturing that goes on in the press.

This is an executive team that continues to deal with contentious crew issues, a still separated flight system and yet has managed to fix major customer issues and operate an on-time, profitable airline. Believe me when I say that that isn’t happening simply because they have some low(ish) labor costs.

Costs are *not* the only key item for profitable, successful airlines.  You have to attract people to your business and keep them there.  That’s about service and US Airways is a whole lot better airline today for the money than it ever was before.

The executive team manages to outperform many airlines on earnings vs revenues  and does it from sub-standard hubs.  US Airways has all of the handicaps, none of the advantages and earned $192 million on revenues of $3.5 billion.  American Airlines managed to lose money on revenues of $7 billion and that’s with their costs artificially depressed at this point due to bankruptcy.

Hey AA?  Do you like apples?

Yes?

How do you like those apples?

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US Airways pilots feel there is nothing in the way of negotiating a new combined contract with US Airways after a ruling made last week that essentially said that the airline and union may do so but there is no cover from a lawsuit necessarily.  A ruling that I feel probably lacked the clarity all were hoping for but which was  a correct ruling.  You can’t give legal cover to people from lawsuits like that.  You don’t know the nature of the lawsuit until it happens.

I agree that US Airways pilots are in desperate need of a new contract.  It’s been 7 years now and it’s time for a successful airline such as US Airways have a truly combined operation.  This is true for US Airways flight attendants as well.

But primary fault in this delay is largely due to the pilots.  Neither group (US Airways and American West pilots are the two groups) could agree on seniority integration and after an arbitration ruling, the US Airways (original) group broke away from ALPA (who represented both groups)  and by sheer numbers formed a new union.  The two sides have been at war in a courtroom since.

And US Airways doesn’t know who the legitimate combined union is really since there has been no ruling on the fight itself.

Successful airline merger seniority integrations that have taken place since the US Airways merger were based on relative seniority.  This meant that for seniority purposes only, the two lists were merged in a manner that more or less preserved each parties seniority position in the new company.

It’s our view that this is both reasonable and right as a method for combining pilot groups (or other labor groups).

Sadly, US Airways (original) pilots want date of hire as the defining measure for seniority integration.  This would lead to a large group of US Airways (original) pilots sitting at the top of the food chain and blocking promotion for years for the younger America West group.  Not very fair and particularly so when you consider this:
It was US Airways (original) that was bankrupt (again) and about to sink to the ocean floor.  Not America West.   America West was health and in possession of an excellent management team who ultimately proved to be more than capable of not just running a combined operation but improving operations tremendously while consistently earning profits.

Yes, I think that US Airways pilots deserve a contract.

I also think the two groups should shake hands, adopt the original arbitration ruling and immediately go to the negotiating table for a new contract with unity.   That’s what moves this process forward.

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American Airlines pilots are now reporting what they’re after in negotiations with American Airlines management and I find it . . . ambitious.  The highlights of their “asks” are:

• Eliminate Group II pay band and move the A-319 into Group III, with a weighted industry average before year three

• Pay rates that align us with our network-carrier peers at Delta and United

• Codeshare restrictions in line with those in the US Airways conditional labor agreement

• Contract duration that is shorter than the six-year duration in management’s “last, best, final offer”

• An industry-standard pension

• An equity claim that can be monetized and has an established “hard floor” protection

• Scope limits that include a hard cap or percentage limits on the 50- to 76-seat jets

To a degree, when you enter into negotiations at airlines, you ask for the world, promise the world to your membership and ultimately settle for something less than the world.

These goals are too much for the present situation.  They don’t set appropriate expectations for either side.

Changing airliners around into different pay groups will materially affect American Airlines’ cost plans.  AA has a solution for that problem:  Impose terms and live with the pilots bad behavior.

Negotiating for pay rates that are equivalent to those of both Delta and United pilots is too aggressive.  Let’s not forget that pilots at both those airlines paid their dues with lower rates and got their airlines to a high performing level before they earned those industry leading rates.  AA pilots haven’t paid their dues and I’m beginning to wonder if anyone bothered to tell them that the AIRLINE IS IN BANKRUPTCY.

Codeshare restrictions are about preserving jobs.  I get that and even approve.  I think that airlines should fly their flights and compete rather than buddy up in every possible way out there.  But I would also point out that while the bankruptcy judge didn’t let AA have carte blanche on codeshares, he pretty much let them get as much they needed and wanted.  This shouldn’t be the hot button issues that the union keeps making into.  American Airlines isn’t going to be a Virtual Airline.

Contract duration seems silly at this point too.  The pilots are already into their 6th year of negotiating a contract now.  Get something in place that allows both parties to go to work on their jobs.  Quit making a fuss and causing a distraction every 3 years when it comes to pay.  Take the 6 year duration and the stability and the benefit it will provide the company as well as you.  Going for a 3 year duration in the hopes that you’ll get an even better rate is just . . . silly.  There isn’t room in the airline industry to see those pay rates grow substantially and there won’t be for years to come.  Sorry guys, you’re fighting for a right that potentially leaves you at a greater disadvantage.

Industry standard pension:  How about you guys take an Industry Standard 401K like the rest of us.

Equity claim:  I’m fine with this but if the pilots want this, they *have* to give something up to get it.  You don’t get industry standard/industry leading benefits and wages plus a substantial equity claim that can be converted to cash and distributed to pilots as well.  That is called having your cake and eating it.  I really do wonder if anyone has mentioned that AMERICAN AIRLINES IS IN BANKRUPTCY.

Scope limits:  I’m in violent disagreement here.  I actually think that AA has limited itself too much with scope limits even now.  There will be growth on routes and routes that are 60 seat commuter routes today may well be 90 seat routes 10 years from now.  But a 90 seat route isn’t a mainline route.  Not in this decade.  There is a solution here:  Offer low, low pay rates to American Airlines to take on this flying internally.  Ask for an apprentice program that hires and trains new pilots and puts them into this commuter flying at “industry standard” regional airline rates with a growth path to mainline flying internal to the company.  But make it *cheap* for AA.  The upside?  The union gets these pilots earlier and has them “feeding” the union earlier in the process and they get to control one hell of a lot of more pilots than they otherwise would.

I don’t think we’ll see a successful agreement out of these latest talks.  I think reality hasn’t hit either party in a substantive way and I think that pilots will decry management and start impacting operations again after these negotiations break down.  I think the prospect of a real contract is slim and I begin to wonder if AA shouldn’t impose terms and take the operational hit for another month or two and let pilots get tired of their behavior.  Or, better yet, impose terms and hire yet another law firm to be prepared to seek an injunction against pilots when they start their slow down again.

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Spirit Airlines is establishing a crew base in the Dallas area to support the flights it is adding furiously into and out of DFW airport.  This is in addition to the maintenance base it has just established at DFW.

Clearly Spirit plans to stay and that puts a big thorn in American Airlines’ side, I think.  Leisure travel isn’t the bread and butter of AA but it is what can fill their aircraft for incremental revenue.  Spirit will drain that off some.  In addition, I do expect that Spirit will put downward pressure on prices at American Airlines.

SWA will see a similar drain of those occasional leisure travelers but its brand loyalty and ever increasing business traffic help alleviate that impact considerably.

Bottom line:  Spirit sees long term opportunity in the DFW area and I couldn’t agree more.  The idea that DFW is an expensive airport to operate from is no longer entirely valid and hasn’t been for some time.  In addition, it is no more and no less impacted by traffic and/or weather events.  This makes DFW an attractive airport and other airlines should sit up and pay attention.

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In a bold understatement, American Airlines CEO Tom Horton has acknowledged in new stories that AA has had a rough few weeks.  Horton was admitting to AA’s operational problems primarily with respect to cancelled flights and reduced schedules due to pilot driven maintenance issues.

It’s notable that Horton would not speak about a merger with US Airways but did mention IAG (International Airlines Group: British Airways / Iberia) CEO Willie Horton was willing to take a minority stake in the airline to emerge from bankruptcy.

I strongly suspect that Horton and his team are continuing to look for every option to emerge independently from bankruptcy.  In short, he seems determined to benefit from the rewards previous airline CEOs have enjoyed upon emerging from bankruptcy rather than necessarily being oriented towards the best interests of AA’s stakeholders.

The problems going on at AA are many and not just limited to the pilots.  We now see an airline unable to cope with its unions with respect to coming to an agreement with pilots to settle the pilot induced operational problems as well as it seems to be having trouble figuring out how to deal with reduced staff as a result of “early out” options negotiated with unions representing flight attendants and mechanics.

Furthermore, it has enjoyed a PR disaster over the operational problems as well as the seat problems on 757 aircraft.

Here is the point:  None of these problems as a single event is that big of an issue.  Airlines go through these from time to time.  However, the ensuing perfect storm belies a company lacking leadership.   To further my point, this is really the first we’ve seen Tom Horton answering media questions in weeks and the answers aren’t entirely forthcoming.

Instead, we’ve seen subordinates and spokespersons responding to each problem as if to say “there really isn’t anything wrong here, look away.”

Denial starts to make you look stupid in these situations.  The growing consensus among industry observers is that it is time for this executive team to go.  I agree.

Whether it be a takeover by US Airways or another executive team, we see a leadership crisis that needs to be solved.  No one is out front and leading the airline through these crisis.  We continue to see “committee” responses to these problems that seem couched to avoid public mea culpas.  Airlines in denial fail more.

I expect that we will see financial results over the next few months that point to this denial and we’ll see a return to the “Wait, wait!  It will get better!  We promise” approach to advocating to the airline.

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Curiously, American Eagle has managed to get deals with all its unions on terms that seem to work very well for its labor and without nearly the muss and fuss that AA has experienced.

I think this has to do with a combination of factors:

1) Dan Garton, President & CEO of American Eagle, sees his destiny with American Eagle and sees the destiny of American Eagle going far past what business it can capture from American Airlines.  In short, he knows deals have got to be done.

2) Labor at American Eagle knows it has to have agreements in order to survive.  Regional airlines can be liquidated as they are not too big to fail.

3) American Eagle as a company knows that to survive, it must have in place agreements that permit it to compete with other regional airlines for business.

4)  American Airlines threw a warning out when it signed a deal with Skywest for flying in Los Angeles.

It is both surprising and pleasing to see just how non-contentious the negotiations have been in the American Eagle camp and makes me wonder if Dan Garton isn’t the person to be leading American Airlines.

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Despite vehement and even angry protests by Akbar Al Baker, Qatar Airways will be joining Oneworld sponsored by British Airways.   The expectation is that Qatar should be a fully integrated member in 12 to 18 months.

This brings a few questions out into the open.  First and foremost, why did QANTAS partner with Emirates in light of the knowledge it had to have had about Qatar Airways joining the alliance?  Does this spell the end of QANTAS in Oneworld?

I think QANTAS will remain in Oneworld for the time being but this does leave Oneworld a bit weak with a founding member not fully aligned with its alliance partnerships.

One wonders if the CEOs of Oneworld fully considered just who they were inviting into their parlor when it comes to Akbar Al Baker.  He is outspoken, a critic of the status quo and known for his angry outbursts and changes of opinion.

And you have to wonder what Al Baker saw in Oneworld.  Oneworld is made up of several airlines that, so far, have struggled more than most in changing with the world.  British Airways / Iberia (IAG) hasn’t exactly taken over Europe.  American Airlines is in bankruptcy.  QANTAS walked away from British Airways and into the arms of Emirates.  Cathay Pacific is . . . Cathay Pacific.  Nothing special.

And Qatar offers a PR coup, for sure, and an airline with an impeccable service product but it isn’t Etihad or Emirates and its Doha hub is less ideal than Emirates’ Dubai hub as a destination.  The airline has a widely varying fleet and I wouldn’t expect much harmony in the fleet for the future as Qatar has orders for wildly differing aircraft.

I think the PR is good for Oneworld, I think Qatar joining isn’t all that much added value in the grand scheme of things.  Qatar doesn’t bring a scale that would help as much as other airlines would.

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The Dallas Morning News Airline Biz Blog notes that American Airlines isn’t doing quite as bad with their on-time record last week.   Just 33.1% of flights were later than 15 minutes minutes.

It’s notable that American Eagle had just 15% of its flights late and that puts it ahead of all the major legacy airlines except Delta and Alaska (and Alaska traditionally does well in these assessments.

American remains dead last among the legacy airlines with United being the next worst at 22%.

Yes, there continues to be a problem at American Airlines.

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There is a growing consensus among many that AA’s leadership just isn’t making the grade.  Most recently, Leeham News and Commentary made a post summarizing, once again, the story of failed leadership at AA since Robert Crandall retired.  It’s a story I’ve told and many others out there have too.

It’s my personal observation that leadership doesn’t look or feel like what it is portrayed as in Hollywood.  There is some kind of belief that a strong leader runs around and says “My way!  I’m in charge! You don’t know, I know!”  This is what I would refer to as the Alexander Haig model.  Many of you may know how well that went.

It seems to me that the very best leaders in business, politics or elsewhere have some common attributes.  One of them is a certain amount of humility.  A humility that takes the form of that person not seeing himself as greater than any other individual.  In fact, that quality is often expressed in the way the leader or leaders see themselves in the service of those they actually lead.

They also learn how to change directions when circumstances call for it.  They are not married to a process that has been outgrown or which no longer fits the circumstances.

They learn to bring in new blood and adopt best practices from other businesses.

They may be tough but they aren’t imperious and they aren’t greedy.  They make decisions based upon what is right for all stakeholders and not just those whose interests are financially aligned with their own.

Sounds a lot like Bethune and Crandall, no?

What it doesn’t sound like is Carty or Arpey or Horton.  And that’s the point that all of us are making now.  Pilots and other labor groups hate the current leadership for both objective and emotional reasons.  I get that.

But this isn’t about hate.  It’s about failure to lead and the body of evidence says its time for other parties to lead.

Filed under: Airline News by ajax
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Gary Shteyngart wrote a story for the New York Times titled “A Trans-Atlantic Trip Turns Kafkaeque” describing a 30 hour transit from Paris to New York City that involved maintenance problems, returning to an airport (London), an overnight stay and more trouble getting home.

Any one trip can turn into a horror.  It’s happened to the best of airlines.  There are some telling points to this story, however.  First, maintenance problems (again) start this off with delays that for American, shouldn’t be so difficult to deal with for an airline with substantial operations in both Paris and London.  These problems aren’t happening in Omaha, Nebraska.

Given that they are happening major destination points for American and given that the bulk of the horror took place in London, a place where AA has a major operation and support from partner British Airways, it just shouldn’t happen.  Finding a usable 767 shouldn’t have necessarily been the hardest thing to do.  Nor finding a crew for that 767.  In addition, even if a 767 couldn’t be found for the flight, it should have and could have been possible to take care of a great many of those passengers on flights with AA or BA.

It’s an example of an airline not trying.  Trying counts for a lot.  You’ll never keep all people happy but you can substantially reduce the impact of such events by just trying.   There are 13 flights daily between JFK and London Heathrow if one considers both AA and BA.   There are another 6 flights between London and Chicago (BA and AA again).   there are 4 between London and Dallas and 4 between London and Miami and another 4 between London and Los Angeles.  that’s a total of 31 flights from London to the “cornerstone” cities of American Airlines if one considers both American Airlines and its codeshare partner British Airways.

If every seat on that 767-300 was full (and I virtually guarantee they weren’t), there would be only 225 passengers to take care of.  30 business class and the remainder economy class.  The math here isn’t hard.  If you can’t deal with 225 passengers at your major European focus city, you have a problem that goes far beyond maintenance.

I’ll grant that accommodating international passengers in a foreign city is a touch more challenging than a domestic flight.  Here is what you do:

1. Dispatch multiple agents including a British Airways representative to the gate to meet the flight.  Make sure they have communications with them such as cellular phones that will allow them to communicate with company operations personnel.
2. Get the passengers through customs in a quick and organized manner and collect them on the other side into small groups of about 30 passengers.
3. Ask your reservations center(s) to allocate 6 to 8 agents with dedicated phone connections to the gate agents for fast re-booking.
4. Determine the final destinations of the passengers and start routing them to alternate hub cities where possible.
5. For the very few you cannot take care of, refer them to a final agent who should make accommodations available at a nearby hotel (preferably located on or near the airport) and book them on the first flights out that permit connections to their final destinations.

Flights cancel.  It happens.  Having a contingency plan and some staff on hand to deal with this problem is not hard.  That aircraft turned around 1 to 2 hours away from London.  That’s enough time to call in a few extra staff to help.  It really is.  Again, this wasn’t happening in Kabul, it was happening in American Airlines’ major European focus city where its prime trans-Atlantic partner was located.

Keeping passengers happy and, more importantly, keeping passengers such as a writer for the New York Times happy, pays big dividends in the end.

Filed under: Airline Service by ajax
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I found this MarketWatch Top Ten brands to disappear in 2013 and it lists American Airlines first.  The story cites that American was a leader but became a “mid-size” carrier after the unions of Delta/Northwest and United/Continental.

Uh, no, it won’t disappear in 2013.  Disappearing implies either liquidation or a merger where the brand disappears in favor of another.  That won’t happen.  American will either exit bankruptcy as a stand-alone and survive, exit bankruptcy and merge with another carrier or merge with another carrier and then exit bankruptcy.  In any of those situations, the brand is almost certainly going to remain American Airlines.

I will concede that the brand is taking a lot of hits this month and is likely to get hit a bit more over the next few months.  That, alone, won’t undo the brand.  It is highly recognizable and the fact that so many are upset at AA right now indicates that there is still ample opportunity to fix these problems and win people back.

Filed under: Airline News by ajax
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