Bombardier, unlike Embraer featured yesterday, has become the aerospace company it is today by combining a number of companies together over the past 25 years.   Its first purchase was Canadair (maker of the Challenger 600), then Short Brothers (maker of the Shorts 360), LearJet and, finally, Dehaviland (Canada) from Boeing. 

 

Notably, products from 3 of those 4 manufacturers exist in one form or another today.  The Canadair Challenger business jet is the basis for the regional jet CRJ-100/200 series.  The Dehaviland Dash 8 / Q400 continues in production today and LearJet is still selling small, affordable business jets.

 

Bombardier has pursued two lines of growth in the commercial airline world in the form of its regional jets (CRJ series) and the Q400 turbo-prop from its DeHaviland subsidiary.   

 

The Dash 8 Q400 is arguably the most efficient regional “jet” available today in that the Dash 8 series is powered by 2 Pratt & Whitney (Canada) turbine engines (and actually does derive some tiny percentage of its forward speed from jet “thrust” in addition to its propeller propulsion).   The Q400 has seen some renewed interest in its product line and finds itself in the enviable position of airliners showing strong interest in the far greater efficiency of these aircraft over 500nm sectors (or less.)

 

Colgan Air (serving as a regional airline to Continental) has adopted a fleet and Frontier Airlines and Horizon Airlines both have new fleets of these aircraft.  Operating costs that are about 1/3 to 1/2 of a regional jet, the Q400 offers comfort (equivalent to a E-Jet), speed (no substantive differences on sectors of 500nm or less from “real” jets) and low entry costs. 

 

Expect Bombardier not only to continue this line of aircraft but also to improve it over the next few years.  Its conceivable that a still larger model with stronger engines could be offered and become quite competitive on both intra-state (Texas, California) and regional (upper North East, Midwest) routes that are currently served by mainline aircraft.   Their only real competitor, ATR, does offer similar aircraft but lacks the financial muscle and diversification of most other aerospace companies. 

 

Everyone wants to fly a jet.

 

Bombardier has a strong, successful line of regional jets that began with the CRJ100/200 series seating 50 passengers and first offered in 1991.  This series has now been superseded by the CRJ700/900 series seating from 70 to 90 passengers and first offered in 2001.  The CRJ1000 is in development and offers a 100 passenger capacity and should enter service some time in 2010. 

 

The early CRJ100/200 jets were 2×2 seating that was cramped and had limited headroom whereas the new(er) CRJ700/900/1000 offer increased headroom and legroom using the same size fuselage.    Both series have seen extensive service with a wide variety of airlines around the world. 

 

The next generation of aircraft, the C-Series, launched in 2008, offers the promise of a wider fuselage accommodating 3×2 seating and from 110 to 140 passengers.  This aircraft will be among the first to use the Pratt & Whitney Geared Turbo Fan engine and,  with the use of extensive composite materials, should be among the most efficient in its class. 

 

In addition, the range offered by these aircraft put them into near trans-continental reach and certainly encroach a great deal of territory currently held by Boeing and Airbus. 

 

This program, first launched in 2006, first saw a suspension due to a lack of orders and then it was re-started in 2008.  Currently, only Lufthansa has made a commitment to the aircraft (30 options) but the range and efficiency of this proposed series should attract other airlines in the next year or so. 

 

Like Embraer, Bombardier must grow and growth means launching future aircraft into Boeing and Airbus’ territory.   Bombardier, so far, has shown an inclination towards going it alone into this territory by pushing forward with its next series. 

 

The next step for Bombardier (in about 10 years time) may be a real mainline aircraft seating from 140 to 180 people in a 2×3 or 3×3 configuration.  This will be dependent on whether or not their CRJ-700/900/1000 series aircraft require an update and whether or not the market for a sub-100 seat regional jet continues to exist (likely). 

 

Bombardier is challenged by its location in Canada (Montreal) with strong ties to unions and an expensive supplier base.  In addition, Bombardier has experienced difficulties in ramping up and maintaining high volume production.  Although they have experimented with assembly in China by shipping complete assembly packages there for construction, they have no real ties to other parts of the world that could lead to reduced manufacturing costs (most particularly labor costs.)

 

Bombardier will continue as a viable and competitive aerospace company.  Whether it can last in competition with Embraer and (in the future) Boeing and Airbus remains to be seen.  Embraer has the advantage on costs while Airbus and Boeing have an advantage in knowledge.  They may become the regional airliner firm to beat with Embraer moving up a class against Boeing and Airbus.

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Before anything else, I’d like to announce that this is my 200th post to this blog.  Quite the milestone all in all.

 

USA Today’s Today in the Sky Blog is reporting that several airlines have removed their advance purchase requirement for bargain fares this holiday season.   Their source, Tom Parsons (CEO of BestFares.com), says that airlines such as American Airlines, Delta, United, Northwest, US Airways, Frontier, Airtran and Midwest have all removed the advance purchase requirement through January 4th.  Continental still has a 3-day advance purchase requirement.  This would seem to imply that holiday travel is extremely soft this season so far.

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At the first of the year, I wrote 3 blog posts shown HERE, HERE and HERE.  It was really just my random speculation on what to expect over the next 12 months.  Well, now it’s December of 2009.  Let’s see how I did.

 

Boeing 787:  I guessed at an April 2009 first flight.  It still hasn’t flown although speculation has it flying this month either by December 14th or December 22nd. 

 

Airbus A380:  I guessed they would make their goal of producing 21 aircraft this year.  As of November 30th, 2009, Airbus says they have delivered 7 A380 aircraft this year.  Ouch.  This is a program that is in financial trouble.  No, I don’t think it will be cancelled.  Not yet but please don’t try to tell me this program will make a profit. 

 

My deathwatch had Midwest Airlines going away most likely by a sale.  That did happen and while the airline has essentially evaporated (from its original form), it does remain as a brand being run by Republic Airways.  

 

I speculated that Frontier Airlines would be bought out of bankruptcy but I guessed that jetBlue would be the buyer.  In fact, Southwest Airlines and Republic Airways were the suitors and Republic won.

 

I thought that United Airlines and US Airways would announce a new merger with Continental a dark horse candidate for buying United.  In fact, Continental became a member of the Star Alliance and firmed its relationship up with United but wisely kept its distance otherwise. 

 

I said that Southwest Airlines would maintain its status quo but that Gary Kelly would be under fire from both employees and outsiders and he was.  However, that view is already being reversed again by Southwest’s resurgent strength in the business.

 

I thought that the Middle Eastern airlines such as Emirates, Etihad and Qatar wouldn’t see a bankruptcy or merger but would slow their growth and aircraft deliveries.  That, in fact, has happened and now we see Emirates working hard to distance itself from Dubai World’s financial woes.

 

China:  I said deferred orders.  Pretty much what happened.

 

The Far East:  I said airlines from that region would maintain their status quo, probably would not defer orders and might make new orders to replace existing equipment for greater effiency.  Again, pretty much what happened.

 

Australia:  I saw QANTAS slowing growth, deferring some orders and fighting hard against new entrants.  Again, that’s pretty much what happened.  I also saw two weak competitors on the US-Australia routes:  United and V Australia.  That is pretty much what is happening although V Australia has been pretty smart in working into a relationship with Delta where it appears the two airlines will cooperate with codeshares.  United remains alone and with weakening demand.

 

South America:  I said the Argentine government would take Aerolineas Argentinas back from Grupo Marsans and the airline itself would muddle along or contract rather severely in some areas.  Bingo.  Exactly what happened.  I also predicted Azul would become the jetBlue of Brazil and its not hard to guess that that airline is pummeling its competitors.  A future prediction was for the airline to fly internationally in 2014 with Airbus equipment.  We’ll see.

 

Africa:  I saw Delta continuing to pursue flights to major African cities (true) and SAA (South African Airways) issuing a small RFP for 777 aircraft to replace its rather inefficient A340 aircraft (didn’t happen.)

 

India:  I thought Jet Airways and Kingfisher might merge with the name Jet Airways being retained.  In fact, both airlines continue to exist but both are suffering severe financial problems, deferring aircraft deliveries and generally flailing about trying to find a way to continue.   One of these airlines will still ultimately have to exit the market and I continue to think it will be Kingfisher.  They have the wrong aircraft and the wrong aircraft on order.  However, Jet Airways is suffering badly from labor actions among its employees. 

 

United States:  I picked United to fail.  It hasn’t happened and while they continue to live, their cash holdings are being reduced, they still have severe labor issues, their service product continues to suffer and I still think they should be the ones to disappear.  I also thought Glenn Tilton would be ousted and, possibly, replaced by Doug Steenland.  That didn’t happen but John Tague has been groomed as Tilton’s replacement.  I still think Tilton should go if United can’t fail.

 

Europe:  I thought we would hear of a surprise from Lufthansa.  I didn’t like their purchase of SWISS and I didn’t like their flying the A340 in competition against the 777 being flown by many of their direct competitors.  They’re still here, still making money and they bought BMI.  I still think we’ll here of misfortune from them but apparently it will take a while longer. 

 

Random Speculations:

• I thought Southwest might add another aircraft type.  It didn’t happen but I think their interest got perked up when they looked at buying Frontier and saw the economics on the Q400.
• I thought Delta might order more Airbus A330 aircraft.  Instead, Delta is parking them in the desert for the winter season.
• I speculated that both China and Japan would defer or drop their regional jet programs.  That didn’t happen but the Chinese jet program appears to be a bad aircraft and unlikely to be used by anyone except Chinese airlines forced to buy it.
• I thought Bombardier would see a major order (20+) for their Q400 series aircraft from a US customer.  Horizon Airlines did up their orders  for 10 more but there were no other significant orders. 
• Airtran to form a small midwestern hub.  Yup, that happened.  In Milwaukee where they’ve taken over from Midwest Airlines and now face Midwest (brand owned by Republic) and Southwest Airlines entry into the market.  I think Airtran will hold on here and continue to develop business.
• Last, I hoped that jetBlue or Virgin America would enter the DFW market.  Virgin’s CEO, David Cush (formerly of American Airlines) did recently speculate about adding flights to either DFW or Austin.   I suspect they’ll choose Austin and DFW will remain a fortress for AA.

 

That’ s it for my 2009 predictions.  I’ll make more at the start of 2010.  On the whole, I probably did as well as anyone in making predictions in this business.

Filed under: Airline Fleets, Airline Service, Death Watch by ajax
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Almost everyone who follows the airline business and the airlines themselves continue to insist that people buy overwhelmingly on price and there is quite a bit of evidence to support that general feeling.    The best example is that among legacy carriers serving a particular non-stop route, when one airlines lowers their price, the other airlines can and do see a drop in their bookings for that route if they don’t match that price.

 

There is a lot of truth that individual routes can be seen as nearly perfect competitive environments.  Any airline executive worth his salt will tell you that when an airline opens up a city pair, they look upon it as growing another business.  Each route is a “business” to be developed and nurtured and maintained.

 

Legacy airlines are the masters of being all things to all people.  Low cost carriers are the masters of high frequency/low cost models.  Leisure airlines have learned how to serve market with low frequency but high value.  

 

But what do most people want?  That isn’t ever as clear as people want to believe.  The dynamics between two cities change over time and adjusting to those changes is essential to maintaining that “business”. 

 

My father, once a very senior airline executive, told a story to me long ago that I’ve never forgotten.  His airline, Braniff, served the Dallas / NYC route with a daily late afternoon flight that for years was a huge money maker because it was flown primarily by businessmen.  In the mid-1970’s, they noticed that traffic on that route began to erode ever so slightly and even a small erosion worried an airline even back then.   Then he happened to take the flight to do some financial business in NYC on behalf of the airline and he realized the problem.

 

Business between the two cities had begun to change.  Traditional businessmen such as bankers or leaders of large corporations had continued to fly that flight because their model was to go to NYC the night before, conduct some business until 2 or 3 in the afternoon and then fly home to be in their own homes by mid-evening.   But entrepreneurship had begun to flower and more and more businessmen/entrepreneurs saw that as a waste of time for such a trip.  They wanted to work until late afternoon and fly home as late as possible in order to maximize their time there.

 

So Braniff added a second flight in the early evening that allowed businessmen to work until 4:30pm, go to the airport and catch the 7:30pm flight home which put them back in Dallas late at night but which met their needs to stay as long as possible to maximize their work.   As a consequence, both flights began to do much better because even the entrepreneurs could recognize that when their work was done, it was time to go home and if it was done at 2pm, they went to the airport and caught the early flight home.  Traditional businessmen began to be expected to be more efficient and when they couldn’t leave at 2pm, they knew they had another option for later in the day.  Braniff began to own that route again.  Frequency was the answer.

 

I would argue that when two or more airlines “own” a route, service is often going to be the discriminator.  But what form of service will be necessary?  Is it options in seating that allow a traveler to have more legroom?  Is it more frequency?  Is it some form of a meal?  Is it WiFi or video on demand?

 

For 30 years airlines have worked to harmonize their fleets, reduce the different number of equipment types and flatten their service offerings to the lowest common denominator.  Particularly the legacy airlines.  But for the past 10 years, we’ve seen new airlines offering more segmented choices on each flight and those airlines are the ones who continue to earn a profit, experience growth and satisfy shareholders.

 

There have been some half hearted experiments with increased choice and segmentation.  Delta had Song airlines offering more entertainment and a brighter, cheerier environment.  United had Ted airlines which was economy oriented.   But I suspect that it wasn’t necessary to change the brand so much as it indicated a need to offer more choice on the aircraft.

 

I think in the future we’re going to see more choices in seating on airlines.   The low cost only passenger wants price above anything else.  The business traveler needs an economy choice (to satisfy their company’s desire to economize) that offers a little more room.  I think we’ll see different seat pitches offered and different service choices (a la Frontier) offered as well.  This is an area where Frontier has pioneered change and seen positive results.  Same for jetBlue.  Those airlines continue to earn an operating profit and grow.

 

Legacy airlines are going to have to be more flexible in fleet, fleet configuration and they’ll even have to consider offering things like meals and entertainment.  There already is a move to do this among certain airlines.  Continental is adding LiveTV to their fleet.  Delta/Northwest has recognized that having a varied fleet allows them to “tune” their service to the demands and continue to earn a profit. 

 

When an airline can adjust capacity on a route by season, month or time of day, it can continue to make money.  When it has just two choices of aircraft to use on a route and both have more capacity than needed, they start to lose money.  (Hello AA.)

 

I think that one day one legacy airline will have the guts to start advertising in markets that speaks to “real world” experience on their line versus the airline that “owns” the city.   For instance, I think Continental could come into the Dallas market and already argue that yes, you have to connect in Houston to go to NYC but if you do, more often than not you’ll get there in the same time with better service than flying American Airlines who has an untrustworthy on-time record and who treats their passengers to old aircraft and little or no service.   Someone will have the guts to start trying to change the perceived value of travel.

 

The truth is that there is a great difference between legacy airlines on any two city pairs.  The key is to identify that difference and communicate it to the traveler.  Right now, that really doesn’t happen.   An airline such as Continental shouldn’t attempt to compete with AA on price alone.  They should offer the real differences such as a meal on flights of 3 hours or more, LiveTV, equipment that is as much as 10 years newer or more than AA and a staff that enjoys doing its job.    They should offer incentives for changing airlines and trying them once such as a guaranteed business class seat for the price of AA’s economy seat. 

 

It will happen in some form.  It has to.  The newer airlines such as Frontier, Airtran, jetBlue and Virgin America have all proved that offering more choice on the aircraft works.  Even Southwest has recognized that it has to offer more choice in order to retain their very valuable business traveler.   What’s more important is that even some passengers who buy on price alone have realized that the incremental extra cost of one or two of those “extras” is worth it once again.

Filed under: Airline Fleets, Airline Service by ajax
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It’s always fun to make predictions about the coming year, right?  Of course, I may well review my predictions in December of 2009 and decide against doing it again.

 

Boeing 787:

 

This aircraft will finally experience its first flight and I believe it will occur on or about its new scheduled time (early April).  For Boeing, credibility is now at stake and they really do have to begin meeting deadlines.  Financial analysts are becoming too skeptical of the company for comfort and airlines want their airliners.  Boeing does have a reputation for being able to pull itself together and get something done in a crisis and that should serve them here. 

 

I also believe we’ll see both static airframes begin their tests and new build airframes begin to flow from Boeing in about 6 months.  My prediction?  The 787 will prove to be a very capable aircraft and will meet or exceed its performance promises.

 

Airbus A380:

 

Airbus met its revised schedule of delivering 12 A380 airliners in 2008 . . . barely.  Originally it was scheduled to deliver 13 in 2008 and 25 in 2009.  Now Airbus says it will deliver 21 in 2009.  However, it is becoming clear that Airbus is now quickly learning how to build these aircraft and turn them out.  I predict they’ll exceed their 21 goal in 2009 by at least one aircraft.

 

Boeing and Airbus:

 

Both aircraft makers will begin to speak about the future of short to medium haul aircraft again.  With milestones for the 787 and A380 being met, I suspect they’ll become more comfortable in speaking of the future of their aircraft lines.  Look for discussions on both the 737 and A320 aircraft families and what interim technologies might be employed to improve their performance.  I suspect we’ll hear about both weight saving materials being adopted as well as the potential of new incremental improvements on existing engines.  Particularly the CFM-56 engines used by both makers. 

 

US Airlines:

 

First, let’s take a look at my deathwatch candidates.  The sudden and precipitous drop of oil prices allowed each of them to take a breather.  Midwest Airlines, however, continues to speak little, fly only a little and its investors have got to be running out of patience.  I still believe that they’ll ultimately go away.  How they do it is the question.  Rather than bankruptcy, I believe it will either be a sale or as a subsidiary airline of Delta/Northwest with the latter being most unlikely.  Who will they be sold to?  Good question.   Perhaps Airtran will get what they wished for and develop indigestion.

 

Frontier continues to muddle along but faces rather intense labor strife still.  I think their situation improved not only because oil prices dropped but because United continues to offer some of the worst product in the industry and because Southwest slowed its growth and took a breather.  While I firmly believe United will do nothing to improve its product, I do think Southwest will return to its goal of killing Frontier as a Denver competitor some time in the late spring.   I suspect Frontier will emerge from bankruptcy this year but I also firmly expect them to be out of business or acquired by December of 2009.  Who buys them?  I’ll bet on Jet Blue.  The aircraft fleets are compatible and Jet Blue has to start building a hub somewhere else in order to continue to experience strong growth.  Frontier gives them that chance.  The long shot?  American Airlines.  Why?  Because Frontier is working with AMR’s Sabre Reservations system now. 

 

United Airlines, my favorite airline to hate.  The Cranky Flier loves to rag on Alitalia and I love to rag on United.  United has lost a tremendous amount of value over the last year and continues to have some of the highest hourly costs of any US airline.   They’ve done nothing to improve labor relations, their service product or their fleet efficiency.  Glenn Tilton is hated by airline pilots but I predict he is goint to be hated by investors before the end of summer.   What happens?  I’m really not sure.  The best thing that could happen is for them to liquidate.  However, I think some airline will see some value there and attempt to buy United and make use of its assets.  Who?  The logical choice is Continental but I believe they’ll hold on to their independent streak.  So my next guess is a US Air / United V 2.0 merger will come about.  Could it work?  I doubt it but Doug Parker (CEO of US Air) wants another merger and United offers hubs he doesn’t have and some aircraft fleet compatibility.   I’ll go “all in” and bet that we see a US Air / United Airlines merger announcement by December of 2009.

 

Moving on from the death watch, let’s look at other US Airlines for a few minutes.

 

American Airlines will maintain its status quo but will begin to feel pressure to conclude some union contract negotiations this year as financial analysts begin to view their lack of progress less and less favorably.  CEO Gerard Arpey will begin to feel the heat but barring a large mistake on his part, will retain his position as CEO.  One possibility, however, will be bringing on a potential successor as President of the airline.

 

Southwest Airlines will also mostly maintain its status quo but I will predict that by late summer its new CEO Gary Kelly will be under fire from both employees and investors for his shotgun approach to growth.  It is beginning to look like it is unplanned and what people most value in Southwest is its ability to form and execute a coherent plan.   There will be no mergers, no real growth and a sinking stock price by December but I think Mr. Kelly will hold onto his position until 2010 barring a major unforeseen development. 

 

Continental, the best kept secret.  Continental will maintain its status quo with, perhaps, very moderate growth in the international sector while it waits to see what happens domestically.  They’ll enter the Star Alliance (exiting from SkyTeam) but discover it offers little value to them as well.   I don’t think they’ll seek to merge with anyone in the next year but if they did, I’d pick them for going after someone like Alaska Airlines rather than United or US Air. 

 

Stay tuned for Part II.

 

 

Filed under: Airline Fleets, Airline Service, Airports, Death Watch by ajax
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The Today in the Sky Blog is reporting that Frontier has rolled out a new pricing model on their website today.   The airline is an all coach service but now they are differentiating that service with the designations “Economy” (primarily a Southwest Airlines emulation but you pay for your luggage), Classic ( a reserved seat and DirecTV and no luggage fees) and Classic Plus (Classic with a snack).  There are other benefits and restrictions with each class.

 

While I do believe that product differentiation is the way to go for airlines in the future, I’m not sure this is differentiated enough to offer a customer a choice.  Yes, service and amenities grow as you pay more and that’s good but look at the Today in the Sky’s story and examine the pricing.  I’m not sure you are getting enough differentiation for the price differences charged. 

 

A coach passenger is buying on price, primarily and to make the product differentiated enough to entice the passenger into a higher price requires something substantive.  Is it DirecTV and a snack?  I suspect not.  I suspect that DirecTV is worth about $10 to the passenger and a snack is worth maybe $8.00.   Free checked baggage?  Well, for Frontier that might be a mistake since Southwest, their major competitor, already offers free checked baggage.  They don’t offer more legroom but their other major competitor, United Airlines, does and for a price differentiation that really might be a better deal.

 

 

Filed under: Airline News, Airline Seating, Airline Service by ajax
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USA Today’s Today In The Sky is reporting that Frontier Airlines has gone to their bankruptcy judge and asked him to break the Teamster’s contract in order to allow some heavy maintenance to be done off shore (Central America most likely.)

 

 I’ll confess that I have so far been surprised at Frontier’s relatively smooth, up to this date, reorganization.  This latest development seems to indicate that all is not as it seems and they may only just now be working on the hard stuff.  The hard stuff is, quite honestly, renegotiating labor contracts and getting commitments from all the stakeholders to play nice in the emergence from bankruptcy. 

 

They remain on my death watch simply because they continue to be squeezed on both sides by Southwest Airlines and United Airlines in Denver.  In addition, they no longer have any fuel hedges (they had to be given up on going into bankruptcy) and while oil prices are lower than their peak just a couple of months ago, they remain volatile. 

 

Even with renegotiated labor contracts and concessions from lenders, they still have to compete with their system based in Denver and that’s a tough market.  Denver really isn’t large enough to support 3 major airlines battling it out in the long run.  A quick look at what happened in Hawaii between go! Airlines (A Mesa Airlines subsidiary), Hawaiian Airlines and Aloha Airlines (who went into liquidation) is all you need to read the tea leaves.  Whoever has staying power wins and, right now, that would be Southwest and United.

Filed under: Airline News, Death Watch by ajax
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The Dallas Morning News Airline Biz Blog has This Story today.  I’m certain there are a number of reasons why airline traffic will be down for labor day but I’m equally certain that airlines are starting to feel the effects of far higher prices when it comes to travel demands. 

 

If this is true, LCC carriers such as Southwest and Airtran are probably grearing up to add even more capacity in existing and new markets.  These carriers can offer low prices on a sustained basis in addition to a basic service level that doesn’t quite show contempt for the consumer.  Legacy airlines such as American Airlines, United and DeltaNorthwest has cut service, introduced a number of new fees and raised fares considerably so far this year.  There isn’t nearly as compelling a case for travel on a legacy carrier as there once was. 

 

In fact, I’m  not sure what the argument is for traveling on a legacy carrier unless you seek a business class accomodation (available on Airtran, however) or a highly convenient direct flight.  Even the basic frequent flier no longer enjoys many of the privileges accorded to him or her in the past.  Fees for redeeming frequent flier miles are now designed to “buy” the ticket and the seats available for frequent flier redeemers is more reduced than ever before. 

 

At this point, a traveler has about the same or better experience on one of the low cost carriers, sometimes enjoys *better* amenities (Hello Jet Blue, Airtran and Frontier) on newer airplanes all for a fare that is, at the least, competitive with any legacy carrier. 

 

Many airlines have already begun their capacity reductions and they probably total about 5% in their markets.  So, we have a 5% reduction in travel demand matching a 5% reduction capacity which means there is about the same amount of people (per seat) chasing a low fare as before.   That means that air fares won’t go up anymore and some airlines will likely begin to look at attracting customers by reducing or eliminating these new fees going into the fall/winter season.  My prediction is that one or more legacy carriers will eliminate or reduce the first checked bag fee for travel sometime in November and December.

 

 

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The latest on-time statistics are out on US airlines and the Dallas Morning News has them here.

 

I’m struck by  more than one item. First, how strange is it that 2 commuter airlines that fly for legacy airlines have better on-time numbers than any 48 state legacy airline? These airlines fly aircraft that is subject to more technical delays and cancellations. It boggles my mind that SkyWest and Pinnacle Airlines are at the top.

 

Skywest flies for United, Delta and Midwest as their feeder “connection” airline using CRJ200/700ER/900 aircraft (and a few Embraer EMB-120 turbo-props).  Ordinarily, the Bombardier aircraft is not universally known for its dispatch reliability but the new(er) CRJ700/900 must be doing much better than its older cousin the CRJ200. 

 

Pinnacle Airlines flies the CRJ200/440/900 aircraft, all similar or the same as Skywest, for Northwest Airlines and Delta.  Right now, you could drop me with a feather.  In addition to the aircraft, these airlines fly out of major hubs that are often disastrously affected by summertime weather. 

 

What is a bit more surprising (if you can believe it) is that US Airways is the top on-time non-LCC legacy carrier.  There are reports that they’ve made drastic improvements at their Philadelphia hub.  Right now, they are neck and neck with Southwest Airlines and, frankly, I’d say you are doing pretty good to be playing ball in Southwest’s neighborhood.

 

What I have to ask is this:  Is it an anomaly (unlikely as US Airways has been climbing steadily) or is because they’re able to depart on-time more often since instituting charges for checking bags?  If this climb in reliability is due to changes in customer baggage habits, look out. 

 

Three LCC carriers, Southwest, Frontier and Airtran, are virtually neck and neck in these ratings and, again, I wonder if this might be due to people traveling with more carry-on luggage than in the past. 

 

American Airlines is dead last (even beat by American Eagle) in the ratings and that, to me, indicates graver trouble at that airline.  There have been some reports of pilots becoming slightly inflexible with respect to work rules.  I believe it is more a symptom of an airline that has become sick in morale and flexibility.  Gerard Arpey won’t fix this with more mattressmakers.com analysis, better financing or capacity constraints.  It gets fixed with leadership.  Something that American Airlines really hasn’t been blessed with since Robert Crandall retired. 

 

Finally, if you offered me a bet that Mesa would have better on-time ratings than American Eagle, I’d have taken the bet with glee.  When you are worse than Mesa, you’ve got real problems.

 

 

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I got asked today what airline(s) I thought might be in real trouble.  Thinking about it for a few hours, I’ve come up with a sort of “death watch” list.

 

First on my list is Midwest.  They just announced they’re grounding their MD-80 aircraft and, as a result, cutting several important routes while expanding their codeshare with Northwest Airlines (who now owns a “passive” 47% stake in Midwest.)

 

Giving up routes such as Milwaukee – Los Angeles does not bode well.  With only Boeing 717 aircraft, they have limited themselves to routes that are “heartland” oriented.  For instance, the 717 can’t make it from MKE to LAX.  It can fly from Kansas City to Los Angeles (that route stays for now) but who wants to fly from MKE to LAX via MCI (MCI stands for Mid Continent International by the way)?  The airline business is, first and foremost, a network game and Midwest just cut 40% of its network putting itself below the critical mass in my opinion.

 

The proposed merger with Airtran would have saved them but they made a deal with the devil (Northwest) and Northwest has no interest in Midwest surviving really. 

 

Next up is Frontier.  Their hub is Denver and they have already cut back their focus cities.  While their fleet is new and fuel efficient, part of their business model counted on being the only LCC (Low Cost Carrier) game in town.  Not so true anymore. 

 

They have United Airlines above them as a legacy carrier operating a substantial hub in Denver and offering a nicely segmented set of seat choices and a global frequent flier program.  Below them is Southwest Airlines.  Southwest has entered that market with a vengeance and contrary to denials on te part of Southwest, it is crystal clear they intend to put Frontier out of business.  Much of Southwest’s growth has been focused on Denver and their CEO has already stated their intention to put more capacity into that city.  Denver can support two airlines, not one.  Since Frontier is already in bankruptcy, they’re my pick for going away. 

 

The only saviour is an airline that fits into their network and I can’t identify one that really meshes well with both their route network and their fleet. 

 

My third pick is Virgin America.  This is an airline that doesn’t quite know what it wants to be.  On the one hand, they want to be a trans-continental, high value, high service airline.  On the other hand, they want to be perceived as the west coast version of Jet Blue.   Trans-continental flights can’t make money using the equipment they have (Airbus A319/320) and their base, SFO (San Francisco) can’t support a real hub operation with good traffic given the competition they have from both legacy carriers and established LCC’s.

 

 

Filed under: Death Watch by ajax
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