The USA Today Aviation Blog, Today In The Sky, reported on who operates the worst 30 late flights of the last month.  They are:

 

July’s 30 most-chronically delayed flights
1. Delta subsidiary Comair Flight 5292 (Minneapolis/St. Paul to New York JFK; late 100% of the time by an average of 134 minutes)
2. Delta subsidiary Comair Flight 5614 (Charlotte to JFK; 100%; 121 minutes)
3. Delta subsidiary Comair Flight 5491 (Albany to JFK; 100%; 97 minutes)
4. Delta subsidiary Comair Flight 5739 (JFK to Pittsburgh; 96.8%; 83 minutes)
5. Delta subsidiary Comair Flight 5440 (Washington Dulles to JFK; 96.8%; 83 minutes)
6. Delta subsidiary Comair Flight 5610 (BWI to JFK; 96.3%; 115 minutes)
7. Delta subsidiary Comair Flight 5588 (Norfolk to JFK; 96.2%; 132 minutes)
8. Delta subsidiary Comair Flight 5496 (Philadelphia to Boston; 95.5%; 83 minutes)
9. Delta affiliate Pinnacle 2021 (Charlotte to Atlanta; 94.7%; 97 minutes)
10. Delta subsidiary Comair Flight 5287 (JFK to Minneapolis; 93.6%; 103 minutes)
11. JetBlue Flight 1076 (Richmond to JFK; 93.6%; 78 minutes)
12. JetBlue Flight 136 (Fort Myers to JFK; 93.6%; 76 minutes)
13. JetBlue Flight 1108 (Raleigh/Durham to JFK; 93.3%; 111 minutes)
14. JetBlue Flight 1056 (Pittsburgh to JFK; 93.3%; 92 minutes)
15. Continental affiliate ExpressJet Flight 2412 (Providence to Newark; 93.3%; 69 minutes)
16. JetBlue Flight 160 (Denver to JFK; 93.3%; 58 minutes)
17. AirTran Flight 311 (Milwaukee to New York LaGuardia; 93.3%; 56 minutes)
18. American affiliate American Eagle Flight 4783 (Washington National to Boston; 92.6%; 72 minutes)
19. Delta subsidiary Comair Flight 5640 (Raleigh/Durham to JFK; 92.3%; 98 minutes)
20. JetBlue Flight 160 (JFK to Dulles; 92.3%; 73 minutes)
21. Delta subsidiary Comair Flight 5438 (Tampa to LaGuardia; 92.3%; 62 minutes)
22. United affiliate Mesa Flight 7297 (Chicago O’Hare to Allentown; 92.3%; 59 minutes)
23. Delta subsidiary Comair Flight 5678 (LaGuardia to Jacksonville, Fla.; 92.3%; 53 minutes)
24. Delta subsidiary Comair Flight 5592 (Richmond to JFK; 92%; 80 minutes)
25. American Flight 1629 (Miami to San Juan; 91.3%; 92 minutes)
26. Delta subsidiary Comair Flight 5741 (O’Hare to Cincinnati; 90.9%; 103 minutes)
27. Delta subsidiary Comair Flight 5366 (Detroit to JFK; 90.9%; 86 minutes)
28. Delta affiliate Atlantic Southeast 4358 (Atlanta to JFK; 90.9%; 84 minutes)
29. Delta subsidiary Comair Flight 5496 (Boston to Bangor; 90.9%; 72 minutes)
30. Delta subsidiary Comair Flight 5515 (Detroit to Cincinnati; 90.9%; 68 minutes)

 

22 of those 30 flights involve travel to or from the New York City area and of those, 16 were to JFK airport.  A little more scrutiny reveals that 15 of the 16 involving JFK were flights operated as commuter flights using regional jets.  One would be tempted to simply associate most of the problem with Comair (Delta’s regional affiliate flying many of those chronically late flights) but if it was just Comair’s operations, they would have fantastically late flights for other city pairs as well. 

 

I’m sure a pattern is revealing itself here.

 

First, airports in the New York City area and JFK Airport in particular cannot accomodate the flights unless it is a perfect day.  Since those airports are subject to severe weather both in the summer and winter, a fair number of those flights simply never take off or arrive on time.  Ever.  If there is one minor disruption at a peak flying hour, schedules for most airlines at those airports are shattered.

 

Second, because those flights are regional jets flown mostly by legacy airline “connector” airlines, they take low priority when it comes to dispatching.  If Delta has 25 mainline aircraft scheduled into the airport and another 20 regional jets, then it will give priority to dispatching those mainline aircraft first for the simple reason that there are more passengers on those airplanes.  Regional jets are carrying generally less than 60 passengers on those aircraft and by letting those aircraft arrive late in favor of mainline airplanes, they disrupt the fewest passengers.

 

However, doesn’t it seem a bit deceptive to have flights scheduled for a route that is 100% late?  Wouldn’t it seem deceptive to schedule flights that cannot arrive at least 60% on time with late being no more than 45 minutes at the worst?  Of course it does.  Airlines ask for and get performance guarantees when they buy aircraft.  A new airplane generally has to be within 2 or 3% of the guarantee or airlines receive performance penalty payments and sometimes negotiate their way out of the purchase contracts.  If Boeing delivered an airplane that was 100% over its fuel burn, they would be out of business.  If they delivered an airplane that was 10% over its fuel burn they would be out of business. 

 

The public puts up with this because it is pretty hard to find out just how reliable a flight is when booking a seat.  It can be done but I just did it on a hypothetical flight from DFW to ORD (Chicago) and it took me more than 12 minutes to check out the statistics on just 3 flights.  If those first 3 revealed themselves to be too late on average, I would have spent more time identifying one that wasn’t too late and that did have a seat at the price I wanted to pay.  Selling services that perform that badly would constitute fraud in many other service sectors. 

 

What if airlines had to publish their dispatch reliability and schedule reliabiilty along with a fare?  It would sure make the consumer approach his purchases differently, wouldn’t it?  After all, how willing are you to pay for a full fare economy seat if you know that the flight you are purchasing it on runs 100% late and by as much as 130 minutes?  You probably wouldn’t buy the ticket at almost any price if you are business traveler because those travelers need some predictability and reliability in their schedules.  Likewise, wouldn’t you be willing to pay an extra $20 or $30 to take a different flight at a similar time that *does* have a good track record?

 

One way to evaluate your prospects for a particular trip is to look at which airlines serve that city pair and what their actual performance is for that route.  FlightStats.Com is a good website for this information but don’t be afraid to insist your business travel agent ensure you are on a flight with good dispatch reliability and on time statistics.  It is cheaper to pay $50 more for a good flight than to risk your entire schedule on a flight that has a 100% chance of making you miss a connection and blow an entire business day. 

 

The greater the transparency in the airline industry, the better the service will be.   If we required a variety of statistics be published by airlines in their flight listings, I would be willing to bet there would be a wholesale change in consumer behavior towards those airlines.  Good for good airlines and bad for bad airlines.  Shouldn’t it always be that way?

 

Update:  I’m told by a frequent flyer who flies Continental most often that Continental *does* publish their performance stats on their website when booking a ticket.  To a degree, that is unsurprising since Continental Airlines is one of the very few airlines that has consistently followed a policy of measuring their performance with very real metrics.  A policy that started with Gordon Bethune and has been continued by Larry Kellner.  Well done.

 

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How do you regulate airlines?  You don’t.

 

You regulate the airports instead.  Rather than constrain airlines by route awards and fare regulation, the better model is regulate airports and we already have an agency that is well suited to the job.

 

Major airports, including those secondary airports in major cities, should be regulated by the regular auction of slots.   By auctioning these slots twice a year, airlines would be forced to consider the value of flying into an airport against the costs imposed on them by infrastructure and resources.  Currently, most large airports in the United States that suffer from congestion do so because of unlimited slot availability or overly high slot allocations per hour.  By setting hourly caps and making those slots available at a price, airlines will have to align their operations according to the value of operating a flight into the airport and the value of monopolizing those same resources would be greatly reduced.

 

What this means is that airlines who have to pay a high price for a slot at an airport such as JFK will be more likely to use that slot for an airplane carrying a larger number of passengers rather than wasting the slot on a regional jet carrying very few.  This would have the effect of shifting those regional jet flights to times of the day when airport use is relatively light.  Critics of such a plan (including airlines) would decry it as a loss of service for people in smaller communities and as interfering government regulation against free enterprise.

 

Nonsense.  Airlines should remain free to operate routes of their choice but they should only be permitted to use public facilities (and that is, in fact, what an airport is) in a way that benefits the whole rather than just their network.  Passengers from Binghamton, NY may have to realize that because they offer so few passengers, it may be necessary to fly at different times of the day and experience some longer connection times because there is no economic argument for them to experience the same service levels (or frequencies) as someone who lives in a major metropolitan airport.

 

By auctioning slots a couple of times a year, you force an airline to weigh the opportunity costs of operating flights into an area on a regular basis.  If Airline A cannot make a revenue argument for flying from Syracuse, NY to JFK at 5:00pm in the evening, then they won’t buy the slot for that route.  If, on the other hand, they can make the revenue argument for 3:00pm, they will.  

 

In addition, it will force more competition upon the airlines for serving such airports because Airline B may be willing to pay more for a slot as a function of having lower operating costs and the airline who manages their costs will be rewarded with greater revenue rather than Airline A who has held on to slots under the current “use them or lose them” regime in place at capacity constrained airports. 

 

Put another way, if Airline A, a legacy carrier, cannot justify bringing 10 regional jets into an airport such as JFK at 5pm in the evening, and Airline B and C can justify bringing in 5 mainline aircraft each into the airport at the same time, the greater whole is better served.  Rather than enjoying those slots as a monopoly, the airlines are forced to regularly evaluate the economics and cannot engage in predatory pricing to deny other airlines opportunities. 

 

The follow on effect of such regulation is that the patterns of demand on airport infrastructure would smooth out some which means airlines and airline facility labor demands would also smooth out resulting in greater productivity on a unit basis.  Airlines would have less incentive to “sit” on gates they’ve leased for peak demands and the barriers to entering a crowded market would be lessened.  If American Airlines has the same number of flights into JFK but they come in more spread out over 24 hours, they need fewer gates and airlines have no incentive to hold those gates for their exclusive use if they cost them money without producing revenue.

 

Does it favor trunk route flying at peak times?  Yes and it should.  An airport like JFK (or ATL or DFW or ORD) should see predominatly high capacity aircraft arriving and departing at those times.  It is more efficient for both the passenger as well as the airline.  It should not be possible for an airline to fly a regional jet between two major cities during the day because of the opportunity cost of doing so.  Right now, airlines are using low capacity regional jets to boost frequency on hub routes and the incremental cost of those passengers makes it more expensive for passengers flying that same route on mailine aircraft. 

 

If the FAA auctioned such slots at airports, they would have a revenue source for additioning staffing at peak times and an incentive for redesigning airways and air traffic control to boost slots at airports. 

 

It would also have the effect of providing a dis-incentive to people who want to fly a corporate jet into a busy hub airport at a peak time.  Such jets offer maximum inefficient use of airport infrastructure at the worst times.  Currently, landing fees offer no disincentive for such aircraft who want to use the airways (modern corporate jets fly at the same altitudes as commercial traffic) and airports (these jets are light and pay small landing fees presently).   The greater good is not served when 4 business people  travel from Cleveland to NYC in a Falcon business jet at 8am on a Monday.  Those people should be traveling on a Continental 737 or 757 to NYC.

 

Likewise, major airlines will have an incentive to right-size their fleets to their routes.   A major carrier will no longer be able to justify “holding” a lot by operating a larger aircraft on a route than necessary because the cost of that slot (presently almost non-existent) will rise to a point that requires a business justification for operating the right aircraft for the right route.  Put another way, a legacy carrier might operate a larger MD-80 on a peak time route, at times, that enjoys only a 50% load capacity just to “hold” that slot for better times.  Under an auction model, that airline can only justify the right aircraft for the right route at the right time and no more.  That legacy carrier might find it of far greater benefit to operate the same route with a Embraer 190 that enjoys a 90% load factor and 30% lower operating costs. 

 

If anything, this pattern of regulation serves to boost competition and efficient use of facilities which, in the end, does benefit the consumer *and* the taxpayer. 

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In the late 1990’s, I worked in a general contractor partnership with two other men.  We reached a particularly bad period where despite all our efforts, our clients weren’t giving us business.  After almost 2 months of giving ourselves $200 paychecks every other week, it was clear that it was time to do something else. 

 

Our particular situation seemed to be based on our costs.  Things like sheetrock and doors had been rising in costs to the point where it became necessary to raise our prices to support the work we did.  There were other competitors, one man shops with a pickup for an office, who were undercutting our bids just enough to win the business.  We faced a choice of lowering our prices to win the business and not have any money or to stand firm and not win the business.  Or so we thought.

 

One of my partners and I were motorcyclists and decided to take a ride during this period that lasted 18 hours.  At one point, we were taking a breather alongside a very quiet road and began talking about our business troubles.  We realized a couple of things that changed our game.  First, the people that were undercutting our business were formerly from larger construction companies setting out on their own.  They were winning on price, not quality and dependability.  Second, we had an operation that had grown some and no longer fit well with some of our clients. 

 

The next business day, we renewed our effort to check in with clients on a regular basis and continued to bid every job available.  By doing this, we began to underline our ability to a project better and for a reasonable price.  We also began to go out and seek new clients who better fit into our business.  This meant asking for the business and delivering exactly what we promised on each job.  The result was that old customers that continued to fit our model came back and we gained new customers who were looking for a company that performed.

 

This should sound remarkably familiar to those who follow the airline industry.  There has been a cycle of attempts to enter the industry by people thought they had a game changing business plan and some were successful while others haven’t been.  Jet Blue brought a new LCC model based on the Southwest turnaround and fleet efficiency but that was also focused on a higher level of comfort and service.  They introduced two types of fleets to right size their routes but stuck with only two in order to benefit from economies of scale. 

 

Skybus came about based on the single fleet, pay for everything model that Ryanair of Ireland built.  They promised rock bottom fares and engineered a plan to accomodate that by flying to secondary cities and airports that offered lower operational costs.  Skybus failed partly because of rising fuel costs but also from a failure to recognize that distances in the US make it much more inconvenient to fly into those secondary cities. 

 

Airlines who identify their niche and develop a plan for it are more likely to survive.  You cannot be all things to all people in this business because that means you have to compete against every other airline at the lowest common denominator.    Why would American Airlines wish to compete against Allegiant Airlines when doing so puts them at a competitive disadvantage?  Allegiant is based on a business model that addresses low frequency, leisure travel combined with ancillary revenue derived from charging for every convenience.  Their labor costs are low and their fleet capital costs are low.   American Airlines isn’t built to compete for that business.

 

Continental Airlines is an excellent example of a company serving the people that fit their niche.  It doesn’t operate a low cost airline, it operates a high frequency, high service system that serves business travelers.  They understand that maintaining a modern fleet with modern conveniences is important to that customer.  They fly where their customers want to go and worry a lot less about being all things to all people when it comes to destinations. 

 

Southwest Airlines has found itself evolving over these past several years.  Often identified with the first time flier in the past, business travelers have realized that Southwest Airlines offers something that many don’t:  dependability.  When they fly Southwest, they know that there is a very high degree of probability that they’ll be able to get to their destination on time and, often, closer to their needs in a particular city.   While Southwest still offers a very low fare compared to its customers and still attracts those first time fliers, they’ve also begun to serve the needs of the business traveler by remodeling their gate areas to offers business conveniences such as laptop power ports.  They are in the process of testing in flight internet connections for the business traveler as well. 

 

In contrast, you have United Airlines who has pursued the “be all to everyone” philosophy and it shows.  With a huge network to leisure destinations, they get soundly beat by other airlines who compete on price.  Their national and international business traveler destinations are served by older, unrefurbished equipment and their service model denies the conveniences a business traveler expects such as meals, beverages and even charging for checking the first bag.  Notice that Continental hasn’t ignored the incremental revenue from such fees in general (they charge $25 for the 2nd bag checked) but they haven’t offended the business traveler with 1st bag checked fees either. 

 

American Airlines and United Airlines have pursued a strategy that offends or, at the least, disappoints their core customers.  Continental, on the other hand, recognizes that the opportunity cost of forgoing that 1st bag fee is paid back in customer loyalty when it comes to choosing Continental. 

 

The last thing the business or frequent flyer wants to hear is that the airline resents them and wants more.  Indeed, many have said publicly that if an airline wants more money, charge a higher fare but don’t insult them by charging for a bottle of Ozarka water on a flight.  It strikes such people as petty and money grubbing.   At the same time, these travelers don’t need to be singled out as the ones to carry the burden of paying for a flight.   Don’t charge exorbitant business fares simply because the company is paying for it rather than traveler.  These business travelers are smart people and generally the ones traveling are some of the smartest.  They will begin to recognize that the fare to travel somewhere on business becomes inefficient at a certain point.

 

I suspect that it is time for airlines to begin eliminating some perks in the business class cabin as well.  Often the business cabin is occupied by many travelers who purchased full fare economy class tickets and used their frequent flier status to upgrade into that seat.  Airlines will have to begin to find ways to differentiate their service and charge accordingly.  Perhaps a full fare economy ticket should be upgradeable to an Economy Plus seat rather than a business class seat. 

 

Service is important to the frequent flier but what is that “service” that is most important?  Is it a hot meal?  A business class seat?  A friendly flight attendant?  No doubt each of those things has some importantance but I’d argue that the primary measure of service is whether or not you can dependanbly transport your customer from point A to point B on time.   That is, after all, what the airline is contracting to do.  Deliver that and the customers bags as well, and you’ll likely win their hearts and minds.

 

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A number of airlines have been asking for permission to delay the start of flights to China from the United States.  The Dallas Morning News reported that American Airlines now has filed for such permission on their Chicago-Beijing route authority. Both US Airways and United Airlines have also asked for the same thing on their recent route authorities.

 

US Airways lacks the aircraft type for making the trip from Philadelphia and United Airlines, who does have the equipment, simply doesn’t want to fly to their new destination in the current economic climate.  These kind of routes cost a tremendous amount of money to operate and without some certainty that they’ll make money, the risk doesn’t seem worth it right now.  To the winners of these authorities at least.

 

The airline industry has played the “save us” card on these routes by making the argument that just because their economic situation changed, they should be given a second or third chance to find a more convenient time to operate these routes.  Yes, the entire industry has experienced a lot of challenges and, yes, the cost of fuel is certainly the biggest. 

 

However, we are not without other airlines who I suspect would be happy to operate these routes.  Why wait for an airline to decide its ready to fly them when we can identify other airlines that are willing to fly them right now.  I suspect that both Delta and Continental Airlines would give serious consideration to even removing equipment from a different route in order to be able to fly these routes.  Northwest, who already operates a large number of Asian routes, might well be tickled to death to offer more service.

 

It is time to go back to a “use it or lose it” model.  Giving airlines 2nd and 3rd chances only removes the incentive to figure out how to operate in today’s climate.  An airline should have no more than 12 months to operate a route authority from the date it is awarded.  If it cannot or will not, then its time to seek other “bids” for these routes.   When you deny such routes to Delta (who asked for ATL-Beijing) and give the to American Airlines (who wanted DFW-Beijing but ultimately asked for and got Chicago-Beijing) who then asks to defer their operation, you are putting Delta at a competitive disadvantage and American Airlines gains. 

 

Let the airlines who can and will operate these routes, have the routes.  Don’t permit large legacy airlines operating in fear the opportunity to “sit” on the routes and prevent that economic growth to someone else. 

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India’s Hindustan Aeronautics Ltd (HAL) has announced plans to build yet another 70 to 90 seat Indian regional jet.  While we don’t have details on its configuration yet, it will likely be powered by a version of the Pratt & Whitney GTF engine (Geared Turbo Fan) and with that seating configuration, I expect a 2 x 2 seating configuration.

 

But does the world need yet another regional jet in that configuration?  Probably not.  Right now Embraer and Bombardier are both offering highly efficient regional jets in that seating configuration and Embraer’s family ranges from 70 to 110 seats and offers cross cockpit compatibility.  Bombardier of Canada has the CRJ700/900 at present and is close to flying its prototype CRJ1000.  Russia’s Sukhoi is hard at work producing their Sukhoi Super Jet, another regional jet in yet the same configuration as all the others.  China’s AVIC I is producing the ARJ21-900, a 5 across regional jet for China’s growing routes.  If you thought I was done, I’m not.  Japan’s Mitsubishi is also producing a very similar regional jet using the new Pratt & Whitney GTF.

 

While both Bombardier and Embraer have enormous backlogs for their aircraft, they also have a very credible track record in building aircraft.  They also have families of aircraft that allow airlines to right size their fleets to routes while at the same time keeping maintenance costs reasonable.  I question whether Mitsubishi, AVIC I or Sukhoi can offer airlines the same capability for some time to come.  I also question whether these airplanes offer the right economics for many airlines.

 

A similar turbo prop aircraft can offer similar seating, comfort and travel times for less than half the operating cost on stage length of 400 nm or less.  I continue to believe that there will be a shift to aircraft that offer both the operating economies and capital costs that make such routes go from marginal to profitable.  Indeed, many mainline legacy airlines have contracts with pilots that are far less restrictive when it comes to seating capacities on such aircraft.  For instance, American Airlines has contracts in place that disallow American Eagle (and other commuter airlines serving American Airlines) from flying these new, higher capacity jets.

 

Continental Airlines showed us the way to a new profitability when they introduced the Bombardier / De Haviland Q400 on routes in the northeast.  Horizon Airlines confirmed their future by choosing to eliminate their CRJ aircraft and older Dash 8-200 aircraft and now they are being replaced with new, modern Q400 airplanes. 

 

The world doesn’t need another new regional jet no matter who built it.  It needs high capacity turbo-props and 110 to 140 seat mainline aircraft.

 

 

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It would be easy to see my two previous posts as anti-union but, in fact, I’m really just anti-stupid and anti-selfish. The primary issue I have with most airline unions is that they have leadership that stands for election on the basis of “getting more” no matter what the present airline industry climate is. The best strategy, presently, for that leadership to remain in power is to promise and fight for short term gains.

 

I firmly believe that both airline management and airline unions would be far better served by contracts that span a far longer term (7 to 10 years). These contracts would fall into term periods that would most likely contain both up and down cycles in the business. Management is better served by having long term, predictable costs to plan for and union leadership would be able to make a better argument for the well being of their membership in that each party recognizes that the long term success of the business supports the long term financial security of the employees.

 

Airlines suffer such exaggerated cycles because it is so difficult to diversify an airline company with other counter-cyclical businesses. The business strengths of an airline do not necessarily carry over to other industries. However, it is possible for an airline to perform a kind of business diversification for itself by diversifying its route and customer structure. Several airlines such as Delta, Continental and Northwest have recognized that by increasing the percentage of their business (and revenue) that derives from international travel tends to balance against their domestic business. Accordingly, they’ve worked hard to adding new, fuel efficient aircraft and flying new long haul routes to mitigate against domestic conditions that rarely align with the rest of the world.

 

This means the business model is changing and that requires a certain cooperation from airline employees. It means that pilots may have to fly longer trips but that can be balanced by requiring fewer trips over a certain period. It means that airlines likely need to measure this “balance” for their employees over a 90 day period instead of a traditional 30 day period. But that can benefit an airline employee as well. Having a route schedule planned for 90 days means that employee can make better personal decisions about their lives and how to accommodate their work.

 

Many of the work rules in place at large legacy airlines derive from the 1950’s and airline travel in the 1950’s was vastly different. Airline travel in the 1990’s is vastly different now too. Wiping the slate clean and negotiating a contract that provides for flexibility (on both sides), economic security (for both sides) and which addresses both the existing business model as well as the evolving one would be of huge benefit to both parties.

 

Unions mistake the need for increased productivity per dollar spent as a call to eliminate jobs in this industry. It isn’t. Increased productivity means being able to use a mechanic to work a variety of aircraft or being able to use a pilot for a variety of routes. It means re-arranging the job functions and duty times to provide for financial growth, not to simply eliminate jobs.

 

Many legacy airlines have let their employees down in one area in particular. Leadership. An airline is best served by a CEO who is, first and foremost, a leader. That CEO should no doubt be served by an executive team who excels at management but a leader “leads” all the employee groups with some common goal and with some harmony. In fact, many legacy airline unions often call for more “leadership” on behalf of their employees and I believe it is no hollow wish.

 

Find a successful airline, today or 30 years ago, and you’ll most often find an airline being run by a leader. American Airlines employees used to refer to former AA CEO Bob Crandall as a Son of a Bitch but they also acknowledged that he was *their* Son of a Bitch. Former Continental CEO, Gordon Bethune, did not architect Continental’s rise from the ashes of bankruptcy through financial management alone, he did it by working very hard at re-aligning the goals and interests of his employees with the airline’s long term success. He worked to make things both flexibile and financially rewarding.

 

It comes as no surprise that many United employees are badly demoralized and disillusioned with their leadership. That executive team has found ways to reward itself during bankruptcy, after bankruptcy and in spite of poor financial performance while tirelessly grinding away at the financial security of their own front line employees. Shareholders would be wise to structure financial incentive packages that only reward and retain airline executives who deliver financial and service performance.

 

The Continental executive team has proven at least 3 times in the past 15 years that it can turn a profit while treating their employees humanely and their customers with great service. The same is true of Southwest Airlines (who I note does have some of the longest term union agreements in the industry.)

 

If an airline executive doesn’t wish to remain a CEO if he doesn’t get millions in financial incentives each year whether the airline performs good or bad, then he (or she) really isn’t the best choice to lead the airline. Airlines are a business whose success can only be measured over a fairly long duration of years. Indeed, if you look at the financial results of legacy airlines just this year, there is no argument for ever investing in the business.

 

The airline employee is the front line service delivery mechanism for an airline. It isn’t the plane, it’s the people staffing the airline that provide that discriminator for choosing one airline over another. No airline in the US can afford to discriminate on price alone anymore. Southwest, a low cost leader, recognized that a few years ago and now has begun offering a more differentiated service product that is more attractive to the business traveler. It is critically important for airline management to get over itself with this idea that airline employees are commodity. They aren’t. They are the prime service provider for customers and customers really do notice and differentiate on that experience more than anything other discriminator (aircraft choice, etc.)

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

Filed under: Airline Fleets, Airline Service, Death Watch by ajax
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The Dallas Morning News reported that American Airlines will be both accelerating 737 deliveries as well as taking up new orders for the Boeing product.

 

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

 

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

 

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

 

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

 

 

Filed under: Airline Fleets, Airline News by ajax
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Airlines have begun making it possible to have a boarding pass using a 2D bar code to check in via PDA and/or Cell Phone.  Here is Continental Airlines’ website regarding this new innovation.

 

In principle, this is a great innovation for many travelers but it comes with some warnings not mentioned by any airlines at present.  If you are a true frequent flier then you are likely aware that sometimes your mileage isn’t credit from a flight now and then.  Airlines require that you send a copy of your boarding pass to prove the credit. 

 

Airlines such as Air Canada and Continental have not figured out how to give you credit when you have a PDA/Cell Phone boarding pass.  So, if you try out this option, buyer beware for now anyway.

 

Ultimately, this is a great innovation and choosing this option does not prohibit you from having a boarding pass printed at check-in (generally by swiping a credit card) so if your cellphone / PDA isn’t working, you’re still covered. 

 

 

Filed under: Airline News, Airline Service, Travel Hints by ajax
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The Milwaukee Journal Sentinel has this story today.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

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

 

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

 

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

 

 

Filed under: Airline Fleets by ajax
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Today I found this Time Magazine story.  From 1966, it describes Harding Lawrence’s 1st year of tenure as CEO of Braniff International.  Now, I know I have put quite a bit of Braniff into this blog so far but that should wind down soon.

 

Harding Lawrence is often reviled as a man who “wrecked” Braniff.  Fact says differently and this story gives a great hint or two as to his genius in operating an airline.  For one, Lawrence took his experiences operating jets at Continental and severely raised the utilization rate at Braniff.   Even in modern days that would be sharp.

 

He also introduced color and life into flying.  He brought a hint of romance and a dash of allure to flying that, until that time, had not been expressed his way. 

 

I’m in possession of annual financial reports on Braniff from 1968 to 1980. If profit is the best metric for measuring Braniff’s decisions and choices, let’s look at the facts. Since the 1968 report has a 5 year review in it going back to 1964. Harding Lawrence and his changes began in 1965.
 

Net income:
1965: $9.5 Million
1966: $17.8 Million
1967: $4.7 Million
1968: $10.4 Million
1969: $6.2 Million
1970: ($2.6 Million) Loss
1971: $0.46 Million
1972: $17.1 Million
1973: $23.1 Million
1974: $26.1 Million
1975: $16.0 Million
1976: $26.3 Million
1977: $36.4 Million
1978: $45.2 Million
1979: ($.04 Million) Loss
1980: ($.13 Million) Loss

 

I would point out that some of those numbers would be a credit to many airlines today.

 

Some other interesting facts are:
 

1) Going from #8 in ontime peformance in 1965 to #1 in 1969.
 

 

2) When Braniff (by Harding Lawrence’s decision) originally ordered the 747, they ordered 2. However, in light of the economic downturn as delivery neared, Braniff (Lawrence) took delivery of one (N601BN) and sold the second (originally N602BN and painted green). That one 747’s utilization was a highly profitable 15 hours per day.

3) Fleet composition in 1964 was 52 planes of which there were 6 different types and of which only 2 types were jets. In 1969, there were 72 airplanes of which there were 6 different types and all were jets. In 1975, There were 81 planes of which 69 were B727’s, 1 a 747 and 11 were DC-8’s.

4) The Braniff route system in 1965 was largely a north-south system with some extensions east-west. In 1975, the route system was balanced with routes traveling from east coast to west coast and from the south to the northeast, northern midwest and even the northwest.

 

5) In 1974 and 1975, Braniff experienced domestic traffic growth rates of 10.9% and 6.6% respectively compared to industry metrics of 2.4% and 1.5% percent. In those same years, Braniff’s fleet utilization rate exceeded the industry standard by a full hour / day.

 

6) Some examples of routes applied for and received by Braniff post 1978 deregulation: DFW–LAX, ATL–MIA, DFW–LAS, DFW–LGW.

 

7) 1979 Trans-Pac routes were instituted with some examples being Los Angeles to Guam and Seoul with follow on services to Hong Kong and Singapore.

 

8. 1979 Trans-Atlantic routes were instituted with some examples being DFW to London, Amsterdam, Brussels, Frankfurt and Paris and similar Boston routes to Amsterdam, Brussels, Frankfort and Paris.

 

Now, I realize that, unlike many opinions on Braniff decisions, I’m actually encumbered with facts. The facts I’ve given do not portray an orgy of poor decision making and egotistical fluff. They actually portray a profitable, growth oriented airline focused on service, right sized fleets and a route system that even today would be enviable.

Further, just the net income figures for Braniff serve to paint a much more fair picture of Harding Lawrence. It certainly disabuses a person of the idea that Braniff management was a bunch of huckleberries flailing around. In fact, it paints of picture of profit, growth and sound financial management for most of Lawrence’s tenure (almost 15 years) and it certainly is a credit to management and their decisions
 

That said, he gambled on deregulation (no more so than many others) and he lost.  The odds were probably in his favor but odds aren’t a guarantee.  He was definitely a man of contradictions at times and definitely was possessed of some idiosyncracies too.  All told, though, I consider him the forgotten titan of the airline industry.

Filed under: Airline Fleets by ajax
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The Runway Girl blog just posted this report on SAAB, Embaer and China with respect to the growing demand for turboprops. 

 

It’s *very* interesting to me that Embraer has begun studies on a new family of turboprop aircraft.  This is an industry they cut their teeth on and many may still remember their small commuter aircraft from the 80’s and early 90’s. 

 

The report takes note that most demand for turboprop aircraft is currently in Europe and Asia.  However, it seems like there will be rising demand here in the US over the next 2 years.  Horizon Airlines, the commuter feeder for Alaska Airlines is phasing out its older DH-8-200 aircraft in favor of an all Q400 (really a DH-8-400 Quiet) fleet.   Also, Continental now owns several Q400 aircraft (and has orders for more) that are operating out of Newark with great success. 

 

The real demand will begin when legacy airlines who contract with regionals (Mesa, Pinnacle, ASA, ExpressJet, Air Wisconsin, etc) ask for turboprops and better revenue.  My guess is that Delta/Northwest will lead here but it might be Continental.  American Airlines and United will be followers, not leaders in this if I’m guessing right.

 

The economics of operating these aircraft on short hops and commuter routes is just too good to ignore and even if oil does drop below $100, it will never be $30 a barrel again. 

 

Filed under: Airline Fleets by ajax
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