Continental Airlines and US Airways have gone from red to black in their latest 2nd quarter earnings reports and it’s a remarkable performance for both airlines. Continental wobbled a bit in the 1st quarter but came back with a strong report of $233 million report and when you combine that with United Airlines earnings, you see a potential competitor to Delta that is the equal if not superior.
Delta Airlines, American Airlines and the proposed ContiUnited merger all will result in airlines with revenues between $23 billion and $28 billion and it just strikese a yellow highlighter across American that it had a gap of over $400 million in profit this past quarter.
US Airways’ result, however, is even more impressive. In fact, US Airways in general is becoming more and more impressive. Operationally, they’re hitting high numbers on completing flights on time, losing baggage and just generally making people feel good about their choice. This is not the airline you saw even 2 years ago and if I were asked about flying them today, I would highly recommend them at this point.
US Airways came in with a net profit of $257 million this quarter and they did this with the least relevant hubs in the industry. They did it despite the fact that after nearly 5 years their pilots still haven’t decided upon a union and negotiated a contract. They did it despite becoming the third wheel among the Star Alliance’s US based partners. They did it despite making Las Vegas, at best, a focus city instead of a hub.
I would love to see some of that DNA move over to American and get things sorted for once.
That’s a less than thrilling announcement. To be fair, American Airlines has lost a great deal less money for Q2 this year than the previous year’s Q2. This year’s Q2 loss is a bit over $10 million while last year’s was $390 million.
The problem is that while this is an improvement, it also highlights just how far behind the curve AA is compared to its brother legacy airlines in the United States. With Delta and United reporting huge profits for Q2 and Continental sure to follow with impressive numbers, American Airlines’ disadvantage is only highlighted.
American blamed much of its Q2 losses on higher fuel prices. The problem with that is that the fuel price to AA is essentially the same price it is to every airline in the United States. The only mitigation for that is hedging and AA does engage in hedging. So, higher fuel prices over this time last year isn’t really a very satisfying answer for what remains a result that is staggeringly far behind other US legacy airlines.
AA has attempted to mitigate that stark contrast by saying that, over time, other airlines’ costs will begin to approach AA’s again and the gap will narrow considerably. Well, that sounds good but . . . that’s going to take years and years for that to happen. What about investors today? In addition, whether or not that gap narrows is contingent upon how each airline manages itself. Is the airline doing mortal combat with its labor groups or is it finding common ground and securing productive contracts? In other words, AA has good PR for that gap but it doesn’t have a substantive answer.
Or does it? AA also just got DoT and EU anti-trust immunity to form closer partnerships with its Oneworld brothers, British Airways and Iberia Airlines. In addition, it is on track to receive the same in a partnership with Japan Air Lines across the Pacific Ocean. AA says that these partnerships could as much as $500 million in revenue by 2012. That sounds like a lot until you realize that that is a 2+% revenue gain. And that’s revenue, not profit.
At the end of the day, we hear a lot about strategies AA has involving new partnerships and re-focusing on core cities. We hear a lot of mitigation of cost gaps between AA and the rest of our legacy airlines. We sometimes hear analysts praise AA for avoiding bankruptcy . . . usually right before the analyst highlights just how much that put AA at a disadvantage today.
What we don’t hear about is substantive and real progress made towards reducing costs. We hear noise and we see somewhat halfhearted attempts to paint a picture that something is being done but we haven’t heard about the real progress made towards not just containing costs but reducing them.
At what point do analysts and investors require AA’s executive team to show them the money?
to aggravate, irritate and disappoint customers one customer at a time.
One FlyingColors reader just let me know about yet another American Airlines blunder that occurred yesterday. This same reader spurred this POST just weeks ago. This time, the Dear Reader had scheduled a family trip to Connecticut and because he’s an AA Platinum member, he used his miles to get 3 First Class tickets for his wife and 2 daughters and decided to purchase a Coach ticket for himself on the assumption he could readily get an upgrade.
I know, you’re thinking this is about not getting an upgrade, aren’t you? Wrong. About a week and a half prior to departure, our Dear Reader tried to confirm their travel via AA online only to discover that, suddenly, his wife didn’t have an assigned seat. Not only that, the online portal wouldn’t permit him to get another assignment for his wife.
Undaunted, Dear Reader phoned American Airlines at their AAdvantage phone number to get it taken care of. Once he had a reservations agent on the line (after 15+ minutes of waiting), he was told by this agent that no seat would be assigned until the day of the return trip from Connecticut and would not discuss the reason why. When probed for more information, the agent simply replied “I’m not at liberty to discuss this further with you.” All done with a secretive and somewhat hostile tone.
That’s when Dear Reader called me and asked what I thought was going on. After hearing his account of the cryptic dialog with the agent, I responded it really could be anything but that it almost sounded like a security problem. Dear Reader wanted to address that before the trip but I explained that likely no one would address the issue until they decided to address it with his wife. Indeed, I also advised that it would likely turn out to be not a problem once they arrived and checked in for the flight.
Well, I was kind of right. It wasn’t a security problem. It was a First Class is oversold problem. At check-in, they continued to decline to assign a seat to his wife and spent their time instead offering a rather generous $300 voucher and guaranteed space on the next available flight via Chicago (he was traveling from Connecticut to the DFW area.)
However, since he was traveling with family and had committments to keep in the DFW area, they declined such a reward and waited. Only after everyone else was boarded did they assign his wife a seat and they were able to return. Dear Reader got to ride in Coach and get harrassed by amateur travelers but they got home.
Yes, his wife and kids were traveling on points. So what? That’s the reward for spending enough money and flying enough trips on AA to become an AA AAdvantage Platinum member. Besides, those seats are so hard to come by that, if they do have them and they do guarantee them and issue a ticket, this is one problem that should *not* be presented to a Platinum member. At the end of the day, American Airlines made up the game and set the rules, let’s not be sympathetic if it doesn’t work out to their AAdvantage.
What’s more, they created a hostile environment for the Dear Reader and his wife by implying it was so much more a problem than it was. Ironically, if they had been told what the problem was, they would have readily re-booked the flight either for later in the day or the day later. Yes, American, your customer could have been made happy by just *telling them* what the problem was. Instead, you chose, once again, to act like information was a golden nugget to be hoarded and induced concern and worry over a flight.
You did it to one of your best customers. And people still ask me why I’ve chosen to take my business elsewhere. Airlines won’t start improving their service and treatment of you, the customers, until you do start taking your business elsewhere. Remember that.
So, I repeat once more: Really American Airlines . . . is that the best you’ve got?
The American Airlines pilots union, APA (or Allied Pilots Association), has new leadership now and the President of that union, David Bates, is already sounding like someone far more reasonable than his predecessor, Lloyd Hill. Bates acknowledges that to recover all the salary cuts given years ago is not possible to do in one fell swoop. That’s a signal of a willingness to find some common ground in an agreement.
However, I remain concerned about a few things. First, this continues to be about salary above anything else. I understand that there continue to be pilots who are resentful of not earning a pre-2001 salary today but it seems unproductive to focus only on that.
A better approach would be getting quality of life improved in return for productivity gains in the next contract. I know of a blog written by a pilot who has spent 11 years at AA and the best he can do is hold a reserve line as an FO on the MD-80. That has to be highly unsatisfying to him and others in the same position.
One complication is American’s focus on its core cities: LA, New York, Dallas, Chicago and Miami. Those are very expensive cities to live in with the possible exception of Dallas. Finding a better way to avoid longer commutes and longer duty days that occur day after day might just help pilots feel a bit more satisfied. While these pilots get to ride aircraft for “free” to their duty stations, there are a number of associated costs that come with that option that are paid for by pilots. Little things like food or a crash pad or a hotel room.
In fact, I’ve never understood why an airline like AA doesn’t offer some sort of accommodations in its large base cities to help with quality of life issues.
Finding a way for a pilot to do his duty hours, get to and from home reasonably and otherwise be a productive member of the crew would go a long way towards making pilots feel appreciated. If this approach was offered, pilots should take a long look at it instead of just counting dollars up.
One comment I’ve read does bother me. Bates made the comment that many of these pilots families “had to pull their children out of school.” What the hell? It’s poor form to complain about taking your children out of school when that can only possibly mean you took them out of PRIVATE SCHOOL. Sorry but a lot of people have had to readjust that way and you won’t get much public sympathy for not being able to afford private school for your children.
As an owner of an iPhone, I’ve become very interested in web sites developed specifically for the smart phone users and even more interested in travel related apps as well as travel specific mobile websites. As much as social networking is becoming important for airlines, I think having a mobile website is even more important.
It’s kind of cool to be able to complain by Twitter or some other social networking media but the busy traveler is even better served by being able to access his airline of choice via a mobile website. I may be wrong but I believe that Continental Airlines had one of the first mobile websites available and that comes as little surprise to me given their popularity with the business traveler.
I wrote about that Continental website more than a year ago. Since then, a number of airlines and travel related websites have now also gone mobile. Now that we have a quorum of companies participating, I’ve added a new section of links titled, oddly enough, Mobile Sites.
It isn’t comprehensive but it is a good slice of what we in the United States would use. Interestingly enough, I think many of these sites were rolled out with little or no fanfare and that seems strange to me.
Midwest Airlines has a site but Frontier, it’s sister airline under Republic Airways, does not. That doesn’t surprise me as I think Midwest Airlines was doing a much better job than many when it comes to technology and social networking. I do hope that that feature will be adopted over to Frontier in the near future.
Virgin America doesn’t have one either and I think I know why. Those folks have used an excessive amount of Flash programming on their sites and that won’t fly on many mobiles including the iPhone. For a company that has positioned itself in the way Virgin America has, I think this is bad for the airline. (Just like I think opening new routes to leisure destinations is bad, too.) Virgin was an early adopter of GoGo Wireless and has its “Red” system onboard for entertainment and food/beverage ordering. They don’t, however, appear to be embracing social networking or mobile apps yet. It is an area that a young, agile airline should be leading in.
Are you listening Mr. Cush? You need someone working on this as of last year!
The various sites available are robust in some cases and some offer pretty limited capability. I expect that that playing field will level out over time and result in a reasonably consistent group of offerings.
Quite a few airlines have offered iPhone apps and I do hope to talk about those in the future sometimes but they’re only relevant to the iPhone and while it is an amazingly popular phone, the Blackberry is the businesman’s mobile phone still.
Web sites that are mobile capable are the way to go both because it serves the busy person with a smart phone but also because it delivers a consistent look and feel to customers who may move from, say, a Blackberry to an iPhone or an Android based smartphone to a Blackberry. Apps, on the other hand, are either phone or phone OS specific and that means maintaining a growing collection of software.
I’ve added a couple of flight services mobile sites as well. Each works from OK to good and, again, I think these will be updated to offer more functionality over time. They’re all linked on the FlyingColors blog but fair warning: a few don’t launch to the mobile site unless you’re browsing from a mobile smartphone.
Got an app you like or another mobile site I haven’t found? Offer it up in the comments section and I’ll add it along with the others.
Update: Virgin America has dumped Flash from its site and is apparently working on a mobile site to be rolled out this year. See this PC World story. That’s good but they’re still behind the curve on mobile sites and, from what I can tell, social networking as well. So much for being a hip airline.
For the past 3 years or more, we’ve heard virtually every airline CEO talk about the need for consolidation and the problem of too many seats chasing too many passengers. Now we have Northwest Airlines fully consolidated into Delta and we’re about to see United and Continetal merge together as well. But does that really solve the long term problems in this industry?
One the one hand, I admire how the airlines are using their dire straits to argue for greater dominance in their industry. It’s the legacies doing this and their “poor me” story is working very well among the public as well as among their own employees.
I would argue that, if anything, we need even stronger competiton in the industry for the long term. The greater dominance we allow isn’t necessarily going to raise prices all that much but what it will do is make it ever more cost prohibitive for new entrants into the market. That’s the ultimate goal of consolidation: keep the new guys out and keep the current competition neutralized as much as possible.
Quite honestly, what we really need is for a legacy airline to go out of business and liquidate. I had long hoped it would be United who had to do this but, sadly, they scrapped by and made it to the other side. US Airways is often pointed to as a candidate and while I’ll agree they are potentially the most vulnerable, I’m not sure I want to see them go.
I’d like to see one of our behemoths leave.
Yes, it would put a lot of people out of work for while. It would lead higher fares in the short term. It would also allow room for new entrants who’ll bring fresher ideas, staff, aircraft and, wait for it . . . , lower fares.
It will help break the stranglehold that unionization has on this industry.
What I’m really proposing is that we need a revolution in the US airline indudstry rather than an evolution of the legacy carriers one more time.
We need airports to have room for new airlines to enter their markets and establish footholds that result in lower fares. That means someone has to go.
This country needs to quite looking at each individual airline as an essential industry to our economy. They aren’t. Not anymore. If one legacy went out of business and liquidated, the other airlines would move so fast to establish new business in those markets that it would make our head spin.
In other words, they would grow the old fashioned way: through competition.
It’s interesting to me that the airlines who have managed to weather the economic recession so well also happen to be the airlines who didn’t contract but, rather, grew themselves as legacies withdrew from unprofitable routes.
It is often claimed that we need the legacies because they serve the small communities. I wonder how the small communities feel about paying a disproportionately high fare in the current systems. The truth is, there are lot of markets that I question the need for air service in many areas.
Does Waco, TX really need flights from Dallas and Houston? Probably not. Those residents should probably be driving to Dallas or Houston for their flights. It costs about $30 to drive to Dallas from Waco. Air fares between those two cities are currently advertised from $130 to $600 one way at present. It’s economically wasteful to take that flight.
We, as a country, should be looking to create more opportunities for new airlines as well as existing LCC carriers who want to enter markets but are bullied away from them at present by the established legacy carriers dominance.
The Chicago Tribune has THIS story on American Airlines and their desire to lower the amount of fuel being carried as reserve on an average flight. In short, AA has discovered that it is carrying an excessive amount of reserve fuel on the average flight. What’s excessive? Some aircraft are landing with almost twice the amount mandated by the FAA and let me point out that the FAA is a pretty conservative organization.
Predictably, American pilots see this as an instrusion on their authority and a dangerous path. But is it? Currently, the FAA mandates that you have 45 minutes of fuel reserves and that’s worked very, very well over the years. Interestingly enough, American itself requires 65 minutes of fuel reserves but the aircraft are landing with an average of 92 minutes of fuel reserves and that’s a problem.
Why? Because when you carry more fuel, you burn more fuel to carry that extra weight. All American wants to do is get their average down much more closely to their mandated reserve number of 65 minutes. Doing so would save them the cost of carry 30 extra minutes of fuel, which over the course of a year in a fleet of over 600 aircraft will translate into millions of dollars of savings.
Captains, traditionially with final say on what fuel they’ll require for a flight, say that this is an intrustion on their authority and potentially puts them into the position of being reprimanded or fired if they do it too often because the airline wants pilots to justify extra fuel by filling out a form. I think the pilots union would love for this to be another bone of contention between pilots and the company.
However, every airline should be doing this for a variety of reasons. First, we really do know how much fuel a typical flight should carry and we know that by route and model of aircraft and the process for figuring this out is genuine science and genuinely accurate. Airlines do *not* want their flights to routinely lack enough of fuel that causes diversions, trust me. Every flight that has to stop and refuel represents a flight that just lost a spectacular amount of money.
Does AA’s form make the process potentially punitive? Yes, I think it does and I think it should. American’s pilots are, quite literally, the best, most experienced pilot corps in the world. The fact that AA’s average has gone up to 92 minutes of fuel left upon landing is shameful for those pilots. They should be nailing the company average 10 months out of 12 and they’re not getting close. So, yes, I think pilots should justify loading more fuel and if they’re inappropriately loading too much fuel, yes, I think they should be counseled on that too.
Just like any other employee today in America’s workplaces who is wasteful and inefficient.
There are legitimate reasons to add additional fuel before leaving. If an airport is particularly congested or experiencing long delays, a pilot will add extra fuel for taxi purposes. If a flight route suddenly has developing weather crossing it, a pilot may add some additional fuel to fly around the weather. There are other legitimate reasons as well and there is no reason why pilots can’t simply document their reasons for increasing their fuel reserves on a particular flight.
US Airways did this a couple of years ago and, yes, a few pilots were sent for extra training and counseling after repeatedly adding more fuel than necessary for flights. Ultimately, US Airways and the pilots came to an agreement on how to work out those conflicts and the airline now saves money by meeting its reserve goals (also in excess of FAA minimums).
This conflict is a union conflict, not a safety conflict. More than a decade ago when fuel prices suddenly rose significantly, all Southwest Airlines had to do was communicate to their flight dispatchers and pilots that they needed to save more fuel and suddenly better, more fuel efficient altitudes were being planned and pilots were being exceptionally aggressive in requesting higher altitudes and more direct approaches to airports to save that money. Safety wasn’t compromised and millions of dollars were saved. If American has the most experienced crew of pilots, Southwest probably has the second most experienced crew.
At the end of the day, saving this money is essential for success in the airline world. Pilots not only shouldn’t be pushing back on this idea, they should be embracing it and working even harder to find places for their airline to remain competitive.
My post from yesterday spurred an off-line response from a frequent reader of the FlyingColors blog. This reader is a national IT director for a multi-billion dollar, multi-national company and he flies American Airlines a lot. Here is his email to me in whole:
Friday, while boarding in Chicago for a flight home after a very exhausting week,three flight attendants decided to begin grousing about the trouble they have every flight finding overhead bin space for the final passengers. As they were standing less than two feet from where I was sitting, I decided I needed to interject in to the conversation that I would be fine with charging for carry-on luggage (not a personal carry-on bag which can fit under my seat) as long as AA stopped charging for checked baggage. I went on to state that AA could not have it both ways and that the problem with a lack of overhead bin space was a result of exorbitant checked baggage fees. The three stopped their conversation, looked briefly at me and then marched off to the back of the plane.
Later, during beverage service, they asked both passengers to my right what they would like to drink and served them without ever acknowledging me. After serving both passengers, I quietly stated, “I would like a coffee please.” The attendant never acknowledged me but unlocked the wheels on the cart and moved further down the aisle. I leaned out into the aisle, raised my hand and repeated my request only to have her turn her back on me again. I asked one last time slightly louder and was, yet again, ignored. At this point, the lady across the aisle commented on my being ignored, as did the gentlemen sitting to my right. At no point during the flight would any flight attendant acknowledge my existence.
I contacted AA via their website to complain. I received a response in less than two hours. I received a vague e-mail stating my complaint would be addressed and I was credited with 5,000 AAdvantage miles. I was not looking for miles but was looking for someone to address the bigger issue. Baggage fees and the problems they create along with poor employee relations with the rank and file. In 14 years of flying regularly with AA I have never complained before but could not let this go unaddressed.
A lot of enthusiasts would call this a one time or occasional incident. I don’t. This kind of behaviour is exactly the reason I work very hard to stay away from AA flights now. There are really two issues at play here.
First, employee morale, lethargy and hostility. For what was probably 3 very senior flight attendants to adopt that attitude towards any customer, much less an extremely frequent flier, for any reason short of illegal behaviour is bad. It’s bad that the flight attendants feel they can get away with it. It’s bad that the other customers have to see that appalling display of behaviour. It’s bad that management lacks the will to make that the exception rather than the rule.
I won’t make excuses for their behaviour but I will point out that this has a lot to do with not establishing a cooperative relationship with your front line employees and not coming to a timely agreement on their contract. There is, quite simply, nothing to lose (from the employee perspective) when these employees behave this way.
However, it is inexecusable to behave this way in any job where you are the front line service provider. I don’t care what problems the flight crew has going on with management. This isn’t just a small morale problem, this is an extreme lack of professional conduct. If you are going to do a job at all, do it right.
Second, let’s take a look at AA’s response to the complaint. It stands in stark contrast to the post I made about another frequent reader’s experience with Delta just weeks ago. You can read that post HERE. Go ahead, click the link, take a few moments to read that experience. I’ll wait.
All done? Great. Ultimately, the “compensation” response was quite similar. Let’s pay the customer something for his trouble. I’m not entirely against that although I do believe the best response is to not let those experiences happen in the first place. But there is something that stands out in stark contrast. It’s the difference in how the customer was addressed with the problem. In the earlier post, the Delta customer service people investigated, indicated that the investigated and provided a satisfactory response to the complaint as well as a sincere apology for the experience.
In this new case, AA managed a timely response that was entirely canned and vague and which has had no follow up.
Lazy, lazy, lazy.
Ultimately, the points or other compensation don’t matter nearly as much as providing a sincere response of some kind when it comes to making a customer feel satisfied.
So I’ll ask the question again: American Airlines, is that really the best you’ve got?
I’ve written on the subject of baggage fees a number of times before. I feel that for any legacy carrier, indeed any carrier other than, perhaps, an Ultra Low Cost Carrier such as Spirit, to charge a fee for the first bag checked is wrong.
WRONG, WRONG, WRONG.
When you are flying to a destination, that is called travel. Travel is universally accepted to include the need to take along some belongings such as clothes, toothpaste and maybe a jacket, too. Taking these items for a trip longer than an overnight or, perhaps, a casual 2 day trip, generally requires a bag that is larger than what airlines accept as carry-on baggage. I can accept charging for a 2nd (or more) bag, but I refuse to go silently along with charging fees for a 1st bag and especially when an airline like Southwest Airlines refuses to charge for such a bag.
Almost all airlines operating in the United States charge to check a bag now. In fact, off the top of my head, Southwest is the only that doesn’t. There was a rush to charge for this when we entered the Great Oil Crisis and the ancillary revenue has titillated both airline executives and financial analysts all over the country. These fees were implemented and then they were even raised in many cases as the Great Oil Crisis eased off.
My extreme chagrin originates in the fact that while everyone in The Business blesses these fees and likes to angle these new fees as “services”, they aren’t services. This isn’t a charging for a Coca Cola, this is charging for a basic requirement (for most) when traveling. A Coke is a much more optional item. Furthermore, these fees subsidize giving these “services” to business class and/or frequent fliers for free.
Regardless, they are here in our system. So, if they’re going to be in our system, it would be nice to at least have some transparency both on the price of the fees as well as the requirements and restrictions governing these things. In other words, we should be able to see an “all in” price for our trip when we’re making the purchase and, by the way, that should be *before* we actually hand over our credit card number for this purchase. This industry is somewhat unique in that there are “fees” being charged after the purchase that while styled as “optional”, really aren’t. And the baggage fee is the epitome of that.
However, these fees have been around for 2+ years now and I don’t think they’re going away. Because of my history with airlines and certainly because of this blog, I know about these fees and I just “handle it” when I’m traveling. My own preferences towards airlines today lean towards LCC carriers such as Southwest and Airtran and on Airtran, I just pay my baggage fee online when doing my online check in and simmer down from my annoyance (which isn’t as great with Airtran since they charge a paltry $15 / bag instead of $25 like most legacy carriers.)
Consider this an open letter to American Airlines.
My daughter went to visit her uncle and grandparents yesterday. Her grandparents paid for her ticket and they chose American Airlines. Now, I should note that I haven’t flown AA since they instituted their bag fees primarily because I find American’s service product to be poor when compared to my other options. In short, I fly other carriers now and I’ll point out that I live in the DFW area, location of AA’s biggest hub.
Guess what I discovered? American Airlines wouldn’t allow me to pre-pay my daughter’s checked bag fee(s) online. There is absolutely no option for that anywhere on AA’s website. None. Zero. Nada.
Really American Airlines? Is that the best you’ve got?
After 2 years, you haven’t made a single accomodation on your website for the change in your business model? And, yet, Airtran made it almost in real time.
I get that you, as an airline, are a leviathan and that it’s difficult to change th direction of such a big ship. I really do. That means I’d have given you about 180 days to get that problem solved. All I can conclude from your inability to implement this kind of stuff is that, as a company, you’re just damn lazy.
But if you had to change your ticket pricing model and accomodate that on your website, you would have that done in 30 days, wouldn’t you? Sorry but a $24 Billion company should be able to get its act together a lot better than that. In fact, I know it’s been pointed out that your website is outmoded already but it is remarkable that as somebody who has visited it regularly since it was in existence, it really hasn’t changed much at all.
By the way, that means it still is a relatively large pain in the ass to get answers to my questions.
What’s more, when I discovered your egregious lack of accomodation for the inconveniences you inflict upon your customers, I phoned your company to see if this could be done on the phone. After your voice recognition mangled my requests 4 or 5 times, I retreated to asking for “Agent” and “Operator”. Imagine how aggravating it was for your system to actually say to me “I understand you want an agent but let me find out more about your needs before I connect you.” Or words to that effect.
Let me clue you in: I’m an English speaking, native born US citizen who is actually known for not having an accent despite living in Texas for 40 years. If your system can’t understand me, that’s *your* problem. Not mine. In fact, it wouldn’t be anyone’s problem because this is a prime example of why I find it distasteful to fly on your airline in the first place and it’s why I book myself away from your airline and have done so successfully now for over 2 years.
It’s worth the extra time to connect in a different city on a different airline. It just is a whole lot stressful than dealing with you, American Airlines.
Second, should I really be on the phone waiting to finally speak to an agent on this issue (which, by the way, isn’t addressed in your phone tree options as nearly as I can tell but I never did get far for all the voice recognition mistakes) for over 18 minutes on a Monday night? In 2010, I should be waiting that long? By the way, AA, I never did get through to an agent. I mashed the “end” button my phone and got in my car and drove to my bank to withdraw extra money to give to my daughter so she could pay for your infuriating baggage fee when she got to the airport the next morning. All because you, American, can’t answer your phone nor be bothered to update your website.
So, like everyone else, I’ll ask one more time: Really? Is that the best you’ve got?
And, no, jetBlue isn’t buying the 737. I’ve found three interesting items to comment on involving the 737 and jetBlue and New York city separately.
First, Southwest Airlines COO and Exec VP Mike Van de Ven has made a statement that re-engined aircraft whether they are a 737 or A320 won’t offer enough improved performance to be attractive to Southwest. And I think there is a message here, particularly to Boeing, about what SWA wants and may be willing to buy. Southwest is a huge customer for Boeing on the 737 and Southwest is just the kind of customer Boeing wants to kick-off with.
I think Southwest wants a new 737 replacement from Boeing and I think they’re signaling that they would be willing to become the launch customer for the right aircraft. COO Van de Ven said:
“I believe that a new narrowbody aircraft will produce one of the single most significant steps toward meeting our economic challenges.”
If nothing else, it’s a message to Boeing saying “please don’t re-warm the 737 again, we need you to work on a new replacement and deliver that as soon as possible.”
The Fort Worth Star Telegram Sky Talk blog has THIS story about the DFW Airport Board and its recent retreat. It’s notable that they mention that they’re trying to use incentives to get jetBlue to start service between DFW and Boston. Currently, American Airlines is the only non-stop airline on that route and, no, the fares are not cheap. Frankly, I don’t think jetBlue will cooperate given their recently announced interline agreement and slot swap with AA.
However, this points up my chief rant about my home town area. We do not have enough competition at DFW airport and I believe that AA is challengeable on both fares and service. Delta has begun challenging American on the Chicago – NYC (La Guardia) route and American is responding, currently, with triple air miles awards to retain its customers.
More significant is that Delta has decided to go head to head with American on a route that American has *owned* for decades. The big worry is about mergers and reduced competition they might create in the US market. To the contrary, I think the latest round of mergers is going to lead to 4 legacy carriers who are going to start looking at each other’s dominance at various airports and, in particular, who isn’t making money and cannot afford to indefinitely “buy” routes with low fares.
That would be American Airlines. US Airways is a bit weak in its route system but they earn profits. AA doesn’t and hasn’t in a long time. Delta’s incursion on the NYC-Chicago route is novel and it may or may not work but Delta has enough financial staying power to sit on that effort for a long time in hopes of building the business. What happens when someone like ContiUnited comes along decides that AA shouldn’t own DFW-LAX? I think we’re going to see plenty of competition in the airline world.
One of the biggest problems with how union leadership gets elected is, in my opinion, that those who do get elected generally do so on the platform that is most aggressive. Whoever promises to fight for more than the other guy generally wins provided he or she can also appear to look aggressive too. As a result, unions are led by the vocal minority and that leadership almost never represents a voice of reason. Without a voice of reason, it’s extremely difficult to get an agreement in place.
American Airlines pilots have new union leadership. Lloyd Hill is being replaced by David Bates and I got a look at what they’re promising. Mind you, union promises are like any other political promises. No one expects all of them to come true but they are a gauge of just how much the elected has boxed himself into a corner. Terry Maxon at the Dallas Morning News has written THIS aviation blog entry. And here is a quote from the Dallas Morning News that is a quote of the Bates team:
Pay – Restoration, including retro plus annual raises plus permanent COLA raises after the amendable date. Scope – Protection and recapture of flying at both the top and bottom end of our fleet mix.
Stagnation – Mechanisms to deal with FO stagnation including a higher percentage of Captain’s pay.
Sequence Protection is the norm in the industry. Pilots should not be financially penalized because of marketing decisions, earth quakes, volcanoes, hurricanes or other planetary events.
Reserve – Our reserve system needs a complete overhaul. We need a system pilots can live with.
Vacation – Increased credit for vacation.
Sick – Enhanced sick provisions for pilots.
Pension – Pension protection for all pilots on the seniority list.
Profit Sharing – The economy is improving. APA should return to a profit sharing plan that mirrors the one management has for themselves.
NEVER . . . GOING . . . TO. . . HAPPEN.
In fact, if this is the negotiating position going into talks with AA, I foresee many more long talks taking place. I think the pilots (or some other union) really wants a strike with AA. They want a precedent for restoring that long lost pay and the pilots think they can set that precedent.
AA cannot afford to give in on issues like that. The productivity of pilots and flight crew compared to other airlines is already pretty bad. Restoring that pay means the end of AA. Management cannot meet those demands. They cannot get close to meeting those demands. To even arrive in the same state much less the same ballpark on those demands would mean the end of AA.
Even worse, AA loses in any strike action that shuts down the airline. I would guess that AA could survive, at most, 10 to 20 days of a strike and that’s it. There are no resources available to assist them with keeping the airline in the air. Not like British Airways has done (While BA seems like a “huge” airline, it’s actually a pretty small airline in terms of fleet size. BA has about 250 aircraft total. AA has considerably well over 600 aircraft.)
There are reasonable union leaders out there. Delta’s Lee Moak is one. Continental’s ALPA leader, Jay Pierce is pretty reasonable. Those men have recognized the fundamental changes in the industry and they understand that a return to status quo not only isn’t going to happen, it isn’t in a pilot’s best interests to happen.
And then we have Lloyd Hill giving way to David Bates & Team. American Airlines let all of these talks go on for too long. To have one union after another all lining up eager to be the one who “sticks” it to the airline is not a good position to be in. To have so many labor contracts in talks at the same time is not a good position to be in. AA is literally standing in a big hall staring at all the other unions who are each independently and cooperatively are determined to A) stick it to the current management team and B) win back pay levels that were unsustainable 10 years ago and remain unsustainable today. And those unions have both the power and, more importantly, the anger and fury to shut down the airline.
USA Today’s Today in the Sky blog reported on an American Airlines flight attendant who stepped in as a First Officer on a 767 flight when the regular First Officer was suddenly afflicted with severe stomach flu-like symptoms. You can read the story HERE.
According to American Airlines, protocol is to search for off-duty AA pilots first and then the next best alternative. Flight attendant Patti DeLuna (61) was qualified as a commercial pilot some time ago and while her pilot’s license wasn’t current, she was able to help fill in for the ill first officer. The plane landed without incident.
American points out that it is perfectly possible to land the 767 with one pilot and I’m sure that Ms. Fagan helped the captain of the flight with his checklists and monitored speed and altitude during the landing. American Flight 1612 was flying from San Francisco to Chicago on Monday, June 14th.
It really is just like something out of the movies.
AA CEO Gerard Arpey has been getting somewhat loud in his refusal to acknowledge that there may be value in a merger between AA and US Airways. His argument is that once you have scale, adding scale doesn’t bring much to the table. Further, he doesn’t think that US Airways brings AA much considering the hubs that AA is focusing on (Dallas, Chicago, NYC, Los Angeles). You can read more HERE.
Arpey was responding to analysts who pointed out that AA bought TWA to maintain its dominance when United was going to merge with US Airways and why wouldn’t AA want that now.
The thing is, no, it doesn’t fit within their current 4 hub/cornerstone strategy. However, that strategy isn’t showing much potential in returning AA to profit either. AA is the only legacy airline not projected to earn a profit for this year. I’ve said it in previous posts and I’ll say it once more. AA and its executive team doesn’t know how to do merger and doesn’t know how to integrate another airline and, more importantly, doesn’t want a merger because it will, most likely spell the end of some of their careers at AA.
I don’t think Doug Parker would lead such a merger but suddenly he looks like a decent successor to Arpey, doesn’t he? Particularly if Arpey wasn’t leading a merger very well. Consider that US Airways, by far the weakest of legacy airlines, is going to earn a profit this year and they’re doing it despite labor issues and their 2nd tier hub system. That’s remarkable. American’s team could learn a few things from US Airways, I suspect.
There is a message here from analysts. That message is: “Do something. Perform. Show us the money. You don’t have an unlimited amount of time to perform.”
It is significant that analysts are now putting the heat on and show no inclination to let up on American. To the contrary, they’re now openly questioning the potential for success in Arpey’s strategy for the airline going forward.
American Airlines recently announced the retirement of the current CEO at American Eagle and then announced that Dan Garton, current EVP of Marketing at AA will become CEO of American Eagle (while initially retaining his duties as EVP.) Then they announced their intention to revisit the sale of American Eagle.
I can understand why since American Eagle is probably undervalued presently as a business and its sale would refill the coffers at American nicely. Analysts and shareholders want to see some financial action at American and this is a good way to provide it.
However, it might be a bit of folly too. Just because it is undervalued doesn’t mean it doesn’t have value at American in its present form. I wouldn’t be a bit surprised to learn that it is bringing a nice load of cash in the form of operating profits that AA isn’t seeing elsewhere. I wonder if the one time gain is worth the long term loss.
Operationally, American Eagle is a pretty well run airline and provides a great deal of stability for AA’s regional routes. Giving that up in favor of potential savings from low bidding regional airlines might have made sense 5 years ago but now I’m not so sure. It is another case of AA being a bit slow to react and make adjustments to the markets. If they had went ahead with bankruptcy, quite a few cost issues would be settled and they would be much better positioned against their competition from the SuperLegacies. If they had sold American Eagle a few years ago, they would have benefited much more from cheaper contracts on regional flying from independent regional airlines.
Now even independent regional airlines are working hard to raise their revenues from contracts with legacies and the regional routes are becoming more and more competitive. Keeping American Eagle in house may let them respond better to changes at this point. Or, at the least, it seems the lesser of two evils.
Even if they do rid themselves of American Eagle, American Airlines still has fairly restrictive scope clauses in its contract with pilots and that needs to be amended before they can contract to fly larger aircraft on longer routes via any regional airline. Keeping American Eagle in house and allowing pilots to “flow” between AE and AA might make those scope changes easier to obtain in negotiations and I think that has a lot of value for the future.
CEO David Cush of Virgin America made statements this week saying that he was the latest wave of consolidation as an opportunity to preserve and even extend competition on the government’s part. Cush noted that the obstacles to a new airline entering a market are A) gate space B) landing and take-off slots and C) frequent flier programs.
It is notable that Virgin America has been essentially shut out of routes that it not only wants to fly but which it was designed to fly. These are trans-continental routes to destinations such as Chicago and Newark.
He states that VA’s position is that those landing slots are public assets and greater access to them is good for everyone.
I couldn’t agree more and I’ve said so before. Allowing dominance at gateway and/or hub cities is a bad idea. There should always be a mechanism for a new airline to enter a market if only to offer a toehold opportunity. I’ve supported seaonal auctions for those slots at slot controlled airports and I believe airports could do a far better job of allocating assets such as gate space too.
However, I also take note that Virgin America has so far avoided any opportunities at destinations that are dominated by one airline and, in particular, dominated by American Airlines. (Cush is a former AA executive.) I would point out that VA could be flying routes from California to Dallas, for instance and they have so far studiously avoided that and instead chose to explore options like California – Florida (a notoriously low yield set of routes).
An Dallas isn’t the only place. VA has had opportunity to fly to Chicago but has refused to enter the market because the gate space that is available is less than perfect. Another opportunity might be California – St. Louis: there are huge aerospace and defense industries with ties to each other in both locations. It’s also notable that, again, St. Louis is an AA and SWA city.
I would love to see middle America experience an airline like Virgin America or jetBlue. I think it contains some greatly overlooked opportunities. There couldn’t be a better time to explore those opportunities while legacy airlines are otherwise occupied in managing cash and stemming losses.
Yes, let’s open the markets up. However, if you’re going to talk to the talk, please walk the walk.
Update 6/10/2010 at 11:00am CDT: I sent 2 emails yesterday afternoon to American Airlines’ Public Relations department and while I got several odd “out of office” emails back, no one yet has responded to my inquiry on whether or not they plan to comment or react to this video.
Original post:
So, I found this video this yesterday evening:
The real lesson in all of this is for American Airlines. You never know *who* is flying on your airline and *who* your employees are potentially harming or lying to on any one day. It might be some powerless schmo and it might be a powerful executive. Even worse, it might be someone with pretty good graphic skills and who knows how to both tell a story and edit a video that goes viral beyond an airline’s worst dreams.
The guy will probably gets some satisfaction from this. Probably a new bike and based on what I saw, that’s probably a $2000+ bike. But the cost isn’t the bike. The cost is the PR nightmare that this will become over the next few days when this video truly goes viral worldwide. And it’s good enough to do so. The cost of everyone at AA now scrambling to deal with this will far exceed the cost of the bike and their efforts won’t fully repair the image problem.
You can read more about the author’s problems at NYC Aviation.
The Dallas Morning News Aviation Blog has this post HERE about analysts beginning to like the idea of a merger between American Airlines and US Airways. This marriage occurred to me back in April and you can read my post HERE. Eric Torbensen at the Dallas Morning News thinks it is a terrible idea and I disagree.
The real reason to perhaps not do a merger between these two airlines is that American Airlines is terrible at mergers. Their employees don’t embrace them and their executive corps approaches them like predators. As a result, mergers at AA tend to be plain “consumption” rather than growth or partnership.
Now, if they could embrace a merger, I believe one such as this could be good for them. First, a merger like this wouldn’t definitely not be sexy. The sexy merger partners are now fully occupied and, frankly, there was perhaps just one that really would have qualified as sexy and doable for AA and that was Northwest Airlines. They’re gone. But just because an AA / US Airways marriage isn’t the sexiest thing on the planet and just because it doesn’t necessarily bring the gains that another partner would have provided doesn’t mean that it doesn’t make financial sense.
This one could. Look at the route maps first. US Airways offers a hub presence in two areas of the United States where AA is actually a bit weak. Phoenix is a nice hub in the web and while it isn’t the strongest hub in the country, it does pretty well. Yes, Southwest is there but guess what? AA knows how to compete with Southwest.
Charlotte is a nice Southeastern US hub that pvovides coverage in area that AA hasn’t gotten much traction. AA tried having a hub in Raleigh (didn’t work) and has, from time to time, tried to expand Nashville. It has Miami but that really is more of an international gateway city than it is a domestic hub. So AA has presence in some weak(ish) focus cities for the SE that the Charlotte hub could change for them.
So, in terms of a domestic network, it works. It really is quite complementary to AA’s existing system.
There is some compatibility between the executive leadership of the two companies. Doug Parker is a former AA manager, for example (and his wife still is an AA flight attendant) and some of the other executive staff has roots in AA as well. Some that don’t are from Northwest and the cultures between Northwest and American Airlines aren’t dissimilar either.
But let’s talk about the romantic international part of this. No, US Airways doesn’t offer much to AA that it doesn’t already have. It’s US Airways weakest area. But it isn’t a money loser and there are some hidden benefits. American can probably either A) redirect feed for those flights to one of their existing gateway cities or B) bolster the US Airways international product and make the US Airways international flights a bit more of a competitor. The smart team would do both.
There is another benefit: A more diversified fleet. There is some overlap between the two companies (737, 757 and 767 equipment but the US Airways mainstay aircraft are Airbus aircraft now. The A320 series aircraft could be useful to redeploy onto AA routes currently being served by the MD-80 fleet. The Airbus A330 equipment could be redeployed to AA routes requiring a little more capacity than a 767 but which aren’t in need of a 777’s size or range.
Finally, such a merger would offer Oneworld domestic coverage in areas of the US where it is definitely weak. The Oneworld alliance leans on AA only in the US and the other two alliances were bolstered by at least 2 airlines domestically. This is a great opportunity to improve the Oneworld alliance.
There is value in such a marriage. The problem is, the people who know how to do this kind of marriage and make it work are at US Airways, not AA. Doug Parker and Company understand the value of a union like this and know that you embrace the partners strength and use it. Gerard Arpey and Company come from a school that is more about being a predator and consuming your competition without really embracing them as partners. Since AA is so much larger than US Airways, it’s Arpey who would lead such a merger and I don’t think he’s the right one.
Actually, I think Doug Parker could do fantastic things for AA. If he can succeed with US Airway’s assets and weaknesses, he very likely could do wonders for an airline like AA with its resources. But the AA board would have to want him and despite the recent flare ups against Arpey from analysts, Gerard Arpey still holds the full confidence of AA’s board of directos. He isn’t going anywhere anytime soon.
A friend of mine pointed me to this little gem from the Motley Fool investing website about American Airlines. You can read it HERE. In short, they apparently do a “throw this stock away” column/editorial/advice on a regular basis and AA is the target of this week’s column. In short, they find AA a less than credible buy because of their vastly higher costs compared to other legacy airlines.
And I couldn’t agree more. American Airlines recently stated that it thought its costs were about $500 million more than other airlines in the United States and their only guidance on that is that, over time, other airlines should see their costs rise and AA will then be more competitive.
Yeah, not so sure about that myself. American Airlines has very poor labor relations these days while other legacy airlines have worked hard to repair those relationships and/or maintain good relationships and the benefits are showing more and more. Those airlines aren’t distracted by labor strife, aren’t affected by poor service from angered employees and manage to negotiate fare wages and other compensation that works for both sides.
What makes AA think that is going to change? Maybe it will for one or two airlines but it isn’t going to change through the whole industry. In the meantime, American will continue to burn its cash reserves and probably not earn a profit for this year while several others not only will earn a profit but quite possibly earn record operating profits.
Combine this with financial analysts revolting a bit against AA in April where the question was asked of Chairman and CEO Gerard Arpey: “Is that all you got?”
There is an increasingly apparent divergence between AA and its other legacy brethren. All other legacy airlines are being run by people that do appear to understand that the game has fundamentally changed again and are resigned to flexing enough to work with that change. AA shows all signs of hopefully waiting in the corner of the room for everything to go back to the way it was. They should have gone into bankruptcy back when they had the chance in 2003. That is what would have resulted in a more competitive airline.
The chances of low oil prices and a red hot economy coming back to save AA anytime soon are as about as good as I’ve got a chance of taking a trip to Australia this afternoon. It’s possible, theoretically, but no one is betting even a dollar on it.
I continue to hope that one of the other legacy airlines will see this weakness in AA and start some action in DFW. We could use a little old fashioned competition in this town.
Continental Airlines announced their first route to use their soon to arrive 787 aircraft. It will be from Houston to Auckland, NZ and if nothing else, this is just fun to think about. Tentatively scheduled for November of 2011, it’s a long way off still and I would regard it as being subject to a lot of things going right such as the aircraft arriving in time.
This is exactly why I believe aircraft such as the A380 and 747-8 have a very limited role in the future of air travel. We now have aircraft that, in the broad scale, are medium sized but very long range capable. The 777-200LR was the first but even that aircraft is a touch big for some routes. Not so for the 787-8. The 787-8 is a 767/A330 sized aircraft capable of handling longer, thinner routes that, frankly, really don’t get flown today.
Houston to Auckland may strike many as a little weird but it really isn’t. It puts Auckland within range of the middle of the United States with a full load and margin for safety. Suddenly there are a whole lot of cities on the East Coast and in the Midwest that can enjoy 1 stop service to New Zealand. Previously those people had to fly to the West Coast and, in many cases, had to make 2 stops before arriving in LA. Even if they had to make one stop, this flight will mean less travel time “door to door” than ever experienced before.
Houston might seem an odd gateway to Auckland but it isn’t. Consider the hub cities the new ContiUnited will have. You can feed traffic from NYC, Philadelphia, Washington DC, Cleveland, Chicago and Houston to that flight. That’s probably not enough to fill a 747-800 but it’s plenty to fill a 787-8 aircraft and I suspect a lot of that traffic will tend towards a more premium customer.
The United part of the airline will continue to handle West Coast to Australia trips. Air New Zealand will probably keep their routes from New Zealand to the US but ContiUnited will now be the first to open up the eastern half of the US to Down Under. That’s huge and a bit of a blow to both Delta (SkyTeam) and American Airlines (Oneworld). This could potentially see Delta and/or AA opening up routes using the 787 to similar destinations Down Under.
Will it happen? I think so but it does have a certain fairy tale quality to it. I remember Aviation.Net members discussing such fantasy routes as far back as 2005 I think and when such things get fantasized on Aviation.Net, I tend to believe they’re too good to be true. However, I believe this has a better than 50% chance of happening because it fits well within how Continental is run, the Star Alliance network and its what a SuperLegacy network airline should be flying when it comes to long haul destinations.
