The Today In The Sky Blog has this report today.  Northwest Airlines unions apparently took exception to management directly asking workers what kind of work environment they would prefer in the upcoming Delta / Northwest merger.

 

The ability of unions to shoot themselves in the foot in this industry boggles the mind.  This union reaction clearly spells stormy weather for Delta in the post-merger organization too.  Between this story and my last post, it becomes clear that union leadership at Northwest is aligned with no one, including their membership, other than themselves and maintaining their current power.  That is not the purpose of a union now or in the past. 

 

Reactions like this only serve to set up a battle line between the union and the airline and today’s airlines cannot afford such conflict if they are to concentrate on succeeding.  It is, first and foremost, in the interests of the union for the airline to make a profit for when they do, they better further their argument for better pay and work conditions.  It isn’t in the airlines best interest to simply cave into craven demands underlined with childish behavior.

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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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United Airlines, an airline that has offered spotty-at-best service for more than 10 years, seems to have the 9 lives of a cat to most people.  Unfortunately, of all the legacy airlines, it is the one that should have melted away some time ago.   It emerged from bankruptcy in 2006 after spending 3 years and over $300 million reorganizaing itself to operate in a world with $50 / barrel oil without a realistic plan to deal with contingencies.

 

The problem is, oil was already at $60 / barrel when it started fresh.  Since 2006, United has been the one airline that always manages to arrive to the party in rumpled clothes and only a $5 bill to pay the door charge.   Those rumpled clothes are an aging fleet (although all of the truly old Boeing 737s are now being withdrawn from service to cut capacity) of aircraft that do not match the interior quality or service level of most of its competitors. 

 

The management team, most importantly CEO Glenn Tilton, has spent more than 2 years maneuvering to merge this airline with another and, yet, has been rebuffed by all potential candidates such as Continental, Delta and US Airways.  Indeed, they took a particularly condescending attitude towards US Airways’ offer to explore mergers when Glenn Tilton implied that he and his team would remain in place and “mentor” the US Airways management team including Doug Parker. 

 

Say what you will about US Airways but it isn’t the company we knew in the 90’s or even 3 years ago.  Doug Parker and team are really America West and they’ve been better at executing to plan than virtually any other management team at a legacy airline.  If anything, Mr. Tilton would be well served by Mr. Parker’s mentorship. 

 

Now the marriage dance in airline mergers is essentially over.  Delta and Northwest are walking down the aisle, Continental has chosen to stand alone (wisely in my opinion) and American Airlines has decided to pursue trans-atlantic partnerships with British Airways and Iberia Airlines.  There is no one else left for United to pursue a merger of equals and they lack the cash and operating plan to purchase a smaller airline as well.  Indeed, Continental Airlines is joining the Star Alliance (of which United is a founding member) and that may benefit United but if they think they will remain the shining star in the US market for that alliance, they are sadly mistaken.

 

Continental’s management team is stable, smart and agile in this market.  They are uniformly the choice of airline among business travelers (and that is who pays the bills) and possess a young, modern, harmonized fleet of aircraft that serve the routes efficiently.  Continental has hubs that will serve that alliance well in both NYC, Houston and Cleveland and offer Star Alliance members excellent codeshare options throughout the United States.

 

United Airlines has a fleet of 747s that are some of the oldest -400 models and by all passenger accounts they are in desperate need of refurbishment (unplanned for 3 years and not recognized for another 2 years while United showed its legs to potential suitors).  They possess a large 777 fleet which, on the surface, would imply some modernity there.  However, about half of that fleet are early model “A” market 777s powered by the less powerful and efficient Pratt & Whitney engines.  No lip gloss found there.  The other half are 777-200ER models that would at first glance appear to be more modern intercontinental aircraft.  They aren’t, really.  They’re what Boeing originally referred to as “B” market 777s and, once again, they are powered by the less reliable and efficient Pratt & Whitney PW4000 series engines.  I would point out that every other operator of this aircraft in the US is using the more powerful and efficient Rolls Royce Trent or GE90 engines (American Airlines, Delta Airlines and Continental Airlines.)

 

Their 767 fleet, a large one comprised of 767-300ER models, shows the same flaws as their 777 fleet.  While some were built as recently as 2001, they are all powered, once again, by the less fuel efficient Pratt & Whitney engines.  I’m sure a theme is beginning to reveal itself here. 

 

The same also remains true for their 757 fleet in that they are powered by the lesser Pratt & Whitney engines while other airlines are utilizing the real rocket of that type, the Rolls Royce RB211 powered 757 that, with winglets, is capable of ETOPS trans-atlantic operations.

 

Ignoring the soon to be gone 737 fleet (which is old and dingy but not powered by Pratt & Whitney for once), the remaining aircraft are various Airbus A320 types.  While they are not old by airline standard, most are more than 10 years old and some are approaching 15 year of age now. 

 

An old airplane is not an unsafe one but, in United’s case, it is an uncomfortable one.  While other airlines have paid attention to maintenance, comfort and even tuning engines, United has spent its time navigating bankruptcy and its management team has bet their golden parachutes on a merger.  With no other really suitable partners, they are now faced with operating an airline that by most standards, is not competitive.  What’s worse, they have lost 2 years time that could have been spent executing a service plan that might work.

 

If the cost pressures airlines are facing continue for another year, they (United) will be faced with another potential bankruptcy and, this time, it should be a liquidation.  There is no argument for this airline continuing its operations under the present regime nor is there an argument for it continuing to operate simply to support air transportation in the United States or abroad.  There are plenty of air carriers that can take up the slack and operate more coherently than United.   In fact, the only part of United ceasingly to exist that I find distasteful is that it potentially offers American Airlines an even greater lock on Chicago’s O’Hare airport.  Since I experience that kind of fortress here in the DFW area, I know just how expensive that can be for a consumer.

 

Successful airlines share a few qualities that I’ve noticed over the years.  They generally possess a young, fuel efficient and harmonized fleet.  They buy the airplanes configured for performance on a variety of routes.  They have leadership rather than just executive management.  They focus on a clean, comfortable flight experienced that is defined by the service provided by its employees.  Such an airline also carefully watches its money and nurtures its finances to avoid running cash short on the wrong day.  It takes care of its employees not by offering the best salaries but by offering a living wage, a hospitable workplace and with fair treatment in both hard times and good.

 

That is the antithesis of United Airlines and, so, they go on the Death Watch.

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The Dallas Morning News reported that American Airlines will be both accelerating 737 deliveries as well as taking up new orders for the Boeing product.

 

As they replace MD-80 aircraft (The Boeing 737-800 is as much as 20% to 25% more fuel efficient than the equivalent MD-82/83), your chances of a middle seat go from 1 in 5 to 1 in 3.  That said, I still find the prospect of flying newer 737s more attractive than the alternative.

 

I remain completely puzzled that American Airlines and United Airlines have not ordered 787 aircraft.  The 787 fits into their fleet and routes very well and offers just that kind of gain in fuel and maintenance efficiency that both airlines desperately need.  Currently, only Northwest Airlines and Continental Airlines have the B787 on order among the legacy carriers although US Airways does have some A350 aircraft ordered.  Indeed, the A350 ordered by US Airways seems a bit too large for their needs even when the purchase is justified with the cross-cockpit qualifications that the Airbus product offers with US Airways existing A320/A330 products.

 

The new DeltaNorthWest Airlines will have Northwest’s B787 orders and will continue to take deliveries on the B777-200LR it already has ordered.  Those two aircraft come very close to each other in performance and seat-mile costs in the ultra-long haul market but the 777 has the advantage when it comes to cargo-carrying capabilities.

 

I cannot believe that for the foreseeable future, there will be no true 757/767 replacement and it is even more difficult to believe that airlines continue to make plans to retain most of those aircraft for the foreseeable future.  Both the 757 and 767 have AviationPartnersBoeing winglet programs in place now resulting in fuel efficiency gains as much as 6% on the 767 but they still remain older aircraft with ever increasing maintenance needs.

 

 

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The pilots of both Delta and NorthWest Airlines have approved a new joint collective bargaining agreement according to CNN.  This is likely the biggest obstacle, labor-wise, to this merger although I do think that there is potential trouble when it comes to the flight attendants of each airline.

 

You see, Delta’s flight attendants are not unionized but they do enjoy some of the best pay, schedules and working conditions of any of the legacy airlines.  NorthWest flight attendants, however, are highly unionized and have not traditionally been very management friendly.  No doubt, some of that enmity is earned.  From time to time, there is a movement to unionize Delta FAs but it always results in a no vote with only about 1/3 of their FA’s ever voting for a union.

 

In this new matchup, it is quite likely that Northwest flight attendants will move to organize under the new company structure immediately and they themeslves have a physical majority over the total number of Delta flight attendants.  See where this is going? 

 

Delta, particularly the current leadership, needs to go to great lengths to try to head off that move for two reasons:  First, they just gave a very handsome deal to the pilots and flight attendants are going to want to share in that wealth.  Second, they currently enjoy unprecedented flexibility that allows them to work much more closely with the flight attendants on things like scheduling and other work rules.  That flexibility rewards both parties presently but a pro-union/anti-management organization will cut deeply into Delta’s ability to maneuver in today’s business climate.

I don’t hold out much hope for Delta though.

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The Milwaukee Journal Sentinel has this story today.

 

Northwest Airlines has disclosed that it has written off its $213 million investment in the partnership with TPG Capital (Texas Pacific Group) that owns Midwest Airlines. Not only does it reflect Northwest’s view on the survival of Midwest Airlines, such a move also likely influences other investors views of both Midwest and the airline industry.

 

Texas Pacific Group is not in the habit of investing in companies and letting them fail but without new leadership and a new strategy for attracting traffic, Midwest has a very poor outlook. TPG does have leadership that is famliar with the airline industry such as David Bonderman (founder) who acquired Continental Airlines in 1993 and who was instrumental in bringing Gordon Bethune into the company from Boeing (trivia: Gordon Bethune worked for Braniff as VP of Maintenance at the same time my father was EVP of Marketing.)

 

However, at this point TPG would have to look seriously at acquiring another airline and merging it with Midwest. That would difficult given Midwest’s fleet (Boeing 717 and now grounded MD-80), its hubs (Milwaukee and Kansas City) and its expensive labor force (as much as 40% more expensive than industry average.)

 

Midwest has been unable to define itself as either a premium service or low cost airline and its struggle to be all things to all people is bleeding it of cash and opportunity. It would have been much better off merging with Airtran when that airline began making offers in December of 2006. Airtran already operates a large fleet of Boeing 717s and Boeing 737 aircraft and could have brought more long haul routes to Milwaukee and increased traffic at Kansas City as well. Even Midwests strategy of Signature and Saver service (effectively a 4 abreast business class and 5 abreast coach service) mates very naturally to AirTran’s own service product.  In fact, it continues to defeat me why Midwest so ardently defended against the merger in favor of TPG and Northwest except that, perhaps, the senior executive staff saw a chance to remain in power.

 

At present, there are no other airlines that make for an attractive partner with Midwest except AirTran and AirTran is now expanding its presence at Milwaukee with both short and long haul flights on its own.  In short, AirTran doesn’t need Midwest anymore and the only business case for acquiring them is to shrink capacity on Milwaukee routes its either operating or plans to operate.  Indeed, AirTran operates on a business model that fits nicely inside the MKE Airports strategy of being Chicago’s 3rd Airport by offering high value, low cost service to a wide variety of destinations.

 

Fans of Midwest Airlines celebrate its cookies and high quality service.  Unfortunately, what Milwaukee really requires is a low cost airline that connects to a variety of destinations important to Milwaukee businesses. 

 

AirTran has the fuel efficient equipment to operate the soon to be discontinued Midwest routes of MKE-SFO, MKE-SEA, MKE-LAX and MKE-Florida.  In fact, it already operates flights into all of those areas and has the ability to feed far more traffic into those routes than Midwest was able to do with its relatively small network.

 

Look for Midwest to continue to be squeezed by both AirTran and Northwest in the next few months with little space to maneuver.

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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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Driving to work today, I spotted an AA MD-82.  There just isn’t an uglier livery than AA’s.  What happens when the next generation of aircraft are introduced into their fleet?  Will they just paint them all grey and be done with it? 

 

A lot of US Airlines don’t have the greatest livery.  Northwest, in my opinion, is the exception.  I think their colours and design are fantastic.  It will be a shame to see that scheme go. 

 

I like Continental and Delta’s tail designs but I’m just not much for the Bland Fuselage look.

 

 

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The competition that exists between Boeing and Airbus has to be one of the fiercest fights ever seen in commercial aviation.  Among aviation enthusiasts, most are dedicated only to one or the other and just visit an aviation enthusiasts discussion website and you’ll discover debate that is even more heated than what exists between Airbus and Boeing.

 

Family and friends have, from time to time, asked me whose airplanes I like the most.  I probably lean towards Boeing more than anyone but for different reasons than many have.  Before going further, I should say that I think Airbus builds a modern, competitive airliner and is in no way materially inferior.

 

I like Boeing’s approach to an aircraft.  I think they value customer experience just a bit more whereas I think Airbus tends to value an airline just a bit more.  One example is the difference between the 737 and the A320 aircraft.  Both are made for the identitical market and both are modern, fuel efficient jets.  Both have had rough spots over the years and both companies work incredibly hard to sell these jets to all kinds of airlines.

 

I should say that I admire how well Airbus has done at making their aircraft families cross-compatible when it comes to flight crews.  A pilot for an A320 can upgrade to an A330/A340 with a lot less training than a similar upgrade from a B737 to B767/B777.  Airbus makes owning their entire aircraft family highly beneficial *if* their aircraft family can fill all of your missions. 

 

However, I do find the 737 just a hair more comfortable.  I’m a rather tall and big person with longish legs.  Having flown numerous examples of both aircraft, I find the aisle seat experience roughly similar and the window seat experience very different.  The A320’s fuselage is more “circular” and therefore curves inward more at the shoulder to head height of most people.  At the window, my perception is that my head must lean away from the fuselage and that feels uncomfortable.  The 737’s fuselage is more ovoid and that same curve is more gradual and starts more above the passenger than next to him. 

 

The seats should be roughly the same but my perception is, again, different.  This simply may be a function of what US airlnes are using for a seat on the Airbus vs the Boeing.  My perception is that the A320 class of aircraft typically have a seat that is a touch thinner, a touch harder and therefore a touch less comfortable on flight durations of 2+ hours.  I have felt it on America West aircraft, US Air aircraft, United Airlines aircraft and Northwest Airlines aircraft.

 

I once had a chance to fly from PDX (Portland) to DFW (Dallas / Fort Worth)  via DEN(Denver).  My flight from PDX to DEN was on a United Airlines A320 that appeared to be older but not “old”.  Within 1 hour, I found myself fidgeting and since I was in Economy Plus next to a window, I expected to feel more comfortable.  I didn’t.  The next segment was on a United Airlines 757 (not a 737 but it does have the same fuselage dimensions and uses the same seats) in plain old Economy rather than Economy Plus.  I was simply more comfortable.  The window seat felt more accomodating and I was finally able to relax enough to nap despite less legroom. 

 

Each aircraft manufacturer tries hard to find the right niche for aircraft and I would argue that as a result of this competition, they actually are more complimentary these days than directly competitive.  An airline could be well served by both Airbus and Boeing without sacrificing efficiency. 

 

If I were to pick a fleet for the upcoming Delta / Northwest merger, I would center on using the 737 family for domestic service (using a combination of 737-700 and 737-800 aircraft, the 767 (or 787-3)  for domestic transcontinental and Hawaii service, the A330 for trans-atlantic (Europe and Africa) and South American service, the 787 for South American / Southeast Asia and trans-pacific service and the 777-200LR and 777-300ER for long haul, high density international traffic from hubs like ATL (Atlanta), MSP (Minneapolis / St. Paul), DTW (Detroit), JFK (New York City) and LAX (Los Angeles). 

 

It’s hard to say where the new Airbus A350-XWB will fit in “mission-wise” when it comes to such an airline.  While it’s passenger economies may be a tad better than the 777, it won’t haul nearly as much cargo.   At present, it cannot quite adequately fill the 777 mission role and it might just be a tad too big to compete directly with a 787-9/10 either. 

 

One thing I admire about Boeing is that they tend to “right size” their aircraft for various markets.  Often people directly compare Boeing and Airbus aircraft on the criteria that one aircraft can carry more people on the same mission than another.  Occasionally, that’s valid.  More often, not.

 

An airline needs aircraft that “fit” the passenger and cargo demand of various routes.  Boeing has 40 years of experience helping airlines plan their fleet on these needs and does it well.  The 787 was never intended to be a 767 or 777 replacement.  It was developed to fit an emerging demand that really fell in between those two aircraft. 

 

The next replacement for the 737/757 series will fall somewhere new as well and probably will not fill a need below the 737-700 and probably will not fill a role that exceeds the 757-300.  That’s a 2 class aircraft that will probably have a family range accomodating from 150 passengers to 220 passengers.  Real aircraft range will probably include transcontinental capability for all variants at about 3500 to 4000 nm (nautical mile) max range.  Airbus will likely target a similar set of criteria with the next generation aircraft.

 

The discriminators in the next battle between Airbus and Boeing will be things like the best operating efficiency, dispatch rates and passenger comfort.   I would give the edge to Boeing when it comes to efficiency and dispatch rates and it is anyone’s guess on passenger comfort.  I’m certain that both companies will sell an amazing amount of the next generation single aisle aircraft and I’m equally certain that airlines will praise both.

 

 

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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.

 

 

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