One very noticeable development with the announced United Airlines / Continental Airlines merger is that 2 of the 3 major airline alliances (SkyTeam, Star Alliance and Oneworld) now have Super-Legacy airlines participating in it.  SkyTeam has Air France/KLM and Delta (Delta/Northwest).  Star Alliance will have United/Continental and, so far, will continue to have US Airways in the US market. 

Oneworld has American Airlines.  A lone airline ever increasingly burdened with debt and who shows little sign of recovering in a market that several airlines have shown improvement in.  Oneworld has the fewest airline partners although it arguably maintains global coverage.  I see some opportunity for a few of its partners, too. 

QANTAS has long had ties to both British Airways and American Airlines but I wonder if they aren’t looking around and realizing that there may be better opportunities with Star or SkyTeam.  They compete with British Airways on many international routes so I wonder how much love they feel on that side.  It’s true that AA provides them with lots of feed in the US but several other partners could do the same in the same cities.  In fact, I suspect SkyTeam would love to have them on board.  United (Star) already flies US/Australia routes.   In addition, Air New Zealand is a Star member and doing nicely on trans-pacific routes too. 

Oneworld doesn’t directly access Canada and has mediocre ties to Africa (via European partners) and Latin America is perhaps a bit underserved in that LAN is the only partner there and their concentration is on the west coast of South America.   The Far East remains well served by Cathay and JAL but India is conspicuously missing.  That’s a country of 1 billion (with a “B”) people.  You would think that having a regional partner in India would be a priority.   Southeast Asia is weak as it is basically served with flights to and from that region but not within.  There is another 1 billion people located in that region. 

There are several European partners but I do notice that there are two primary hubs:  London and Madrid.  Not the hubs most people want to fly in and out of.  London is congested and prone to delays and Madrid is served by Iberia, not an airline with a great reputation.  It also doesn’t “feel” like a convenient hub. 

What is more noticeable is that the founding partners of Oneworld were mainstay legacy airlines.  Airlines that have not seen any revolution to date and who often are burdened with some of the highest costs to operate in their regions. 

With the ever growing size of both Star and SkyTeam, I do wonder if there will be any room for Oneworld.  Could the Oneworld alliance be absorbed by the other two?

Filed under: Airlines Alliances by ajax
No Comments »

American Airlines is a pretty conservative organization.  It doesn’t hire from outside the airline very often and it manages itself pretty closely.  It is, in many ways, the IBM of the US Airline industry.   Well, the IBM of the 1970’s anyway. 

Mergers and acquisitions haven’t been a very successful pathway for American.  One look at the TWA “merger” which was really a purchase and you’ll understand why.  They tend to focus on their core strengths and it is particularly difficult for them to adopt new staff and destinations.  Purchases, for them, seem to be more about keeping dominance in a particular area rather than growing their business. 

When Delta and Northwest started off on their merger, it was easy to understand why AA was unruffled by the development.  There was no assurance of success on any level be it financial or operational.  Being the biggest isn’t AA’s game nearly as much as being the strongest and I’m sure their management corps looked at that merger and decided it wasn’t something to worry too much about. 

But Delta has had better financial success than AA and it seems to be “right sizing” aircraft to routes and enjoying better yield and that has got to be attention getting on some level.  It got Continental’s attention apparently.  If the Continental / United deal does go through, I have to wonder who AA starts to look at.   It’s one thing to have an aberration in Delta but it is a whole other bag of bananas to have Delta/Northwest and United/Continental next door to you.

So, is it US Airways?  They aren’t just the logical choice because they’re the only legacy airline left.  There is a certain sensibility to the idea.  AA has no hubs out west (just a large presence at LA) and, in fact, has no dominance in any of the areas where US Airways does operate.  Well, Philadelphia is close to Washington DC and NYC but it isn’t the DC or NYC market either.    AA has no southeastern presence either.  Miami is a hub but it isn’t an regional hub like Atlanta or Charlotte. 

There isn’t much fleet compatibility there and I’m not sure there needs to be.  Delta has shown that as long as you have an economy of scale in the aircraft type, you can have it in the fleet and use it to your advantage by rightsizing your aircraft to the route. 

Labor problems?  Well, AA is kind of used to labor problems and their labor unions are so strong that I kind of wonder if they wouldn’t smack all those US Airways EAST/WEST conflicts into shape.  If nothing else, it would give the EAST/WEST unions something to unify over. 

Say, did you know that US Airways CEO Doug Parker used to work for AA?  His wife still does.  Guess who US Airways’ President Scott Kirby used to work for?  Sabre when it was a division of AMR, the holding company for AA.   Two more of the executive team come from Northwest Airlines from an era when they really weren’t that different from AA culturally speaking. 

Both airlines have a lot of debt.  The US Airways team has actually proven itself to be pretty scrappy in many areas.  They cleaned up the Philly problem from US Airways EAST, managed their finances carefully and have continued to be a player despite unresolved challenges.   Neither has really made money though. 

However, a real merger, not just a purchase and dissolution but a merger, has some potential even if AA’s team retains most of the control.  It has some of the same potential that Delta / Northwest had and fewer of the risks that a United/Continental merger has.  It helps the Oneworld alliance as well. 

While I think AA could do it, I also think the chances for them to screw up a real merger are far higher than I would give many other airlines.   I think they would approach it as a takeover and attempt to dominante everything.  And as a result, I think we would see the hubs in Phoenix, Philadelphia and Charlotte slowly fade away over time with nothing much to show for its effort after 10 years.

Filed under: Airline News, Airlines Alliances by ajax
No Comments »

During American Airlines earnings call yesterday, one financial analyst got a little rough with AA and, more specifically, Gerard Arpey and Tom Horton.  By rough, I mean the question posed was “Is that all you got?”  The Dallas Morning News Aviation Blog has a good description of the exchange HERE. 

They make a good point.  American Airlines has really been a disappointment for a decade and the leadership has frequently leaned on multi-year plans and talks of how well things are going and what can be expected from new deals and new alliances.  Sometimes it is talk of how one time expenses got in the way of a profit, etc.  At the end of the day, you really should deliver something now and then.  I would point you to Continental as an excellent example of this.

American Airlines didn’t file bankruptcy.  Everyone talks about how they did the right thing and didn’t file bankruptcy.   The employees gave back 30% or more of their salary instead.   Problem is, when your competition (United, US Airways, Northwest, Delta) does file bankruptcy and does lower its costs and does streamline its operations and does reinvigorate its workforce, they’ve got you boxed in.   All the airlines in that list gained a permanent advantage over AA and regardless of the talk of “doing the right thing”, AA has a big disadvantage. 

What’s really frustrating isn’t that disadvantage.  What really irritates people is the leadership’s habit of deferring and delaying to another day many of the problems that do, at some point, need to be solved.  It’s the risk created by ignoring, deferring or delaying the resolutions of these problems that makes one so irritated and, dare I say, now a bit unconfident about AA’s long term future? 

They have an old, fuel inefficient, passenger inefficient fleet.  Much of that renewal has been deferred resulting in a fleet of aircraft that is more maintenance intensive, which carries fewer passengers per segment and which burns more fuel doing it.   

There isn’t a labor group at AA that isn’t spoiling for a fight at this point.  The risk of one or another getting their way and having a strike is increasing month by month.  For 4 years, we’ve seen AA labor groups have their contracts become amendable, negotiations begin and then . . . nothing.  There is no sense of urgency on AA management’s part to have this settled.

These issues and more make it appear as if no one is really solving problems.  They’re deferring them, delaying their resolution or, in some cases, just ignoring them but no one is showing up, raising their hand and saying “We solved this problem.  It won’t be on our plate anymore going forward.” 

The thing is, bankruptcy would have done that for them.  There would have been final solutions and the airline would be coping with immediate problems instead of being bogged down with what is really nearly 20 years of baggage.   My point is, I’m not sure bankruptcy *was* doing the right thing. 

It’s OK to describe problem resolutions as ongoing for a year or two or maybe even three.  It’s been going on a lot longer than that at AA and JP Morgan analyst Jamie Baker has noticed.  And I think this is just the beginning.

Filed under: Airline News by ajax
4 Comments »

The FAA has denied exemptions for their 3-Hour Rule at NYC area airports.  They replied:

“Passengers on flights delayed on the tarmac have a right to know they will not be held aboard a plane indefinitely,” U.S. Transportation Secretary Ray LaHood said in the department’s announcement. “This is an important consumer protection, and we believe it should take effect as planned.”

 

” In denying the requests, the Department concluded that airlines could minimize tarmac delays by rerouting or rescheduling flights at JFK to allow the airport’s other three runways to absorb the extra traffic.”

 

“The Department also noted that it has the ability to take into account the impact of the runway closure and the harm to consumers when deciding whether to pursue enforcement action for failure to comply with the rule and the amount of a fine, if any, to seek as a result of non-compliance.” *

And that is really what I both expected and hoped for as a reply.  I am certain the war of words is not over, however.

*  These quotes are from the Dallas Morning News Aviation Blog entry which can be read HERE.

Filed under: Airline News by ajax
1 Comment »

The Dallas Morning News Aviation Blog has THIS story about Delta possibly deferring or cancelling its (inherited from Northwest) 787 orders for 18 aircraft (and 50 additional options.)  And this kind of makes sense to me. 

Northwest probably did need those 787 aircraft for its trans-pacific routes.  Its 747 fleet was adequate for some routes but others just couldn’t stand a 747 and Northwest doesn’t have any 777 aircraft.  The combined fleet of Delta and Northwest is a different matter, however. 

If anything, I think Delta might have one long haul aircraft type too many.  That said, they have 767 (Delta) and A330 (Northwest) aircraft for medium haul routes and configured so that each is nearly ideal for passenger density.  They have the 777 (Delta) and the 747 (Northwest) for long haul, high density routes as well.  Frankly, I think Delta might be better off adding the 777-300 to its fleet and retiring the 747 but that isn’t their plan.  They are refurbishing the 747 aircraft and extending leases on them.  Clearly Delta sees a profitable use for them at this time. 

The 787 isn’t going to be a trans-Atlantic aircraft.  Certainly not on the first routes for any airline.  A new(ish) build 767-300 or A330-300 can do those routes just as economically.  The 787 is better suited to routes like NYC to Tokyo or LA to Sydney or Atlanta to Rio de Janeiro or even the US to India.  Delta has the right sized aircraft for those routes.  

Delta can probably sell those orders profitably at this point.  There are a number of airlines who don’t have new(ish) 767s or A330s and there are several more who need to downsize from a 747 or 777 on long haul routes.  Airlines such as Continental and AA come to mind.  

Mind you, the enthusiast in me wishes all US airlines flew the latest and great aircraft.  The practical side of me says we’ll probably only see Continental take up its orders on schedule and even AA will likely take its time adding the 787.

Filed under: Airline Fees by ajax
1 Comment »

Senator Charles Schumer has obtained “commitments” to not charge fees for carry-on luggage from several major legacy airlines.  Read HERE for the entire story.

There are a couple of things I notice.  First and foremost is that each airline making the commitment (American Airlines, jetBlue, Delta Airlines, United Airlines and US Airways) each have significant operations at La Guardia or JFK Airports (or both.)  Airports in the state of New York and both of which are within Senator Schumer’s power base. 

Also notable is that Continental has been quiet.  Continental’s operations for NYC are concentrated at Newark Airport located in New Jersey.  Well, I also suspect that new Continental CEO Jeff Smisek is sensible enough to ignore the Senator. 

Of course they made the commitment.  It doesn’t fit within their business model and is impractical for them to try.  It costs them nothing to make the commitment and get their name in the news much as Spirit has had theirs in the news since making the announcement that they would charge carry-on fees. 

The only people benefitting from Senator Schumer’s diatribes is Spirit Airlines.  I leave Senator Schumer out of that equation because the more he speaks, the more it becomes clear that he doesn’t know what he is talking about and that this is more about his name in the press that advocating something for his constituents. 

Imagine the good that could be done if he shouted as loudly for redefining NYC’s air traffic area and getting better air traffic control systems in place. 

Instead he leads the charge against an airline who has no New York bases and who flies just 14 flights from NYC (La Guardia) to destinations such as Detroit (2 flights), Fort Lauderdale (7 flights), Myrtle Beach (4 flights) and Atlanta (1 flight). 

Hard to view them as a threat to NYC area consumers particularly since they offer flights on the NYC – FLL route as low as $60 each way with a checked bag fee of $19 and who *still* allows personal items free on board if they fit under the seat in front of them.  

Let me point out that several airlines who he received commitments from charge *more* for checked baggage. 

So much for reality.

Filed under: Airline News by ajax
1 Comment »

In a BusinessWeek story today, which can be read HERE, I noticed a paragraph that gives some hint as to who wants to be in charge of the new airline if a merger agreement does come about.  It says:

UAL, based in Chicago, and Tempe, Arizona-based US Airways are discussing an all-stock transaction to combine the companies, with the smaller US Airways being the acquirer, said the people familiar, who asked not to be identified because the talks are private. The merger would help United steer travelers to international flights from US Airways’ domestic routes, said one of the people.

That sounds like US Airways management being the “lead” group in a merger and, more importantly, Doug Parker as CEO.  However, I don’t know where US Airways has the financial capability to be the surviving entity either.  (Note:  Just because US Airways is the surviving entity doesn’t mean that the name United Airlines goes away.  They may well choose to keep that name.)  In addition, where does that leave United President John Tague?  He is arguably the executive who has best managed United and who is arguably the one to succeed Glenn Tilton as CEO. 

Doug Parker and team have done a fairly admirable job in keeping US Airways afloat and viable but they still have unresolved issues with their labor unions at present.  Such a merger would mean 3 different groups of pilots who would have fairly strong ideas on which union should represent them and how much they should be paid.  The AmericaWest/US West group is the minority group at present but could potentially regain some leverage and power if they could agree with the United pilots. I find it hard to believe anyof the 3 groups would agree with another.

If they really wanted to do this, I suspect they’ll have to give up some substantive group of routes and, possibly, equipment to gain approval.  The Washington D.C. area is the trouble point since US Airways has a strong position in Washington, Philadelphia and Charlotte and United has a strong position in Washington as well.  I’ll bet Southwest could be interested in paying for routes into and out of Washington National airport but I’ll also bet that UA/US doesn’t want Southwest having a foothold there either.

None of this makes really good sense.  If this is a real negotiation for a merger, I don’t see it happening without giving up lots of advantage in Washington which hurts the merger potential.  If it is an attempt to bring someone like Continental to the table, I think Continental is smarter than that.  That leaves American Airlines and they just don’t seem to like mergers like that.  They don’t mind acquisitions but mergers aren’t their cup of tea.  However, one could make a case for an AA/US merger that might actually have some benefits similar to the Delta/Northwest merger. 

But I seriously doubt AA’s unions would cooperate with a merger like that.

Some analysts see Continental making a bid.  I don’t.  Merging with United doesn’t give them any advantage they don’t already have and saddles them with labor problems and a fleet that is aging and which doesn’t mix with Continental’s well at all.  People keep pointing to United’s position on Asian routes but I would point out that if Continental had the equipment, they could probably siphon off United’s customers without buying the company.  Coincidentally, Continental has early 787 positions that could allow them to do just that.  I just don’t see Continental going for this.

Filed under: Airline News by ajax
No Comments »

The Dallas Morning News ran THISstory on Wednesday about new cooperation between American Airlines and jetBlue.   In short, the two airlines will swap slots at JFK airport (AA to *gain* 12 slot pairs) and Washington Reagan National Airport (jetBlue to *gain* 8 slot pairs) and start cooperating (interline agreement) on flights where they do not compete. 

It will become possible for a passenger in Burlington, VT to fly jetBlue to JFK and then seemlessly transfer to American Airlines to fly to London Heathrow airport.  This is a good thing for both airlines.  AA gains the opportunity for more feed into its major trunk routes (not flown by jetBlue) and jetBlue gets feed for its more obscure routes not served by American or American Eagle.  These feeds will take place both at JFK and Boston’s Logan Airport in the Northeast and, most importantly, these “complete” flights are only available via American Airlines at the present.  jetBlue doesn’t have the capability to offer such things yet. 

Both airlines get to increase their potential strengths at airports where they want to compete harder and it’s a deal that is much more likely to happen with the FAA’s blessing than the Delta/US Airways deal currently under proposal.  The deal also likely works to keep an airline such as Southwest Airlines or Airtran marginalized at those three airports without appearing to suppress all LCC competition since the deal is with jetBlue after all.  This is smart.

However, it greatly disappoints me that jetBlue has taken this route.  It isn’t unprecedented since jetBlue is already cooperating with airlines such as Lufthansa (who owns 17.5% of jetBlue) and Aer Lingus but it is disappointing because it shows jetBlue willing to be a 2nd tier partner with a legacy instead of building upon its own successes.  Can you really see jetBlue adding flights from the NYC area to destinations in Texas or Chicago now?  That would be highly unlikely. 

It would appear that jetBlue has decided the status quo is good enough instead of challenging other airlines in new markets as was their mandate and focus when starting the airline.  It’s a safe play and even profitable in the short term but it limits their ability to compete and deliver new service in the long term.  Now it sounds as if their strategy is to be more like Alaska Airlines (friend to many, enemy of very few) and a lot less scrappy like Southwest, Airtran or Frontier/Midwest.

Filed under: Airline News by ajax
No Comments »

Since I wrote this post HERE in mid January, I’ve kept an eye on airfares between these two cities.  A check made yesterday revealed that advanced purchase (and not too advanced as in less than 30 day) fares are now at $158.00 on American Airlines and Airtran.  They are a few dollars higher on Midwest and a few more dollars higher on the Frontier flight that is actually the Midwest flight. 

Airtran hasn’t started these flights yet and when they do, they’re planning to use SkyWest CRJ-200 aircraft for those trips.  Not the most comfortable airliner for 2+ hours of flight.  It’s interesting to note that since I last visited this subject, AA has upgraded its equipment to CRJ-700 aircraft on most of the flights with just one ERJ-145 remaining.  Midwest/Frontier continues to use Embraer E-170 equipment and both those aircraft are quite tolerable for the trip. 

Even more interesting, Southwest Airlines is now offering not one but two “direct” flights with no plane change between the two cities and their cheapest available fares match Airtran’s offerings.   The flight times are 3 hours, 10 minutes which is just shy of an hour more than the others nominally.  In other words, they’ve shortened up the transit time by 20 minutes and when you consider where you live in Dallas, flying through Love Field just might make that a wash at this point.  You also get to fly a mainline Boeing 737 instead of a regional jet.  The real kicker is no bag fees on Southwest which, in many cases, makes Southwest the cheaper flight and potentially no longer than the others “door to door” for many in the Dallas area. 

I would say that if Airtran does expect to keep this route, the CRJ-200 isn’t going to be adequate for that route.  They’ll need to offer the kind of service they have on their B717 aircraft to siphon away traffic from both AA and Midwest.

Filed under: Airline Service, Travel Hints by ajax
No Comments »

Have I missed something in the pay of flight attendants?  Are there flight attendants running around and purchasing 10 bedroom McMansions on their salary?  Are Gucci and BMW their favorite affordable brands?

I am baffled at how there can be so much resentment towards flight attendants and their pay.  If you looked at what  the annual take home pay was for a real worker bee at *any* airline, you’d wonder how the airline manages to hire people.  They make many teachers look well off.  I’m not exaggerating. 

So why is everyone so resentful of flight attendants wanting a living wage?  In particular, I’m calling out those airline enthusiasts who love to pretend that flight attendants are bred for serving them and who believe anything less than perfect service (and they, the enthusiast, define perfect) just serves up a reason why flight attendants are underpaid. 

A 25 year AA veteran flight attendant doesn’t earn what en entry level administrative assistant earns at my company. 

Regardless of who happens to lead a union and what drivel they may promote, surely we can all agree that flight attendants (and gate agents, etc) aren’t overpaid and perhaps, in light of pretty significant rise in the cost of living, could use a raise.

Filed under: Airline Service by ajax
1 Comment »

Anyone who follows this industry is well aware of labor problems at many US and European airlines.  There have been at least three major strikes I can think of in the last month in Europe (BA, Lufthansa and Olympic).  American Airlines seems to have had almost its entire operations labor force at the negotiating table for the past 4 years and not a one of them seem to be acting like a deal is soon to be had with several threatening to ask for release from negotiations to begin a 30 day cooling period and one (the TWU) who has asked for such a release. 

Even Southwest Airlines has had a couple of snags in the past year with its pilots union and their TWU local.   Delta’s flight attendants are making noise about trying to unionize again and this time they may have the votes for it when you consider that Northwest’s flight attendants were rabidly unionized.  Frontier employees haven’t rebelled yet but I kind of wonder if that isn’t closer to happening than many realize given Republic Airways’ direction.

US Airways has problems with its pilots’ unions not being able to get along well enough to come to a consensus on whether or not the sun rose in the east.  I do wonder how long it will be before we see the unions at United Airlines begin to overheat much like American Airlines’ already are. 

Sure, there are some airlines who are managing to get along with their operations employees pretty well.  That includes Southwest Airlines, Continental and even Frontier (for the moment.)  However, a pretty vast number of airline employees seem to be simmering just before the boil over point and I’ve begun to wonder if there doesn’t need to be a better industry solution to collective bargaining than what they’ve got now.  With the way things seem to be headed, particularly at legacy airlines but certainly not limited to them, there could be a truly momumental perfect storm of labor actions in the US. 

I won’t argue who is paid well, paid poorly or over-paid.  I certainly won’t argue who is or isn’t over worked either.  Frankly, if you think being an airline employee in operations is a cush job, you really don’t have visibility into just what those jobs entail and just how many hours a day they consume.  But if there is this much job dis-satisfaction among these ranks, clearly change is called for and I really don’t think this is all about money.

I think this is about job satisfaction.  Yes, the union leadership (such as it is and that ain’t much) expresses the grievances in monetary terms but I really don’t think it’s all about the paycheck.  I think it’s about feeling job satisfaction and feeling some meaningful reward from the job which, yes, includes salary levels.  For airlines, I think this about a need to have greater flexibilty and ways to improve productivity that aren’t constrained by decades old rules. 

Who is going to find a better way in this system which is largely based on 1930’s law and habits?  I really wonder if there is any industry leadership who has the ability to find a better way.

Filed under: Airline News by ajax
No Comments »

I found THIS little nugget today announcing that Airtran will hold its annual shareholder meeting in Milwaukee on May 18th this year.  At first glance, I might accuse Airtran of just pandering to the Milwaukee market.  On further reflection, this is a bit more than just pandering.  It’s too much effort for just pandering.  It strikes me more as respect quite honestly. 

I’m sure most see this as a shot aimed at Midwest Airlines since Midwest is considered Milwaukee’s home town airline.  But I’m not sure it is aimed at Midwest so much as it might be aimed at both Southwest Airlines, American Airlines, Delta and United.  There just isn’t any brand for Midwest even in Milwaukee anymore and to think it might still exist is to not give enough credit to those who live in Milwaukee.  They aren’t fools, they can read newspapers and they’re just as smart as any other market. 

But Milwaukee is a loyal city and I think Airtran is making the right moves in Milwaukee.  Rather than just showing to offer a good fare, they’re investing in the city and I suspect that Milwaukee will respond to that.  That’s why I think this move is aimed much more at Southwest, American and, yes, even United and Delta.  AA, Delta and United all serve Milwaukee primarily through their nearby hubs and have never shown much respect for Milwaukee as a market.  At least not until Airtran and Southwest showed up. 

Southwest is the newest airline to arrive but Milwaukee has courted them for years without success.   Southwest didn’t pay too close attention to Milwaukee until Airtran did.  Only Airtran showed up, grew their presence in the market and now is respecting the city by making it a focus city, an employee domicile and now their shareholder meeting site.  This all is very smart on the part of Airtran and it will get noticed.

Filed under: Airline News by ajax
No Comments »

There has been quite a lot of talk in the media about mergers recently.  Financial analysts are high on the idea and two airlines in particular have batted their eyes at potential suitors again. 

The CFOs of both United Airlines and US Airways have made recently comments stating they see more consolidation needed in the US airline industry and both said their airlines remain open to the idea of merging with someone.  No big surprise because both of those airlines are arguably the poorest performing legacy airlines in the US.   It’s also no big surprise that financial analysts now want to see another merger because they’ve seen the financial response to the Delta/Northwest merger. 

I don’t see it happening myself.  Neither US Airways nor United Airlines happen to be particularly attractive properties for another airline for one.  Neither American nor Continental really have anything to gain by mating up with those two for example.  Well, Continental could benefit from UA’s Chicago hub and its international business.  American already has a nicely balanced business and, more importantly, it needs to focus on its labor problems and get those solved first. 

Continental has done better by managing itself and its employees carefully and really isn’t inclined to pick up one of the two airlines with some of the worst labor relations around.  They’re kind of smart over at Continental.  Now that they’re in the Star Alliance, they have the best of both worlds going for them.

So why don’t UA and US join together?  Well, their hubs would fit together kind of nice and there would be some nice synergies to be realized in consoldating operations.  Even their fleets kind of work together.  However, UA is headed by Glenn Tilton who isn’t interested in giving up his position to someone else unless they, too, are an airline titan.  He’d benefit from a merger personally but his ego doesn’t seem to want to let him have UA be the “consumed” airline.  He wants to buy and consume someone else. 

US Airways is being managed by Doug Parker who has plenty on his hands already with a pilot group that is so dysfunctional that it would make wife-beating appear respectable and his airline is short cash anyway.  He’s got no money to buy anything with and his somewhat anemic route structure isn’t all that attractive to any other airline.  No one wants his labor problems at all. 

Besides, I”m not sure consolidation is what this industry needs.  A liquidation could actually be the better answer.  More on that tomorrow.

Filed under: Airlines Alliances by ajax
No Comments »

It’s been announced that India’s airline, Kingfisher Airlines will be joining the Oneworld alliance, probably in about 18 to 24 months.  While Oneworld and Kingfisher are playing this up big in today’s news, it puzzles me and, frankly, I have some doubt as to whether or not it will actually come about. 

First, Kingfisher hasn’t exactly been the most financially solvent airline in a market with 2 other major competitors (Jet Airways and Air India) nor has it exhibited a very rational strategy on choosing its destinations.  It has a couple of trunk routes from India to London and Singapore, a couple of route to leisure destinations in Asia and a domestic network that is reasonably extensive but not overwhelmingly competitive.

While I’m sure that Kingfisher offers Oneworld partners AA, BA and QANTAS some feed, it doesn’t appear that Kingfisher itself has the resources to make use of the partners in their home countries.  Their fleet is comprised of A330 aircraft and while they’re scheduled for A380s and A350s, not a person around thinks they’ll actually take up the A380 and the A350 is scheduled for deliveries to start in 2014 but it’s unlikely that those will be on time either. 

What also surprises me is that Jet Airways, Kingfisher Airlines major competitor, already had a good codeshare relationship with American Airlines and QANTAS.  Their equipment and services better aligned with Oneworld so I’m puzzled why we are not hearing about Jet Airways joining Oneworld. 

There certainly is a need for a Oneworld partner in India and with Air India joining Star Alliance, that left Jet Airways and Kingfisher.  My guess is that they couldn’t make a good enough business case for Jet Airways who enjoys good relationships with SkyTeam members too.  However, if I had to pick between the two, Kingfisher wouldn’t be my choice. 

I suppose Kingfisher may work if it wants to be the domestic provider for Oneworld in India.  They do have the domestic network to make that work.  But they will likely become jealous of feeding all that high dollar traffic to AA, BA and QANTAS just to get the domestic traffic in India.  It doesn’t feel equitable.   One thing I’ll say for Oneworld, their partnerships do seem quite equitable for the most part with each partner airline appearing to bring a good strength to the table both domestically and internationally.

Filed under: Airline News, Airlines Alliances by ajax
No Comments »

Alaska Airlines and its sister company, Horizon Airlines have announced a pilot program to introduce electronic boarding passes into their system.

Electronic boarding passes are displayed on a PDA with a bar code that can be scanned at the airport.  Continental began pioneering this technology but Delta and American Airlines have been testing it out at various airports over the past several months as well.  All of the anecdotal reports that I’ve read so far seem to indicate that it has worked well and fairly smoothly with the only comments being that some TSA officers were surprised by seeing one but not unfamiliar with it.

What do you do if you cannot get your PDA to display the boarding pass?  You can always get a paper copy by checking in at the airport as well.   Passengers choosing this option aren’t at risk just because of a problem with their PDA. 

Alaska / Horizon also introduced their new mobile website at:

http://www.flyasqx.com/

If you’ve tried this technology on a recent flight, your comments on it are welcome.

Filed under: Airline News by ajax
1 Comment »

American Airlines has pursued a strategy of semi-engagement and delay with most of their employee union groups for several years now.  It wasn’t a completely ineffective strategy for the past few years in that salaries remained the same and with the current economic climate most employee groups haven’t been in the mood to push things.

The problem is, most of those employee groups gave up significant wages to prevent a bankruptcy filing and are now approaching 8 years without a raise.  Now the Flight Attendant’s union and the TWU (representing several groups such as mechanics and bag handlers) are pretty much at the end of their patience.  While the economy hasn’t recovered, nor has the employee’s quality of life.  If anything, I would suspect most employees’ have suffered significant degradation of their quality of life.  Particularly in the past 2 years.

Accordingly, these employees groups have reached a point where there is little to lose from strike.  To the outsider looking in, it would appear that they have their jobs to lose (via bankruptcy and downsizing) but that isn’t necessarily true.  While AA has suffered large losses over the past 2 years, it also holds a great deal of cash.  Those employees are looking at that cash.  What’s more, to expect employees to simply sit without a new contract and, more importantly, some certainty for the future is rather naive at this point.

Both the flight attendants and the TWU have asked that they be released from negotations soon and be allowed to start the first steps towards a strike.  Unfortunately for AA, they’ve got a bit of a good argument for this now.  TWU employees have been negotating since 200 5/2006.  Flight attendants just a tad shorter than that.  It paints the picture that none of these negotiations are going anywhere and the common party to all is AA’s management.  At some point, they will be released from these negotiations to start a 30 day cooling off period.

What’s worse is that AA is faced, potentially, with three very strident labor groups asking for release all about the same time and, at this point, with some justification.  It puts them in a bad position to negotiate with any one group and in a position to not be able to operate at all if any of these groups cooperate with each other.  Ordinarily, I wouldn’t expect them to but this time . . . maybe.

Both airlines and unions need a better way to negotiate.  It is unfair to the employee groups to be stuck in negotiations for more than 1 to 2 years.  It’s bad for the airline to have incentive to maintain the status quo by delaying and it’s bad for parties’ morale.

Filed under: Airline News by ajax
No Comments »

American Airlines and British Airways won tentative US government anti-trust approval  to cooperate closely with each other on routes and pricing.  Iberia Airlines, Finnair and Royal Jordanian are also a part of this package.  The one caveat from the Department of Transportation is that the “partnership” yield 4 slot pairs at London Heathrow airport to other airline(s) that might provide service between Heathrow and the United States.

This partnership is still contingent upon EU approval but I suspect the EU will grant it as well. 

Is this good for the consumer?  Well, in the long run I suspect so.  There is plenty of competition between the US and Europe in general and frankly I suspect travel to London Heathrow hasn’t been this competitive ever already.   In this case, I think we’ll see some capacity reduction between AA and BA on those US-London flights and that might well be justified.  There may be a few non-stop routes that see fares rise some but overall the general population of the US and the UK will likely find fares pretty reasonable or even unchanged in most respects. 

This will be a huge plus for OneWorld members in that they’ll be able to find better coordinated schedules for a variety of destinations throughout Europe and the US.  And it should put OneWorld on much more equal footing with both the StarAlliance and Sky Team. 

Of course, Richard Branson finds it all outrageous but, then, if you follow Richard Branson and Virgin Atlantic, you knew that he would already, didn’t you.  (I do think Richard Branson has finally cried wolf one too many times and no longer gets the credibility he might once have had.  One thing is sure, it’s time for VA to start looking for a partnership.)

Both BA and AA might moan and grown over giving up 4 slot pairs at Heathrow but both know that 1) those pairs will yield a tidy sum in a sale and 2) they’ll still have plenty of maneuvering room to make lots of money. 

I doubt very much either airlines’ unions will be happy about this though.  AA pilots will worry about a reduction of flying on their part which, in my opinion, is only a worry if they continue to fight new ultra-long haul services that AA could use their aircraft on.  This is a real concern given this agreement’s potential to free up 777 aircraft to fly to new destinations. 

The real win for OneWorld will be gaining anti-trust immunity with JAL for trans-Pacific services.  With that agreement and this one, OneWorld gets the opportunity to compete with the other two alliances on pretty good footing and they haven’t had that in quite a while.  Both agreements would also make it more attractive for other airlines to join OneWorld now. 

I would not be surprised if this development doesn’t suddenly make it a bit more attractive for OneWorld to approach US Airways about joining.  US Airways would make for a very complimentary addition to OneWorld and it would allow them to leave an alliance where they are quite literally relegated to secondary status on all fronts.  In OneWorld, US Airways could offer good domestic service to the other partners and cooperate well on both trans-Pacific as well as trans-Atlantic services.

Filed under: Airlines Alliances by ajax
No Comments »

It’s official, JAL is staying inside Oneworld and the folks at American Airlines can relax on that front.

The only thing that surprises me about this announcement is that it was done this quickly. I thought it would take a month or more for the airline to come around. That said, it was a smart move for two reasons.

First, the last thing JAL needs to be doing right now is agonizing over an alliance. Their problems were not going to be solved by being in the right alliance. They were going to get solved when the executive leadership started focusing on cutting jobs, slashing costs and rationalizing the routes. The new JAL Chairman and new president apparently decided to move that issue of their plates and get on with the real work.

Second, it’s a smart move because there were big anti-trust issues involved with a lashup with SkyTeam and Delta. The US government signaled as much a couple of weeks ago when it told Japanese negotiators for the new open skies treaty that approval for anti-trust agreements already applied for was not a “done deal”. By staying with Oneworld, JAL gets to preserve its alliance infrastructure, benefits from revenue guarantees for the next few years and has the time to focus on restructuring itself rather than wasting their time on fighting an anti-trust battle in the US.

One thing that has become clear from this fight. American Airlines has emerged as the leader of Oneworld. The other major partners, Cathay, QANTAS and British Airways, didn’t really step up in the way you would expect of such a partnership. Yes, this was a fight based in the US but those 3 airlines stood to benefit but didn’t really work terribly hard to win the fight on behalf of AA. Look for AA to become the Oneworld leader and the airline that starts setting the direction for Oneworld for the future.

That could be good or bad. Good because Oneworld really hasn’t had much leadership from any airline to date. However, American Airlines has to set a direction that other airlines want to follow and one that benefits everyone in the alliance. If they don’t take up the leadership reigns, look for Oneworld to melt away in 5 years or less.

Filed under: Airline News, Airlines Alliances by ajax
No Comments »

It would appear to me that a few airlines are heading for a second set of problems just as their economic situation is improving a bit.   Several legacy airlines have employed  a strategy of delaying negotiations and keeping the dialogue open without really resolving things among their employees.   American Airlines and United Airlines have been particularly bad at this.

Southwest, on the other hand, recognized a need to continue to have settled relationships with its employees and made quality of life as much as pay a big issue.  The same is true of a few other, newer airlines.

I really believe that offering better quality of life possibilities is the way to get these conflicts resolved.  Everyone focuses on pay but the issues such as health care, time off, flight benefits and even fatigue are the things that can be resolved to the benefit of both sides and lead to more productivity and less conflict (which leads to distractions in running the business.)

Healthcare is a big one.  It’s expensive and among airline crew, very much needed.  While companies see it as expensive, in many respects, it isn’t.  $10,000 worth of healthcare per employee can be worth $20,000 in salary and lead to much better loyalty, happiness and productivity.  While it is difficult to tie this to direct savings elsewhere, there is no doubt in my mind that relieving employees of this worry would lead to much better labor relations.

Think about how tired *you* are after flying just one long trip in a day.  Imagine how it must feel if you’re “working” 2 or 3 trips in one day.

Time off is important too.  All too often, airline crew are seen as having lots of time off because of their schedules.  What isn’t often observed is just how much recovery is required after flying 2, 3 or even 4 very long days in a row.  It takes a few days to recover from the kind of grueling schedules that are required to stay profitable.   Restructuring trips so that employees can maximize their pay while working and, at the same time, have enough time off to recover and be ready for their next set of trips will lead to better quality of life. 

Flight perks are a very demoralizing area for many airline employees now.  Yes, they get to fly free . . . when there is space available and, let’s face it, there isn’t much space available these days.  That makes people feel as if those perks’ value has been greatly diminished and, in many respects, it has.  Airlines would be better off to scrap unlimited “free” travel and, instead, offer a limited set of guaranteed positive space benefits.   There would be a great deal more value in the employee being able to count on being able to use those benefits *when* they wanted to use them as opposed to having to live in a state of uncertainty as to their plans.  Modest guarantees have much more value than unlimited perks dependent upon space  being available.

Why not allow an airline employee accrue a guaranteed space ticket much like most of us accrue vacation time?  Work so many flight hours, get a guaranteed space ticket.  Let them carry the benefit on the books as long as they like so they might “earn” enough benefits to take their family someplace.   Award them a business class seat at various anniversaries but not at 5, 10, 15 and so on years.  Do it every 3 years of service. 

Pay is important and its time for airlines to start looking for a different way to pay their crew.  The pay for most airlines has become too complex and, frankly, rewards seniority far more than the work provided.  30 years ago, flight attendants weren’t expected to make a 30 or 40 year career out of flying.  They generally flew as much as 10 or even 15 years and then quit.   That allowed a great deal of turnover in seniority that became arrested in the late 1970’s. 

The truth is, a senior flight attendant for a legacy airline (and by senior I mean 20+ years) is generally able to hold schedule in a city he or she wants to be domiciled in and fly a relatively easy schedule while making a good salary. 

By easy, I mean that flight attendant might fly one or two legs a day, maybe spend one night away from home and fly another one or two legs before being off for 3 or 4 days.  A junior flight attendant may be flying 3 to 5 legs a day, staying away from home as much as 3 or 4 nights and have just 1 or 2 days off before doing it again to earn a salary that, frankly, isn’t very much a living wage.

Pay and productivity aren’t matched very well.  Airlines need to pay not by the mile and size of aircraft but, rather, by something like the number of legs they fly in a day and the number of nights away from home they endure.   Airlines want more productivity but there is a disconnect from that with the current seniority system. 

Keep the seniority systems for allowing a flight attendant to choose their schedule.  But make the pay for a grueling schedule rewarding and the pay for a light schedule less rewarding.  You’ll find senior flight attendants taking on the hard, difficult trips to earn that pay and you’ll find them doing a great job of handling it by virtue of their experience *and* their reward for hard work.

Most of all, take care of your employees.  Make it easy for them to get something to eat and drink between trips.  Make it easy for the gate agent to have a brief respite between serving 2 flights.   Find ways to allow more cross-functionality between jobs at the airline so that employees want to help each other get through the day faster and happier as opposed to protecting their jobs. 

I don’t see airlines like American and United trying to take care of their employees.  I see them looking at their employee base with contempt and hostility.  After 30 years of this, it’s time for everyone to take a breath and work out something that works for both sides. 

If this isn’t done, legacy airlines will find themselves being held hostage via strikes just as their situations have improved.  The worst thing you can do is to starve a person and then when you have all the food, fight them for it.  At that point, the starving person has nothing to lose by fighting and everything to gain.

Filed under: Airline Service by ajax
No Comments »

The Dallas Morning News Aviation Biz Blog has THIS STORY on how American Airlines has notified the FAA that they may train management employees to serve as flight attendant crew in the event of a strike.  This move is likely a response to the APFA statement recently stating that they’ll move to ask the NMB (National Mediation Board) to declare an impasse, the first real step towards a strike.  I also consider it a move by AA to rattle its sabers just a little as well.

The airline did this once before in 1993 in anticipation of a strike by flight crew and while that strike ended somewhat disastrously for both parties and only with the intercession of the President, something did occur to me.  It worked poorly last time for two reasons.

First, AA was unable to fly a full schedule resulting in lots of cancellations as well as congestion on other airlines.   AA made preparations but it really didn’t put its heart into that attempt at strike breaking.  Second, the service component was abysmal.  Employees had been trained to serve in the more important safety roles but not the service roles.

It occurs to me that this time, it could work a lot better.  There is very little service component compared to 1993 for one.  Second, if they managed to keep their planes in the air, this could dramatically dampen labor unrest among the rest of the airline. 

In addition, American’s operations are more diversified now and I  kind of wonder if their operations aren’t modeling just how to combine flights and keep passengers moving for a while.  A strike would still be a disaster for both parties, in my opinion, but I kind of doubt that either party is going to back down.  AA’s flight attendants are notoriously militant and have been kind of spoiling for a strike for over 10 years but I don’t think there are many flight attendants who could withstand a very long strike financially. 

Moreover, AA has pretty good liquidity but that will start disappearing in a large cloud of smoke if there is a strike.  Their liquidity is what has kept financial analysts and investors off their backs.  Lose that liquidity and you’ll be looking at regime change real quick.

Filed under: Airline News by ajax
No Comments »