Delta / Northwest is not only big with respect to the number and type of airplanes they have, they are also big for the number of hubs they are currently operating.  Conventional wisdom continues to bet that some of those hubs will be closed or rationalized just as it bets that the airline fleet will be reduced.

 

My guess is that there really won’t be a reduction in hubs of any real significance with the exception of two.  This new airline has two hubs in close proximity, Memphis and Covington/Cincinatti, and each serves similar markets.  However, rather than being combined into one, I suspect that Memphis will likely be de-emphasized into a “focus” city with more connecting traffic routed through Covington/Cincinatti.  The yields in each city are very good but Covington/Cincinatti is by far the city with the best yields.  Memphis is likely to remain as a focus city because it is a good gateway to the central midwest section of the US.

 

All other hubs in the US such as Atlanta, Minneapolis / St. Paul, Detroit, and Salt Lake City have the airline as a dominant carrier and there is no reason to combine any of them with respect to the routes they serve. 

 

Now, both airlines operate significant flights from gateway cities such as Los Angeles and New York and it is quite likely that the airline will work hard to combine some flights going to the same cities.   For instance, flights from the New York area going to the same destinations in Europe will be combined to raise the load factors on the equipment being used.  However, Europe presents an interesting problem because Northwest has been in a close relationship with KLM and has used Amsterdam as a “hub” to connect to other cities in Europe.  Delta, on the other hand, is used to flying direct flights to a variety of cities in Europe without a hub or close partner.  I suspect the relationship with KLM will be reduced so that Delta can raise the loads on its own flights to smaller European cities.

 

Northwest comes to the table with a hub in Tokyo, Japan and they have 5th Freedom Rights to pickup and carry traffic from Tokyo to other cities in Asia.   On the surface, that would appear to be a very valuable asset.  However, the value of that arrangement was far greater when the political climate in Asia was much different and the range of aircraft made it more convenient to fly to a central hub.   Today, it can be much more profitable to fly direct to a variety of Asian cities using newer, long range aircraft such as the Boeing 777 and the about to be introduced 787.  I have no doubt that the Tokyo hub will be retained in some form because the yields from traffic originating in Tokyo to other Asian cities is still well worth the effort but I suspect that there will be a renewed emphasis on point to point flying as things evolve in the new airline.

 

The thing most likely to change at Delta’s hubs will be the aircraft equipment.  With a wide variety of equipment to choose from, it would be unsurprising to see a shift of long haul aircraft between the hubs in order to improve yields, load factors and even to explore new routes.  That will be done slowly and carefully so that Delta doesn’t have to service too many different types of aircraft at each hub.  Once again, aircraft being used at various hubs to service various areas will probably be rationalized.  It would be unsurprising to see A330s shifted to longer South American and African routes with B767-400’s moved to trans-atlantic routes originating in MSP and DTW. 

 

Los Angeles will probably see a greater concentration of 747 aircraft being used on trans-Pacific flights.  New York and Atlanta will probably see 777 aircraft moved in for long range, point to point flying to destinations in India, South America and even Asia.  

 

At present, Delta has 4 different types of long range aircraft in the 747, 777, A330 and 767 with another on the the way (787).   Since Delta already operates GE powered 777-200ER/LR aircraft, they’ll likely place an order for some 777-300ER aircraft and use those to replace the aging 747 aircraft.  That will reduce flying by one type.  The A330 aircraft will be retained until a fleet of 787-9/10 aircraft can be purchased and then the A330 will likely be let go.   Delta’s 767-400 aircraft is fairly new but it will probably suffer the same fate as the A330 in being replaced by 787 aircraft in the future.  Suddenly, two basic types with 2 sub-types between them can service all the long haul routes and, at the same time, offer some harmony at each hub. 

 

I do wonder if Northwest’s 787 orders will be switched from Rolls Royce engines to GE GEnx engines.  That would permit Delta to operate two basic aircraft types that would use the same brand of engine and engines that share some basic design philosophy as well. 

 

The tricky part of managing all of these hubs for Delta will be the domestic fleet which is comprised of Airbus A320 series, Boeing 737 series, DC-9 series and MD80/90 series aircraft.  Because it is more efficient to perform maintenance on a domestic fleet that keeps the aircraft close to a maintenance center, I do wonder which hubs will get which aircraft.   Both Airbus and Boeing offer good choices for domestic fleets in the A320 and 737 series.  The DC-9 fleet is old and will be retired over the next couple of years so it isn’t a factor.  The MD-80/90 aircraft isn’t exactly old but it does become somewhat of an orphan and they don’t offer the fuel effiency that the A320 and 737 offer.  It’s quite possible that Delta will retain both the A320 and 737 series and simply order more of both until they can choose a next generation domestic fleet type from Boeing or Airbus.   I do believe that the MD80/90 fleet will be selected for retirement in the next 2 years. 

 

The exciting part of this merger will be watching the decisions that Delta makes about its new future. 

Filed under: Airline Fleets, Airline News, Airline Service by ajax
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The US Justice Department approved the merger between Delta Airlines and Northwest Airlines today.   The two companies will now begin to work on executing the combination as quickly as possible and it should culminate with a combined operating certificate in 1 to 2 years. 

 

In the meantime, Delta and Northwest have already made a great deal of progress towards completing the merger.  The executive team has been selected, agreements with pilots have been obtained and each company has been working pretty hard towards merging the culture of each airline together.  While no doubt there are bumps in the road still to be encountered, this particular merger shows great signs of being accomplished with relatively little strife. 

 

Flight Attendants are targeted for being a trouble area.  Delta’s flight attendants are non-union and while there have been a few votes over the years to unionize, all have failed pretty soundly.  Northwest’s flight attendants are unionized and have been characterized as even miitant.  Delta’s CEO, Richard Anderson, has urged that everyone work together and while his stated preference is for no further unionization (and he has backed that up by being very willing to negotiate differences), he also has said that he and the rest of the executive team will abide by whatever vote there is.  It is likely that the flight attendants will have a vote after the merger is officially executed and it is likely that it will be in favor of unionization since a combination of Northwest’s flight attendants with the minority of Delta flight attendants in favor of a union would win any vote.

 

While both CEOs of each airline have professed that such a diverse fleet of aircraft will permit them to “right size” aircraft to a particular route, it is highly likely that the fleet will be pared down over time.   Northwest’s youngest aircraft are manufactured by Airbus and Delta’s fleet is comprised entirely of Boeing products.   Certainly both major aircraft manufacturers will see an opportunity with this merger and both will be pitching their mainstay aircraft lines, the Airbus A320 series and the Boeing 737 series.  With an gentleman’s agreement in place between Delta and Boeing that gives Delta preferential delivery slots, this is Boeing’s opportunity to lose.

 

A good guess is that, initially, the Douglas DC-9 fleet will continue to be eliminated and bases for the Airbus A320 and Boeing 737 fleets will be established at selected hubs.   It is possible that the Airbus A330 fleet will be phased out in favor of more Boeing products such as the new 787 of which Northwest already has a significant order on.  The 747 fleet will most likely be phased out over time in favor of the 777-300 and which Delta already owns in the 200ER/LR version. 

 

The combination of these two airlines will form the world’s largest airline both by revenue and traffic.  This will even dwarf American Airlines by a significant degree.  However, because of industry contraction and the obvious economies and advantages to be gained by constraining capacity in markets that the new Delta will be dominant in, it is likely that the airline will actually contract both its fleet and, to some degree, its employees.  However, major layoffs of any significant numbers are very unlikely and most contraction is likely to be done through natural attrition.

 

 

Filed under: Airline News by ajax
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The Dallas Morning News Aviation Blog is reporting that Southwest Airlines just announced that they will begin flights out of Minneapolis / St. Paul next March.  The first flight will be to Chicago Midway which is no surprise. 

 

For some time, pundits have claimed that Southwest couldn’t enter this fortress hub and now they are.   To me, this is exciting news because I think that Milwaukee might not be very far behind as a station.  There is a lot of originating traffic between Milwaukee, Minneapolis / St. Paul, Chicago, St. Louis, Denver, Detroit and Kansas City.  If you look at the type of flying one would do between those city pairs, it looks exactly like a Southwest Airlines strategy.   What’s more, Southwest is already very strong in all of those cities except MSP and MKE.  The cost to start those routes and market them are relatively low since the airline only has to introduce itself in two of those cities. 

 

I feel certain that Southwest will grow MSP and then turn its attention to Milwaukee either in late 2009 or early 2010.   Sooner if they can so that they can compete against Airtran there.   This is good news for Minneapolis / St. Paul and probably bad news for Sun Country Airlines, an airline that has been faltering in the MSP market for a few years now.   I would be tempted to mark Sun Country Airlines as a possible purchase by Southwest because their facilities  and base in MSP has some value for Southwest.  Even their fleet, Boeing 737-800s, comes close to matching Southwest’s (B737-300/500/700) but I suspect they know that all they have to do is wait and much of it will be theirs anyway.

Filed under: Airline News, Airline Service by ajax
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Almost all airlines in the United States operate from hubs.  Going from West to East, they are (in no specific order), Phoenix, Salt Lake City, Denver, Dallas / Fort Worth, Houston, Minneapolis / St. Paul, Chicago, Detroit, Cincinatti, Memphis, Atlanta, Cleveland, Philadelphia, and NYC.  There are a few other cities that some might argue are hubs but which I think are more “focus” cities than the above cities.

 

One way airlines have reorganized themselves to meet the cost pressures of non-deregulation on the costs side of the airline industry is to simply start “connection” and/or “feeder” airlines or to contract with those airlines.  Some examples are American Eagle, Mesa Airlines, Comair, Compass and Express Jet.  There are others too.  These airlines fly regional aircraft (regional jets and turbo-prop aircraft) on behalf of the mainline airlines.   Unions permitted these airlines by getting “scope” clauses in the contracts that limit the size of the aircraft to be operated. 

 

Often those scope clauses originally limited airlines to flying regional aircraft that had 50-odd seats or less.  What they didn’t do was limit the kind of flying such aircraft might be asked to do.   As things evolved post-1978 deregulation, airlines began to establish large hubs with multiple banks of flights each day.  They did so in order to “concentrate” their operations and take advantage of economies of scale.   Over time, mainline aircraft departing from a hub either went to other hubs or to larger 1st and 2nd tier cities.  Mainline aircraft stopped serving the smaller third tier cities (for example Des Moines or Jackson, MS.)  It never occured to unions to limit both scope and distance in those contracts because originally it was assumed that regional aircraft couldn’t serve route sectors of much more than 200 to 300 nm. 

 

Instead, mainline airlines used their feeder airlines to pick up traffic in those cities and carry it to a hub where the passenger then transferred to a mainline aircraft or another regional flight to get to their final destination.  For instance,  a passenger might fly American Eagle from Des Moines to Chicago, transfer to an American Airlines flight using mainline aircraft and continue on to a final destination such as Los Angeles.  

 

Prior to 1978 deregulation, American Airlines might have flown a route from Chicago to Los Angeles with intermediate stops in Des Moines and, say, Salt Lake City.  Remember this is a hypothetical example.  While hubs were beginning to develop or had developed, those entities really resembled what we call focus cities today.  It was a concentration of traffic and opportunity to rotate aircraft through maintenance facilities but it wasn’t a fortress hub that we see in places such as DFW or MSP today.

 

Over time, new aircraft such as regional jets that had greater capacity and speed than original “feeder” aircraft such as the EMB Brasilias or SAAB 340 aircraft were introduced.  These regional jets were capable of mainline aircraft speeds and altitudes and were capable of flying route segments in excess of 400 nautical miles.  Since the cost structure for such aircraft was an order of magnitude less than that for mainline service, airlines began to realize that they could use these aircraft to serve routes that contained a lot of O&D traffic for more point to point flying. 

 

Suddenly, American Eagle wasn’t just serving cities from DFW that were in Texas and surrounding states.  With regional jets, it began serving medium haul, thin traffic routes from DFW.  One example is the one I gave yesterday:  DFW to MKE.   That route has a lot of O&D traffic (Origin and Destination) but very little connecting traffic.  What that means is that people flying from MKE to DFW were terminating their trip at DFW instead of necessarily continuing on to another destination and vice versa.  If a MKE passenger wanted to get to Denver, they would fly either to Chicago or MSP to connect or possibly direct on a United Airlines “connection airline”. 

 

The feeder/connection airlines evolved into the “point to point” service provider for small to medium markets.  The reason is that airlines can only afford the flight crew labor costs for routes where the yield (profit from revenue) justified those costs.  The only way to find that yield is to concentrate flights through hubs.  One example, again, is DFW.  American Airlines “feeds” traffic from all over its network (including American Eagle’s network) into DFW where they “concentrate” that traffic and redistribute it to other routes.  This means that those routes load factors remain very high for each flight. 

 

On the surface, that sounds efficient.  However, there are some underlying factors that reveal it to be inefficient to operate such hubs.  First, it means that you have to schedule your traffic in banks of flights.  You want your flights to arrive at about the same time and then take off again at about the same time.  In order to manage that, your departure times at outlying stations may have to be excessively inconvenient to passengers.   Your airport service staff tends to work in concentrations with excessive idle time in between banks of flights.  You still have to pay them and they remain there because you service large banks of flights at one time.  An airline must have that staff in place over the full duty period to accomodate those peak periods.

 

Such hubs also tend demand fleets that are largely homogenized.  American Airlines, for instance, standardized on the MD-80 for these flights (and now is doing so on the B737-800) and therefore has to find routes that fit the aircraft instead of aircraft that fit the routes.  Because they must fill so many seats on mainline routes to make a profit, it drives them to feed more and more traffic into the hubs.

 

Hubs also can cause system wide service disruptions.  A bad weather day in Chicago can wreck two major legacy carriers systems (United and American Airlines) for multiple days because any disruption ripples outward through the whole system.  Since all flights go to or depart from the hub, there is no flexibility to “route around” the problem city.  

 

All of those issues inhibit a legacy carrier from earning long term profits and they haven’t earned reliably for over 20 years now. 

 

The best example of how best to operate in today’s airline market is, no surprise, Southwest Airlines.  While they do have several cities that look and feel like hubs, they really aren’t when compared to other airlines.  They are focus cities.  Those focus cities permit some concentration but they really exist to provide some operational flexibility and maintenance. 

 

Southwest Airlines focuses on flying point to point routes and high frequency commuter flights.  If you try to get from one city to another on Southwest’s system, you are very likely to fly there direct and in many cases non-stop.   The percentage of traffic on flights from focus cities that is “connecting” is relatively small compared to legacy airlines. 

 

When a flight from Southwest Airlines departs DAL (Dallas Love Field) for ABQ (Albuquerque), it isn’t coming back that day most likely.  Instead, it will continue on to, perhaps, Phoenix and then to Portland where it will turn and head to Los Angeles and then, maybe, to Denver.  The plane  goes through 3 focus cities but at all times it is carrying O&D traffic primarily. 

 

That point to point system with focus cities permits them to offer highly convenient flights that fly direct (in other words, a passenger doesn’t have to get off the plane and board another one) and they get a higher utilization rate out of both the aircraft and crew because they aren’t sitting at hub for 1 to 2 hours waiting for their flight to depart again.  Instead, Southwest crews do fast turnarounds at focus cities (20 to 40 minutes) and depart for still another city.  Southwest not only gets high utilization from their aircraft but they also get high utilization from their flight crews. 

 

Southwest Airlines’ crews are paid competively and even generously but the airline also gets far more productivity from them in a given duty period.   Ironically, Southwest crews also fly less fatiguing schedules overall and spend more nights at home than most other aircrews.   Southwest captains earn as much or more than any other Boeing 737 captain but because they negotiate not just raises but flexibility in their contracts, their standard of living is quite a bit higher than it would be at most legacy carriers.   They offer more productivity in return for working an easier duty period at a competitive salary. 

 

They also don’t fly small commuter aircraft and they don’t avoid flying to 3rd tier markets.  Southwest flies B737 equipment to cities such as Indianapolis, Odessa, Corpus Christi and Brimingham.  Every other airline serves those markets with primarily regional jets and Southwest manages to earn more profit flying to those same cities using mainline aircraft that is more than 100% larger.   Not because their crews are “cheaper” but because their crews (and their unions) bargain for more than just money.  It’s a competitive negotiation with real give and take and, as a result, Southwest gets high productivity without working their crews longer hours, bad morale or high turnover. 

 

Next we’ll look at why seemingly “fair” fares can’t earn real profits for most US carriers. 

Filed under: Deregulation, Trivia by ajax
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Deregulation in 1978 was never full deregulation.  It was, instead, deregulation of the revenue side of the equation.  Airlines were suddenly free to fly routes and set fares as they wanted.  The barriers to entry on a route were no longer regulatory but, rather, business cost.  My father phrased the start of a route as “starting a new business” and I must say that that is true.  Airlines have to invest in infrastructure, new employees and market their services when entering a new city or route.  The airline is essentially starting a new business.

 

What never got deregulated was the labor cost side of the equation.  Flight crews were fully unionized (with the notable exception of Delta’s Flight Attendants) and the union approach to wages and work rules was and always has been to negotiate for more each contract.  When the game changed with regulation, the airlines were still inhibited from negotiating freely for their labor on an open market because the unions had 30 years of precedent and enormous political power.  God help the airline who had pilots striking against it because it denied *any* revenue to the company and airlines are cash intensive businesses.  They go out of business very quickly if that cash stream is interrupted. 

 

Using pilots as example, take a look at their negotiating power in 1978.  First, the barriers to entry in a career as a pilot were (and to some degree remain so) very high.  A typical pilot spent 7 to 9 years in the military flying multi-engined aircraft and when they exited, they got their ATP license and went hunting a type certificate to fly for an airline.  Once in an airline, they entered a seniority system that made it very difficult to leave because every airline had the same system.  If you started at one airline, made captain on an aircraft type and then wanted to leave, you had to start over again.  The union(s) set a contract and work rules in place that essentially made each airline a fiefdom.

 

The airline union is the lord and the pilots are the serfs.  Well paid serfs in their later years but serfs nonetheless.  Not only is there no incentive to seek work elsewhere, there were strong incentives to stay and play the game no matter what.   Even when an airline is by all measures about to fail.

 

This situation remains true for most airline unions to some degree or another.  What the government never did was deregulate labor so that airlines could compete for qualified people to fill their staffing needs.  One interesting by-product of this is that airline pilots work terrible schedules today.  They do so because it is enormously expensive to have a pilot sitting on the ground doing nothing.  Airlines fly pilots on different schedules than their flight attendants (at least at most airlines) and they do so because they want to extract all possible value from them because the cost is so high.  Ironically, a more ratioinally paid airline pilot would work an *easier* and more rational schedule that impacted their lives (both personally and professionally) far less if their pay were more in line with a free market competition.   Mind you, they wouldn’t be underpaid, just paid more in line with the demands of their job.

 

My father thinks that a free market salary for a pilot would be about $70,000 / year and there would be far less range between entry level and an experienced level.  I personally believe that number would be higher.  About $100K to $120K.  I think so because the costs to become a qualified airline pilot and the skill required still make for a rather rare person today.   The pilot still has to become qualified under FAA rules by getting time first on single engine aircraft, then multi-engine aircraft and turbine engined aircraft.   Flying also takes  talent.  Being an commercial pilot also means having a great understanding of engineering (many pilots gets undergraduate degrees in engineering for just this reason.) 

 

What the airlines needed was an opportunity to negotiate for new labor under new rules.  It would have been impractical and politically difficult to “break” the existing unions.  It would have been better to set new rules for airline unions and airline flight crew going forward.  For instance, eliminating the seniority system but making one’s qualifications and types fully transportable between airlines for the same pay would have made it more fair to both sides.  A pilot who was “captain” qualified on a Boeing 737 would be able to take those qualifications and fly at any airline for market pay.  

 

Suddenly a pilot would not be married to just one airline and have to deal with fear of furloughs and bankruptcy multiple times in their career that could reset them back to “zero” in their career.  Instead, they would be able to seek positions at other airlines for a commensurate career salary.  The same could be true for any flight crew.   It would even have the benefit of further “harmonizing” best practices among various airlines. 

 

Over the years, some airlines have made some attempts to re-negotiate this situation.  American Airlines introduced the A/B pay scales in the 1980s.  That worked very well for many years but the advantage was lost because the “B” scale employees still worked for the original union and the “A” scale employees had a vested interest in raising all salaries for everyone.   

 

There is nothing wrong with unions existing in the workplace.  However, when a union’s sole focus is on raising salaries to everyone else’s detriment, it begins to lose value.  Unions can and should enforce good work rules, good working conditions and even qualification standards and salaries.  They should not, however, distort their own labor market or their airline goes down.

 

Another way airlines have gotten around this is by starting commuter feeder airlines.  American Airlines has American Eagle for instance.  These “new” airlines have employees who are hired at “market” rates and who remain employed by unions.  Now the airlines use these airlines to fly mainline routes at higher frequencies because it is more cost effective than flying the route with less frequency but greater capacity using mainline equipment.

 

A great example of this is American Airlines and how they served the DFW – MKE (Milwaukee) route a couple of years ago.  They used 50 seat ERJ-145 aircraft in their American Eagle subsidiary and flew as many as 5 cycles a day.  What’s worse, they frequently turned away people or re-routed them through Chicago because their aircraft were either capacity limited or load limited.  The aircraft had average load factors far in excess of 85%.   The better solution would have been to fly either mainline MD-80 or Boeing 737 aircraft 2 to 3 times a day.   That would have offered better service (more reliable and not load limited), more comfortable seating and slightly shorter flights.  But they couldn’t because AA MD-80/B737 pilots for such routes would cost 4 times more than American Eagle pilots. 

 

The demand was there.  The fares actually offered great revenue opportunities (when compared to average DFW – ORD fares) but the expenses were still too great on the labor side.   So people were offered a cramped ERJ with all coach service that, by the way, eventually lost passenger traffic to Midwest Express (who flies more comfortable MD-80s and B717 aircraft) and to other mainline airlines who would service Dallas via Chicago or Minneapolis-St. Paul. 

 

Regional Jets were never built for serving such markets and they do so very inefficiently.  Regional aircraft should never be serving route sectors greater than 400 nautical miles and certainly should never be serving mainline city pairs such as MKE-DFW.    They should fly from Odessa to Dallas or Cedar Rapids to Milwaukee. 

 

Could labor be less regulated in the airline world today?  I don’t know.  It would require great political will and I frankly don’t see that on the horizon.   It would require the airline industry to be both realistic and cooperative with each other and it would require unions to recognize that not every contract means “more” but maybe it means different and more accomodating instead.  It should also offer some job security and certainty too. 

 

In the next part, we’ll take a look at how the lack of full deregulation has distored air travel in the United States and caused inefficiencies.

Filed under: Deregulation, Trivia by ajax
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This weekend I had a series of long and very interesting conversations about airline economics and deregulation in the airline industry with my father, a former executive vice president of Braniff.  I have been following the airline industry since the mid 1990’s and very closely since the early 2000’s and after this weekend I can only say there is still more I don’t know. 

 

The insight I gained on the industry this weekend isn’t easy to get anymore.  Much of what takes place today in the airline world overshadows the history of the industry.  But I thought I would share my new insight in a series of stories this week on airline economics and deregulation.  Information presented as fact comes from my father.  The opinions are mine unless otherwise attributed to someone else.

 

The first of these stories is quite naturally about the history and background of the airline industry.  What almost any fan knows is that the airline world as primarily fostered by air mail contracts originally.  It wasn’t until the DC-3 (and similar aircraft) that an airline could really earn profits from passengers and even then air mail was an essential part of earning a profit as an airline.   In other words, passengers reduced the importance of air mail but it was a long time before it diminished the importance of air mail revenue to a point at which it could be considered relatively unimportant.

 

Prior to air mail, the fastest way to move mail around was by train.  Trains had reliable schedules and a robust network of lines that made it easy, for the first time in history, to move mail in a timely manner.  Since many infant industries are heavily influenced by more mature industries, it comes as no surprise that many of the “best practices” used by railroads were “inherited” by airlines as they began to operate. 

 

One good example of this is how engineers on trains were (and still are) paid.  It was based on time, distance and weight.  An engineer who operated a long, heavy train on a transcontinental route quite obviously was going to A) Be away from home. B) Need skills and experience to operate that train over different terrain. C) Be able to know how to stop such a leviathan in an emergency without completely destroying the train itself. 

 

The engineers were paid a scale of wages that took into account their skill and experience as well as punishing time away from home and long duty hours required to push that train to its destinations.  In other words, an engineer who had to stay on duty for 12 hours a day driving a 1/2 mile long train over a mountainous area would be paid much more than an engineer who drove a feeder line over a short distance delivering boxcars to factories in an industrial area.  Quiet naturally, this kind of thinking was quickly adopted by airlines and airline pilots. 

 

Very early in the game, airline pilots were paid according to the size of their aircraft (a DC-3 pilot earned much more than a pilot of a Ford Tri-Motor) and the distance they traveled.  They are paid in the same manner today.  A pilot who flies a Boeing 737 on 4 or 5 flight segments for 10 hours is paid less per hour than a pilot who flies a Boeing 777 for one flight segment that takes the same time.  The argument is and always has been that the B777 pilot is responsible for a larger aircraft, more souls on board and therefore works harder for those same hours. 

 

The reality is really quite different.  Most of the work a pilot incurs is on takeoffs and landings, not during cruise flight.  It requires no great difference of knowledge to fly a B777 or a B737 and, in fact, it may be easier to fly the B777 with its more sophisticated flight management computers.  The number of souls on board sounds like a good argument but, as my father pointed out, is it?  After all, in almost any aircraft crash, the pilot(s) are the most certain to be casualties.  So, isn’t it in their best interest to fly that aircraft as best they can no matter how many others are on board?  Of course it is.  Practically speaking, we regard it as a tragedy if 20 or 200 people are killed or injured in a crash.

 

So, who should be paid more?  If it is about how hard the work is, then many regional feeder pillots should be paid far more than the B757 pilot who might only fly 3 or 4 segments in a day.  That same feeder pilot might work twice as hard for the same duty time because he or she is making 5 or 6 or even 7 landings and take-offs per day.  Both pilots have to know a complicated set of systems.  Both planes have just 2 engines.  Both airplanes have to navigate the same kind of airspace and altitudes.  Who is working harder?  The regional jet pilot is.

 

But he or she is also the least paid.  Regional jet pilots just starting out make as little as just $20,000 to $25,000 per year.  A B757 pilot is likely making 5 to 8 times that much money for the same or less duty hours. 

 

All because airlines adopted the same pay models that railroads used.  It suddenly becomes more clear why airline managers often resent pilots the most.  In the mid 1970’s, a Braniff 727 captain made as much as 50% more than a senior Braniff executive.  Did the captain work more hours?  No.  In fact, if he worked 80 duty hours a month and if you allowed a 20% bump in hours for time worked but not paid, he or she still only worked 96 hours in a month.  That same airline executive was paid for 160 hours per month and probably worked about 200 hours per month.   The airline can’t run profitably or reliably without either person so who was overpaid?  The pilots, of course.

 

In the next part, we’ll take a look at how pilots (and other aircrew) distorted the the 1978 deregulation of the industry.

Filed under: Deregulation, Trivia by ajax
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Given the semi-success of the all business class airlines that formed around flying from NYC to London, I’ve wondered if there wouldn’t be a demand for such service between Los Angeles and NYC.  Frankly, I wonder if an all First Class service between those two cities wouldn’t be in demand. 

 

I could see an airline such as American Airlines or Delta Airlines or United Airlines fitting out a 737-800 or A320 with their international business class or first class product and offer a customized service from the curb to the airplane as well.  If one flew from LAX to EWR, it would be as convenient as convenient gets and serve industries such as the entertainment business with near private jet service. 

 

The airlines would simply need 2 or 3 dedicated aircraft refitted and could draw upon senior staff for such flights.  With lie flat seating, the airline could offer both morning and evening departures from each city and by flying into EWR, put their customers close to Manhattan.  They likely could charge a small premium (10 to 20%) over their existing product just to allow people to avoid flying with the masses and the associated delays that come with more people on one airplane. 

 

That is the one city pair that could support such service.  I do believe it could have potential for profitability but I also believe it would raise the profile of the airline as well.  

 

 

Filed under: Airline Service by ajax
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As an experiment today, I decided to go through the process of booking a flight and estimating the cost of the ticket and fees that might be associated with that trip.  To be fair and give a reasonable representation, I’m going to assume that I’ll enjoy a couple of beverages (but not liquor or beer since I don’t drink on flights as a general rule) and that I’ll be hungry.  To make it interesting, I chose to fly from DFW (where I live) to EWR (Newark Liberty International Airport and where my brother lives) and I’m going to choose 2 airlines for comparison.

 

To start, I visited American Airlines’ website because AA is, after all, the dominant carrier in my home town and most likely to offer a variety of flights that are non-stop.  A reasonable person seeks out non-stop first, right?

 

I found a flight leaving on a Friday morning and a flight returning on a Monday morning so that I could visit for the weekend.  After entering my preferred criteria, AA shows me a set of flights that, to my surprise, are labeled as being $164.00.  I’m feeling good suddenly.  I chose the outbound flight and it then asks me to select a return flight.  Hmm, there is that same fare so I choose an early morning return for the same price.  It felt like my roundtrip fare was $164 the way it was presented even though I actually know better from my own extensive experience.  The presentation gets one’s hopes up I suspect.

 

It wasn’t.  It was $164 each way for total of $328 and that, my friends, was as super saver fare.  The standard Economy saver fare (still not the full economy fare and therefore still subject to some restrictions) was $876 each way for a total of $1752. 

 

Now, my super saver economy fare was to also be taxed $21.00 for fees levied by various governments.  Now I’m up to $349.00.  Mind you, that’s what it has cost to simply book the flight and let me note that if I want a paper ticket (which would be unreasonable today but wasn’t just 8 years ago), I would pay an additional $25 and I would only have that option *if* I lived in a country where paper ticketing was required such as a Latin American nation.  Yes, they’ll let you pay $25 to receive a ticket if you live in a country where e-ticketing isn’t permitted. 

 

Now, since I’m flying to visit my brother, I plan to bring him a few things and since we tend to go out and enjoy ourselves, I’ll be taking my larger suitcase and need to check that bag.  The first checked bag fee is $15.  In some respects people have been seeing that as almost reasonable.  How reasonable does it look when you realize that you pay that fee EACH WAY?  Yup.  $30 for roundtrip baggage check of my bag.  If I were traveling with two bags to be checked (unreasonable), it would cost a total of $80 each way to transport two bags (and they still have to be under 50lbs each.)

 

So, just to plan, I’ll need to find out what my food and beverage costs will be for this trip.  I’ll be wanting a couple of soft drinks or cups of juice each way and it turns out that on AA, this will be complimentary for me.  GREAT! 

 

Both of my flights will be morning departures and it would be nice to eat a meal enroute so that I don’t empty my brother’s cupboard or force him to stop at a Nathan’s as soon as I get there.  It doesn’t have to be a big meal or a hot meal, just a good sandwich or something similar for a breakfast item.  Checking AA, I find that I have these options for my morning flights:

Snacks for $3.00

• 4oz of mixed nuts
• A 4oz MegaCookie (i’ll be choosing this.)

 

Snacks for $4.00

• Cheese and crackers (not for breakfast!)

 

Breakfast Sandwiches for $6.00 each.

• Breakfast Bagel Sandwich
  Enjoy a plain bagel topped with slices of roasted turkey breast and mild muenster cheese. This sandwich is served with a side of Hellman’s® mayonnaise and dijonnaise mustard.
• Club Croissant Sandwich
  Savor a freshly baked croissant topped with thinly sliced roasted turkey breast and aged cheddar cheese, garnished with crisp green leaf lettuce. Hellman’s® mayonnaise served on the side.

 

Neither of those sandwiches are very appealing but let’s assume I’m hungry enough to get one.  My meal costs each way will be $9.00 for a total of $18.00 roundtrip.  But, hey, I get a free Coca Cola right?

 

So, to take this trip on American Airlines, it will cost me $397 and that doesn’t seem too bad all in all.  However, let’s say my brother and I have just too good of a time and I want to return a day later.   That would cost me a whopping $150 change fee *and* the difference in fares.  Since it would be a morning flight, it’s safe to assume that I’ll be paying full economy fare and that would mean a one day change would cost me $1137. 

 

Now, let’s take a look at taking a different airline.  Since I have done this trip once before on Airtran, I’ve chosen them as my economy option.  It will require me to connect through Atlanta but my departure and arrival times are actually quite close to the non-stop AA flights so I’m happy enough with that.

 

First, I discover that my travel fare options include a super saver fare for $164 each way or a total of $370 roundtrip with taxes.  The taxes and fees for this choice were a stunning $43.00 higher.  Not a good start.  There is some good news though.  Airtran will let me check that first bag for free so I save $30 and find myself at this point with a total cost savings of $9.00 over AA right now.

 

But I will be hungry so let’s check out the options on Airtran.   Hmmm, no food except a complimentary snack of pretzels (which I only know from experience as it is not shown on their website.).  I’ll have to buy some food at an airport and I think that if we assume that I’ll purchase something resembling breakfast at McDonald’s, I’ll probably pay about $4.50 for a couple of sausage biscuits or breakfast burritos (and I’ll enjoy them more too just from my own experience.)  Let’s call my food charges an additional $10 just to be safe. 

 

My all in price on Airtran will be $380 vs AA’s price of $397 for a savings of $17.00 overall.  Now, which would I actually choose?  That’s tough to say.  Airtran offers XM satellite radio which I like a lot but I do own a MP3 player and I would very likely bring it along anyway so that doesn’t compel me towards Airtran.  I do prefer Airtran’s seating, particularly on their 737’s which use a Recaro seat that is a great deal more comfortable than AA’s economy seat.  That *might* compel me to choose Airtran. 

 

However, Airtran also offes a business class upgrade at the gate for pretty cheap prices per segment.  Assuming I could get it for 2 of the 4 segments, it would only cost me $69 each segment or a total of $138.  That is compelling.  In my experience, you need only arrive about 1.25 hours before your departure time and you can usually get these seats.  Flying Business Class gets me a nice seat and that is it though.  For a man like me at 6’1″ with long legs and weighing 275lbs, it’s nice to be a bit more comfortable and I would probably take that upgrade for two flight segments.  So, I would pay $518 total to fly travel an extra hour but be comfortable.  You might choose otherwise. 

 

My point here is that cheap economy fares are pretty much the same no matter what the airline.  At least on trunk routes.  It might be possible to save a dollar here and there but more often it isn’t.  Airtran’s approach strikes me as more honest in that while I do pay the same base fare, I don’t pay for the first bag checked (reasonable) and I do have some upgrade opportunities to a better seat.  I don’t get food but, then again, do I really want food from the airline?  In the real world I do not.  I’ll happily buy a burger or a breakfast at the airport because the food is not only cheaper but a bit more appetizing. 

 

Just for the record, I planned a similar trip from DFW to PDX (Portland, where my mother lives) for the same dates on both AA and Southwest Airlines.  Using the same criteria, here are the all in prices:

 

American Airlines:  $527 (including $21.00 in taxes and fees) for the ticket and a grand total of $575.00 (checked bag fees and meal prices included).

 

Southwest Airlines:  $469.00 (including $76.94 in taxes and fees) for the ticket and a grand total of . . . wait for it. . . $469.00.  Southwest has no baggage fees and they do not offer food.  Would I take SWA?  Nope.  Because it requires me to fly from DAL (Love Field) to ABQ (Albuquerque) and then to SLC (Salt Lake City) where I changes planes and fly on to Portland.  That’s a whipping and it’s just worth it to fly on AA’s decrepit MD-83 for only 3.5 hours to get there. 

In general, low cost carriers such as Southwest and Airtran are providing a slightly lower fare than the legacy carriers.  The difference in fares are mere dollars but that is because we examined economy super saver fares.  Want to know why those airlines soundly trounce legacy carriers?  Take a look at their business class fares.

 

DFW to EWR

AA:  $2902.00 all in.  Since it is business class, there will be no baggage fees and a decent meal will be provided. 

 

Airtran:  $1070.00 but since we’ll still have to buy a meal, let’s call it $1100.00 even. 

 

That is a savings of over $1800.  And it is the biggest reason why airlines such as American Airlines are doing everything possible to hold on to their valued frequent flier.  Sure, Airtran takes about 1.25 hours longer but if I’m running a business, my guys will be flying Airtran because with a savings of $1800, I don’t mind if they lose 2.5 hours of productivity. 

 

This is the real reason airlines such as American and United resent low cost carriers.   Low cost carriers set the price for the “fill” of the aircraft.  Which is the revenue they would not earn if they didn’t sell a seat at a discount price.  In addition, low cost carriers such as Airtran, Jet Blue and Frontier (and to a lesser extent, Southwest) are now competing for those business class passengers at prices legacy carriers can’t come close to. 

 

 

Filed under: Airline Service by ajax
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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. 

Filed under: Airline Fleets, Airline Service, Airports by ajax
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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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In 1966, American Airlines released a set of specifications for a new kind of an airplane, an “air bus”.  This plane was to carry 250 to 300 people in a wide body configuration using two new, more powerful fan jets and it would be able to operate short to medium trunk routes such as Denver – Los Angeles or New York – Chicago.  Many enthusiasts will recognize that both McDonnel Douglas and Lockheed responded to this with the DC-10 and L1011 aircraft and both were to become rather legendary.

 

But while the DC-10 experienced great commercial success and the L1011 became the pilot’s airplane (reportedly one of the easiest planes to fly ever built), it was Airbus that got it right with their A300.  Both the DC-10 and L1011 were “compromise” aircraft in that they had 3, instead of two, engines to meet a specification that United Airlines issued:  the ability to take off with a full load from Denver’s mile high airport.

 

Airbus was originally formed between Aerospatiale and Deutch Aerospace with Spain’s CASA and England’s BAC joining later.  Their original aircraft utilized 2 GE CF-6 engines and had a range of about 1500 nm.  The A300 would later grow in both range and payload ultimately culminating in the A300-600R which was capable of carrying more than 260 passengers and a full cargo load for more than 4000 nautical miles.

 

At one point in the mid 1970’s, Airbus A300 sales were so bad that they had to just keep manufacturing airplanes in order to keep the assembly line open while betting that times would change and their aircraft might be adopted by others.  One landmark change in sales for Airbus was Eastern Airlines.  Frank Borman, President and CEO of Eastern, was searching for a replacement for Eastern’s Boeing 727-200 aircraft that would carry more passengers with better operating efficiencies on Eastern’s high density, East Coast routes. 

 

Borman, the former NASA astronaut, was a tough negotiator and ultimately got 4 Airbus A300s to try out for terms that amounted to the cost to operate the aircraft.  Eastern discovered that the aircraft was a huge moneymaker for those routes since it consumed 30% less fuel than the competing Lockheed L1011 that they also owned.

 

Ultimately, Boeing responded with the 767, also a twin engined aircraft, originally designed for much the same mission as the A300.  However, in many ways the two aircraft evolved to serve different missions.  The A300 thrived as a trunk airliner that could carry a massive amount of cargo easily (because its fuselage was designed to accomodate 2 side-by-side industry standard LD3 containers) and operate on high density routes with both speed and low seat costs.  While it was certified for ETOPS(Extended Twin Engine Operations over water or “Engines Turning Or Passengers Swimming) and was even ultimately used on over-water transatlantic routes, its specialty remained its original mission.

 

The Boeing 767 was built with a narrower fuselage that could not accomodate those same LD3 cargo containers two abreast but it did find its own mission in the transatlantic arena as it gained both range and capacity.  To use the similarly sized 767 on the same routes as the A300 was to set oneself up for failure.  The A300 was just too good at what it did.

 

American Airlines owns a number of A300 aircraft and while they were always used primarily for those same routes that Eastern once flew (NYC to Miami and the Caribbean), they also used the aircraft for transatlantic routes such as NYC to London. 

 

To date, there is no other better aircraft for that short to medium haul, high density mission that the A300 has served so perfectly.  Since many A300s are aging now, they are being withdrawn from service but there exists no true replacement for this marvel either.  Boeing 757/767 aircraft cannot carry either the same passengers or cargo efficiently and while the A330/340 aircraft use essentially the same fuselage, they only begin to show true efficiency on 4000nm or greater missions. 

 

In most markets where the A300 has been withdrawn, that capability has been replaced with greater frequency with airlines using B737-800/900 aircraft and A320/321 aircraft.  The Boeing 787 derivative 300 series does, at first glance, meet that mission profile carrying a great number of passengers (280 to 310) on routes as long as 3000 nm.  However, the only airlines to order the 787 are Japanese carriers ANA and Japan Airlines.   Many speculate that the 787-300, designed to replace the 767 and A300 on regional routes, will either have to grow in range (4500nm) or face being a Japan only aircraft.  Indeed, Boeing announced last year that the 787-300 won’t be certiied for use in the US although it could be done very easily should Boeing decide that there is a market in the US for such an airplane.

 

Sadly, Airbus does not have a new replacement on deck.  Their focus has been on the giant A380 and developing their new A350 series aircraft.  Sales of their A330 aircraft have been brisk still and Airbus will likely turn its focus to an A320 replacement aircraft once they have both time and resources. 

 

I have no doubt that Airbus will once more “get it right”.

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

Filed under: Airline Fleets, Airline Service by ajax
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Not you, the consumer. Oh, we know your type these days. You buy on price and frequency. Next is loyalty to your frequent flyer plan (and some of you even buy based upon gathering your FF miles ahead of price.) You aren’t going to change. You never really have and you never really will. You are the girlfriend/boyfriend who promised to change and never did.

 

It’s time for airlines to fly smart. No, really, it is.

 

Southwest Airlines pioneered the modern strategy that most airlines try to emulate in one form or another. They have a single type of aircraft (Boeing 737) and trade high load factors for high utilization of aircraft and crews. It’s a model that works for them and even for some others. Legacy airlines have adopted a modified model that included narrowing the fleet types which allows not only fewer costs in equipment but also permits airlines to use their staff across a broader range of aircraft.

 

But it appears (to me at least) that that strategy in the current economic climate is going to prove flawed. The truth is, the airline industry tends to have to re-invent itself every 30 years or so. That reinvention has taken the form of a revolutionary change in aircraft or, in the case of the 70’s, a new regulatory climate. Traditionally, it’s aircraft.

 

One of the criticisms of the proposed Delta / Northwest merger is the mish-mash of fleet types they’ll have. The CEO’s of both Delta and Northwest have responded that it in fact appears to be a big advantage in the merger because it will permit them to “right-size” each city pair with the proper aircraft. What this means is that with different fleet types comprimised of aircraft capable of varying efficiencies and loads allows them to fit the right aircraft to the right flight.

 

For example, a flight from Atlanta to Nashville might typically carry an average of 90 passengers per flight and Delta might be using a Boeing 737 for the flight segment that carries about 130 passengers. That means their using a new (high capitol costs but more fuel efficient) airplane to fly the route with an average load factor of 69%. It’s a short flight segment so the fuel efficient engines of the 737 don’t play as big a role in savings as they would on a longer flight. Post Merger, Delta may put a Northwest DC-9-40 on the segment that carries about 110 passengers. Suddenly the capital costs are extremely low (the airplanes were paid for years and years ago and the costs to operate it are maintenance and periodic refurbishment), the load factor is now 81% and flight has about similar fuel and labor costs. What’s more, that 737 can now fly on flight segments with average loads that are much closer to its capacity and which provide greater revenue yields as well.

 

More airlines in the US need to re-examine their fleet strategies. Almost all flights being flown by regional jets of 50 seats or less *lose* money now. Particularly when they are used for “long and thin” routes such as DFW / CLE (Cleveland). An airline of real size (US Legacy carriers but also LCC carriers such as SWA, Jet Blue and Airtran) can benefit from a diversified fleet.

 

There are countless “shuttle” type routes that could yield far more profit by using new, advanced turbo-prop aircraft such as the Bombardier Q400 and ATR-72. There is no rational justification to use regional jets on short segment routes when compared to these advanced turbo-props for instance.

 

An airline could, for instance, fly a Q400 on flights between Dallas and Austin offering 70 seats per flight and make money by filling only half of them per flight. Time flying between cities would be virtually the same as Southwest Airlines’ Boeing 737 and seating would be about as comfortable. The capital costs, maintenance, fuel and labor costs for that aircraft are all significiantly less than the 737 but offer about the same comfort and convenience.

 

Reduced fleet types made sense in the 80’s and 90’s because airlines were focused on the hub and spoke model. It allowed an airline to use aircraft interchangeably and since fuel costs were extraordinarily low, load factors could be as low as 60% and an airline could still make money.

 

Today, airlines need aircraft that are more pin-point appropriate for their routes. Short segment shuttles should be flown by Q400’s while longer segments with greater density should be handled by 737s and A320s. Large trunk routes should be served by Boeing 757s, Airbus A320/321s and even smaller widebody aircraft such as the Boeing 767 and Airbus A330. Longer, thin routes should be served by the upcoming Boeing 787 and A350-900 aircraft while long, high density routes will be better served by the Boeing 777, Airbus A350-1000, Boeing 747-800 and Airbus A380.

 

There will be increased demand for a new kind of aircraft. One that is a re-birth of the original DC-9 and Boeing 737. A 100 to 120 seat aircraft that can fly 25% more efficiently over route segments of 500 to 1000 nautical miles. Bombardier (Canada), Embraer (Brazil), Mitsubishi (Japan), AVIC (China) and Sukhoi (Russia) are all working on such aircraft or already have such aircraft available for order. Boeing and Airbus don’t.

 

The days of flying a regional jet such as an Embraer ERJ-145 or Bombardier CRJ-200 are over. They cannot fly profitably short or long, thin routes anymore as they offer, at best, only 50 seats and a product that is quite unpleasant for trip durations over 1 hour.

 

Legacy airlines no longer can afford to “sit” on routes to protect them for use at later date. All of the capacity cuts made so far are squarely aimed at routes that do not generate sufficient revenue to justify their existence. To serve those routes in the future, they’ll require an aircraft whose economics ENSURE profit.

 

That means airlines will seek to merge and become bigger because size permits greater fleet diversity and fleet diversity means more revenue per passenger. Even airlines such as Southwest, Airtran and Frontier will have to begin considering the value of “right sizing” their fleet to their customers. To some degree, Airtran does that with their mixed fleet of Boeing 717/737 aircraft.

 

Greg

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Not first class.  Not really.  To misquote the movie Jerry McGuire, today’s first class is really a whole different lifestyle, not just a more comfortable seat.

 

It’s a whole different show in coach, however.  Just for kicks, I looked up the seat pitch on a Braniff 727 for coach in the 70’s.  Today’s seat pitch on a legacy carrier is about 32″ with an inch variance.  For a 6’2″, 260lbs man, like myself, that means a pretty uncomfortable ride.  Braniff’s seat pitch was 38″.  (in the future, I’ll provide some cites for such information but I looked that up 3 or 4 months ago and I can’t remember where I found it now.) That missing 6″ drives me crazy. 

 

The truth is, a 32″ seat pitch makes sense economically.  The average flight sector here in the US is less than 2 hours (Why do I always seem to be on 3+ hour flights?) and 32″ is plenty tolerable for 99% of us for the price and time spent in the seat.  There are even some airlines who are adopting better seats for once.  Not harder, thinner, flatter seats.  Seats that are a bit more ergonomic, better contoured and, best of all, designed in a way that a 32″ seat pitch offers just a touch more space.  Airtran’s Recaro seats on their Boeing 737-700 fleet are a great example of this. 

 

For a time, American Airlines *increased* their seat pitch from 1 to 2 inches in the late 90’s / early 00’s.  (Later reduced again post September 11, 2001 to provide a greater potential load density) I’d rate that current Airtran seat the equivalent and that means a lot coming from me.  I should also mention that Airtran offers affordable upgrades to their Business Class product priced about $40 to $80 per segment and I’ve found them quite easy to get even at the gate.

 

Delta is about to install a new seating product from Thompson that is a kind of herringone pattern that offers greater legroom, an armrest for both arms and even greater privacy.  Still more surprising is that this new seating configuration actually allows them to *increase* the seat count on an airplane.  Look for this in their international 767 airplanes first although I suspect favorable customer acceptance will cause it to show up on other airplanes in the future too.

 

I think that one day we’ll see  a greater number of choices for seating on many airlines.  It’s already starting now to some degree.  Airlines such as United Airlines and Jet Blue and US Airways have started selling seat locations that have greater seat pitch and/or favorable location(s) for slightly more premium prices.  United Airlines offers Economy Plus with greater seat pitch as a sub-section of their coach cabin and having tried it I’d say it was worth the extra $30 / segment I paid.  US Airways is selling location on existing configurations such as exit aisle seats, bulkhead seats and aisle seats all for a slight increase in price.   Jet Blue has been reconfiguring their aircraft to offer a choice in seat pitch at varying prices. 

 

Jet Blue’s model is where I expect the majority of legacy airlines will go.  Over time, new seating products such as Delta’s (described above) combined with varying seat pitches will allow the airlines to price discriminate among their customer and generally *increase* their revenue without necessarily a loss in total passenger capacity. 

 

30 years ago, the model was to price discriminate on the basis of flight convenience.  A passenger who bought far in advance paid less than an impulse buyer.  Then airlines such as American Airlines realized that an unfilled seat was lost revenue and began offering unfilled seats at prices that includes restrictions on flight times and days (convenience). 

 

Next we’ll see far greater choice in our prices based upon seat pitch, location, service, advanced purchase, travel dates and times and even based upon how much luggage you want to carry (already happening.)  My prediction is that seat choice will be the prime discriminator.  Today’s passenger most wants a decent seat and a flight that takes off and arrives on time.  The airline that provides that wins.

 

Filed under: Airline Seating by ajax
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