Well, Mexico’s low cost carrier, Interjet, has just ordered 15 of the long range Superjet 100 with options for 5 more. This really is a big deal for Superjet as I believe this is their first Western Hemisphere order.
Watching Mexicana’s meltdown last summer was painful for any airline watcher and, at the same time, one more example of just how much the business has changed and just how much labor groups among airlines aren’t seeing the paradigm shift in the business.
Now a new group is trying to re-launch Mexicana and this seems pretty unwise to me. In the short time Mexicana has been gone, the void it left has been filled by both domestic players (Aeromexico, Volaris, Viva Aerobus and Interjet) as well as foreign carriers from the United States.
If anything, it shows that there was an excess of capacity in the marketplace and there may even still be a bit of that today. Mexico’s domestic market decreased by just 1% year over year measured last October and that is with a world recession still very much in place.
No, it’s best that that airline stay away. The last thing Mexico’s domestic market needs is a revived Mexicana under any terms. It’s sad to see them leave but it’s best for the airline industry there.
If anything, it’s emblematic of what we have not done in this country: namely allow a legacy carrier to fail. It wouldn’t have collapsed our air system and it wouldn’t have even resulted in massively higher air fares or a massive disruption in travel. It would have been destructive to the labor working at that airline but I honestly believe that would have recovered much better in the long run too.
It’s been a long time since we allowed a trunk airline to fail permanently and, yet, I think it would have been better than the consolidation we’ve permitted that has resulted in SuperLegacy airlines that are carving larger chunks of the US off for themselves.
The best thing that could happen for Mexico’s aviation industry is a reinvestment in its infrastructure and encouraging its newer players to avoid the mistakes made with both Mexicana and Aeromexico.
I think just about everyone was at least a little surprised at the announcement of the QANTAS flight between DFW and Brisbane, Australia. It was a subject that would pop up on the radar now and then but generally dismissed with skepticism of it ever happening. Particularly with the equipment that QANTAS had for making the flight, namely the 747-400ER.
Flights between the United States and Australia have been the domain of west coast cities such as Los Angeles and San Francisco and the primary equipment has been the 747-400. The aircraft available to make such a flight has already changed and is due to change a bit more in the future. The 747 got used more because of its range and ability to haul a passenger load with a strong load of cargo. Generally, long flights like that work best if there is enough demand for a 747 because seat costs go down.
Now the 777-300 is plying trans-Atlantic routes between the US and Australia and soon will be on routes between the US and New Zealand. It’s a good aircraft for the trip because of the 777’s ability to fly it non-stop, carry a load of cargo and a fairly large complement of passengers. We’ll see these West Coast to Down Under flights fracture a bit more in the future when the 787-8/9 come online with airlines.
So why the 747 and DFW? Well, it’s notable that SFO is losing its flight with QANTAS but that makes sense now. San Francisco is the domain of United, not American Airlines and QANTAS is partners with AA via Oneworld. Los Angeles remains and it should remain as a Western US departure point between for Oneworld.
Until now, Oneworld has had to feed all its traffic from all over the United States to either Los Angeles or San Francisco and while LA is a Oneworld focus city, all other Oneworld focus cities are east of the Rocky Mountains. They are Dallas/Fort Worth, Chicago, New York and Miami. In that group, there was only one city that made sense with the aircraft available today: DFW.
The other thing that has changed is the new anti-trust immune cooperative agreements that are forming in Oneworld. First there is the trans-Atlantic Oneworld partnerships and second is the trans-Pacific(Japan) Oneworld partnership. Next is logically AA/QANTAS.
With DFW and Los Angeles as that “hub”, Oneworld can feed traffic to DFW from points east of the Rocky Mountains and from points in Mexico, Central America and South America all to DFW. Yes, AA can feed that 747 nicely. And if they do it well enough, you can bet on seeing an Airbus A380 being switched into that route.
DFW gets a nice boost from all of this as well. It’s already started to transition back into a more “international” airport than it has bee in some time. British Airways is now using a 747 on one of its flights to DFW and AA is using more 777s for its flights to Europe. It will continue to grow as a Oneworld “hub” both because of its good location (not nearly as affected by weather as other potential hubs) as well as the availability of room to grow.
I would be completely unsurprised at the addition of another direct route to Tokyo and a direct flight to China in the near future. Currently AA has 2 flights to Japan via 777s and I think we may see one more or, alternatively, we may see JAL start flying one of those flights with its own 777. AA has wanted to fly direct to China from DFW (and it should) but has so far been blocked by its pilots over duty time rules that AA wanted a variance for from the union. The flight they wanted to do ultimately went to Chicago instead. Expect AA to make another run at such a route.
One thing I don’t think we’ll see is a lot of additional routes from Los Angeles to Oneworld destinations. It’s a crowded airport with limited room to grow. Delta/Sky Team has a strong base in Seattle and United/Star Alliance has got strength in San Francisco. Dallas / Fort Worth offers the growth opportunities now with the ability to fly longer range flights using the 787 and 777 and I think we’ll see more and more long haul flights from DFW.
I have to say that I’m very pleased for DFW and I see this as a very good development for American Airlines as well. It’s nice to see opportunities created like this within Oneworld and on AA’s part, too.
It has been reported loudly that Delta is poised to issue an RFP (request for proposal) for as many as 200 jets and this is an order no manufacturer wants to lose. The rumour comes just days after a record breaking Airbus order from IndiGo of India.
At this point, it’s still rumour but this one strikes me as pretty much dead on. Delta has a huge fleet (720 aircraft with about 40 orders in place which include the deferred NWA order for the 787) and quite a few of those aircraft need to be replaced now or in the immediate future.
Delta has the Northwest fleet comprised of the very old DC-9-5o, MD-88, MD-90, 757, 747 and some older Airbus equipment. The Boeing fleet from Delta’s legacy side isn’t quite as old but there are some 757s and 767s in need of replacement as well. Considering the widely varying fleet, it would come as no surprise that an replacement order is due.
Oil prices and future fuel prices will also drive the need for this order sooner than later if Delta’s goal of a consistent operating profit is to be realized.
Pundits think this is Boeing’s to lose and I disagree. Richard Anderson, CEO of Delta, has much more history with Northwest and he is no Airbus hater. This will be an extremely heated competition and I will say that if Boeing were to lose this order or a significant portion of it, that will sting Boeing and its product line for years to come.
The prime driver for selection is going to be based on a number of items. First and foremost, trip costs for aircraft to serve a particular grouping of routes. We’ll see orders for single aisle aircraft to serve what I would call non-transcontinental routes. In today’s world, that would be the Airbus A319 and Boeing 737-700. Having trans-continental capability in the aircraft would be a plus but these aircraft are going to serve the focus cities of the airline with routes stretching out from the cities but not across the country. The mission that the MD-88s, MD-90s, Airbus A319s and Boeing 737-700/800s are serving today.
The A319s are brand new and so are the Boeing 737-700s/800s. This is going to be about replacing the McDonnell Douglas fleet.
Then there is a need for the larger trans-continental capable aircraft that remain single aisle serving longer trunk routes that won’t justify a widebody. Currently, the Airbus A320 and Boeing 757 are serving those routes. The A320’s arrived in early 1990’s and the 757s date from the early 1980s to the late 1980s. The options for replacement here are the Airbus A320/321 and the Boeing 737-800 and 737-900ER. Neither aircraft actually “replaces” a 757 which has great range and great payload. I don’t think the A320s are going anywhere yet so this will probably involve a 757 replacement and they (Delta) may or may not want it to harmonize with their existing A320s.
Then there are the 767s. Some are getting old and some are quite new still. Delta needs an aircraft stretching between what a 757-300 offers and an A330-300 offers. The 787 fits this and the fact that Delta has deferred its legacy NWA order for these makes me think that these aircraft won’t be candidates for replacement.
The 747s are pretty old and frankly I don’t think these we very well cared for either. They need to be replaced and I do think we’ll see orders to do this on these aircraft. None really serve routes that demand 4 engines so I think we’ll see a replacement oriented around 2 engines.
I think it’s anyone’s guess on the single aisle orders. Airbus will fight like crazy to win this order with their A320NEO options and Boeing may well have to announce a 737 replacement at a great price to win it back. Boeing should actually have great incentive to get going on the 737 replacement if Delta is truly interested. With Delta, Southwest and, potentially, Ryanair all wanting a better 737, there is an exceptionally strong business case to get going on this.
If Boeing doesn’t offer a better 737 in this, I think the order goes to Airbus.
As for the 757/767 replacements . . . well, I’d give the edge to Boeing. I think the 787 *is* a good answer for these aircraft. They offer the right amount of extra capacity for growth, long haul capability, extremely high efficiency and flexibility. I do think it possible that an order might be mixed between the A330 and 787 unless Boeing gets off its duff and gets that 787-9 into production. The 787-9 is the A330 killer.
Since I don’t think the A330s are going anywhere, I don’t see much opp0rtunity for Airbus’ A350 in this mix. It’s deliveries are too far off and the A330s just don’t need to be replaced for a long time.
I think Delta’s large widebody strategy is likely going to be a mix of 777-200s and the 777-300ER to replace the 747s. They already have a fleet of 777-200LR with GE engines so I think they’ll order 777-300ERs with GE engines to replace those 747s. It will do everything the 747 will do only more efficiently. I do *not* think the 747-8i will enter into this order. Delta doesn’t need the capacity and the 777-300ER will serve all the routes the 747 is currently serving with no problem. The A350-1000 is far too far off and its ability to perform is simply way too unknown for this to be serious contender at Delta.
I do not think that Bombardier or Embraer will enter into this order at all. They just don’t have a product that meets the needs of an airline like Delta very well at all.
Don’t expect an order announcement for about a year. Delta will let the manufacturers fight it out with best and final offers for quite some time and it will take time itself to do a detailed analysis. But I can’t wait to hear their decision.
I have wondered for some time now why the Sukhoi Superjet 100 hasn’t gotten more attention both in the media as well as from western airlines. This really isn’t your father’s Soviet airliner. It isn’t your father’s regional jet either. This is a regional jet that has gone through design and development and through test with some delays but without too much drama and it’s soon going to fly with an airline. Aeroflot gets to be the first.
Maybe there is stigma from being a Russian design and maybe there is stigma from being an airliner going into service with a Russian airline first. There shouldn’t be. Aeroflot wants just as much efficiency as any other airline in the world.
At first glance, this airliner might be a touch small for the markets it is entering. I’m not sure that’s the case. So far, the Superjet is on target to be about 6% more efficient than the equivalent Embraer and that is no small achievement given that the Embraer E170/190 airliner is pretty new itself. The Sukhoi actually hits a bit of a sweet spot for US airlines in that it can serve as a regional jet (not a regional jet doing mainline long thin routes) and do it with competitive efficiency.
One area that this program has suffered problems is in the engine. The PowerJet SaM146 is a partnership between SNECMA and Saturn NPO. Most of the engine comes from SNECMA who has ample experience in building a well designed engine. However, production problems at the Saturn NPO plant have slowed deliveries. This is not anything that hasn’t been experienced by virtually all engine programs. The real measure is in whether or not they get the problems ironed out and start producing engines that are satisfactorily reliable and in sufficient quantities to meet production demand.
At the least, I think airlines should be taking a strong look at this aircraft. There are a few detractions or unknowns with this airliner. If you’re going to bring an airline type into your fleet, its efficiency is certain a big factor and so is size but there are other components not talked about enough. An airline wants to know that the manufacturer can support the aircraft with maintenance and parts and it wants to know that it can do it where the airline is using that aircraft. I haven’t been able to find out much about what Sukhoi and its partners are willing to provide in this area but it certainly shouldn’t be too difficult to meet those needs on the European continent initially. With Boeing as a consultant on this project, I wonder if Boeing couldn’t be engaged to support the aircraft in the western hemisphere.
Another component is reliability. So far, we know this jet has done pretty well in testing and it was designed to meet all western standards for certification. That does mean both Europe and the United States. But how that aircraft actually performs when in use by an airline day in and day out is still unknown. If it turns out to have a poor dispatch reliability rate, no one in the west will be interested. Sukhoi and its partners get one, perhaps two, chances to prove this airliner’s ability to perform day in and day out.
To persist in the idea that a Russian designed airliner would be inherently wrong to choose is bad. The Russians have been designing and building strong, reliable jet aircraft for nearly as long as the west. They have excellent engineers and aeronautical skills. They do already know how to build a big jet and they are, after all, the only other country with a space program as long and as technically successful as the United States. In short, they do have a great body of aerospace knowledge and skills. It’s an aircraft to watch over the next 2 to 3 years.
It’s an airliner that can actually deliver on its promises and be of real use to a variety of airlines. This stands in stark contrast to those airliners being designed presently in China, the COMAC 919 and ACAC ARJ21.
QANTAS is adding a flight between DFW and Brisbane (with continuing service to Sydney) in May. And I don’t mind saying that I didn’t see this coming. Certainly not a QANTAS 747 flight. This flight will come at the expensive of QANTAS serving SFO and I actually do think that is quite smart.
More on all of the details in another post after I’ve had time to do research on this development.
One thing that has become clear as a result of the conflicts between American Airlines and global distribution systems and online travel agencies: there is, at the least, a need to change the transaction model.
One thing American Airlines is right about is lowering the costs per ticket sold via these systems. In a modern world, the IT infrastructure should provide lower costs now. If the GDS companies want to retain this business, they need to come up with an e-commerce model that works for present day airline needs.
Those needs are accomodating the unbundled services and fees that airlines are now using to enhance revenue as well as upselling customers into better services. The present systems are basically the same old distribution systems that have existed for decades with a web interface on the front.
The airlines would be better served by establishing a standard for others to work from. The requirements for what airlines need today and what they may need tomorrow should be established first and the GDS companies and online travel agencies need to re-think their own business model some too.
But allowing one airline to push out of the system and establish its own standard doesn’t necessarily permit transparency. These companies need that transparency because they do their business on the basis of schedule and price. Their value added is in offering you the best available fare for your schedule and in establishing complicated itineraries.
The transaction costs associated with offering fares/tickets through such a system should be less than $1.00 per ticket if operated under a modern and well designed system. It’s no more a complex purchase than buying something on Ebay.
Airlines have an industry group and they can write these requirements and they should. GDS and OTA companies have a place in this industry as well and they need not fear their imminent demise but only as long as they do move along with the times. It’s 2011 now and systems that date back as far as the 1960’s should be put to bed no matter how much renovation they’ve gone through.
With the announcement of Asiana Airlines purchasing (6) Airbus A380 aircraft, I began to wonder about the success of this aircraft as a whole. So far, it appears that Boeing was right about the demand for very large aircraft although it lost all of that demand (practically speaking) upon the arrival of the A380. My biggest concern about this program is the airlines it is dependent upon.
Just one airline, Emirates, is responsible for 37% of the A380 orders and just one region, the Middle East is responsible for 44 % of all the A380 orders. That is a stunning amount of eggs in one basket for a region that is volatile and largely dependent on wealth generated from one commodity. Think about that, roughly 1 of 3 A380 orders comes from a small handful of airlines who are based in a tiny area that is highly interdependent.
The next largest region responsible for orders, Oceania/India/Southwest Asia, is responsible for 23% of A380 orders with most of those placed by two airlines: QANTAS and Singapore Airlines. Now, I would bet on those two airlines. QANTAS because of their rather unique position in their markets and Singapore because of their ability, day in and day out, to fill their aircraft. But the remaining orders from airlines in that area such as Malaysia Airlines, Thai Airlines and Kingfisher, are suspect at best. I question their ability to use and fill those aircraft regularly and I wonder if some of those orders won’t ultimately be converted to A350 orders with deliveries farther into the future.
Europe accounts for about 20% of the orders and almost all of those airlines do possess the ability to use the aircraft based on their current business. However, their traffic is being impacted more and more by those Middle East airlines who’ve also bought the A380 but who also enjoy dramatically lower costs. In addition, at least two of those airlines were, at least in part, driven to make their orders by their political leaders in Germany and France. Any political influence in orders for such an aircraft bring some risk into the picture. Ultimately, those airlines have to earn a profit from those very expensive assets and filling 500 seats daily is a difficult thing to do day in and day out.
The only region with orders that seem credible is the Far East (China, Korea, etc). Those locations have the numbers to fill those aircraft and their orders are small and cautious, not big and grandiose, at 9% of all A380 orders.
Is it a success? Well, when your order book is so heavily depedent one so few, it doesn’t speak well of your ability to drive future orders and ultimately have a program that at least breaks even. Do you really believe that the Middle East and, in particular, Emirates, can continue to drive that order book up to the point that Airbus can earn a profit? I don’t. I also don’t think Europe or the Far East can do it either. In the case of the former, routes are fracturing into ever more longer and thinner routes. In the case of the latter, the number of people who can travel is very dependent upon what are, in some cases, still 3rd world economies.
So, no, the A380 isn’t succeeding financially and it isn’t likely to succeed financially. 40 years ago, a vanity project could be tolerated but if Airbus was run as a real business, this is a program that would be getting the axe, not promoted by the likes of John Leahy.
Who owns a ticket? A LA Times Columnist wrote THIS column about the inconsistencies that airlines offer when it comes to what you’re actually buying when you buy a ticket on an airline. In short, a man wanted to not use the first part of a ticket but still wanted to use the 2nd and last part of a ticket for his booked flight. When he called US Airways, they explained that if he didn’t use the front end, then it was a ticket change and he would be charged a change fee plus a higher fare.
So, who owns the ticket? And, more importantly, why do legacy and SuperLegacy airlines treat customers like they’re in Las Vegas where the “house” always wins? This isn’t a business model that really exists anywhere else.
Part of what has to be understood is that when an airline is advertising a fare for a route, it’s really advertising or making available thousands of fares for hundreds of flights. It’s better to think of each seat on each airplane for each flight as having its own price. That price is, like many things in this world, set by demand. Now, many of those seats have the same price. Airlines are essentially contending that you are buying non-refundable access to that specific seat on the aircraft (non-refundable in the case of the lowest cost fares anyway) and when you don’t use that seat, it costs them.
There is some truth to that. That seat starts out “fresh” when it is loaded into the travel systems with a fare. Over time, the fare for that seat may vary considerably. It may be bid up in price by high demand and it may fall to lower and lower prices as no one buys that seat and the departure for that particular flight and seat grows nearer. Once it’s sold, it’s difficult to sell it again for the exact same price. If you bought 2 months in advance and want to change flights 2 weeks in advance, the airline has lost about 8 weeks of opportunity to sell that seat and it wants you to pay for that opportunity cost.
There is some logic and fairness to the airlines’ point of view. However, many people question why they cannot re-sell that seat on to someone else if they’re unable to use it and transfer it into another name for a nominal transaction cost. It’s a good question. Airlines don’t want people buying tickets far in advance for a low price and then re-selling them much later for a profit to them but at a price that competes favorably with the airlines’ advertised fare (that is likely much higher). Again, the airlines do have, to some degree, a legitimate claim.
The problem comes, in part, from how airlines present what you’re buying when they market that space on a flight. It’s presented as a general price from point A to point B when it really is a specific seat on a specific flight from point A to point B. In the case of the man described in the column, I think you could reasonably argue that while he may be required to “give up” the portion of the fare on the first flight, he shouldn’t be charged a huge change fee plus a fare difference to simply travel back on the second flight as he already planned because the airline will be capturing its revenue still while having the potential opportunity to re-sell that seat again at a higher price.
Some airlines play a bit more fair and the best at this is Southwest. They don’t do change fees and that’s good. However, they do charge you fare differences if you need to change your flight. Sometimes, on Southwest, you’ll pay more for that new ticket difference than you would on other airlines by buying a new ticket and abandoning the Southwest ticket. Many people have pointed this out but it’s an infrequent occurence and the better point is that Southwest treats this situation in a manner that, to most people, strikes them much more “fair” and far less a game where the house always wins.
The transaction costs for changing a ticket are relatively small. I think they would be covered by a fee of no more than $25 or $30. However, the airline isn’t just charging you transaction costs. It is also charging you the average loss that comes from missing the opportunity to re-sell that seat at a higher price. However, it isn’t as simple as that either. If the fare is dramatically higher for that same seat when a person wants to give it up and change it, it’s because there is a strong demand for it and if there is a strong demand for it, they’ll likely re-sell it again, too.
Should a person be able to transfer a ticket into another name? I would argue that it is probably inappropriate in most circumstances. I think there are exceptions to that and they should be acknowledged. For instance, I think it should be possible to transfer a ticket to another name provided that new person lives at the same address and can prove so with a valid ID.
Are change fees unfair? To some degree but not nearly as much as many think. Low fares have driven this change fee and its the price we pay for the lowest fares we’re offered. What I do think could be done here is an insurance scheme.
You could offer a structured insurance scheme where for one fee, a person would be allowed to change flights but not destinations. For another fee, they would be allowed to change flights and destinations for only the fare difference(s). These fees could be as low as $15 or $20 per ticket and they would help mitigate people’s risks and provide revenue to go towards lost opportunity.
Or you could just approach it like Southwest and change the model, accept some risks along with your passengers in return for fierce loyalty.
SAS is a difficult airline. Actually, it’s a good airline with a lot of difficult problems in its future. Formed as a consortium of the flag carriers of Denmark, Sweden and Norway, it continues to be 50% owned by the governments of those three countries. All three countries have a strong social policy for employment as well. But despite the relative wealth of its citizens and their desire to travel, it has been losing money regularly. In part because its clientele also enjoy a good deal and have chosen low fare discounters such as Ryanair and Norwegian Air Shuttle.
The governments have made noise about about selling off their stakes but that’s a tricky business. Each government needs to agree to that in order for that to work well at all and in order for it to be an attractive sale to potential purchasers. The airline deals with a huge number of unions and unions with quite a bit of political power.
This airline needs what many European state owned airlines have needed: privatization and a merger.
It’s fleet is rather broad for an airline of this size and that could use some rationalization. It should be an attractive property for an airline like Lufthansa if a purchase is desired because it could benefit from Lufthansa’s purchasing power and the ability to give it a rational fleet as well as flexibility. And it’s already a member of the Star Alliance.
If a merger is what’s called for, I think this could be a very attractive deal for British Airways / Iberia Airlines. While this is a Oneworld group, it is a group that could allow SAS to maintain its identity much easier and offer it some long haul route rationalization but, at the same time, offer SAS the opportunity to continue some long haul flying as well.
This would be a group that, in Europe, would have Northern Europe, the British Isles/Ireland and Southern Europe covered very well. The problem is, you would have to pick just one Nordic city for a hub and who gets that? Stockholm? Oslo? Copenhagen? Each country wants to maintain its links to the world. Stockholm is the most rational choice for a hub in that area since it offers a large O&D market, strong business ties and quick hops to all of northern Europe. Oslo could remain a focus city and so could Copenhagen.
But the trick is the unions and the strong socialist social policy in that country. I don’t see things changing for this airline because of that. Sadly, those countries political power is based on such ties to labor unions and disrupting those unions or even causing them to lose out on what are exceptionally well paid positions is political suicide.
It happens over and over again. Does the airline want to survive? Or do the owners want to avoid political problems today at the cost of even having an airline tomorrow?
Analysts say that airlines are betting that the recent surge in oil prices is temporary and they are not hedging their fuel costs any more at present. Airlines “hedge” their fuel costs by buying contracts on fuel oil that closely track with the price of jet fuel. If the price of fuel goes up, they earn more and that offsets the cost of jet fuel. However, if the price of fuel goes down, they earn less (or even a loss) and that raises the cost of their jet fuel.
Frankly, I don’t think oil will stabilize until both the dollar and euro stabilize as a function of recovering economies. The US economy is showing all manner of recovery now but it will remain slow and we still have an enormous debt to manage for the next few years. The dollar will remain weak for the time being and weak currencies make for more trading in things like oil right now. The more trading in oil, the more volatile its price is and the more likely it is to surge and retreat.
It’s a hard bet but it’s something they, the airlines, will have to revisit in a few months again.
I went to work on figuring out air fares to travel from Dallas to Chicago as well as from Norfolk, VA to Chicago today and made a startling discovery.
The air fares got a bit more confusing all of the sudden.
Why? Because American Airlines is no longer being listed (or emphasized at the least) on my 3 favorite travel websites. And it looks as if the other airlines might just be tweaking their availability on AA routes to take advantage.
How would they do that? By offering flights that are connections because suddenly it appears as if they are the only available game on those routes. I’ve never seen so many different Delta connections at what is a pretty good price between Dallas and Chicago and let me remind you that Delta has no hubs in either city.
I found great fares and, no surprise here, they were on Southwest instead of the others. In addition, I did check AA fares on their website because despite my strong desire to avoid AA, I may have to fly into O’Hare airport instead. Their fares are exceptionally low compared to previous times that I’ve checked them. Off the top of my head, I’d say they’re lower between DFW and ORD than I’ve seen them in 3+ years.
Also interesting, to me, is that United (with a hub in Chicago) is *not* the cheapest fare between DFW and ORD. Not by a long distance. It’s Delta and Frontier leading that pack on online travel agency sites.
US Air gets the nod now between Richmond, VA (alternate for Norfolk in the case of my other traveling partner) instead of American Airlines.
American Airlines might say they’re doing fine but I suspect they may not being doing as fine as they say. The picture presented out there suddenly is a very different landscape and to the traveling consumer who isn’t an airline fanboy or an AA enthusiast, the choices being presented are very much new and different and even attractive.
There have been some truly disappointing revelations about the 787 and its development over the past 2 months. We have learned that more than 300 aircraft were priced at or below $76 million excluding engines. A startingly low price for this class of aircraft no matter what it is made of. We’ve seen just how bad the vendor management has been for this global product and it is highlighted by Boeing buying these facilities to run them themselves to achieve better production rates and quality control. Finally, we’ve learned that many of the technological approaches involved in this aircraft are going to require a longer period to mature than was originally expected as well.
Richard Aboulafia has referred to this program as a disastrously executed, brilliant vision and that strikes me as real truth at this point in the program. He also speculates that the 787-8 may well be the “interim” aircraft while the -9 actually ends up meeting the performance needs of airlines in the long run. That, too, strikes me as real truth.
What hasn’t been considered yet is where the ultimate solutions found for the 787 influence future production. I continue to believe that Boeing hasn’t laid a complete egg with this aircraft. I think it will prove to be, in many respects, a legendary airplane over time. I think it will have a long production run and favorable reviews through its lifetime.
Once these solutions are found and that oh so necessary experience is, well, experienced, it will have a positive influence on future aircraft development. Boeing may no longer be poised to earn scads of profit on the 787 but it is well positioned to use its body of knowledge to earn scads of profit on other aircraft it needs to build. They will have gone through all the pain necessary to know how to apply these new technologies to a 737 replacement or a 777 replacement/enhancement and that will serve them well in the future provided they don’t let lose all those people involved in this program.
The 737 replacement may not use these exact approaches such as CFRP or an all electric architecture but it will use some variation on a theme for that technology and they’ll know how to do it better. They’ll be past the hump, so to speak. This speaks well for Boeing in the latter half of the next decade. Right now, they’re hurting.
But also consider that Airbus hasn’t pushed the envelope nearly so much and they have a great deal of learning to go through still. And as tough a road as Airbus has in front of them with existing programs, that forecasts still more pain in the future.
There is never that much revolutionary change in alliances. Last year, there was a fight over JAL between Oneworld and SkyTeam and Oneworld won but they really were destined to. It made sense for JAL. The alliances worked a bit to get better access to areas they were deficient in and to a large degree, they were successful. I don’t expect much change, if any at all, this year.
The Middle East:
Emirates did what Emirates does: it ordered more aircraft. I did what I do: failed to see how they’ll use all those A380s and 777s. The financial scene in the Middle East and, in particular, the UAE continues to be weakish and while I suspect it will recover somewhat this year, I think the area no longer carries that gleam it once did. I don’t see any failures in the near future but I don’t see any airlines really blooming either. Success there is, as is true for most businesses there, fairly dependent upon oil prices.
India:
Nothing astonishing happened there but it was already pretty mucked up. It remains mucked up and will likely stay mucked up this year.
The Far East:
China did kind of force their airlines into agreeing to buy Chinese aircraft as I predicted. In fact, Chinese aviation is suddenly acting very Chinese in that it is being required to toe a more obedient line. Face is everything there and I don’t like it when airline businesses are operating on the basis of “face” rather than good decisions. It’s notable that in the launch orders for the COMAC C919 aircraft, each airline took up just 5 aircraft orders each. They don’t want that airliner any more than anyone else.
JAL has done OK for the year. They’ve made progress with their finances and they did make some hard choices. They did have to file for bankruptcy protection and no one should have been surprised about that. The new CEO, Kazuo Inamori, and President, Masaru Onishi, are succeeding and making hard choices. Frankly, more so than is characteristic of a Japanese company and they deserve credit and support. This airline isn’t fixed yet but it is on its way.
Oceania:
QANTAS got hit pretty bad by the Rolls Royce failure on its A380. United Airlines is still on the US-Australia routes but badly needs to upgrade its product and it doesn’t appear positioned very well to do so. Perhaps Jeff Smisek & Company will address that better this year. Delta and V Australia didn’t get to form an alliance and they’re trying again. Someone has to give in this area and it will be either in the form of a codeshare alliance between Delta and V Australia or in the form of an airline withdrawing from the market (United or V Australia).
South America:
LAN, in fact, did continue to succeed in South America. So much so, they bought TAM to create LATAM and then bought AIRES (a Colombian airline)covering both the east and west coasts of South America. LAN is, in my opinion, now a SuperLegacy of South America and that’s a bit dangerous for them. South American governments are more protective of their countries airlines that is the custom in other parts of the world.
Curiously, LATAM is now operating airlines in two different alliances: Oneworld and Star Alliance. While there is speculation that they’ll continue this with LAN brands in Oneworld and TAM brands in Star, I think they’ll have to pick one and this may well mean a big battle among all three alliances. This is an area where SkyTeam could do well for itself by gearing up for battle now.
Aerolineas Argentinas: Well, what can I say? Well, I’ll say exactly the same I did last year.
This disaster is much like the country itself. It won’t go away but it won’t perform either. No outside airline will consider taking it over after what happened with Grupo Marsans’ ownership. They lack an appropriate fleet for their flying, a strategic plan for stabilizing their revenues and no clear plan for future growth. But the Argentinian government also won’t let them go away. It is a matter of national pride.
LAN Argentina is growing in Argentina but somehow I remain skeptical that it will be allowed to succeed too well. Why? For one reason, the government of Argentina owns Aerolineas Argentinas and it has a vested interest in that airline earning money. For another reason, LAN Argentina is owned by the LAN Group of Chile. Look up how Chileans and Argentinians feel about each other.
Colombia / Central America:
Avianca TACA is doing fine and I look forward to seeing how they’ll compete against LAN.
Venezuela: Bah!
Europe:
British Airways accomplished a few things. They got into a royal battle with their flight crew that remains unresolved today in part by being petty. Their flight crew union, Unite, furthered that argument by being petty. BA did get their merger with Iberia accomplished and after many, many years they have their anti-trust agreement for trans-Atlantic flights between its European Oneworld partners.
Look for the BA/IB union to do OK in its first year and they may even start looking for another partner as soon as possible. The anti-trust agreement between Oneworld partners should also add to the bottom line. However, it’s time to settle this fight with Unite and it’s time for Unite to get real.
Lufthansa is moving along and did do something with their BMI purchase. I don’t think it did them any good when its CEO, Wolfgang Mayrhuber, started complaining about its ability to compete with the likes of Emirates. Whether or not he had a real point (and he probably did), it also did signal just how hard a job they’re having with the task of competing with the Middle Eastern airlines.
They also still have their A340s and their plans to add the 747-8i. They got their first A380 and all I see is fat, fuel consuming airplanes. This is going to be a problem for them if oil prices rise much more and when you consider that much of their competition is flying fuel efficient A330s and 777s, it makes you wonder about their long term strategy.
KLM/Air France: More of the same. I think this airline will need to make an order for new widebody aircraft soon. Because it remains, essentially, a French airline, I see a large order for A350s and a small order for 777s. I do not see the 787 in Air France’s future.
Airlines will earn profits and even earn great profits throughout the world. Many will be “record breaking” but as much from inflation as a recovery. Those profits will soon start to burn a hole in someone pocket and that is when I think we see capacity growth. I think that capacity growth will start with the Middle East airlines pursuing more revenue lucrative traffic from Europe and North America. But we’ll see it happen in the United States, too.
I would dearly like to see the 787 enter into service with someone and I think we will see it do so. But Boeing has got to get a rein on itself. The failures in the 787 program are as much about poor management as they are about stretching technology. There is too much accountancy going on there and not enough visionary leading. It’s time for them to start winning and they could do so by winning the KC-X tanker program once and for all. But it is also time to start talking about what’s next.
The demands of the 787 program *will* decrease as will the demands from the 747-8 program. Will it be talk of a 737 replacement or an improvement to the 777? I think the airlines would like to talk about the 737 replacement and that seems sensible. Rather than play cautiously, reach again, I say. Push engine manufacturers to come up with something to raise the game and push technologies again. It’s also time to talk about the 787-10 and I think there are more than a few airlines who would like to be a part of those discussions.
Airbus is going to muddle along denying any real problems with the A350 until the end of this year. Then we’ll hear about something delaying the entry into service date by a considerable amount. John Leahy will insult Boeing and claim the A350 will put the 787 to death but it won’t. Airbus might well buy the KC-X tanker program but I question the wisdom of this in light of their ongoing A380/A400/A350 problems as well as their announcement development of a new engine option for the A320 series. When do they earn money the proper business way?
It would be nice to see Embraer make a move into the 130 seat market and I think those guys could do it very well. Bombardier gets bashed by everyone but I still think they have something with their CS series and I think it will be taken up by another airline soon.
I think we’re going to see another round of fees. Just as soon as airlines can identify what other parts of their service they can de-couple from the basic flight. I think we’re going to see airlines put a price on early boarding and we’ll probably see fuel surcharges amounting to tens of dollars.
But let’s hope we see an interesting and prosperous year in the airline industry.
At the beginning of each new year, I like to review what I thought would happen over the previous year and where I think things might go in the next year. Let’s take a look.
North America:
I thought that not much would happen with AA labor in the past year and that pretty much was the case. We’ve now seen several years of virtually no movement on solving these issues and I suspect that 2012 is the year that we see some kind of movement. Look for the flight attendants to be the aggressive parties but the pilots to be the leaders. All they need is a management group that wants to get something done. This might end up being a make or break year for AA CEO Gerard Arpey and it could well be based on coming to an agreement with their labor groups.
United Airlines (and Continental) really didn’t go where I thought which was the status quo. Instead, they merged and got going on getting somewhere and I like that. I didn’t think they would merge and said so at the beginning of last year. They proved me wrong. However, I think CEO Jeff Smisek hasn’t considered carefully what he needs to get agreement on to move forward with each phase of the merger. Look for this year to be good for United financially but bad on getting labor groups to agree on something. I don’t think they are headed in the same direction as US Airways . . . yet.
This is a year for Delta Airlines to continue rationalizing its routes and aircraft. They spent much of last year doing so and saw great financial results. However, their goal of a sustained 10%+ profit margin makes me think we’re going to see some weird stuff out of them somewhere around the beginning of spring. Probably in the form of new and innovative fees.
US Airways pretty much performed as predicted and I like how they are earning a profit but I hate how they still have no agreement with their flight crews that will permit them to quit operating two airlines in one. If Doug Parker were to have a New Year’s Resolution, it should be to hire someone who’ll get that taken care of this year.
LCC(s) and Regionals:
I didn’t see a merger partner for Southwest except, perhaps, Sun Country. Southwest proved me very wrong on that but I like the results. One concern I have is the somewhat “plodding” progress towards consummating this merger into one company. Does it indicate a plodding approach to actually consolidating operations? One good thing is this brings the potential for greater international flights and, hey, Southwest, consider just keeping that Airtran reservations system and then spending some real time to pick or develop a new one that will last another 30 years. You could do a lot worse.
Frontier/Republic is holding its own and I thought they would hold their own. I think they’ll hold their own this year but I don’t see them merging with anyone and I don’t see them growing subtantially either. Brian Bedford could prove me wrong and I hope he does.
Airtran made the Milwaukee market. They deserve the credit for the huge growth that city has seen in air travel. Southwest needs to commit to doing the same when they lead the game.
I slammed Virgin America a few times last year for appearing to be afraid to compete. In particular, with American Airlines. Finally, Virgin America made the plunge and came to DFW with flights from both San Francisco and Los Angeles. I liked the move and I think there is room for them to grow here. Time will tell. One thing I’ve noticed so far: AA doesn’t seem to be attacking them quite as badly as one would have expected from AA just 5 years ago. Mr. Cush, let me suggest that you could really do well with some flights from DFW to the NYC area. In particular, to Newark.
Alaska Airlines has moved closer to Delta in the past year and that worries me a bit for Alaska. They’ve generally been an airline willing to do a deal with anyone that made sense. Now, they appear to be more and more the Delta lackey and that could harm them in the long run. Another thing: Alaska doesn’t have any more logicical merger partners that make sense. American Airlines may have missed an opportunity here by not getting closer to Alaska instead of withdrawing more and more.
I don’t think we’re going to see any big mergers in the US this year. We might see one minor merger and that’s OK with us. I think this year we’ll see legacy and SuperLegacy airlines attempt to earn as much money as they can to retire as much debt as they can and to bank as much war chest as they’re able. However, I see competition heating up this summer and I think the LCC and new entrant carriers are going to put pressure on the legacy and SuperLegacy airlines in the form of adding capacity *and* routes. The question is, will the industry discipline we’ve seen hold strong or will someone crack?
In the Global Distribution System aka Online Travel Agent Wars with American Airlines, SABRE just dropped a bomb and announced that it will discontinue AA listing one month before their contract ends in August and it will list AA different between now and then.
Care to guess who owns Travelocity? That’s right. SABRE does.
So far, AA continues to insist that it is comfortable with booking levels at present while it remains in discussions with both Orbitz and Expedia.
This really doesn’t feel like something that AA is going to win on its terms. There may be some adjustments because, after all, Orbitz, Expedia and Travelocity all have something to lose as well. However, this whole push on the part of AA is beginning to smell a lot like its attempt to “rationalize” fares under CEO Crandall back in the 90’s. That didn’t work out too well for AA either.
Care to guess who used to own SABRE and who developed the system as a subsidiary company? That’s right, American Airlines did.
There have been a few recent and prominent incidents involving the Russian airliner Tu-154 that have resulted in a number of people and agencies calling for it to be grounded. The most prominent was the loss of the Polish President last year in a severe accident and the most recent was a Tu-154 that had an engine explode and cause a massive fire when taxiing for take-off to Moscow in Surgut.
A lot of criticism is levied at the Tu-154 (and it’s cousin, the Tu-134) is probably mis-placed. If you look at the statistics involving the Tu-154 and its closest Western relative, the Boeing 727, the Tu-154 has a pretty comparable record. In fact, most incidents in the last 5 years were related to human error, not an aircraft failure of some sort.
The loss of the Polish President was due to a pilot risking a landing that his aircraft wasn’t capable of making safely. Other hull losses were results of terrorism or mistakes involving governments firing missiles (Ukraine) during exercises. Another hull loss was due to air traffic control mistakes in Switzerland involving the Tu-154 and another cargo aircraft.
There were 1015 Tu-154s and 852 Tu-134s built and those two variants are roughly equivalent to the 1800+ Boeing 727s built over roughly the same duration. Between the Tu-154 and Tu-134, there are roughly 94 serious incidents resulting in approximately 64 hull losses. The Boeing 727 has a record of 325 “incidents’ (serious and not serious) with hull losses totaling approximately 110 airframes. One would be tempted to say the 727 has a worse record but it should be recognized that 727s typically have flown more cycles than the Russian airliners over the same duration.
Is the Tu-154 dangerous? No more so than other Western airliners of a similar generation. What’s dangerous is airline pilot training and air traffic control facilities and maintenance facilities in Russia and other former Soviet Bloc and middle/central Asian countries. Those places don’t always have the best standards for training pilots or the best equipment for weather restricted landings or the best maintenance workers with the best training at the best maintenance facilities.
It’s notable that, over the years, there have been some very boneheaded moves made in the 727 that resulted in very bad accidents. Early in the life of that aircraft, its very safety was questioned when a few pilots literally flew them into the ground when landing because of its high sink rate on approach. Training and procedures were changed and that aircraft went on to a very successful life.
Would I hesitate to take a trip on a Tu-154? Only if the airline was poor or had a poor safety record. The basic airframe is perfectly safe and the most modern Tu-154M models are up to any Western standard. The “B” models are old but they aren’t necessarily unsafe by definition either. It’s all about the users.
Expedia has made another move against American Airlines in removing them from their system altogether now. That means that American is no longer listed on 2 of the 3 biggest online travel agencies: Orbitz and Expedia. As I write this, they remain on Travelocity.
American says that they aren’t experiencing any decline in business and that may remain the truth for now as they’ve been in the media enough to remind people to go directly to their website for booking passage to a destination. But that doesn’t mean this works for AA in the long run. It’s notable that neither Delta nor United nor any other airline has decided to remove their listings from the big 3 agencies and that might just be because they are enjoying even better bookings all of the sudden.
American says this is about offering a better experience for the consumer by offering their direction connection that will tailor flights to the person shopping. Online travel agencies says that that methodology means that American controls what the shopper sees instead of giving the shopper the chance to see the lowest fares.
The truth is, the online travel agencies are more “right” in this fight than AA is. This is about raising revenues by only letting the customer see what AA wants them to see based on their history.
Airlines such as Southwest and jetBlue have made their business rely upon their own websites for booking historically and they have done fine with that approach. Now both airlines are seeing value in being listed alongside others on some of these sites and that is as much based on accessing a larger audience as it is the fact that they have competitive fares.
I suspect we may see a different set of results from either party in another 2 to 4 weeks. Both sides have to determine the real impact to their business models and then decide if the lost revenue (and believe me when I say both sides are losing money over this spat) is worth it in the short term.
Sun Country Airlines has decided to team up with the Mall of America in Minneapolis / St. Paul to offer travel packages to the British next summer. Sun Country plans to fly their Minneapolis – London route again (via Gander, New Foundland each way). Flights will begin late May and continue until the first part of September.
This year, the route will fly to London Gatwick airport. Last year, it flew to London – Stansted and pitched the connection possibilities with European discounters Ryanair and easyjet. This year’s seasonal service will offer twice weekly service compared to once a week last year.
As for the travel packages to the Mall of America, I actually do think that might work well for them. The US dollar is seriously devalued right now and there isn’t much hope of seeing it rise against the British Pound (or the Euro for that matter.) It makes shopping here cheap.
And, frankly, Minneapolis / St. Paul is one fine place to visit in the summer anyway.
I recently decided to enjoy the hobby of collecting diecast airliners. Actually, I decided to collect diecast Braniff International airliners. After I had built a bit of fleet, I decided I wanted to photograph them. Since I was going to photograph them, I wanted to try to put them into a setting that appeared “real”. Here is the result:
