Virgin America has decided it will fly from both Los Angeles and San Francisco to Philadelphia as its next routes.  Philadelphia isn’t the coveted route into Newark that Virgin America wants so much but these routes do fit into its value proposition quite nicely.

Virgin America’s value comes into play the most when the flights are longer.  Why?  Because passengers value the inflight entertainment, inflight internet and on-demand food service on a flight where the duration is longer rather than a shorter hop.

Philadelphia makes for a good fit and I do think we’ll continue to see routes added that are of this nature over time.  In my mind, Virgin America’s service works better on flights of a duration that is greater than 2.5 hours.  I also expect we’ll see more mid-continent routes over time as well.  However, many of those mid-continent routes stretch to the East Coast and that means acquiring slots at many airports that are very, very hard to come by.

It’s possible that airlines will have some opportunity to acquire those slots as a function of American Airlines’ bankruptcy.  The problem is that those slots are extremely expensive to acquire.  We certainly saw that on the recent sale of slots (ex-Delta/US Airways) from both the NYC area and Washington D.C. National airports.  Airlines such as JetBlue were willing to bid exorbitant prices to get them. 

Airlines need those slots and most particularly Southwest Airlines and Virgin America.  The question is, will they be willing to invest the money to win them?  Southwest has the cash but likes a value purchase.  Virgin America doesn’t have large cash reserves and has to focus on earning a profit some time soon.

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WestJet Airlines of Canada is considering the startup of a turboprop regional airline to run as a sister company to serve destinations that WestJet cannot serve today with its single fleet of 737 aircraft.   WestJet pretty much serves all the destinations it can with its current fleet and future growth in Canada will require a different, smaller aircraft.

Currently, many small towns and cities in Canada that can’t be economically served by a 737 are served by Air Canada and its regional airline, Chorus, with turboprops.   Fares on those routes are high and WestJet thinks it can lower prices and capture market share. 

The likely airliner to be chosen would be the Bombardier Q400 if only because of Canadian ties but I also think it would be a smart choice and it would mirror the kind of success that Horizon is having with the same airliner.

This would be an approach that I’ve long favored for Southwest Airlines.  The Q400 has the perfect economics for serving those small communities and the speed necessary to be useful on stage lengths under 500nm.  Most flights to such small cities are far less. 

It’s true that I’m an ardent fan of using the turboprop for this service and I think legacy airlines are ignoring the economics at their own peril.  An LCC carrier that operates a single fleet of Q400 aircraft for serving the smallest of cities and larger towns is quite likely to be able to earn large profits even in competition with major legacy airlines.   This same strategy would work perfectly for Southwest Airlines on flights to cities in the Texas regional area such as Lubbock, Amarillo, Corpus Christi and the like.  Frequency could go up and costs would go down.

The question is, will labor at such airlines tolerate the startup of such an airline?  Part of me says yes, part of me says no.  If there is a clear growth path for pilots to enter the business in the turboprop world and upgrade to the 737 at such companies such as WestJet and SWA, I think they might be willing to accept lower salaries for such flying.  If it keeps flying “in the family”, I think they may accept it.  But it has to be sold right and done with some good guarantees on its implications for existing flights using mainline aircraft.

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It has been announced by the Wichita, Kansas chamber of commerce that Southwest Airlines has indicated to them that Wichita, KS would retain service.  Currently, Wichita has flights connecting it to Atlanta via Airtran and it will likely retain those flights through most, if not all, of 2012.  The flights will be converted to Southwest service by 2013.

There was quite a bit of speculation that Southwest would remove Wichita from the schedule like it has several other smaller cities.  I wasn’t convinced as Wichita fit kind of well into the existing Southwest system which has significant flights to Kansas City, Denver, Oklahomta City and Dallas which are all at least somewhat economically tied to Wichita.  Certainly more so than Atlanta is.

In addition, flying to Atlanta didn’t necessarily provide connection opportunities to those cities that are economically tied to Wichita.  Southwest can provide those connections and that has real value for Wichita and Southwest.  For instance, let’s say Southwest does provide service and starts flying from Wichita to Kansas City instead of Atlanta.  From that gateway city, people of Wichita can access the entire Southwest system (including Atlanta and Florida) without feeling like they’re criss-crossing the country to do so. 

I expect that Southwest will connect Wichita to either Kansas City, Denver or Oklahoma City.   Kansas City and Oklahoma City are very short stage lengths and Denver is right in the sweet spot for Southwest typical route length.

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Over the past 12 months, FlyingColors has doubled its readership and has seen nearly 1000 blog entries reached with enough words written to equal a book with over 1700 pages.  But enough about me, let’s look at the last year in the airline world.

North America:

Southwest Airlines did its deal with Airtran and bought itself an Atlanta base of operations and some very valuable landing slots at Northeastern airports.  As if that wasn’t enough, it made a firm deal on a bunch of 737MAX aircraft and agreed to take on even more 737-800 aircraft for its routes.  However, the airline wasn’t without some trouble:  Airtran pilots tried real hard to step on their on feet in a seniority deal with Southwest Airline pilots.

American Airlines struggled (more) and lost more than a Billion dollars (again).  Instead of making any real progress with its labor force, it decided to file bankruptcy but not before having made a historic order for aircraft from both Airbus and Boeing for the A320 and 737 series aircraft (with both A320, A320NEO, 737 and 737MAX in the mix).  2011 also saw long term CEO Gerard Arpey depart the company (to work with former Continental CEO Larry Kellner) and AA President Tom Horton took over.

Virgin America has horned in on American’s routes, Frontier has struggled more and more under Republic Airways leadership and US Airways still doesn’t have pilots or flight attendants integrated onto one seniority list.  JetBlue decided to fly more to the Caribbean, entrench itself even more at JFK airport and blew it during an October snowstorm (again).    United and Delta made money.  Quite a bit actually.

I think we’ll see Frontier either spun off rapidly in 2012 or the rapid decline of the airline necessitating bankruptcy of Republic Airways.  I don’t see a real strong suitor for Frontier except, perhaps, JetBlue but since Frontier isn’t based at JFK airport, I do wonder at JetBlue interest in an airline like Frontier.

I think we’ll see Alaska Airlines find even more odd partners for its success and still manage to cozy up close to Delta while doing it.  Southwest will start painting Airtran aircraft in its colors and operating even more great deals to more places from Atlanta but I also think that if any slots at JFK, LGA, EWR, IAD or DCA come available for purchase, Southwest will bid the cost of a Boeing and lose again.

I think it’s possible that Virgin America will make money in 2012 and I think it is really possible that we’ll all be pleasantly surprised by that.  The determining factor?  Cost of fuel. 

United will order a nice chunk of aircraft and I’ll bet that it will be an order similar in mix to the American Airlines order from both Airbus and Boeing.  However, I do not think it will be similar in size.  I think it will be a partial fleet replacement with lots of options for incremental change in the fleet.

I think Delta will continue to make a big pile of money with very little controversy surrounding it except that I think Delta will look for and execute a plan to encroach on more Legacy and SuperLegacy airline routes as it has announced its intention to do so from La Guardia Airport.   I also think that Delta will decide its not afraid of Southwest and it will decide to give Southwest a taste of bullying it hasn’t experienced before.   Particularly in Atlanta.  It’s not just an opportunity for Southwest to succeed in Atlanta but it is also an opportunity for Delta to capture lost customers.

I think we’ll see capacity restraint for another year and higher air fares than seen in a long, long time.  I do not expect to see another new airline show up and I think we may well see one true LCC depart the picture if things get particularly rough with respect to fuel prices or competition.  Milwaukee will become the regional airport it was intended to be instead of a bloody battleground between LCC airlines.

Tomorrow:  The rest of the world

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Southwest Airlines and Airtran flight attendants have come to an agreement on merging their seniority lists now and it smells like a similar deal to what the pilots enjoyed.

SWA flight attendants, 10,000 strong, receive enhanced job security and seniority while Airtran flight attendants get an Atlanta base and better wages.  I would not be surprised if Atlanta is “fenced off” as a flight attendant base for former Airtran flight attendants for a period of time.

Both unions have to vote to ratify the agreement but expect that to be done quickly as there is no incentive to try to wait things out if the pilots’ negotiations are anything to go by.

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Southwest is clearly positioning itself to operate a family of aircraft.  They also clearly see a strong need for the -800 (5 more aircraft ordered) and I think they recognize a need to enjoy all the fuel efficiency benefits available to them at this point in the company’s life.

SWA has made its intentions to compete in major markets and at major airports throughout the country.   Those airports require more capacity per flight in order to grow and enjoy health profits.  In light of their challenges in getting slots to operate from NYC airports as well as slots for Washington (National), I suddenly wonder if the -900 and MAX9 won’t enter into the picture.  If they can get enough frequencies in and out of those airports to operate an accomodating daily schedule, they can at least benefit from larger and larger aircraft.

The question is what to do about their traditional smaller markets that have enjoyed a lot of Southwest service.  Many of those markets get served with 737-500 aircraft or they enjoy the -700 by being a part of follow on service to another destination.  For example, my mother flew to the DFW area last week on SWA by going nonstop to ABQ and then onwards (on the same aircraft) to Dallas. 

This is how Midland, Lubbock, Amarillo, Oklahoma City, Tulsa, and Little Rock enjoy more frequent service with mainline aircraft.  In fact, each of those cities enjoys 5 daily round trips each except Little Rock which has 6.  That is on Southwest alone and does not include service provided to the DFW area by American Airlines/American Eagle who offer as many or more frequencies using primarily ERJ-140 aircraft and a few MD-80s.  But once Love Field in Dallas becomes available for non-stop flights to destinations within the 48 states, those cities suddenly don’t look so good for the mainline aircraft they have today.  I don’t think they’ll lose that kind of service entirely but I do think that such cities will see reduced service or they’ll need smaller aircraft.

In light of Southwest’s order, I no longer think they are necessarily going to embrace the CSeries.   The truth is, more and more, the turbo-prop offers the right economics for those flights.  And, yet, I’m not sure SWA wants to be a turbo-prop operator.  So I wonder if we’ll see Southwest morph into a larger, more mainline airline that starts to ignore those smaller cities it has so successfully served for decades.

I also notice that while they’ve made their orders today work for a stable fleet count, they can also change their minds and grow if opportunities present themselves.  It’s a flexible plan and I like that.  Southwest *will* order more MAX airplanes but the follow on orders will be in single digits mostly and very incremental over time.  Southwest will likey obtain more options as time passes but mostly it will use the ones it has today strategically. 

Finally, time for another prediction.  I think we are going to next see Ryanair jump on the bandwagon for new aircraft.  Odd favor the MAX and I’ll predict that their goal will be a 250 aircraft order that focuses more on the MAX than it does on replacing existing aircraft in their fleet.    When?  If it’s Boeing they really want, it will be very soon.  I would expect it to happen in the next 30 to 40 days.  If they truly want to evaluate Airbus against Boeing, then I’ll guess that we’ll see an order announcement somewhere in March or April.

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Well, it’s 150 firm orders for the MAX and another 58 for the 737NG.   Close enough to my own predictions that I’ll gloat for a moment.

I’m done.

Southwest becomes the launch customer for the 737MAX and this becomes Boeing’s biggest order ever.  More importantly, it’s the ring of legitimacy that Boeing hears in its ears now.

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Southwest Airlines is legendary for its use of the 737 and it could even be claimed that they made the 737 what it is today.  The exclusivity of the 737 to their fleet is also legendary although they have owned subsidiary companies that flew other aircraft.

TransStar Airlines used the DC-9 and MD-80.  Now, as owners of Airtran, they have the 717 (which is really a DC-9) as well.  But all of those aircraft were flown in the subsidiary airline’s livery.

Question:  Can you name the other aircraft that Southwest has flown in their own livery?

The answer after the fold: (more…)

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Well, it’s starting to bubble out in the media that Southwest is close to making an initial order for the 737MAX.  Rumours say it will be a 100 aircraft order.  If negotiations are beginning to finalize, I think it will be for far more aircraft than that.

Southwest currently has 550+ aircraft in its fleet.  Of those, 195 are not Next Generation 737s (-700s).  Those aircraft need to go sooner than later but Southwest only has 133 orders for 737s and of those, 20 are for the -800.  (Southwest also holds 37 options and 98 purchase rights.)

Of the next generation fleet, 370 are -700s and while those seem awfully new, quite a few are getting rather old as well.  Southwest was the launch customer for that aircraft and owns the first one built.  They don’t need replacement in the next 3 to 5 years but they will need replacement in latter part of the decade.

My prediction is an order for 200 and another 200 to 300 options.  I think they’ll choose the CFM Leap56 engine and I think the mix will be weighted towards the 737 MAX 8.   I don’t think the MAX 7 will be ignored but Southwest is growing and it is able to fill the MAX 8 but it will still have a healthy and relatively new fleet of -700 aircraft for its short haul and long/thin routes to use. 

Southwest actually doesn’t generally order “big”.  Typically, they order a few aircraft at a time.  But if they choose the MAX (and they will), there is no reason to not take advantage of Boeing’s desire to get a major airline into the order list.  American Airlines was a hail mary pass and now Boeing needs a credible 737 user to endorse the aircraft.  (Lion Air wasn’t it.)

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Southwest has been working on adding international destinations to its system for several years now.  With the purchase of Airtran, it gained an airline already doing it and it will soon integrate those international destinations into its system as codeshares.  That will be a big moment.

Question:  What airline with international destinations was Southwest’s first experience with international destinations?

The answer after the fold: (more…)

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Earlier this week, it was announced that Southwest/Airtran was *adding* routes from San Antonio to Mexico City and Cancun. Airtran will be the “airline” that services those routes.

Yes, Airtran will grow into some routes.

Fares aren’t announced until regulatory approval is gained. I do wonder if Southwest plans to use the Airtran entity for international expansion. But I wonder about a lot of things when it comes to Southwest lately. Like when are they going to introduce a reservations system that doesn’t require a handcrank?

Those routes are curious to me. Southwest already has its codeshare into Mexico with Volaris but that connection is focused on the West Coast area and it offers flights from the US to Guadalajara with connections onward.

The Mexico City and Cancun flights are smarter flights. Particularly smart from San Antonio. And don’t be one bit surprised to see one added to Monterrey in the near future.

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Am I the only one who missed the pilots of Southwest and Airtran ratifying their seniority agreement? My excuse was a weeklong bootcamp training session at my company. What’s yours?

The highlights are that both groups overwhelming approved the agreement with in excess of 90% of both groups voting and inexcess of 80% of each voting group saying “Yes”.

This is good for Southwest, Southwest’s pilots and Airtran’s pilots. Conflict erodes profits and eroded profits at Southwest hurt everyone’s fortunes. More importantly, there is a template for coming to agreements among other unions.

Furthermore, Southwest can get on with the business of harmonizing and integrating Airtran. The sooner that gets done, the sooner the synergies of the merger are realized.

The question is this: Will the other unions avoid the mistakes that Airtran’s ALPA group made?

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Every airline reporting on its quarterly financial performance last month cited fuel as a major impact to their bottom line.  Airlines saw significantly higher fuel prices this year compared to 2010 and it’s true that it’s a hit to profits.

On the other hand, it’s notable that fuel hedging contributed significantly to their losses on paper.  Why?  Because fuel prices did not go up high enough for those fuel hedges to provide benefit.  Instead, they went down.

The truth is, it isn’t high fuel prices that are killing airlines.  It’s the price volatility that hurts them.  Airlines haven’t been able to plan their costs very effectively for the past 3 years.  Hedging is supposed to “smooth” that volatility and it will except that it also causes paper losses which reflect negatively on the airline when it announces its financial performance.

Is it necessary?  I used to think so.  In fact, I was a big advocate of fuel hedging not because of the windfall profits it provided many airlines for many years but, rather, because it really did make costs stable.  US Airways has stopped fuel hedging and their financial results show that fuel hedging just may not be necessary anymore.  Their profits are not taking a hit from hedging contracts that “lose” money.

In fact, US Airways performance is exceptional when balanced against the challenges it has.  This is an airline that 6 years later is still effectively operating as two airlines (under one name).  It still doesn’t realize that kind of synergies it needs to from its merger.  It has serious impacts from labor groups who cannot agree on what day it is much less on who represents them with the company (this would be the pilots) and it still doesn’t have a combined seniority list with one agreement in place with both the pilots and the flight attendants. 

This airline also flies from far less popular hubs, contracts with far less ideal regional airlines and has far fewer international flights and even if it could fly more international routes, it lacks the equipment to do so.

But the airlines makes a strong profit.  As strong or stronger than the SuperLegacy airlines.  The one thing it hasn’t done is announce major paper losses as a result of fuel hedging.  It might be time for more airlines to roll with the punches.  It’s a highly complex, risky effort that doesn’t appear to be providing the benefits its supposed to.

Fuel price volatility will continue to be a problem.  Airlines need stable oil prices and, frankly, so do the world economies.  However, let’s not forget that fuel is a problem for *every* airline.  They all enjoy the same problem in this area. 

I expect that we will see airlines focus more and more on fuel economy over the next several years.  We’re already seeing it in some airlines such as American Airlines who has finally realized that if it dumps its MD-80 aircraft, it can not only enjoy double digit improvements in fuel efficiency, it can fly more people as well.  That doesn’t mean that airlines with Next Generation 737s or Airbus A320 series aircraft will be dumping their fleet for new aircraft.  They won’t.

It does mean that we’ll see older aircraft from the 70’s and 80’s going away.  Yes, that means MD-80s but it doesn’t mean MD-90s (which use a far better engine).  The other aircraft it points to are those that many may not have considered. 

The 767-200ER is already clearly a candidate for removal and the 767-300 isn’t far behind it.  These are 1970’s design aircraft and with engines of similar caliber.  There are no more improvements and as fuel climbs, these aircraft become quickly unattractive even when completely paid for.  The 757 is entering into this territory as well.  I would expect that we’ll see a number of these begin to be retired or sold off for cargo work.  Again, these are 1970’s aircraft and while their amazing performance lent them a lease on life, they’ve become very expensive balanced against other aircraft that can perform 90%+ of the same missions.

Say goodbye to the older 737s.  I’m talking about the 737-300/400/500 series aircraft.  These are efficient, for their time, but very inefficient when compared to the latest modesl coming off Boeing’s line.  They had a short extension to their usefulness but you will see these depart rapidly from US based fleets over the next 1 to 3 years. 

The oldest A320 series aircraft are now due for replacement as well.  Some are older than those inefficient 737-300 aircraft and no longer have the fuel efficiency that the latest Airbus offerings possess.  They *seem* like a new aircraft.  I’ll point out that the A320 aircraft started deliveries in the late 1980’s (1988) and several US airlines such as United own some of the oldest models. 

Look for airlines to “upsize” their aircraft.  Southwest is doing this by buying the 737-800.  For a tiny bit more in costs, Southwest can fly significantly more passengers on routes that are seeing enormous demand.  They can make more money for a tiny incremental cost in fuel and one additional flight attendant. 

Finally, buying blocks of the A320NEO and 737MAX will make an airline look smart.  It is universally recognized that while oil prices may one day stabilize, they won’t return to $20/barrel.  The airline with the most fuel efficient aircraft will see an advantage.  That’s why I honestly believe we’ll see a large order from Southwest Airlines for the 737MAX.  It’s a good evolution for the airline and it will continue to fit within its business plan for some time to come. 

Why no orders from Southwest yet?  Because Southwest is one hell of a good negotiator and recognizes that they have power in the simple fact that if Southwest buys the aircraft, it’s an endorsement that everyone will pay attention to.  I expect to see an initial Southwest order for 100 to 200 aircraft sometime in the next 6 months.  Southwest will get its deal and Boeing needs Southwest to stamp approval on the MAX.

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One result of the consolidation that has gone on in the US airline market is that we have 3 SuperLegacy airlines with each roughly the equivalent of each other in size and revenues.  Each of those SuperLegacy airlines has both fortress hubs as well as hubs in extremely competitive markets.  I speculated that the result of these mergers would actually be more competition rather than less in major markets because that’s where the money is.

American Airlines has a plan that involves channeling 98 to 99 percent of its traffic through one or more of five “cornerstone” markets:  Dallas, Miami, Los Angeles, Chicago and New York.  There are just two fortress hubs in that mix today:  Dallas and Miami.  Los Angeles and New York are highly competitive markets for all airlines and Chicago is a major hub for both AA and United as well as being a strong focus city for Southwest Airlines. 

Delta Airlines retains its strength in Minneapolis (fortress hub), Detroit (fortress hub), Atlanta (fortress hub + LCC carrier encroachment), Salt Lake City (fortress hub) and competes aggressively in New York and Los Angeles.

United Airlines has its focus on Houston (fortress hub), Chicago (major hub with AA and Southwest), Washington DC Dulles (fortress hub), Denver (fortress hub + LCC),  San Francisco (hub) and competes strongly in the New York City and Los Angeles markets.

It’s not hard to see who the loser is here.  American Airlines has the highest costs and suffers more competition in more of its focus cities.  Even in Dallas, a fortress hub if there ever was one, American Airlines gets to face increasing competition from LCC carriers at DFW who’ve identified exceptionally high fares on cities they can serve and they face increasing competition from Southwest Airlines at Love Field particularly in 2014 when the Wright Amendment essentially goes away.  Miami is strong revenue wise but will never serve as a convenient hub for the rest of the United States.

The only way these airlines continue to grow is to make inroads in these competitive major markets.  Their established dominance leaves little low hanging fruit to explore.  If one were feeling predatory, an airline such as Delta would begin to focus on cities such as New York City, Los Angeles and Dallas.   So far, Delta has engaged with the competition in the first two cities.  Why do this?  Because American Airlines can no longer afford to fight sustained battles on its home turf on price and its service product is at least a generation behind the other two SuperLegacy airlines. 

In fact, I would maintain that engaging American Airlines in the DFW area could yield great success over 2 or 3 years.   American cannot fight that kind of engagement off on price alone.  It doesn’t have the service product it once had and its regional airline is one of the worst in the country at this point.  There is a reason why Virgin America and Spirit Airlines have shown up there.  There is a reason why Lufthansa is doing well with flights to Germany there and there is a reason why Emirates smells an opportunity there too. 

The weak animal in the forest is American Airlines.   If Delta and/or United can work up a sufficient warchest, competing for AA customers in its cornerstone markets can provide growth.  But they aren’t immune to encroachment themselves.

Both airlines suffer competition from LCC carriers and, in particular, Southwest Airlines.  Look at where SWA is now a viable and cost effective alternative to the SuperLegacy airlines.  Los Angeles, San Francisco, Phoenix, Denver, Dallas, Houston, Chicago, Washington D.C., Atlanta and New York City (3 airports currently).  Southwest can provide price competitive fares, an equal or better economy service product, an equal or better ontime record and flights that are just as convenient if not more convenient at the end of the day. 

Southwest achieves that while also serving what I would describe as 2nd and 3rd tier cities.  Cities such as Kansas City, St. Louis, Nashville, Salt Lake City, Las Vegas, Lubbock, Little Rock, Indianapolis, Pittsburgh. Albany, Buffalo, Norfolk, Seattle. . . you get the idea.  And they serve these cities with a better offering than most SuperLegacy airlines.  In fact, Southwest tends to not just get the most frugal passengers but also the most value oriented passengers.

What’s different between those two?  Frugal flies the cheapest flights . . . period.  Value oriented passengers pay for the most bang for the buck.  A value oriented passenger pays a premium price for a fare that lets them travel efficiently, comfortably and without fees.   He or she doesn’t buy the cheapest fare.  They buy the SWA business class fare because it is hundreds of dollars less than SuperLegacy fares, doesn’t nickel and dime them and provides convenience they can no longer get from other airlines. 

They do well with those passengers in their focus cities but they do really well with those passengers in those 2nd and 3rd tier cities.  Do the math:  Fly on AA from Little Rock on an MD-80 or regional jet in cramped quarters to a hub or fly on Southwest on a more comfortable, newer 737 and direct to your destination. 

Those cornerstone strategies used by SuperLegacy airlines are heavy weights hung around their necks.  First they’ll survive at each other’s expense and then they’ll all suffer at the hands of the more convenient LCC carriers.

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Southwest and other airlines took a bit of a hit in their fuel hedging over the last quarter due to lower than expected oil prices.  This resulted in a loss for SWA that otherwise would have been a profit and the loss is a paper loss at that. 

In reviewing the company’s performance as well as taking a view on the near and medium term future, CEO Gary Kelly actually sounded downright positive on the whole.   With some emphasis on caution, Kelly seems a positive future for Southwest and says that business bookings have remained stable and revenue growth is downright sweet. 

Good to hear. 

What I haven’t heard yet is a plan for handling the issues a 600+ aircraft airline should be doing with excellence.  For instance, why not illuminate folks on what the plan is for a new reservations system that will accomodate things like, you know, code shares that you have with partner airlines. 

Where will Southwest grow next?  The Airtran purchase is growth but not growth beyond the two combined companies.  In fact, we already know that there will be some contraction as a result of that purchase.  What’s the next Southwest adventure when it comes to routes?

And what is Southwest doing to prepare itself for 2014 in Dallas?  Dallas is a metroplex area with more than 6 million people in its catchment area.  Southwest manages to capture a nice portion of the eastern half, yes.  But in 2014, the gloves come off at Love Field with respect to non-stop flights to destinations in the continental United States.  Southwest will be restricted to operating from 16 gates at Love Field and that is not enough gates to serve everywhere people in the DFW area want to go.   (We’ll talk about this later this week.)

Southwest is an airline that generally keeps quiet until it really is ready for an announcement.  But this is *not* a small airline anymore and there is precious little conversation going on as to how SWA will manage itself in the future.

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Southwest Airlines CEO Gary Kelly has decided to engage and fight a newly proposed fee of $100 per flight proposed by the current administration.  For details on his point of view, read THIS and THIS. 

I couldn’t agree with him more.  I think such increased fees are burdensome for an industry that benefits *all* citizens and businesses in the United States.  Whether you’re an infrequent or frequent traveler, you still benefit from a transportation system that makes quite a few parts of our economy successful. 

I also think that such fees imposed on travelers (directly or indirectly) is akin to treating them as having deeper pockets than the rest of the country.  That couldn’t be farther from the truth.  Some taxes and fees are quite reasonable and should be expected.  In light of the debt this country is in, I absolutely think we need to raise more revenues through more taxes and fees. 

I do not, however, think it is effective or smart to push burden off onto a class of people who have a weak lobby in Washington.  This goes a bit too far and it should be pulled off the table.

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Southwest pilots have been briefed by management that there really is a Plan B if Airtran and SWA pilots cannot come to an agreement on merging seniority lists.  Plan B is to keep Airtran as a separate entity and that would not be good for Airtran pilots (or other crew.)

There is a perception that Southwest is a friendly and nice company and, by and large, they are.  However, what people often forget is that Southwest is quite capable of making swift, hard decisions in the face of adversity. 

What Airtran pilots’ union didn’t consider is that playing coy on the first agreement and refusing to send it for a vote unintentionally signaled to Southwest that there may be adversity on the horizon.  Indeed, I would imagine that quite a few Airtran pilots are now fairly peeved at their leadership since the first agreement was more beneficial in terms of pay and seniority than what is on the table now.  Southwest’s message to Airtran pilots is this:  the deal doesn’t get better the longer it takes, it gets worse.

What’s the worse case scenario?  Plan B.  The unspoken part of Plan B is that Southwest can slowly diminish the size of Airtran over several years, transfer equipment (i.e. aircraft, gate space, etc) over to SWA and ramp up to take over Airtran flying over the next several years by hiring new pilots and crew that fit within their standards. 

In other words:  Want to keep your job?  Well, after this round of negotiations, the deal is that you get to interview for your job at some point.  If you successfully interview, you’ll join SWA at the lowest run in seniority and at reduced wages.  It will still be one of the most secure jobs in the airline industry but those people will have to reset to the beginning again and earn their way upwards once more.

Is Southwest that cutthroat?  You bet.  Is this a negotiating tactic on the part of SWA?  Yes but it comes with the knowledge that SWA really will act on its Plan B unlike some airlines.   Either way, SWA gets what it wants from the Aitran purchase and the worst case scenario for them is a stretched timeline for achieving all the benefits from the purchase.

Is this a gun held to Airtran pilots’ heads?  Well, no, not exactly.  They’re free to choose their destiny.  However, Southwest isn’t an airline that can be bullied and its pilots’ union isn’t either.  That’s the difference in this situation.  There is nothing to gain by being recalcitrant.   Even if Airtan pilots tried to strike (and remember that that can take years before the National Mediation Board gives permission), Southwest can move in and take on that traffic without much impact. 

What defies my imagination is how Airtran pilots (and other crew) think there is a better deal to be had than getting a payraise, decent seniority and the most secure job available from US airlines.

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Southwest Airlines CEO Gary Kelly is now openly predicting that SWA will see as much as $1Billion in revenue growth as they restructure the Airtran Atlanta hub into a more traditional Southwest focus city.   Airtran currently operates a traditional hub and spoke system in Atlanta.

Airtran’s model as an LCC carrier was really a hybrid.  It did operate primarily a hub and spoke system and it also used focus cities and even did a little point to point flying.  Airtran did what they had to do to compete with Delta, earn money and to do it by perenially being the little guy in most markets.  Absolutely nothing wrong with that.

Southwest is right, however.  Operating a traditional SWA focus city is the right thing to do because it serves the greater good in the SWA system as well as focusing on the customer that yields the most *profit* rather than the most revenue.   More importantly, SWA has some horsepower to offer that premium customer that Airtran doesn’t have.  More connecting flights to more destinations, primarily.

I’ll miss Airtran’s business class and I’ll miss their style of business.  It worked for me very well and I’ve flown them many times.  Even Gary Kelly admits that SWA expects to see some business travelers move to Delta as a result of the changes in service product.  After reflecting on this for several weeks, I think this is, at the most, a trivial issue. 

Why?  Because SWA actually offers a great service product.  The seating is good.  The flight crews are good.  The business traveler can accomodate themselves with priority boarding.  No, it isn’t a “first class seat” but neither was Airtran’s really.  Airtran offered an economy business class seat, in my opinion.  You didn’t get the same perks that legacy airlines offered with their first class.  You got a better seat and a few free drinks.  That’s it. 

Southwest can compete with that.  More importantly, if you’re a business traveler and you’ve chosen Airtran, I would guess that, most often, you’re an entrepreneur or work for an entrepreneurial company that places a premium on appropriate spending for travel.  If so, Southwest fits that role just fine.  I’m very skeptical that there are very many traditional frequent flying businessmen who are using Airtran.  Delta fits their needs better.

I look forward to seeing what SWA does in Atlanta.  I look forward to seeing new connections as a result of Atlanta becoming a SWA focus city.  It should work very well not just for Atlanta residents, but travelers from the entire southeast region.

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Remember the woman who was removed from a Southwest flight because of some improperly perceived threat based on someone “overhearing” a partial phone conversation?  She was actually kept off by the captain because the crew just didn’t feel “safe”.  Get the details here with a Dallas Morning News Aviation Blog post.

The woman, Irum Abbasi,  has decided to sue and I don’t blame her.  You see, I’m not a subscriber to the idea that the 1% rule is valid and I sure don’t subscribe to the “abundance of caution” approach to safety.  The woman was inconvenienced, humiliated and insulted primarily because she was a muslim and dressed accordingly. 

A muslim woman dressed according to her religion is *not* a threat.  It’s time that commercial businesses, even a nice one like Southwest, get their act together and start using better judgement.  I do *not* disagree with the woman being questioned.  That is, perhaps, appropriate.  But once the TSA determined she was not a threat, she should have been put right back on that aircraft and into her same seat. 

And the aircrew should have been told to settle down and do their jobs.   And captains need to get over themselves and failing to do so, should be reprimanded for engaging in behaviour that would get most people fired today.  If airlines continue to fail to exercise good judgement, I would recommend a few airline execs and airline captains go through extra screening, have their religions questioned and be inconvenienced with a voucher and offer to fly the next day. 

The woman suffered harm and, possibly, damages.  That’s what lawsuits are for.

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Even though Southwest Airlines believes in LUV, they do not, apparently, believe in excessive public displays of affection.  Actress Leisha Hailey and a companion were removed from a flight recently after passengers complained of a kiss. 

How bad was that kiss?  Who really knows.  Should she/they have been removed from the flight?  Probably not. 

Here is the thing:  You can err on the side of caution when it comes to safety but it would be wiser to err on the side of tolerance with respect to many other things such as dress and non-threatening behaviour.  Do I think Southwest discriminates against gays?  No, I don’t.  They have an excellent record there. 

But I do think that there appears to be a focus on anything outside a fairly rigid norm and that might need to be relaxed a bit.   Here is the thing:  I don’t expect Southwest to put up with lascivious behaviour on their flights and I don’t expect them to put up with grossly inappropriate clothing.  I think a reasonable person knows just where those lines are but Southwest has had just a few too many incidents related to people’s behaviour that, at the end of the day, incur no real harm.  Do we really care if two women share even an enthusiastic and somewhat lengthy kiss?  Probably not.   More importantly, is Southwest prepared to act exactly the same way the next time husband and wife or boyfriend and girlfriend share a kiss?  Because I’ve seen more than one energetic kiss shared between such at Southwest gates and on their aircraft.

As for the actress . . . I don’t find her tweets all that funny either.  The militant tone isn’t necessary and its undignified.  By all means, be outraged if you believe you’re wrong.  But show a little more dignity while you’re at it.  Throwing out threats and accusations in real time makes you look like a child and like you deserved your treatment. 

I honestly don’t know if the acrtress’ behaviour was inappropriate or not.  Frankly, that would have to be one hell of a kiss to have crossed a line.  It’s possible it was.  It’s equally possible that some passenger(s) and/or flight attendants need to focus a little bit more on what’s important in life and a kiss isn’t it.  Minding one’s business is an important business skill as well. 

Both parties look bad in this and both should look bad.  Rather than reviewing the incident and, once again, standing by your people, Southwest needs to review whether or not it needs to communicate a better set of standards.

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