Since Virgin America began operations, I’ve been watching for something sensible to happen.  There have been a few developments that make sense. 

 

In addition to VA’s initial trans-continental routes, they began to add some West Coast service to places such as San Diego, Las Vegas and Seattle.  This let me increase aircraft utilization since those routes from San Francisco and Los Angeles weren’t 6+ hours but, rather, 2 hour (or less) hops.  And having a bit of network to feed into those trans-con flights made sense too. 

 

But this put them into competition with a few very well established airlines as well.  United, Southwest, jetBlue and Alaska Airlines all operate on the West Coast very effectively and on the same routes. 

 

Alaska Airlines, a legacy airline with a very good full service product started to jump on the anti-VA bandwagon and issued a number of objections to their “US Owned” status to the DOT.  Most likely because VA had a product that competed very well against their full service business class product and that was a major source of revenue.   Alaska Airlines had a lot to lose on some of those routes in particular.  Strangely, United remained pretty quiet and probably because their frequent flier program kept their business customer pretty loyal.

 

Speaking of frequent flier programs, that was another area that Virgin America was a bit lax in and that kind of surprised me too.  They had 2 extra years to develop a strong program and have the infrastructure in place to support it.  It was something that, in my mind, would have made sense since the business customer likes such programs and they had a good trans-continental service product to attract those people.  Instead, it was rolled out a tad late and still lacks much of a partnership with anyone. 

 

Although VA positions itself as a low cost carrier, it really offers a 2 class service product that is comparable to any legacy airline and, in many cases, it is a service product that is much better. 

 

Aircraft are equipped with a two class cabin (first and coach) called, oddly enough, First Class and Main Cabin.  There is a Main Cabin Select product but that’s really access to Main Cabin seats that have a bit more legroom (exit aisles and bulkhead seats) with some of the First Class service product (meals, beverages and premium tv channels are free).  It’s an economy plus plus or semi-business class product. 

 

I believe all airlines could stand to offer more service products through their cabins and this was an area that I thought VA was kind of smart in.  I still think a lot of airlines could stand to differentiate even more but I liked what VA had there.   It was more “business” than “coach” than a lot of airlines’ economy plus products and even competed very well against a similar offering from jetBlue.

 

jetBlue really took things to aother level with their LiveTV offering on their aircraft.  Virgin America took it to yet another level by offering a full entertainment system (including TV) that even allowed shopping and the ability to order food and drink from a menu, thus eliminating the traditional beverage and meal cart services.   The system, called Red, worked pretty well although some reviews had it not always working or in need or a re-boot from time to time.  Such systems do take time to work out bugs and time for staff to learn to work with. 

 

VA also got aggressive and was the first US airline to offer GoGo inflight Wifi on its aircraft.  With accomodations like power ports at each seat and the existing entertainment offerings, this was likely adding whipped cream to the ice cream.  All of their aircraft are equipped with it and Virgin says they’re doing OK with it.  Probably more so than some airlines. 

 

All of these offerings cost a lot of money to both purchase and maintain and VA continued to see red ink as time passed by.  (It is difficult to get a very good picture of VA’s finances because it continues to be a private company instead of a public corporation.)   At one point, rumors that its US investors wanted out spread around and Alaska Airlines filed yet another objection to VA with the DOT who, recently, yet again ruled that VA was more than sufficiently US controlled.  (Read THISfor more info.)   CEO David Cush did continue to speak publicly that their revenues were improving monthly and that he did think VA was edging closer to an operating profit.

 

In fact, VA did manage to eek out a small third quarter operating profit as reported in December which, frankly, surprised a lot of people.  I know I was.  It was a 59% improvement (according to VA) over the previous year’s third quarter and they managed to make it happen in what has been arguably one of the worst economic climates for airlines ever.  This got my attention.  Frankly, the climate hasn’t been good for VA since they started to improvement during those times is impressive, to me anyway.

 

Virgin America is also a bit unusual for the airline industry in that it has a number of women in senior leadership positions.  Their SVP for Inflight Services, VP – Marketing, SVP-CFO and VP – Planning & Sales are all women. 

 

Also curious is the rather interesting Canadian influence in their leadership.  The Chairman of Virgin America is Canadian Don Carty, former Chairmen and CEO of American Airlines.    Frances Fiorello, SVP – Inflight Services has had a long career with Candian airlines such as Canadian Pacific, Canadien Airlines and Air Canada.   Bob Weatherly, SVP of Flight Operations, has a similar Canadian history. 

 

And then there is the American Airlines connection which kind of puzzles me at times.  Don Carty, David Cush, Diana Walke,  and Ross Bonanno each have a history with AA.  Virtually all their senior leadership has extensive with experience with previous airlines.  In fact, after looking into their biographies, it made me realize just how VA might be managing to make it despite all predictions against them. 

 

It’s a strong team with a strong background in successful airlines that, for the most part, have reputations for good cost control and good service products. 

 

Virgin America has been on my death watch for at least a year.  Now, a lot of my inclination towards that has been based on routes.  Yes, they’ve grown and, yes, they’ve added routes.  But they don’t seem to want to really compete except where there is really low hanging fruit against their service product. 

 

They recently opened up routes between, of all places, Fort Lauderdale and Los Angeles and San Francisco.  Obviously they saw some opportunity there but I don’t get what the attraction is in adding those two routes before a lot of other opportunities.

 

VA doesn’t have an East Coast network at all.  They have destinations in NYC, Boston and Washington, D.C. (in addition to the Fort Lauderdale routes) and that’s OK.  Competing on the East Coast is brutal and those three main destinations have enough originating traffic in them that they don’t necessarily need network traffic feeding in on the West Coast yet.

 

David Cush has, at times, talked of adding routes from the West Coast to Chicago but he wants O’Hare airport and claims there are no gates to be had.  This isn’t exactly true.  There are gates but VA doesn’t want to pay the price to get entry to them.   There were, at one point, gates available at Chicago’s Midway airport but VA doesn’t like that idea either. 

 

More recently, Mr. Cush dropped hints of adding a route possibly to Austin or Dallas / Fort Worth.  Most agree that Austin might happen (there is a strong tech connection between Austin and the West Coast) but doubt the DFW possibility. 

 

You see, my problem is that VA seems to be ignoring the possibities in the middle of the country.  With their service product, they could compete very well against AA on routes between DFW and San Diego and Los Angeles.  They could compete well with AA and United on routes between Chicago and Los Angeles and San Francisco.   There is a strong connection between Denver and Los Angeles and despite the back alley fight going on in Denver, it has possibilities. 

 

They’ve by-passed Portland, Oregon which has strong ties to both LA, Seattle and San Francisco and Alaska Airlines, who owns a lot of that traffic has already proven to be susceptible to VA’s service product.

 

Indeed, if you look at their route map right now, they have every appearance of avoiding any destination that is a real hub for a legacy airline. 

 

I can’t think of a market that is more need of a real competitor in service product to destinations on the West Coast than DFW.   Completely dominated by American Airlines, the service product and prices to West Coast destinations is weak and expensive respectively.  Atlanta could stand a bit of competition on routes to the West Coast too.   The same is true for Miami, Minneapolis / St. Paul, St. Louis, Detroit, Kansas City, Cleveland and maybe even Philadelphia and Baltimore. 

 

It’s always a nice strategy to enter airports where the barriers to entry are easy and cheap when you’re getting started.  But VA is more than 2 years old and clearly has a product that, like jetBlue, can compete against major airlines and win.   In any of the major hubs I”ve named above, they are dominated by one or two airlines on those West Coast routes that are flying old aircraft with little new service product and who have much higher costs than VA.  It isn’t going to get easier to compete with these guys with time. 

 

That’s why a part of me continues to view VA with skepticism.  New airlines don’t win by being afraid to compete.   Airtran and jetBlue are perfect examples of airlines who were willing to go up against major legacy airlines and beat them on both price *and* service.   Airlines who weave and duck from their opponents tend to lose.  Skybus was a great example of that. 

 

There are often moments that are ripe for smaller businesses to make a commitment to going against their major competitors and, if you wait too long, those moments go away and never come back.  I’m starting to sense that Virgin America is beginning to lose those moments. 

 

Would I fly VA?  Sure.  I’d love to enjoy their service product.  However, they fly nowhere I want to travel so it is going to be a long time, if ever, that I get to try them.  Would I suggest them?  Absolutely.  At least for now.  They aren’t going to go bankrupt any time soon.  They’ve managed to get past that infancy stage now and kudos to them.  They offer some fantastic prices on their routes and I doubt anyone would be disappointed by flying them.

Filed under: Airline History, Airline News by ajax
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I tend to ignore Virgin America often even when they do make the news.   I’ve had a lot of trouble figuring out what this airline is supposed to be and even more figuring out whether or not they are really going to succeed. 

 

VA has made some news in the past couple of months, though, and I figured it was time to talk about them. 

 

Virgin America began as a concept annunced by the irrepresible Richard Brandon (founder of Virgin Atlantic and the Virgin Group) and it went through quite a few iterations before it launched.  It changed its announced name from Virgin USA to Virgin America, for instance.  Ownership structure was fiddled with several times to meet US restrictions on foreign ownership of airlines.  Business leaders changed and their original CEO, Fred Reid, was eventually removed to satisfy the DOT and gain permission to launch. 

 

Their approach to finding a home was weird to me and kind of reflected a European viewpoint that led me to believe they weren’t necessarily looking at the US market properly.  After leading a kind of competition to find a home, Virgin America settled on San Francisco as its “operations” home and New York City as its “corporate”  home.   Neither location struct me as particularly wise because NYC and California are expensive places to operate and they’re no more representative of the United States than a lot of other locations.

 

While they went through the start up process, Virgin America faced a lot of criticism from other airlines.  Flatteringly, it was quite a bit more than many startups have received over the years.  On the surface, the objection was always to the perceived foreign ownership of Virgin America.  My own sense was that other US major airlines saw another potential jetBlue starting up and given jetBlue’s success, yeah, it would worry a few airlines. 

 

Strangely, at the end, some of the loudest objections came from Continental Airlines who, from my point of view, had the fewest reasons to fear Virgin America’s competition.  Continental had a strong 2 class operation that was highly favored by businessmen for both its service, comfort and frequent flier program.   From my perspective, American Airlines and United Airlines had the most to fear from this upstart’s trans-continental plans.   Even jetBlue had some reason to be worried since VA’s product most closely competed with jetBlue’s and had the biggest chance of nibbling away at jetBlue’s customers.

 

I think the biggest concern from existing airlines was that, once again, a well financed 2 class airline was entering the market that had low labor costs and brand new efficient aircraft.  Startups always have low costs because the airline industry is based on seniority.  A new airline with all new employees quite naturally has some of the lowest labor costs but that does change over time and it really depends on the airline on whether or not those costs rise dramatically or not. 

 

jetBlue has been able to keep its labor costs relatively low by being pretty good at taking care of their employees, for instance.   By having such low costs, airlines like jetBlue and VA, are able to compete very hard on those trans-continental routes that are many airlines bread and butter. 

 

When VA agreed to remove CEO Fred Reid from the operation after no more than 9 months of operation after the certification was awarded, they had to go find a new CEO.  Now, Fred Reid never had the kind of reputation that I would expect an operation like VA to need or want.  Formerly of Delta, Fred Reid performance at Delta was mixed and he certainly wasn’t a charismatic leader which I thought would help VA quite a lot in the US.  Richard Branson’s kind of bravado has never played nearly as well in the United States as it has elsewhere in the world.

 

My thought was that VA would seek a more personable, charismatic leader who would not only have a strong airline background but who would also be a good public figure for this venture.  VA, apparently, felt otherwise and found their next CEO at American Airlines in the form of David Cush.  

 

Mr. Cush certainly fit the bill when it came to having a strong airline background.  He had 20 years of airline experience in a wide variety of positions and a great education too.  The thing is, Cush did it all at the most conservative of airlines, American Airlines.  Huh?  Yes, Cush had youth going for him and he does present himself rather well but it still didn’t mesh in my mind.

 

I suspect VA’s investors, most particularly its US investors, wanted someone who had a very strong financial background and who understood just how important it was to preserve cash and operate with strong controls in place.  They had, after all, funded VA with more money than had ever been put together for an airline startup in the US when VA began.   He did most recently work as Vice President of Alliances and Chief of Sales for American and this hints at Mr. Cush’s ability to access corporate clients.  With VA’s transcon strategy, this kind of made sense.

 

Virgin was so delayed in getting permission to start up, it leased several of its delivered Airbus A320 aircraft to the late Skybus Airlines.  When they did begin to operate, they were hindered in fully starting up operations because some of those aircraft were occupied until Skybus failed miserably. 

 

But . . . operate they did.  Finally in August of 2007 and fully 2 years delayed, they began flights between San Francisco and NYC and Los Angeles and NYC.  This wasn’t a bad start in that they were connecting major business centers with lots of traffic but it didn’t allow them to really get high utilization of their aircraft and pricing on those routes has always had lots of competitive pressure so they lost lots of money operationally. 

 

Every airline loses lots of money in its first months and years.  Airlines really operates lots of small businesses.  Each route is really its own business and it takes time to grow those routes into profitable operations and it takes varying time to do it for each route.  It is an investment that takes time to go profitable and much more time to provide a good ROI (return on investment.) 

 

VA was off and running and I was still scratching my head.  There were still many parts to this airline that defied rational thought in my opinion.  Tomorrow, more on VA and its service and routes and where it is today.

Filed under: Airline History by ajax
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I don’t spend a lot of time on two aircraft manufacturers who really are the first real potential competitors to Boeing and Airbus in the future.  Embraer and Bombardier. 

 

Let’s take a look at Embraer today.  Embraer, a Brazilian aerospace company, got its start in the 1960’s and entered the commercial aviation world with its EMB 110 Bandeirante (1968) and EMB 120 Brasilia (1983) serving the small commuter turbo-prop market. 

 

These tough aircraft from Brazil managed to serve a need in many US markets and I remember them flying for American Airlines in the 1980’s and 1990’s.  American Airlines used them to fly multi-stop routes from their DFW hub and others such as Delta and United used them similarly from their hubs.

 

It was the ERJ-145 that Embraer brought to market in 1995 that took this company to a new level.   This line of regional jets were the first to combine small size (as few as 30 seats and as many as 50 seats) with modern turbine jet engines to provide a (near) mainline aircraft experience to the small feeder routes of major airlines.   Unfortunately, these aircraft were only economical to operate when jet fuel was inordinately cheap through the 1990’s and early 2000’s. 

 

Embraer knew this and began development on a larger, more capable family of airliners that aren’t quite regional jets and aren’t quite mainliner jets.  These new jets, now referred to as “E-Jets”, are the ERJ-170/190 family and this is where Embraer signaled its willingness to encroach on the territory of Boeing and Airbus. 

 

The E-Jets, introduced in 2002, have a seat capacity ranging from 80 to 120 people in an all coach configuration and, at first glance, that doesn’t seem to quite reach into the 737/A320 territory but its worth another look.  The E-Jets, at least the larger E-190/195, offer similar size and range to the early 737-100/200 and the first DC-9 series aircraft.   This was confirmed when David Neeleman (founder of Morris Air and jetBlue) chose them to start his new airline in Brazil, Azul.   US Airways is now deploying this aircraft on its East Coast shuttle routes. 

 

These aircraft offer something that neither the 737, A320 or DC-9 never offered:  no middle seats.   Designed for a 2×2 configuration, these aircraft offer a coach experience that really is no different than the current offerings from Boeing and Airbus and, in some cases, really better.   These aircraft are now serving the routes originally serviced by first generation 737’s and DC-9’s. 

 

And what’s next?  Embraer has shown it has the technical expertise to offer a mainline aircraft and if it expects to grow as a company, the next step will find it offering a 737/A320 competitor.  If timing is anything to go by, I would be unsurprised by a new airliner being offered in 5 years or so and quite likely offering the new Pratt & Whitney GTF engine.  

 

With both Boeing and Airbus deferring development on the 737 and A320 series of aircraft for as much as 10 more years, there is an opportunity there for makers such as Embraer and Bombardier since even major US airlines are eager to re-develop their fleets with more fuel efficient aircraft.

 

At some point, both Boeing and Airbus will have to make a few choices.  They can choose to cede the 100 to 140 seat market which is tough to imagine given that this where aircraft are truly mass produced. 

 

They can choose to form a partnership with Embraer and/or Bombardier and co-market a new aircraft under one or the other’s brand names.  Airbus has some ties to Embraer and Bombardier has had contact with Boeing over the years but neither has anything approaching what would be called a close tie.  I think there is some likelihood of this happening and, frankly, I expect that whoever forms ties with Embraer is likely to succeed.  Embraer has a bit more financial strength and a much cheaper labor base to manufacture from than Bombardier (located in union-heavy Canada).

 

The final choice is to go head to head with Embraer and Bombardier.  From a personal viewpoint, I hope that both Boeing and Airbus take this route.  It can mean only better aircraft in the future for everyone.  However, both Boeing and Airbus are currently manufactured in areas with strong union ties (Boeing is reducing this risk with the establishment of an assembly line in South Carolina and Airbus is “experimenting” with an assembly line in China for low production volumes) and with a relatively expensive supplier base. 

 

There is no doubt that Embraer offers a great product and certainly possesses the ability to take it to yet another level.  They are poised to take advantage of another family of aircraft that could be made in a way that type ratings between the E-Jets and a new, larger family could be shared.  This would be very attractive to a wide variety of airlines.  

 

Whatever their choice, Embraer is one to watch.

Filed under: Aircraft Development by ajax
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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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What if you have to re-schedule your travel while in the middle of it?  Any regular flier dreads any changes to their flight schedules before leaving on their trip but needing to make a change in the middle of a trip is positively terrifying.

 

But should it be?  Perhaps not.  Legacy airlines are charging exorbitant fees to change flights with some reaching $150 just for the privilege of ringing the airline and asking to return a day later or two days earlier.   On American Airlines (and most legacy airlines are similar), if you change your ticket, you’ll be liable for the new one way fare plus a change fee ($150 in most cases for domestic travel) which, if you bought a non-refundable advance fare, could be exorbitant.    But you do you have options if you are willing to work a bit.

 

Recently, a friend traveled to the Northeastern US for Thanksgiving.  While visiting family, one of his parents was injured and he decided he should stay over a while longer to help out.  Changing his ticket cost him a small fortune and, unfortunately, he didn’t think to look outside the box.   If he had abandoned that ticket and simply shopped for a new ticket on Airtran, jetBlue or even Southwest Airlines, he would have saved hundreds of dollars.  Ironically, there were sudden last minute fare sales for immediate travel instituted on the very day he chose re-ticket.  

 

Flexibility, as always, is the key.  Yes, you may have to accept 1 or more connections or even explore ticketing on two different airlines but the savings is often far greater than what your time is worth.  If you feel intimdated by having to do battle with the airlines or pressured by the need to resolve the issue quickly, I highly recommend trying the Cranky Concierge service that I’ve blogged about HERE.    Airline geeks are creative thinkers and the fee you’ll pay Cranky for thinking for you will be paid for in huge savings in most cases.    What could take you 3 or 4 hours to explore (even if you’re relatively sophisticated at searching for airline fares) can be solved by someone like him in a matter of an hour or less in many cases.

Filed under: Travel Hints 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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The Dallas Morning News is reporting that American Airlines has decided to close its operations at Dallas’ Love Field airport . . . again.   American has tried a number of different strategies at the airport including the most recent exercise of flying EMB-145 jets from DAL to ORD (Chicago).   By all reports, this latest strategy actually was successful but in a case of winning the battle and losing the war, those flights will now go away.

 

Why did they go away if successful?  Because they were only successful in a very small way.  AA never had much luck in operating any other flights from Dallas to other destinations including Austin, Kansas City or St. Louis.  They needed more than 6 successful round trip flights a day to make operating at Love Field a worthwhile enterprise.

 

Notably, AA has apparently signed a new long term lease that keeps keeps their 2 gates at Love Field in their hands.  Why sign a long term lease and then leave?  Because the brokered dissolution of the Wright Amendment gives 16 gates to Southwest and 2 each to American Airlines and Continental.  If AA were to give up those 2 gates, they would likely be snatched up by another low fare carrier to be used to further infiltrate AA’s routes.  My guess is that it is a blocking exercise.  Besides, they are valuable property and may offer AA the opportunity to sub-lease them to other airlines if they don’t use them.

 

Why didn’t AA stick with the Chicago flights?  Because while those flights were successful, they could only be flown with aircraft that have 56 seats or less (for now.)  That means that the only growth available was more frequency.  Airlines such as AA really can make much more profit by flying more capacity on such a route.  In other words, they could do much better if they were able to use MD-82 or Boeing 737-800 aircraft on the route.  They won’t be able to until 2014.

 

I would, however, speculate that AA could have made more money on this route using reconfigured CRJ-700 aircraft from American Eagle.  These aircraft could have been reconfigured with a business class and economy section down to 56 seats and probably flown much more profitably.  However, these aircraft probably don’t lend themselves to being reconfigured in such a way.  How do you efficiently place business class seating in an aircraft that is already limited to 2+2 seating in economy?

 

American is doing what is good for American.  However, what would be better for Dallas is another airline taking over and using those gates for a good purpose.  Yes, even Southwest Airlines could use a little competition these days.  Imagine jetBlue offering Austin / Dallas flights that connect back to the East coast through Austin.  Or how about Airtran connecting through Little Rock or Houston?

 

In the end, Love Field will not see much if any real competition develop.  Not while 3 very successful and very large airlines control all the gates there.

Filed under: Airline News, Airports by ajax
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As I suspected, the new focus on airline safety is all about bird strikes.  The Middle Seat Terminal Blog (a Wall Street Journal blog) has THIS post.  After the US Airways Flight 1549 ditching, I suspected that there would be lots of chatter about preventing bird strikes and there has been.

 

Some of this chatter is about putting screens in front of the engines, for instance.  No one stops to think just how strong and well engineered a screen would have to be to withstand the force of an 8 pound bird and well as how fine it would have to be to keep debris from entering the engine.  Nor does anyone consider that by putting such a screen in front of an engine, you are effectively disrupting the air flow into the engine and that will, at the least, reduce engine efficiency if not keep it from operating as designed.

 

Consider a goose that weighs about 4 kilograms being struck by an aircraft going about 250mph.  That is just about the exact scenario for Flight 1549.  Such an impact represents over 27,000 joules of energy.   In very rough terms, that is enough energy to move more than 3 tons of weight about 1 yard.  By the time you engineer a screen for that jet engine, you need a better, more powerful jet engine to carry all that extra weight. 

 

The truth is that bird strikes are not uncommon and almost always result in non-event.  In fact, engines and other parts of aircraft structure have to be engineered to withstand most bird strikes likely to be encountered.  Jet engine makers have to prove their engine can take a strike and not furiously disassemble itself and damage a wing or fuselage.  Cockpit windows have to be able to take a punch too. 

 

The truth is that commercial aircraft handle these events very well and what happened to that Airbus A320 was actually a statistical anomaly.  It is so rare for a commercial jet to encounter birds and lose both engines to the point that the aircraft cannot return to an airport that in my research, I cannot find another instance.  Oh, it may well have happened but it is exceedingly rare. 

 

Put another way, you have a far greater likelihood of experiencing an “incident” from turbulence than you do from a bird strike.  That doesn’t keep you from flying does it?   From my perspective, this incident proves that nothing more does need to be done to mitigate problems from bird strikes. 

 

First, it is rare for them to disable an engine but it does happen.  A jetBlue Airbus encountered a bird strike this past weekend and rejected its take off.  After returning to the terminal, evidence of a bird strike was found.  Any other week, this would not have made national news.  For birds to disable both engines is virtually unheard of and that is a good thing.  Any modern two-engine airliner is capable of taking off, losing an engine and maintaining climb power to go around and return to an airport. 

 

Airports do their part to prevent this problem.  Unfortunately, airports happen to be places that attract birds because of the wide, open areas that are flat and which generally contain a lot of what birds want.  Airports scare them away and do their best to make flight areas a very unattractive place for them to flock to.  And they are very successful at that in general. 

 

One of the other points that I think escapes what happened to US Airways is the altitude that they encountered these birds at.  It was at about 3000′ above the ground and how common do you think it is to find birds at that altitude?  Very rare.

 

The traveling public is quite safe when it comes to bird strikes.  This was an anomaly and you are just only now hearing about this “problem” because it just rarely happens to ever truly affect a flight. 

Filed under: Airline News, Airports, Trivia by ajax
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The Cranky Flier made this post to his blog last week. In short, CF decried a woman’s New York Times Op-Ed on the demise of the glory days of travel which she apparently experienced as a flight attendant for TWA.   The Cranky Flier reckons that the changes that deregulation has brought on are what has made air travel affordable and to bring back the high service given in the 50’s, 60’s and early 70’s would deny that access to most of us.   Quite honestly, I do agree with him but I think a point was missed in Ann Hood’s Op Ed as well.

 

I’m pretty sure that Ms. Hood was decrying the loss of the great meals, comforting flight attendants and more correct behaviour but I think what prompted her Op Ed was actually a perceived lack of service on *any* level by airlines today.  I don’t think anyone realistically expects air travel to include 3 choices of meals, pillows and blankets and free cocktails anymore.  However, what causes people to continue to get upset is the generally poor nature of any service provided by most airlines.

 

I experienced that service as an airline brat from the late 1960’s to the early 1980’s and it really was pretty remarkable in many respects.  However, I don’t miss the Chateau Briand on Braniff flights between Dallas and Portland and I really don’t seem to miss the first class seat or the pillows or drinks.  OK, I do miss the seats but that is because I’m a 6’2″ man weighing 260lbs with long legs. 

 

What drives this perceived lack of service is airlines not keeping promises made when you buy a ticket.  Those promises are outlined by airline advertising which is quite good at showing a relaxing customer on an airplane enjoying a drink as he or she flies to their destination with the expectation that the airplane will be kept at comfortable temperature and will arrive on time.

 

Let’s look at what an airline passenger might enjoy from the time they decide to book a flight to the time they arrive back home from their trip.   First, they must book their flight online.  Most people not only don’t mind this, they prefer it these days.  However, none of us are amused when we attempt to book a flight online only to find the website overloaded from a fare sale or network disruption caused by weather.   If the customer tries to phone the airline to book they’ll be faced with long phone queues, surly reservations agents and the threat that their airline ticket is now going to cost them a bit more for booking via phone.

 

The customer is gratified at being able to check in early through the web but when they arrive at the airport they discover that checking in their suitcase requires them to stand in another long line in order that they might essentially check-in a second time so they can check a bag.  Even if they only have one bag, they’ll have to pay a fee to check it unless they are a road warrior with some sort of privileged status with the airlines’ frequent flier clubs.   Then they get to stand in yet another line while watching those same privileged fliers go through an express line with the TSA. 

 

Once at the gate, they’ll have to work to find an open seat to sit in while waiting for boarding call because aircraft are flying much more full these days and most gates at most airports aren’t designed to accommodate the loads that many airlines serve on their narrowbody aircraft.   At the boarding call, they get to watch those same privileged fliers board first onto the aircraft (even if they aren’t flying first class that day with their free upgrades they still get to board first) and then wait for their group to be called while some fellow passengers cheat and just board early anyway.  Since most customer service agents at the gate are unwilling to enforce the rules in many cases, these cheaters get away with that move.

 

If the passenger has a boarding call in the last 1 or 2 groups, they get to discover that all the other passengers have apparently carried their life’s possessions with them and occupied all the overhead luggage space.  If they say anything about the lack of space, some flight attendant will inform them that they might have to gate check their bag or put it under the seat in front of them.  Putting a bag under the seat in front of you hasn’t really been possible for adults since the early 80’s when airlines reduced seat pitch in coach from an accommodating 34 to 38 inches of space down to a tight 30 to 32 inches of space.   So, they put their coat in a crammed overhead bin and hand over their luggage to a surly flight attendant who is annoyed that they now have to catch the attention of ground personnel so the bag can be loaded in the luggage compartment.

 

Once seated, the passenger waits and waits for departure from the gate which is delayed a few minutes.  Finally after watching their watch for an additional 13 minutes, someone hurriedly closes the door and the pilots get a pushback.  Technically, the flight has left on time at this point.  Only the pushback results in them taxiiing slowly towards the runway where they run into a traffic jam of aircraft waiting to take off because most airports are woefully lacking in the infrastructure to accomodate the number of flights trying to depart at the same time. 

 

After another delay of 20 minutes, the aircraft takes off.  As it levels off, the surly flight attendants go to work immediately to serve their one beverage service during the 2 hour flight.  Now, the passenger knows that soft drinks (and virtually any other beverage) now costs money so they ask for water when it is their turn and find a surly flight attendant telling them that will be $3 for the half litre bottle of water they offer.   The passengers declines the water and tries to recline their seat only to discover that while the seat may recline, it reclines right into the knees of the passenger behind them who objects loudly. 

 

Upon arrival at their destination, the passenger collects their things and moves slowly towards the door.  In some cases, they now must wait on the airbridge for their gate checked luggage to be brought up to them and in other instances they must now trudge off to find the baggage carousel to collect their things.  Because these aircraft are flying so full, this amounts to another delay of 20 minutes or more. 

 

Once they have their baggage, they make their way to the curbside and take out their cell phone to call the person picking them up to tell them they are at the curbside now.  They have to do this because security no longer allows anyone inside the terminal and the airport management is now charging $7 to park in the parking structure for less than an hour to pick up their party.  

 

Go through that kind of experience each way and it is no wonder that passengers are decrying service from airlines left and right.  If you only experienced half of what I’ve described just now, you’ll loathe and hate the airline you just flew.  Not because you weren’t served a 3 course meal but because the airline who implicitly promised you a safe, relatively pleasant and on time experience didn’t even really pretend to try to deliver that promise. 

 

What people want is for an airline to be honest in what they’ll provide and to honestly deliver it with the possible exception of extraordinary circumstances.  Oh, there are a few airlines who do deliver on such things and they quite rightly also make a profit.  Southwest, jetBlue and Continental all come to mind as airlines that really do delivery almost every time.  However, for much of the US traveling public, those three airlines aren’t an option nearly as often as they would like. 

 

Indeed, the situation I just described is almost precisely what I experienced flying Airtran last year from Dallas to New York City.   It’s disappointing at the least and offensive in most respects.   Did I like the ticket price?  Sure.  But if you accurately described the more likely service scenario and then asked if I wanted to pay $50 more to just get where I wanted to go without that scene playing out, I’d happily dive into my wallet and hand over the cash.  

 

The problem isn’t that we’re addicted to the lowest fares possible.  We’re not.  We, the passengers, are too stupid to realize that the airlines aren’t really going to deliver on those implicit promises.  Like the co-dependent wife who keeps taking back her alcoholic husband, we keep going back to the airlines and expecting a different experience.  The truth is, if we would examine our last service experiences with various airlines and seek a different choice until we found an airline that treated us well, airlines would pay attention. 

 

Why?  Because it quite literally costs nothing extra to deliver what an airline generally promises today.  jetBlue, in particular, gets that concept and that is the biggest reason why they have succeeded flying from JFK airport in spite of all the known obstacles to flying from that airport.  So does Continental as they have huge hubs at weather delayed airports too but they understand that giving the customer the implicitly promised service leads to greater success on their part.  Southwest promises less service than either of those two airlines but has some of the highest customer satisfaction of any airline because they DO DELIVER ON WHAT THEY DO PROMISE. 

 

It isn’t the glory days of service that we miss.  It’s the constant disappointment we experience on airlines today that causes us to lament a lack of service.  It simply doesn’t exist for most passengers.  We are treated better, on average, at an inexpensive restaurant where we spend about $9 for for a meal than we are on an airline where we spend $200 or more for a flight.  Most airlines’ attitude is to chastise the passenger for complaining.  That’s the motivator for the glory days.   In the glory days, airlines didn’t act like you should be grateful just to have a seat on their aircraft.  They acted grateful that you chose them to make you trip on.

Filed under: Airline Service, Deregulation by ajax
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