About 24 hours after the Southwest Airlines / Airtran announcement, rampant speculation on who American Airlines should partner with started up. The truth is, while I can make an argument for them to merge/acquire US Airways, I think they’ll shy away from a merger. If they do go shopping for an acquisition, I don’t think it will be oriented towards a real “merger” a la Delta/Northwest or ContiUnited.
There are a couple of targets left. Alaska Airlines strikes me as one that should interest Southwest, American Airlines and Delta. I think it’s pretty hard to get a deal done with Delta because of regulatory issues particularly in the Seattle area. I think it’s pretty hard to for AA to get a deal done with Alaska because both parties have high labor costs and AA just won’t know what to do with the rather unusual operations Alaska performs in Alaska.
I don’t think anyone is going to buy jetBlue at present and jetBlue’s CEO says they’re going to grow organically. I would be happy to see jetBlue just get outside of its NY/Florida comfort zone and stop treating the midwest like it has the plague.
Frontier could be an interesting proposition for jetBlue, I think. Sadly, I also think that Republic Airways is going to hold on to Frontier for dear life given what’s going on in the regional airline world. Nevertheless, I do think that jetBlue could harmonize Frontier’s service and routes to the jetBlue way and make something of that airline.
US Airways? Well, they are the somewhat pretty girl who never gets asked out anywhere except to make some other guy jealous. Until they get their labor house in order, I think it’s going to stay that way. Their executive corps, however, ought to be attractive to someone. Despite all of US Airways weakenesses and their “East/West” style of ops, those guys make money. There is a lot to be said for that.
I think they are more attractive for bringing into a new alliance. Currently, US Airways belongs to Star Alliance but ContiUnited kind of makes them look superfluous. SkyTeam just doesn’t need them either. Oneworld aka American Airlines/British Airways, on the other hand, could perhaps take advantage of them. The deal would have to be a bit sweet because US Airways, if nothing else, is enjoying a nice “under the radar” ride on Star Alliance right now.
I can’t think of anyone who could find a use for Virgin America at this point except, well, the Virgin Group. Even the Virgin Group seems to have a hard time seeing a real value for working with Virgin America. If they had any money, I would point them to Frontier but I think Republic Airways would just laugh out loud.
The truth is, I think there is suddenly some opportunity out there to start a new airline. I would look for weak airlines who have major hubs and very little competition. Some place where business customers and leisure travelers alike are dissatisfied with their current offerings and restrictions. Some place that has a history of embracing the airline industry and where you can hire experienced people to kick that venture off. That would be a great place to start something new. I wonder where such a place might be?
There is a reason there is a lot of focus on the near mid-west and east coast when it comes to airlines. That’s where people are. The population density in our eastern half far exceeds that of our western half. Even LCC carriers “get it” and if you think otherwise, look at the focus of jetBlue, Airtran and Southwest Airlines.
But I think the opportunity of the west and mid-west is getting ignored. All one has to do is take a look at routes flown from the DFW, Houston, Kansas City, Salt Lake City and, yes, Las Vegas area and wonder at the possibilities. Yes, the flights are a bit longer in length and time but they also fly in and out of airports that are far less congested and far less affected by weather.
Southwest ignores routes from DFW while it waits to fly unrestricted from Love Field in 2014 and I think that is a mistake. jetBlue has ignored the Dallas market despite the fact that it connects an amazing number of people to areas where it already has a strength: the east coast and west coast.
Airtran has game in the east and even in the upper-Midwest now but it has ignored the west so far and that puzzles me. It’s an airline that is clearly ready to go to the next level and be a real national player. Frontier is playing some in the west via Denver but take a look at the fares it is charging on those western routes. I think Frontier is more vulnerable than it thinks.
More importantly, I don’t think there has been the same LCC stimulus in many western markets that we’ve seen elsewhere. Many LCC’s operating routes in the west seem to have come to some tacit agreement with legacy airlines on competition. With the exception of the west coast, we don’t see much LCC stimulus going on past 150 miles east of the west coast.
There is opportunity there and the airline that figures out how to build a better network there is potentially set to earn a great deal of money. Sure, Southwest is out there and they do have pretty good coverage but even they could stand a little competition these days. At least outside of California and Arizona.
Steven Slater says he quit jetBlue. jetBlue says he’s no longer with the company and comments no more on the subject.
Regardless of the circumstances behind Slater’s official departure from jetBlue, it was time for him to go.
It was time for him to go because he clearly had reached a point in his career where dealing with problematic passengers was more of a problem than he was perhaps prepared to tolerate. I’ve said it once already but I’ll say it again: The big shame in this episode is that the passenger wasn’t criticized more for their behaviour and banned from the airline. All too often airlines accept that kind of behaviour tacitly in the belief that it will scare away customers. I myself suspect it might only scare away the people you don’t want as customers to begin with. My strongest suspicion is that it will scare no one away.
It was time for him to go because jetBlue can’t have that kind of liability in the air. Once Mr. Slater acted out in public like that and abused emergency systems for his grand exit, he was a liability. What if he did something again and this time is resulted in harm against a passenger or co-worker? He created a record of not being in control of himself and that’s a liability for his employer.
That said, jetBlue missed an opportunity to back its other employees and demonstrate that while bad behaviour from employees won’t be tolerated, nor will bad behaviour from passengers. I truly believe it would have been a strong morale booster and it would have raised respect for jetBlue yet another notch.
In an interview with TheStreet.Com, jetBlue CEO Dave Barger says that jetBlue has earned the right to grow. His justification for that comes from jetBlue having positive cash flow, steady earnings and it’s contrarian nature that has lead to success at difficult airports.
Personally, I think all airlines have a “right” to grow. I just think they have to make a busines case for it and as far as I’m concerned, have at it.
I think this signals something else. Here is an LCC announcing its attention to grow in almost insolent manner. In particular, Barger declares their intentions at Washington Reagan National and fails to mention that his opportunity for growth there comes from a partnership with American Airlines that included a slot swap.
But this is somewhat classical behaviour on the part of LCC’s. They see revenue opportunities on routes that legacy airlines are only, at best, barely managing to cling to and the LCC’s want to earn that money. Their costs are lower and they can handle going in at a lower fare and capturing the business. The only tool a legacy has to use to fight off that competition when that happens is adding frequency and matching prices for a sustained period. It does work sometimes. From time to time, a legacy airline can fight off an LCC intrusion but it’s hard and it does eat up cash and resources until it’s over.
That was easier to do when there were few LCC’s and they were focusing on peripheral airports and lesser routes. Now we have quite a few LCC carriers and they want in on the big action. That’s why we have Virgin American flying trans-continental routes, jetBlue flying from JFK and Southwest Airlines introducing itself at both La Guardia and now Newark airports.
Can legacy airlines fight these attacts on many more fronts as the airline business recovers in the US? Maybe. At least to some degree. But I suspect they’re going to have to be a bit more choosy on their fights and I think w’re going to see some markets where even SuperLegacy airlines concede, eventually, to LCC intrusion.
Dave Barger and jetBlue are the first to declare their intentions but they won’t be the last. It’s notable that all of the US LCC’s are earning good profits and increasing their revenue base (with the exception of Virgin America who has yet to earn a profit). That makes for a warchest and with their sizes approaching a critical mass, they can afford to take on more and more legacy airlines.
Airtran did it in Atlanta. jetBlue did it at JFK airport, Southwest did it in Denver and now it’s happening at Washington Reagan National. It’s going to happen at more and more airports too.
One alternative defense might be for more and more legacy airlines to strike deals with LCC carriers and offer them some success but access they can control as opposed to an all out fight that results in legacy airlines bleeding red with losses.
Look for more airlines to declare their intentions and justify those intentions with their current earnings and revenue growth.
American Airlines is introducing a new fee. This time, a fee from $19 to $39 can you get you a seat up front in coach including bulkhead seats and it will allow you “group 1” boarding.
Personally, I’m all for offering more varied product on aircraft. That’s the one development among “debundling” that I am in favor of. However, please offer me something of real value. Frontier gets it. United gets it. Airtran gets it. Even Southwest Airlines gets it.
AA doesn’t get it. A seat that has no more pitch or other benefits except that it is “up front” and I can potentially board earlier (and sit in an uncomfortable seat longer before take-off) isn’t more value. If the seat comfort isn’t going to change, do I really care if it’s up front or in the back? Well, maybe I do if I’m on a cranky old MD-80. Does it afford me more opportunity for overhead space? No, not really. Despite reports to the contrary, it’s just not that hard to find overhead space. Sure, the bins are more crowded but you can still access them.
If anything, it’s the jokers who put their luggage up front and then take their seat in back that annoy me.
But I’ll gladly pay for more seat pitch and a generally more comfortable seat. I’d gladly pay $20 / segment to gain 2 more inches of pitch alone. And I can already get that on an airline of my choice in most cases. For the prices AA is offering for this “service” you can more often than not get an Airtran business class upgrade. You can get more seat pitch and more service on Frontier. You can get more seat space on jetBlue. Southwest Airlines’ fee for priority boarding affords me a real opportunity to choose one of the best seats in a 737 for a cheaper price and you can bet I’ll have bin space on the SWA flight no matter what since they aren’t fools and charge exorbitant fees for baggage checking.
Perhaps this might have some appeal to a business traveler but I don’t think such a fee is going to be reimbursed as an expense. That certainly wouldn’t fly at my company, a major aerospace and defense firm.
How about a $25 fee that A) gets you a exit aisle seat and B) *guarantees* your checked luggage arrives with you? That might be particularly attractive to AA flyers.
At the end of the day, for any traveler except the most extravagant, it’s money that can be better spent elsewhere. And if you are that extravagant, you’re probably getting an upgrade to first class anyway.
Ahh, the jetBlue incident. The moment that many have fantasized about for years. A flight attendent delivering a resounding “fuck you” to obstinate and rude passengers somehow strikes a chord in many of us.
As you can imagine, I’ve had a lot of people privately make comments and ask questions about this over the past 2 days.
It’s your fault. The customer, that is. I’ve long said that there is something odd that happens to people when they get on an airliner. They just go weird and often do things they would never consider doing anywhere else in their lives. For instance, would you ordinarily choose to have sex in your dirty bathroom? Would you ordinarily get so liquored up that you would urinate on the restaurant floor? Would you argue with subway driver who asked you to sit down for your safety?
Paying a few hundred dollars to fly from point A to point B really does not grant you an exemption from behaving appropriately in public. It doesn’t grant you an exception from safety rules and it doesn’t offer you an opportunity to behave like a completely rude jerk just because you feel like it. When you’re on an aircraft, you are traveling in the public and when a flight attendant asks you to sit down and refrain from grabbing your luggage, be a good boy or girl and just do it. Contrary to what you think, standing up and grabbing your suitcase so you can rush to the front of the line to exit the aircraft is *not* going to improve your day so much that you just can’t stop yourself.
Before anyone points a finger at the real problem being leisure travelers or infrequent travelers, I strongly disagree. I’ve seen plenty of frequent fliers behave just as bad as anyone else. Remember the woman who decided that she was treated poorly on Southwest Airlines because she was denied a seat on aircraft in favor of seating an overweight child? She was on standby. She didn’t have a confirmed seat and it doesn’t matter if the kid was overweight or not. It lacked class to contact media and act as if she was horribly wronged by the airline. She wasn’t. She was being petulant and acting entitled to far greater treatment than she deserved or had paid for.
It’s your fault. You, the airline, have caused this. You have spent the last 80 years teaching the public that they’re always right on your aircraft that *your* airline owns. You’ve condemned your staff over and over again in favor of someone who spent $200 one time to travel on your airplane and your staff knows just where the line is. Sadly, that line offers only a small amount of uncomfortable manuevering space.
The truth is, the customer isn’t always right. That comes from someone who has spent most of his career in service industries. The customer is quite capable of being wrong and making that person who chooses to be obnoxiously wrong in charge of your staff’s career isn’t the way to properly run a business. You have a right to say “this customer broke our rules, behaved boorishly and conducted themselves in a manner which would get them banned from a restaurant so we ban them from our airline.”
You really do. I wouldn’t use that power lightly, mind you, but it’s time to re-set some expectations for your customers. One of those expectations is that $200 is not purchasing them the right to ignore airline regulations, FAA rules or the right to abuse your staff.
It’s not entirely surprising that the jetBlue flight attendant kind of lost it. Do I think he’s a hero? Absolutely not. Do I think he’s a horrible person? Absolutely not. Sadly, he’s most likely a person working a hard job (not unlike most of us) who simply allowed his anger to reach a point that he chose to do something terribly foolish and unprofessional. He’s neither an absolute sinner nor an absolute saint. He’s a human being who clearly made a bad mistake.
Not unlike the many people who do one really stupid thing on aircraft as customers almost every week.
Most telling of all is that I’ve yet to have seen anyone condemn an extremely rude and disruptive passenger for their part in this.
I’ve thrown a few punches at Virgin America lately and their seeming cowardice when it comes to flying the markets they said they would fly. Over the past few weeks, each time I’ve done so, I’ve realized that, in many respects, the same applies to jetBlue.
David Neeleman has been gone for nearly 3 years and I see an airline that is kind of stagnate. I’ll grant that times have been hard for the past 2 years but it’s notable that the airlines who’ve seen profits even in those times are the ones who have grown, not contracted. They are the ones who had some vision to risk some new routes, not contract and play it safe.
jetBlue, as an airline, has always impressed me with their courage and their vision. They started in markets where there was more than adequate service and they made a difference not just because they were an LCC charging the lowest fair but because they developed an immediate and exceptional reputation for how they treated their customers. Their amentities were innovative but it was how jetBlue valued you as a customer that won people over.
But where is that risk and vision and, frankly, customer treatment today? The Cranky Flier recently had a post on their new food offerings. You can read that HERE. It really is illustrative of just exactly how jetBlue has evolved in the past 3 years. They aren’t competing, they’re now simply matching what other airlines have to offer and holding on to what they have instead of growing themselves into markets where they genuinely have something to offer.
If an airline has the courage to get started in the New York City area and compete on some of the most important routes out of that area (and other major metro areas) and succeed, shouldn’t we see that as a successful model for the future? jetBlue appears to now be sidestepping any opportunities to compete and instead defend their marketshare.
A partnership with American Airlines is a visionary step? Really?
I think it hardly surprises us that the stock price of jetBlue isn’t reflecting its former glory anymore.
How about coming down to DFW airport, setting up shop in Terminal E and going head to head with AA and Southwest. If you can win in New York, you can win here.
Instead, I read about “possible” nerd routes between Austin and San Jose. C’mon jetBlue, you’re on the East Coast and the West Coast and down in the Caribbean. Is it really possible that you’re afraid to enter into markets like Chicago, St. Louis, Denver, DFW or Houston? And by enter, I don’t mean a couple of flights to your hub cities. You have one of the best service products around (although it has been eroded some) and it’s time to find new focus cities and quite ignoring the middle US hub cities. You can play there if you have some vision and courage.
One thing I’ll say about Southwest over the past 2 years is that they haven’t been afraid to explore opportunities. Even as they slowed their growth, they still sought out opportunities and took on some risk to make things happen. I’m not advocating that any airline bet the farm on anything. I am, however, advocating that LCC’s like jetBlue and VirginAmerica really aren’t engaging where they can play and compete and I wonder what’s holding them back these days.
I speculate often about that and I do wonder if it isn’t the CEO’s of those two companies. Both Dave Barger and David Cush have long and significant histories at legacy airlines. Continental and American Airlines respectively. It can be very hard to break habits you learn at that kind of airline. They’re both much more suited to a Chief Operating Officer role than a CEO role in my opinion and the boards of directors at both airlines could stand to start looking for someone who isn’t tied to “that’s how we do it in this business”. A new David Neeleman or Herb Kelleher is what leads those airlines to the next level. They’re out there, you just have to find them.
Sean Menke might just be available, it is certainly worth calling him.
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.
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.
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.
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.
Two days ago, the new CEO of WestJet stated that WestJet would be pursuing a code share agreement with Delta with the potential to implement this either before or in place of their existing agreement with Southwest Airlines. Several reports tie this in with the proposal to give WestJet some slots at (5 pair) at La Guardia Airport in the Delta/US Airways slot swap deal currently being discussed.
First, I continue to be skeptical that there will be an agreement between Delta and US Airways for this major slot swap between La Guardia and Washington National airports given both the FAA’s and Department of Justice’s attitude towards this deal. Other than Delta and US Airways, no one is thrilled about the idea of Delta and US Airways getting to “pick” their competition by granting these slot swaps to airlines who aren’t poised (and never really will be) to compete with these two legacy airlines. If a deal does go through, I expect it will look different than the current proposals and it will involve a transparent auction of these slots to a high bidder.
Nonetheless, this is a bad announcement for Southwest airlines for a few reasons. First and foremost, the thundering silence that continues from Southwest since this announcement was made sort of indicates they were as caught off guard by this as anyone. It isn’t good for such a large airline to appear as unprepared for this development as they seem to be.
Second, the original deal between Southwest and WestJet is part of a 3 nation alliance between Southwest, WestJet and Volaris, all airlines operating in the tradition of being LCC carriers and all with a model similar to Southwest’s own. Southwest was clearly the leader in this alliance and it appears that it’s delays in getting themselves positioned to start this alliance have hurt this agreement. Acting like the 800lbs gorilla and then not getting the job done in time doesn’t make you appear to be an agile player in the airline community.
Southwest has said the delays came from making other changes a priority within their IT system. Whilethere are some changes such as new business class options, none of those changes to date are the kinds of things that should have delayed such an alliance for a year or more. No other airline would have taken nearly as long to integrate into that kind of alliance and that points out problems with Southwest’s IT system. Southwest is accustomed to going it alone on their systems (they do not, for instance, participate in a global reservations system) andhave done so for nearly 20 years. Now, that departure from industry norms is starting to hurt them apparently in being unable to make these kind of changes and integrations in a quick and agile fashion.
Third, Southwest’s image of leadership among LCC carriers is further hurt by this. Many founders of LCC carriers have pointed to Southwest as their inspiration for how to run a modern airline. No doubt that this is true but it also points out that these 2nd and 3rd generation LCC carriers have become more responsive to both their customers and the potential for new business than Southwest has managed. Losing that image of leadership is a bad thing for Southwest both externally and internally.
Making substantial partners wait to engage in a strategic alliance that, by all accounts, should be very beneficial as well as ground breaking is neither smart nor a good show of leadership. Canada really only has 2 airlines capable of entering into an agreement like this and the last thing you want is to annoy the 2nd largest airline of Canada into exploring options with a heavy hitting airline such as Delta and its associated alliance, SkyTeam. Volaris may prove to be more patient but you have to wonder if they aren’t asking themselves if there is another partner in the US who might be interested in them. A partner such as jetBlue or Virgin America or even the Republic Airways two-headed beast, Frontier/Midwest.
This doesn’t mean that a wholesale change in leadership is called for at Southwest but it may well indicate that it is time to find ways to become a leaner, more agile competitor. The days of simply having to show up and winning customers are over. Witness the competition that SWA is seeing in new markets such as Denver and Milwaukee. In this industry, winners attack and grow rather than ponder and play it cautious.
Both Delta and jetBlue have requested exemptions to the 3-hour rule about to be implemented in April for their operations at JFK airport citing the runway closure for re-construction that will be in place until July. At first glance, this seems a reasonable request and I’m sure most would say such a condition is justified.
To be honest, I thought so at first as well. However, the more I thought about it, the more I didn’t like the idea. This will set a precedent for other “exceptional” conditions in the future and what I don’t like about this is that this is not an unplanned or unforeseen event. We know the runway will be closed. There has been plenty of time to plan operations to accomodate this closure. Both the airlines and the FAA have had plenty of time to come up with a contingency plan to deal with potential problems. When I consider that, I really don’t think the 3 hour rule should be exempted.
If this runway closure was sudden due to unforeseen circumstances, I could certainly get behind the idea of an exemption. That isn’t the case. Granting exemptions for planned events is unwise, precedent setting and undermines the rule itself for future events.
It makes no sense to have rules and advocacy for customers if those rules can be undermined by a planned event. If we do grant these exceptions, then I have to ask what is the sense in having a rule in the first place?
Airlines might be tempted to state that they did plan for this event but the rule caught them out since much of their planning was done before the announcement. My response would be that that planning clearly was inadequate if there is a genuine fear of running into 3 hour delays.
If the FAA feels it must make some kind of accomodation, I would suggest they grant the exception only on days with weather events that impact airport operations or some similar conditions. Set a boundary range of conditions and if the airport meets those conditions, no exception is allowed.
I realize that these thoughts likely rankle many airline employees and airline fans even. I’ve never believed the 3 hour rule is a perfect rule. I do, however, think it is a good rule to start with and the nice part about rules is that they can be changed if they don’t work. With the massive and constant changes that go on with carriers’ carriage contracts that are simply designed to protect the interests of the carriers only, it’s time to have some rules that protect consumers.
I recently read one article that pointed out that while a consumer can be charged an egregious amount for needing to change their travel date on a non-refundable ticket, an airline can change that flight at any time without penalty to the consumer. This is a great example of the imbalance that exists between consumers and airline service providers. We have finally begun to address some of those imbalances and I think that is a good thing. I also think that by addressing some of these imbalances with rules that define a more just and fair relationship between the consumers and airlines, airfares may well go up in price a bit. That, in and of itself, is not necessarily a bad thing either.
The relationship between consumer and airline today is, frankly, one of the more dysfunctional in existence. It resembles two spouses who hate each other and yet refuse to get a divorce or seek other options in life. That relationship is only going to change if we actually do something and doing something shouldn’t take several years of hearings either.
I would love to see a commission that addresses these issues in a timely manner similar to BRAC (Base Realignment and Closure) Commission that addresses how this nation closes and realigns military bases on an annual basis. It’s isn’t perfect but it is bipartisan and something that we all generally can abide by.
Imagine a airline industry rule making commission made up of 3 former airline executives and 3 former FAA and/or DoT administrators and one former Federal judge that address these needs and issue guidance upon reaching a simple majority consensus on a fair rule. No consensus, no rule. Have them meet and issuance guidance twice a year and let the rules be implemented. It’s bipartisan, reasonable just and fair and may well have the ability to help both the airline industry as well as consumers.
Instead of mergers galore, I think what this industry really needs is growth.
To most people, that sounds crazy in light of the present economic situation in the industry. It depends on who I think should be growing, doesn’t it? We need to see more growth and expansion from airlines like SWA, Airtran and jetBlue. Heck, let’s throw Virgin America into that mix too. Those are the airlines that are going to drive service and price in this business for the foreseeable future.
Now, how they should grow is up for debate. Each of those airlines is pretty good at what it does and how it does it so trying to merge with an equal really isn’t a great idea. They shouldn’t dilute their corporate culture in favor of growth at any cost. However, that doesn’t mean you can’t pick up a deal here and there. Frontier was a perfect example of an airline that would have been a good buy for any one of those airlines. In hindsight, there should have been a bit more of a bidding war for Frontier.
There aren’t a whole lot of smaller airlines in this country. Frankly, I think Virgin America is more of a candidate to be taken over than to consume someone else. Sun Country Airlines still looks good to me, particularly for someone who wants an good entry into the Minneapolis / St. Paul Market. There was a time when it would be very unwise for most airlines to attempt to compete with Northwest Airlines in that market. Now that they are Delta, have 48 hubs and are headquartered in Atlanta, I suspect an airline could get an edge into that market.
But there are other growth opportunities out there. DFW has space to be a focus city for an airline. So does Houston. Las Vegas is no longer to be a hub for US Airways. St. Louis is an old city but it is still a city of industry with an airport that has nothing but crickets chirping in it. There are plenty of regions lacking in good competition still.
I don’t think a merger of legacy airlines will do anyone any good. Oh, it would take come capacity out of the system which would probably raise prices on *some* routes. I’m not sure if that is “good” for the consumer. It might create further dominance of a region or hub and I don’t see the benefit in that. The Delta/Northwest merger was one that worked because it labor issues were settled, there wasn’t a whole lot of overlap between the two companies routes and each company was accepting of the idea. Those circumstances don’t occur very often.
Some time ago, US Airways and Delta Airlines came to an agreement to “swap” slots between New York’s La Guardia Airport and Washington DC’s Reagan National Airport. Delta would get a large number of slots in New York and US Airways would get a smaller but more important number of slots in DC. Each airline would get to consolidate their power in the city they’ve chosen to be a power player in.
This required regulator approval from the Department of Transportation and the DOT finally issued their ruling on this. They were OK with it only if each party sold a number of those slots in the respective markets. And they preferred that the slots go to “slot needy” airlines (i.e. airlines who have no slots at those airports or who have an extremely limited number of slots.) In other words, the DOT wasn’t completely comfortable with just how consolidated each airline would become in each market.
Both airlines expressed dismay and offered that they wouldn’t necessarily go through with the deal if those were the conditions. Both felt that the consumer was losing out on improved benefits in those markets. Oh, and of course this is the fault of the Obama administration according to some pundits.
Now, the airlines don’t want to give up those slots to the slot needy because it potentially allows a toehold into two markets that have been very difficult for LCC carriers to find access to. Southwest Airlines, for instance, only managed entry into the La Guardia market by buying the assets of defunct ATA. jetBlue would love access to Washington National but there has been no real opportunity there either. Frankly, both Delta’s and US Airways shuttles between NYC and DC would be pretty threatened by a jetBlue operation running between those two cities and Boston.
Frankly, I’m glad the DOT put those conditions on this swap. First of all, no consumer ever benefited from an airline consolidating its position in a market. The benefits airlines speak of are things like connections to other destinations, through ticketing to other destinations, etc. The benefits are *not* better prices. Ask people how American Airlines is doing in Dallas ever since Delta withdrew from the market.
I don’t mind airlines merging and growing bigger but I do mind airlines carving out domains in certain markets with regulatory approval. Those markets aren’t monopolies to be granted. And in those two particular markets, there isn’t exactly a limited number of customers available.
In fact, in those two markets, LCC carriers have been shut out largely by large, legacy carriers who have “sat” on their slots rather than give them up or sell them. It is quite literally to their benefit to operate a slot pair with a 40 seat RJ rather than to give the slot up because the introduction of competitive fares from LCC airlines who might get a toehold will literally decimate their yields in those markets.
But keeping competition away and even allowing airlines such as Delta and/or US Airways to consolidate their strength in such markets is tantamout to providing artificial support to airlines who have cost structures that are no longer viable in most of the United States. I do wonder what the anti-Obama administration pundits have to say about this kind of government support for legacy airlines?
The truth is, we need to distribute *more* of the wealth in those slot controlled markets, not consolidate it. We need other airlines encouraged to enter those kinds of markets and provide solid competition on routes that are held in a stranglehold grip by legacy airlines. That is what will benefit the consumer.
Azul turns 1 year old and has posted some pretty impressive numbers. According to THIS Wall Street Journal story, Azul has managed to carry over 2 million people in its first year of operation.
Flying with a fleet of 14 Embraer E190/E195 jets with a 106 and 118 seats respectively, Azul plans to grow their fleet considerably ending up with a fleet of 33 aircraft by 2011. Azul was, to date, the best financed airline venture yet at $200 million in start up capital and is an excellent example of how to start an airline properly.
Owned and controlled by David Neeleman, former founder of Morris Air and jetBlue (and who also assisted in the founding of WestJet in Canada), Azul shows great promise for stimulating air travel demand in Brazil.
Ordinarily, I’m not too keen to talk about completely foreign airlines but this is one I like to watch because I have a feeling that Mr. Neeleman will come back to the US again one day and start yet another airline. I presume he presently has a non-compete clause in force between himself and jetBlue but I wouldn’t be surprised to learn he’s already looking at a map of the United States and making plans with himself for the future.
According to the Wall Street Journal Middle Seat blog, American Airlines has decided to match the bag fees recently implemented by Delta and Continental. You can read more HERE.
So, at present, Delta (including Northwest), American Airlines, Continental, United and US Airways are now all charging $25 for the first bag and $35 for the second bag with some of the airlines offering “discounts” if you perform your “bag fee purchase” online. That would imply that they each see this price for checked bags being a bit more elastic than one would have thought. Or, at the least, they see it as elastic as long as they all go for the same increases much as the case is with air fare increases.
So far, no low cost carrier has adopted this pricing model or even raised their checked bag fees. I suspect they won’t either as it gives them an opportunity to show themselves as the good guy while gaining some incremental revenue.
If this rise in fees sticks for the next 1 or 2 quarters, I do think it will put tremendous pressure on Southwest Airlines to institute their own version of bag fees, at least by institutional investors and analysts. So far, Southwest and its CEO Gary Kelly have resisted these calls to add checked bag fees and, so far, they believe it is resulting in incremental revenue from passengers switching to Southwest to avoid fees. Since CEO Kelly (and Southwest as a whole) is not one to shade the truth, I’ll continue to believe these claims.
However, with other LCC carriers such as Airtran and Virgin America and even jetBlue (on the 2nd bag) have added fees and do report significantly improved revenues from that, I would imagine that the call for Southwest to add these fees will be defeaning particularly when Southwest could implement a jetBlue or Airtran style program and see improvements to their quarterly results which haven’t been too impressive in the last year.
It is sad but I don’t believe we’ve seen the last of these increases. I do think that some airline will probe the upper limits of these fees just a bit more yet. I do think that Southwest will resist the call to add these fees for at least another 6 months but if there hasn’t been some kind of collapse in the price of these fees by then, I would not be surprised to learn that Southwest has begun to make changes to their infrastucture to implement them. I think the first sign will be the withdrawal of their “no fees for checked bags” advertising.
Delta Airlines chose to announce they are increasing their checked baggage fees. If you pay online, your fee goes from $15 for the first bag to $23 for the first bag. The second bag checked rises from $25 to $32 (paid online). Continental matched those fees almost immediately. While it seems exorbitant to me, I wonder if anyone will really notice right now.
I suspect Delta did this simply because they have pricing power at most of their hubs (ATL, MSP, DTW, SLC, CVG, MEM) and because they don’t think it is going to affect the consumer’s decision about which airline to fly in most cases. Delta doesn’t get a lot of LCC competition at its hubs except for ATL and there seems to be a unspoken agreement with Airtran not to get too ugly there. Besides, Airtran has checked baggage fees too.
The thing is, most online sites that offer booking for airlines in the US do not mention baggage fees when displaying prices for routes. Delta will continue to appear to be very competitive on routes while likely adding additional incremental revenue through the “gotcha” approach. Quite honestly, I suspect they’ll get away with it. At least until there is a healthy recovery in the airline industry and that is likely 18 to 24 months away still. Maybe more.
Will others match it? I suspect that American Airlines might. There is no precise harmony among airlines on these fees, not yet anyway. Continental already had pretty high fees at $18 and $27 for online checked fees (with a $2 and $3 surcharge at the airport). AA is at $20 and $30 respectively whether you check online or at the airport. US Airways is at $20 / $30 for online (with a $5 surcharge for checking at the airport.) United is $15 and $25 for online checking.
By contrast, Southwest Airlines has no fees up to the 3rd bag, jetBlue offers the first bag free and $30 fee for the second while Airtran charges $15 for the first and $25 for the second. In other words, these fees are all over the place. The truth is, as competitive as airfares are on many routes, these fees can change the equation pretty dramatically in some cases since those fees are for each way on a round trip flight.
These fees have added dramatic amounts of revenue to airlines’ bottom line and I don’t see them going away at all. I don’t think the fees among legacy airlines will harmonize much at all until and if online travel sites begin showing an “all in” pricing when comparing fares. Even with such comparisons, I don’t think the fees go away so much as they just begin to merge together among the airlines.
Will anyone else raise their fees? Well, maybe. I’m sure it will be tempting to do so among all the legacy airlines. One or two may even try to raise the ante some. I kind of think both United and American Airlines will try some kind of new mix in the future. I don’t see the LCC carriers playing around with their fees much if at all. They have the revenue and now this may be their chance to follow Southwest’s strategy in a modified form by advertising lower checked baggage fees.
I don’t think Southwest will change its attitude on these fees based on this new development. Their strategy appears to be working for them and they don’t have a history of following the pack when something works. That said, I’m sure it is something they’ll re-examine from time to time and it doesn’t mean they won’t add fees at some point in the future. Right now, they appear to be capturing customers with their ‘no fees” approach and their aggressive advertising seems to have caught some attention.
As much as I hate these fees for the 1st bag checked, I hate that airlines and travel websites have done really little to truly show the “all in” price for these trips. It makes things just that much more murky for the consumer and that is a bad thing. However, the best thing you can do is learn the fees for the airlines you may be shopping for a trip and do the math yourself. You’ll be frustrated by it and no doubt resent it but there isn’t a ready made solution at this time.
Frankly, these developments are just one more reason why I wonder about Southwest re-joining the travel agency world. The world has changed since they left it and, quite honestly, I think they could re-structure their IT infrastructure and re-join those agencies with little incremental costs involved. At that point, they become the no brainer for many consumers from my view. Even as aware as I am of airline options and even being located in the DFW area, even I tend to forget about Southwest as an option sometimes.
One strategy for learning these fees is to visit LuggageLimits.Com (also linked in my sidebar).
Today, part 2 in my views on whether or not we’ll see a real “Ryanair” style airline here in the United States.
Watch what you fly here. The most recent LCC entrants here have bought Airbus. No real surprise as Airbus likes to make a heck of a deal on an aircraft for new airlines in the hopes they’ll have the “in” for future orders if that airline succeeds.
Boeing isn’t too interested in that. They want to see a solid business plan and a real possibility of success. What’s more, big orders aren’t the enticement they once were for Boeing. Boeing got burned on a few of those deals with Ryanair being the most notable since it allowed Ryanair to buy aircraft, fly them for a couple of years and sell them at a profit. Boeing isn’t going to let that happen again any time soon.
Is Airbus the right aircraft? Yes. No. Maybe. I kind of think not. I think it is well suited to the jetBlue and Virgin America airlines of this country because they can support that upgraded service product nicely. That said, those airlines would have done just as well with Boeing aircraft. In fact, jetBlue went with Airbus because Boeing refused to offer a decent price for a decent order.
But Airbus doesn’t strike me as quite the right choice for an LCC. They’re a bit higher off the ground, have a little worse operational dispatch rate and don’t always have the best range vs weight ration for certain routes. Yes, they’re a family of aircraft that offers a range of size that captain can fly across the type range.
Boeing seems better. Supported here in the United States, you have better access to mechanics, parts and plenty of maintenance contractors to keep you going. They’re a little bit closer to the ground, a little easier to turn around and have a little bit better dispatch rate. In addition, their range of capacities is a little bit better for routes and virtually every model has trans-continental capability now without being weight restricted.
The model I would look long and hard at isn’t either of those. I think a new LCC carrier trying to emulate Ryanair ought to take a serious look at the Embraer 170/190 aircraft. They’re cheaper to operate and can carry a full load of passengers and baggage although little cargo (which isn’t an LCC’s concern anyway.) They offer a family of sizes, have a good dispatch rate, offer quick turn arounds, great range, good comfort and great potential for routes requiring frequency and low costs. It is no wonder that David Neeleman chose them for his new airline, Azul, in Brazil.
But you can go used in the US and do pretty well too. Allegiant Airlines buys used MD-82/83/87 aircraft, for instance. They MD-80’s are overbuilt, cheap to buy and still pretty cheap to operate. They have range, good dispatch rates, ease of maintenance and they’re abundant on the used market. The same is true of older Boeing 737 models (pre Next Generation models) and those are becoming to cheap to purchase as well.
In the end, an LCC needs an aircraft type that is relatively easy to expand into a fleet, keep one class of pilots flying it and which has a ready source of aircraft to augment and/or replace the fleet with.
One type, many sizes should be the rule. Ryanair uses one size, the Boeing 737-800 and Southwest basically uses one size, the Boeing 737-700 but they can afford to do so. A new LCC needs operational flexibility and being prepared to use the three basic sizes of either type would be a good thing.
But you can split your types too. Airtran did this successfully by entering the world with DC-9s, transitioning to Boeing 717s and then growing in capacity by bringing on the Boeing 737. That worked because while they needed two different pilot groups, the pilot groups could be kept “rational” with the same pay rates. jetBlue split their types between the Airbus and the Embraer(190) and split their pilot groups pay rates too. There was risk involved in that but jetBlue avoided that by offering pay rates on the Embraer that were as generous as that being offered other pilots flying mainline aircraft at other airlines.
Find airports that welcome you and that have demand to locations you can serve. Sounds easy but it isn’t. In the US, airports tend to be wedded to airlines that have served them for decades. When DFW opened, it was served by a number of major airlines and each terminal served one or more airline. Now, DFW has been taken over by American Airlines (nearly 4 of 5 terminals) and does little to serve the needs of airlines who aren’t AA.
Airports need to figure out that putting all their eggs in one basket with a major, hubbed airline isn’t a good strategy in the long run. Once those airlines have that dominance, they use it to beat airports down on fees and coerce airports into paying for infrastructure the airlines then get to own. It doesn’t benefit the local economy to have one dominant airline as prices rise and service falls. This isn’t just true for DFW either. When airports begin to aggressively pursue new entrants, everyone will win.
New and existing LCC entrants need to make a better argument too. All too often, LCC’s tend to fear competing in those markets dominated by a major legacy carrier and that’s a mistake. Airtran wasn’t afraid to go up against Delta and it paid off. jetBlue wasn’t afraid to compete in one the most competitive markets in the world (NYC) and against some of the biggest airlines. In the past, there weren’t good examples of what an LCC can do for both an airport and a metropolitan area. Now there is and new LCCs in particular need to use that to their advantage.
Treat your staff well. Airlines sell a service product and while you may get customers on price, you’ll keep them with service. Offering strategies to your crews that permit you high productivity and your crew a living wage along with a good working conditions can only lead to your success. Treat them like commodities and you’ll fail. Southwest, Ryanair, jetBlue and Airtran get this. Skybus and Mesa Airlines don’t. Look at who is making money.
Quality of life is just as important to airline crew and staff as wages. Airlines that offer good quality life tend to have happy crew flying their flights and treating their customers right. At the end of the day, it is a lot cheaper to keep a customer than it is to find new ones every week.
Will we ever see a close replica of Ryanair’s model here on a national basis? Yes, I think so. Right now, no. The market is too crowded but that will change again and new airlines will be started again. US attitudes towards fees and advertising are changing, although slowly.
First we need to see a major airline liquidate or merge with another to reduce capacity some more. Then we need to see an uptick in the economy that induces people to spend some money on travel again (both leisure and business travel.) There needs to be a glut of aircraft useable for such a venture (and that’s happening already) and airports need to figure out that it is in their best interest to find space for these new entrants. That really hasn’t started to happen yet but it may yet still happen.
