It’s common for a variety of friends and family to ask me about obtaining a “cheap” fare to some destination throughout the year.  It’s a frequent request as we approach spring but this year what I’m hearing most is the comment that fares are “way up” compared to what they usually are.

Yes, they are.  Air fares have been rising steadily over the past several weeks with one airline bidding up the fare(s) and the others following with increases of their own.  Typical fares are much higher and often as much as 25% higher than this time last year. 

In addition, airlines are returning to the fee game and several have recently tweaked their fees to get more revenue in the door especially in advance of leisure travel that usually finds people checking more luggage.  JetBlue just raised its 2nd bag checked fee to $35 and American Airlines has added a “booking fee”. 

And now we’re hearing about fuel surcharges.  These are, in some ways, the most irritating fees attached to base fares around.  While they must be specified prior to booking, these fuel surcharges aren’t necessarily advertised as a part of the base fare.  In addition, they’re often a one fuel surcharge fits all flights approach.  That means a $20 fuel surcharge is supposedly covering fuel costs on both that 500 mile flight as well as that 2300 mile trans-continental flight.

Is this about fuel?  Yes, it is.  When oil prices rise such as they have over the past 2 months, jet fuel prices actually rise faster and higher.  They are not proportionate to the cost of a barrel of fuel and that has to do with how a barrel of oil is refined into various types of fuels and other products.  Fuel prices are skyrocketing and they threaten the airlines in two ways:  in demand as well as costs. 

The airlines well know that rising fares can cost them passengers and that is evident in the fact that airlines are already announcing reductions in their plans to grow capacity over this calendar year.  American Airlines announced it was going to bring back several hundred flight attendants as well as hire new flight attendants (with special skills for international flights) just a few months ago.  Now it is announcing that it will offer several hundred flight attendants the opportunity of a leave of absence because it will not grow its capacity quite as much as planned.

Cuts in capacity are designed to improve how much someone is willing to pay for a seat.   It’s simple economics:  if there are 100 seats but 110 potential customers, the airline is liable to get a premium price for its seats.  If there are 100 seats and just 90 customers available at a particular price, those seats will either fly empty or the airline has to cut prices to get them filled.  It’s a difficult balancing act because those seats fly every day whether there is a body in the or not.  If you cut your prices too much, you’re liable to fly that aircraft (even full) at a loss.  If you raise your prices too much, you’re liable to fly that aircraft at a loss as well due to empty seats. 

The various fees that legacy airlines charge are designed to boost the average fare and maintain profitability.  It’s notable that US Airways has said that but for their additional revenue from these ancillary fees, they would be unprofitable.  For an industry that has seen exceptional losses over the past 20 years, those fees represent a new era of profitability and survival.

Are they fair?  Reasonable?  In many cases, I think not.  I think the approach to fees has been poorly executed and has potentially driven away customers because of airline clumsiness in instituting them.  Airlines are rather new at the game of marketing value added to their business.  The entire industry was founded on and run by the maxim of providing the best value added product for over 70 years.  Now, they’re expected to figure out how to earn more profit by charging for value added items and their novice approach is very noticeable.

The notable exception to this is two airlines:  Southwest Airlines and jetBlue.  These airlines haven’t ignored fees but they have paid attention to the game better than most.  When you pay a fee on one of these airlines, there is added value and the customer perceives added value.  The profitability and increased revenues that Southwest has experienced is firm proof of that.

Tomorrow:  What to shop for when it comes to fares

Filed under: Airline Fees, Travel Hints by ajax
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Returning to Dallas on Southwest from Chicago was a different experience.  First, we neglected to insist on avoiding Lakeshore Drive from downtown Chicago to Midway.  This found us sitting in stop and go traffic with our margin of safety time eroding quickly.  A quick tip and some encouragement to the taxi driver found us suddenly surging ahead when a hole opened and he got us there with time to spare. 

Again, I paid for Early Bird check-in on my flight.  This found me with a seat number of A group, position 37.  This is unsatisfying and I don’t believe the old “A” group went to 37.  What I’m saying is that A37 really translates into roughly B10 when you consider the number of people ahead of you and the fact that virtually every flight departing MDW originated somewhere else and already has passengers on it. I obtained a seat in the back on the aisle and that’s OK.

My security experience at MDW was unpleasant and I would say it was about average for a lot of busy airports.  In this case, I put the blame squarely on the staffers.  They were certainly moving in the Chicago Way.  One thing that found me objecting vocally were the wheelchairs.  While I stood in line with my belt and shoes in my hands, I saw 3 wheelchair bound people go to the front of the line where all three people got up, walked able bodied through the process and then sat down again. 

Sorry but being in a wheelchair does not entitle you to get in front of two dozen people waiting to move through.  I objected and the TSA offered that I was being unreasonable.  I offered that fair is fair and able bodied people in wheelchairs don’t get to go in front of me. Based on the reaction of passengers around me, public opinion was on my side.

Again, this airport is crowded and I walked the full lengths of both A and B concourses where I did not witness an empty Southwest gate.  I witnessed empty Delta gates and empty Porter Airlines gates but not one Southwest gate.  They are bursting at the seems and the gate areas don’t quite have enough space for full flights in my opinion. 

On this flight (via STL again), I witnessed person after person trying to stuff grossly overpacked and slightly oversized rollaboard cases into overhead bins.  This causes many delays when boarding the aircraft.  People move through the aisles slower, they put their things away slower and they fight for overhead bin space near their seat.  Flight attendants numbering just 3 per aircraft are not enough to keep this kind of herd flowing smoothly.  Even a few off duty Southwest staff pitched in to help and made little difference.

One staffer attempted to move my modest briefcase and light fleece jacket all the way to the back.  Uh, no, you aren’t going to penalize me for being efficient in favor of people who are apparently clueless about checking oversized bags.  My stuff took up, at best, 1/5 of the overhead bin.  I’m comfortable with that and it’s notable that just 2 fat bags were able to fit into the bin next to my stuff and the bin lid was only closed after a SWA FA essentially beat the bags down with the lid until it latched.

The flight departure was significantly delayed and I would attribute all of that to people boarding slowly, sitting down slowly, arguing for bin space instead of accepting a gate check of their bag and, last but not least, a 100% full flight.  These 100% full flights are exactly why SWA needs the Boeing 737-800 in its fleet.

Once every got seated, we did depart the gate fairly rapidly and experienced about a 10 minute taxi delay as well.  Once we took off, things settled down and the trip into STL was quick.  Taxiing into STL was efficient and deplaning went quickly.  However, once again, it was 100% full and, once again, we played baggage and seat games far longer than necessary.  This found the plane departing even later. 

Ultimately, I arrived in DAL about 40 minutes late.  That was unsatisfying because it wasn’t weather and it wasn’t the aircraft.  It was the sheer mass of people attempting to occupy too much space on that aircraft.   Southwest needs bigger gate areas to get people organized onto the aircraft and it might be time to consider some variation of assigned seating.  Too many people are jockeying for position on full aircraft and that delays things quite a bit.  Assigned seating would eliminate the jockeying and, I think, speed seating.  Unassigned seating on aircraft that are seeing 70% load factors is one thing but on aircraft that are as much as 89% load factor average, it becomes almost untenable.

All of that said, I still think the experience on both flights was as good or better than what was available to me via American Airlines, DFW and ORD airports.  And about $300 cheaper as well.  I still recommend Southwest but I also recommend that you use flights that are “no plane change” flights into and out of MDW or you may well risk making a connection.  That recommendation stands until Southwest improves its ontime rate at Midway.

One more hint:  Southwest doesn’t charge for checking your bags.  It has an excellent record when it comes to lost or misplaced baggage and it delivers checked bags to its carousels pretty quickly.  Save yourself trouble and just check your rollaboard.  You’ll find yourself able to maneuver on and off the airplane quicker.  You won’t have to fight for overhead bin space near you (and if you don’t get it near you, you’re going to be massively delayed in getting off that aircraft anyway.)  Don’t be vain and insist on taking it onboard when it is completely unnecessary on this airline.

Filed under: Airline Seating, Airline Service, Airports, security, Travel Hints by ajax
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Last Saturday, I wrote about a trip I was taking from Dallas to Chicago on Southwest.  This was my first opportunity to fly Southwest between the two cities and I’ve long believed that even though the flight was a one stop flight, it was actually as efficient or more efficient than taking a legacy carrier such as American Airlines from DFW to ORD.

Yes, it was.  Entry into Love Field and moving to the gate was simple and quick.  I don’t know why but they appear to be able to move more people through security at Love Field in shorter time than anything I’ve ever seen at DFW.  I also don’t know why the TSA staffers at Love Field are coherent and focused and polite in stark contrast with the typical TSA staffers I’ve seen at DFW.  The experience at Love Field is better in every way that counts.

The flight departed on time and arrived in St. Louis on time.  I paid for Early Bird check-in and got an excellent window seat in the front of the aircraft.  The flight was about 80% full to STL but I managed to not have someone sit next to me on that segment. 

Departing STL for Chicago, we were delayed a brief while and the Captain announced that they were holding at the gate due to traffic congestion in Chicago.  The weather in Chicago was overcast with extremely light snow falling and temperatures at about 36 degrees.  When we did take off, there was light to moderate turbulence for the first 45 minutes or so but it wasn’t really uncomfortable with a seatbelt on.  As we neared Chicago, the pilot performed a series of “S” turns and I would presume he was asked to do so to fit into the traffic pattern.

Landing at MDW was uneventful and the taxi to the gate was short and quick.  But now we get to the downsides.  It’s clear that Southwest is overtaxed at MDW.  It’s clear by the fact that virtually every gate had an aircraft and when I deplaned, I found every gate area I passed full to overflowing with people awaiting a departure.  The walk from the gate areas to the baggage claims is long(ish) but no more so than at many other older airports.  Certainly not really more than one experiences at Love Field. 

By the time I claimed my baggage, the person I was to meet there arrived and I waited another 15 minutes for him to claim his luggage as well.  Travel into downtown Chicago was efficient and quick but probably only because we insisted on taking the interestate northwards instead of being lead to Lakeshore Drive.  Make a note of this:  You’ll generally always be better off if you insist on the taxi driver not taking Lakeshore Drive to downtown.  They’ll insist that it is quicker, it isn’t.  It’s slightly shorter but much more congested as a rule.

My Southwest service excellent in all respects on that flight but I do understand why MDW is having delay problems.  I don’t think it is the airport so much as it is the fact that virtually every Southwest flight into and out of this airport is full.  By full, I mean full to the brim. 

What makes those full flights worse is the fact that a great many people are business travelers carrying quite a bit of carry-on luggage.  By quite a bit, I mean an obscene amount.  With unassigned seating, these travelers jockey for position, jockey for overhead bin space and jockey to avoid sitting in a middle seat.  I’ll have more on that in my next post on this trip.

Overall, the experience was pleasant and everything Southwest is praised for.  But that said, you’ll find that I see some growing pains in the Southwest model that I think Southwest is going to have to figure out if it expects to continue to profit in the future.

Filed under: Airline Service, Airports, security, Travel Hints by ajax
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Hey Southwest! No one likes a snotty busy body off duty, in uniform flight attendant trying to be all things to all people at the expense of the customer who has paid your fees and checked his bags. Like the one (FA) in 16C today.

And make the people carrying on board grossly overpacked and slightly oversized luggage gate check their bags. You’ll turn those flights faster.

Filed under: Airline Service by ajax
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Later today, I’m flying from Dallas to Chicago and this time I’m trying out Southwest Airlines’ service from Love Field to Midway Airport.  Both airports are the quintessential second airports for their respective cities and both have a strong Southwest history. 

Why this airline and these airports?  I’ve long advocated that you can enjoy a better, less expensive flight on Southwest that is essentially the same time elapsed “door to door” as a flight on a carrier such as American Airlines. 

So, I’ll be making a much quicker drive to Love Field airport where I’ll make a much quicker transit  through security to my gate.  I did pay the $10 Southwest Fee to early check in to improve my seating options (and it’s a fee that, for Southwest customers, does provide extra value).  My flight, however, is not non-stop.  I’ll be on a one-stop Southwest flight that pauses briefly in St. Louis.  Total programmed flight time?  2 hours, 55 minutes.

I paid $408 for this trip last Saturday compared to American Airlines fare for similar departure times on the same days of $659 and that does not include the fees for one checked bag that I’ll have to take with me.  All in, AA would have cost me (or, rather, my client) over $700. 

If I had taken AA, I would have had a much longer drive to DFW airport and a much more expensive one as well.  (One takes a tollway to DFW if one expects to get to DFW in a reasonable amount of time from where I live.)  The difference in time to get to each airport for me on a day where there are no traffic jams?  About 20 minutes less to access Love Field.

My Southwest flight time will be 2 hours, 55 minutes (if they’re on time) and a similar choice with American Airlines would be 2 hours, 30 minutes.  With the difference in drive time alone, I’ve just made up 20 minutes of a 25 minute difference.  When you account for the fact that I can arrive at Love Field with a bare minimum amount of time for passing through vs DFW airport where I would arrive about 15 minutes before my one hour deadline prior to flight time (because checking bags and passing through security at DFW can be easy or it can be real lengthy), I’ve just gained another 10 minutes. 

Since I”m arriving at Chicago Midway Airport, I’ll have a drive to my hotel in downtown Chicago that is nominally 6 miles shorter in distance and about 20 minutes quicker than if I arrived at Chicago O’Hare.  I’m now up by 30 minutes using Southwest.

At least in theory.

But let’s take a look at the contrasts in experiences I’m liable to enjoy between the two airlines.  On Southwest, I paid the $10 Early Bird Check-In fee so I’ll have a very high likelihood of obtaining a good, front of cabin seat on a 737-700.  It will be a fairly new aircraft and possibly a brand new aircraft.  It won’t be old and it won’t have old, worn out seats either.  I’ll enjoy 32″ to 33″ of seat pitch, most likely a friend flight attendant and no charge for a beverage.  Because of the nature of my trip, I have to check a bag and that comes free and on an airline with a good reputation for baggage handling and security.

If I had taken American Airlines on similar flight time, I would have enjoyed a 20+ year old MD-82.  Since I would have bought AA’s best economy price, I would have likely been at the back of the aircraft and sitting in old, worn out seating with 31″ of seat pitch.  My flight attendants would have most likely been cranky, older crew who have a reputation of taking out their job dissatisfaction on their customers.  (AA flight attendants can be good but in my experience the DFW and Chicago based crews are frequently hostile to customers.) 

My bag would be handled by an airline who had a less than positive reputation for baggage handling (and strangely I’ve had many bags delayed over the years on the DFW-ORD route) and only for a $25 fee each way.   If I had paid AA’s fee for priority boarding, I’d get earlier access to overhead bins but no options to sit in a preferred seat up front and an economy passenger on an AA MD-80 flight is going to have the options of “bad” and “worse” when it comes to seat assignments.

Savings in dollars:  About $300

Savings in time:  About 30 minutes door to door (if this works out as I expect).

What do I give up?  I don’t get frequent flier points on American Airlines.  Let me point out that my dollar savings alone just bought me a “free trip” if I wanted it.  Which would you rather have?  about 1600 frequent flier point or $300 in savings?  Which would you rather fly on?  An old MD-80 with old seats and a hostile flight crew or on a fairly new 737 with new seats and a friendly flight crew?

Once I complete this trip, I’ll write up what actually happened.

Filed under: Airline Fees, Airline Fleets, Airline Seating, Airline Service, Airports, Frequent Flier, Travel Hints by ajax
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WestJet of Canada and American Airlines have announced a codeshare deal where AA will put their flight numbers on up to 20 WestJet destinations in Canada not currently served by American Airlines.  This is in addition to WestJet’s brand new relationship with Delta which is an interline agreement.

WestJet was originally supposed to enter into a rather unique codeshare agreement with Southwest Airlines and Volaris (of Mexico) but chose to abandon the deal about 1 year ago when it decided that Southwest was taking too long to implement this and thought its fortunes were better served with another airline.

In many ways, WestJet is pursuing the Alaska Airlines model in being fairly agnostic as far as what airlines it will do a deal with.  The airline believes its future is better served with doing one-off deals with a variety of airlines rather than aligning itself with just one.   It isn’t an accident that WestJet’s CEO, Gregg Saretsky, is a former Alaska Airlines executive.

Curiously, WestJet is a Canadian low cost carrier that has based its operations on the 737-700 (with some -600 abnd -800 aircraft as well) and works much in the same model as Southwest.  It has two hubs, Toronto and Calgary, and pursues frequency on its trunk routes and serves a variety of small destinations throughout Canada as well.  They already fly to international destinations in the United States, the Caribbean and Mexico.  Also curious, this airline was founded with the help of David Neeleman while he waited out his non-compete clause with Southwest Airlines. 

WestJet has existing codeshare agreements with Cathay Pacific as well and interline agreements with British Airways, Air France, China Airlines and KLM. 

I can’t help but think that WestJet is the Canadian version of the airline that Southwest seeks to become and it would appear that WestJet is doing this with more agility and quicker execution than Southwest seems to be able to muster.

Filed under: Airline News by ajax
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Southwest has gotten a transition plan for its absorbtion of Airtran approved the FAA it would appear they are on track to close their merger later this spring.  The transition plan calls for both Southwest and Airtran to be operating on one certificate early in 2012. 

In addition, Southwest has gotten a transition agreement into place with its pilots’ union which establishes the procedural framework for integrating Airtran pilots into Southwest’s structure.  This does not mean that we yet know how Airtran pilots will be actually integrated into the Southwest seniority list.  The silence on that issue is probably an indicator that progress is being made.  Unions don’t usually start firing public shots at each other unless they feel like progress is being blocked. 

I expect we’ll see more announcements on the merger in the next few weeks and certainly after Airtran holds its vote on March 23.

On another front, Southwest’s Gary Kelly has said that Southwest plans to grow further in Milwaukee.  Like Airtran and Frontier, Southwest sees Milwaukee as a real opportunity and by taking over Airtran, it should have plenty of space and opportunity to continue its growth.  I expect that we’ll see Southwest continue its battle against Frontier in this city as well Denver where both have grown  but more at the expense of United than each other.  Southwest is now carrying more passengers out of Denver than Frontier. 

Finally, Southwest should start flying from the NYC area’s Newark Liberty International Airport.  Southwest gained important slots from ContiUnited as a function of their merger and they’ve now got approval from the airport to begin flying from 3 gates to 2 destinations (Midway and St. Louis). 

With toeholds in both La Guardia and Newark Airport as well as Long Island’s Islip airport, I expect that we’ll see Southwest look for other opportunities to grow each new airport’s flights.  La Guardia, I expect, will be the slower growth airport as slots are extremely valuable there and several airlines are vying to be New York City’s airline of choice.  

One wonders if service to Islip will continue in the face of this NYC area growth and I expect the answer is that the flights will stay as long as they remain profitable and there are no other better profit opportunities elsewhere.  In the near term, I expect they’ll stay.  Islip is nowhere close to NYC and Southwest has been serving primarily East Coast destinations from Islip with Chicago Midway being the one exception to that.  Chicago may perhaps be dropped but I expect that if Southwest has found it valuable to serve the airport today, it will find it to be profitable to do so in the future.  Currently, Southwest’s competition is US Airways at Islip.

Filed under: Airline News by ajax
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Southwest Airlines and iTunes are partnering up to promote Southwest’s new WiFi service (currently on 65 aircraft) by offering free music downloads.  InAirtainment will allow people to download this music while in the air.  A playlist of 20 free songs will be offered but there is a catch:  We’re not talking about top 40 songs here.  These songs will be from bands “about to fly” themselves.

Regardless of the value of the songs, this is a nice partnership and something a bit more unique than previous promotions for WiFi service.  The cachet of iTunes certainly helps promote the announcement. 

However, this also means that it has value only to those using iTunes and that potentially leaves a lot of people out of the promotion.  Nice approach but I think a partnership with someone like Amazon would have actually provided more value.  On the other hand, that kind of partnership would have also excluded iTunes users. 

It’s nice to see Southwest trying to be unique as usual but I have to give this promotion a B for its idea quality and a C- for its real value to the customer.

Filed under: Airline News by ajax
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Delta Airlines is going to introduce its own version of “premium economy” seating on its international flights.  In this case, it’s called Economy Comfort.  Users will get the same seat economy has but more leg room and some extra amenities such as no charge for drinks. 

Often when I consider what to write for this blog, I find myself wanting to be an advocate for the passenger as much as the airline geek as well.  The truth is, airline geeks can be a vicious bunch when it comes to understanding or embracing what the common passenger is experiencing. 

I think the common passenger experience on legacy and SuperLegacy airlines is appalling.  Sadly, so much of the improvements that would improve that passenger experience could come at little or no additional cost.  At the worst, they could come from legitimate fees designed to offer a better value proposition.

Seating is one of those value propositions that I think is horrific on most US airlines.  Seat pitch is terrible and we all know that it often is only reduced more and more.  We’ve even seen airlines introduce new “thinner” seats to to cram more seats onto an aircraft.  One consideration few ever gave to that proposition is that “thinner” really does equate to less comfortable as well.

When I consider how far we have come with respect to first and business class vs economy, I’m gravely disappointed.  It astonishes me that airlines will spend a fantastic amount of resources (and it really is fantastic) on what can amount to maybe 10 seats on a large widebody aircraft but will completely ignore challenging their seat supplier to supply a better seat for those in the economy section.

Make no mistake, while those in the front of the bus might represent real profit, it’s those in the back of the bus that make or break the airline when it comes to meeting its expenses.  Without those economy passengers, the airline would sink quickly.  Notice that all business class airlines have never thrived?

There have been tiny little improvements and changes over the years.  I actually like and enjoy the Airtran Recaro seats on their 737s, for instance.  But isn’t kind of shameful that Southwest Airlines offers what is arguably some of the best economy seating in the world?  Great leather seats with good seat pitch that, in many cases, exceeds legacy airlines pitch now and those same seats are not “thinner” or “harder”.  They’re comfortable.  Genuinely comfortable. 

But here’s the thing, it’s not that Southwest improved so much.  It’s that everyone actually got so much worse, really.

I”m not going to argue for more seat pitch.  If you’ve got 32″ of pitch, you win in my book.  If you’ve got 30″ of pitch or less, I consider you a chinchy airline with zero class.  In between, you’re lackluster and have no argument for purchase of a ticket except, possibly, price.  But I won’t even argue for more than 32″ of pitch. 

But don’t tell me that we can’t challenge seat designers to come up with a better seat that is cost effective to install, practical to maintain and which offers a better seating experience.  We can, we should and the airline who does will have a real and tangible value proposition to offer consumers.  Build it, advertise it and they will come.

In the meantime, I’ve no problem with charging for more seat pitch and a free drink (which I’ll point out wasn’t free but simply included in the increased price as in the days of old.)  I’ll often pay for such an amenity myself. 

However, let’s not get carried away lauding airlines for seat designs that, for the most part, reside solidly in 1970’s thinking.

Filed under: Airline News, Airline Seating by ajax
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WestJet and Delta announced a signed interline agreement between the two airlines last Monday.  WestJet already has a number of interline agreements with other airlines and it appears to be behaving in the Alaska Airlines model more than anything else.  In other words, it will do a deal with whoever makes sense.

This is a great deal for Delta as it gives me them some access to the Canadian market that its alliance, Sky Team, lacks so far.  Only Star Alliance has some penetration in Canada via Air Canada.  I expect all both Sky Team and Oneworld to pursue WestJet as a candidate for their alliances in the attempt to lock out their competition from what is the only real “national” airline in Canada other than Air Canada.

This announcement also has to sting Southwest Airlines.  Southwest was set to enter into a similar agreement with WestJet but that crumbled apart when WestJet pulled out after waiting 2 years for that partnership to be enacted.  It was an ideal connection for Southwest and a big loss as well.  There won’t be another opportunity like that in Canada for a very long, long time. 

While Southwest Airlines hasn’t signaled any moves towards Canada yet, I actually expect them to do so but only after they are firmly capable of international flying in their IT systems.  They have a lot of their plate presently so I wouldn’t expect this in the next 2 years but I do expect it.  I also hope that Southwest learns from that experience and realizes that being a bit more agile when partnering with people is a good thing and waiting years to make it happen may well result in changing circumstances that put them out of the game.

Filed under: Airline News, Airlines Alliances by ajax
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The FAA is hoping to give its NextGen air traffic system a boost by paying jetBlue over $4million to equip 35 jetBlue aircraft with new navigation systems.  It’s hoped that by giving this push, the rest of the industry will embrace adopting these systems quicker and in greater quantity.

So far, many airlines have argued that the FAA should pay them to install these systems.  I think the airline industry has had enough government support for the last decade and its time to get going on investing in their business.  (Not for nothing, this is what happens when you continually save airlines from liquidation via government loans and liberal bankruptcy laws.)

The FAA’s NextGen GPS based system will have a system of ground stations covering the country by 2013 and all airlines will be required to use the system by 2020.  But the FAA also recognizes that if it can get airlines to buy into the improvements sooner than later, it can pull its schedule forward and realize some real gains now rather than later.

Here’s the best reason to adopt these new systems:  they pay for themselves.  Southwest is already making use of this kind of system to better orchestrate its own operations and now expects annual savings of up to $60 million / year.  You can equip a lot of aircraft for $60 million in found money.

Filed under: Air Traffic Control by ajax
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In the latest financial results, most underperforming airlines attributed their lack of success to rising costs and specifically fuel costs.  Fuel costs did rise but let’s return to early fall when airlines were gleefully setting expectations for the winter season. 

Many airlines were so confident that they actually raised prices and talked confidently of record profits.  The problem is, the traffic didn’t materialize in many cases and I would attribute that to the fact that demand for the winter/holiday season is very dependent on price.  A few airlines did see that and held their prices or even had some sales.  Notably, Southwest Airlines kept a close eye on their demand and lowered prices were necessary. 

But the development that no one has talked about much but which is showing up is a rise in capacity.  That rise in capacity isn’t showing up in great numbers with new routes or increased frequency nearly as much.  Instead, it is coming from an increase in the size of aircraft on some routes.  Airlines are upsizing some routes and also increasing capacity through the aircraft they’re adding to the fleet to replace older aircraft.

Delta, for instance, has retired its smallest DC-9s in favor of Airbus A319 equipment.  American Airlines is replacing MD-80s with 737-800s.  Southwest is adding 737-800s to its fleet in about 1.5 years.  US Airways is adding A321s to replace 737-400s.  At first glance, these “replacements” are perceived to be a 1 to 1 exchange but in reality they’re often as much as a 10% increase in capacity per aircraft. 

The creeping rise in capacity shows that the industry isn’t necessarily in agreement on capacity restraint going forward and that could foretell a collapse in prices as these airlines chase customers to fill their aircraft.  I don’t think we’ll see huge losses in the next year but I do think we’ll see an erosion of profitability.   The airlines who possess fleet flexibility should fare better than those who are largely locked into large blocks of fleet types.  Think Delta vs American Airlines. 

Mergers didn’t solve an excess of capacity.  Not really.  They did bring some costs down but neither of the two big mergers had much overlap and capacity was therefore not really reduced much in that sense.  Since there are no merger candidates with much overlap in existence right now, I don’t think this problem is going to go away very soon.  The real solution is to actually let an airline go out of business.  The only candidate for that is American Airlines and they have lots of maneuvering room left presently. 

Look for capacity to be a bigger talking point among financial analysts over the next 3 months and particularly at the end of the next financial quarter.

Filed under: Airline News by ajax
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I wonder if I am the only one grossly underwhelmed by airline performance in the 4th quarter.  American’s performance is, at this point, embarrasing to the company’s leadership in my opinion and they hold on, in my opinion, only because of an ever thinning smokescreen.   Delta only managed to eke out $19 million and for an airline that had charged through most of 2010 with impressive profits, you have to ask “why” it was so dismal.  Even if you allow for weather disruptions, it still kind of stinks.

ContiUnited (I’ll stop using that moniker one day soon) managed to beat expectations but still posted a significant loss and let’s not forget that both of these airlines were performing exceptionally well prior to the consummation of their merger.   Even Southwest remained guarded abouts its prospects going forward despite a reasonably decent fourth quarter result.

Are rising fuel costs a problem?  Certainly but they aren’t a problem anyone was unaware of.   The same is true of labor productivity.  These are pretty well known variables and if you don’t know how to manage those effectively at this point, it is time to leave the business.

When US Airways manages to stand out among our airlines given the inherent weakenesses they have in the US marketplace, you have to ask who isn’t doing their job, no?  Alaska Airlines even shined and that is an airline who has all the costs one would associate with any of the legacy US airlines. 

It certainly points out that mergers aren’t the solution to everything and capacity management doesn’t necessarily ensure profits.  In fact, I wonder if this excess of restraint isn’t effecting demand in general and driving customers to other options secondarily.   There is a reason why Southwest keeps running up its revenue score. 

At some point, you have to go out there on the playing field and compete.  Competing isn’t just offering the best price, it’s earning that customer for more than one particular flight.  With all that the airlines have implemented to enhance their revenues, are we finally seeing the results of that behaviour towards consumers?  I certainly think its a important part of the equation.

It’s time to put on the pads and get out on the field ready to play rough and compete.

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Since Southwest Airlines announced its re-vamped Rapid Rewards program, it has taken a lot of flack both from long time program members as well as in the press.  Undeservedly so, in my opinion. 

Southwest needed to do something badly with that program and orient it towards the customer of tomorrow as opposed to the customer of the early 1990s.  These changes do that and while, yes, some people who have been reaping the rewards (pun intended) from short haul flights will do a bit worse, customers who will drive their business going forward will do a bit better. 

It’s all about rewarding those who spend more and travel more.  It’s scaled to mostly reward the people who are driving profits the most and that is what a rewards programs should do. 

I do hope that Southwest holds its course on this program and resists the temptation to change or revise their new plan.  Doing this now corrects a strong imbalance that has existed for some time and ensures that Southwest is competing nationally when it comes to this kind of program.  People will settle down in time and members will buy into the changes but it will take time as no one likes change.

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Who owns a ticket?  A LA Times Columnist wrote THIS column about the inconsistencies that airlines offer when it comes to what you’re actually buying when you buy a ticket on an airline.   In short, a man wanted to not use the first part of a ticket but still wanted to use the 2nd and last part of a ticket for his booked flight.  When he called US Airways, they explained that if he didn’t use the front end, then it was a ticket change and he would be charged a change fee plus a higher fare.

So, who owns the ticket?  And, more importantly, why do legacy and SuperLegacy airlines treat customers like they’re in Las Vegas where the “house” always wins?  This isn’t a business model that really exists anywhere else. 

Part of what has to be understood is that when an airline is advertising a fare for a route, it’s really advertising or making available thousands of fares for hundreds of flights.  It’s better to think of each seat on each airplane for each flight as having its own price.  That price is, like many things in this world, set by demand.   Now, many of those seats have the same price.  Airlines are essentially contending that you are buying non-refundable access to that specific seat on the aircraft (non-refundable in the case of the lowest cost fares anyway) and when you don’t use that seat, it costs them.

There is some truth to that.  That seat starts out “fresh” when it is loaded into the travel systems with a fare.  Over time, the fare for that seat may vary considerably.  It may be bid up in price by high demand and it may fall to lower and lower prices as no one buys that seat and the departure for that particular flight and seat grows nearer.  Once it’s sold, it’s difficult to sell it again for the exact same price.  If you bought 2 months in advance and want to change flights 2 weeks in advance, the airline has lost about 8 weeks of opportunity to sell that seat and it wants you to pay for that opportunity cost. 

There is some logic and fairness to the airlines’ point of view.  However, many people question why they cannot re-sell that seat on to someone else if they’re unable to use it and transfer it into another name for a nominal transaction cost.   It’s a good question.  Airlines don’t want people buying tickets far in advance for a low price and then re-selling them much later for a profit to them but at a price that competes favorably with the airlines’ advertised fare (that is likely much higher).  Again, the airlines do have, to some degree, a legitimate claim.

The problem comes, in part, from how airlines present what you’re buying when they market that space on a flight.  It’s presented as a general price from point A to point B when it really is a specific seat on a specific flight from point A to point B.  In the case of the man described in the column, I think you could reasonably argue that while he may be required to “give up” the portion of the fare on the first flight, he shouldn’t be charged a huge change fee plus a fare difference to simply travel back on the second flight as he already planned because the airline will be capturing its revenue still while having the potential opportunity to re-sell that seat again at a higher price.

Some airlines play a bit more fair and the best at this is Southwest.  They don’t do change fees and that’s good.  However, they do charge you fare differences if you need to change your flight.  Sometimes, on Southwest, you’ll pay more for that new ticket difference than you would on other airlines by buying a new ticket and abandoning the Southwest ticket.  Many people have pointed this out but it’s an infrequent occurence and the better point is that Southwest treats this situation in a manner that, to most people, strikes them much more “fair” and far less a game where  the house always wins.

The transaction costs for changing a ticket are relatively small.  I think they would be covered by a fee of no more than $25 or $30.  However, the airline isn’t just charging you transaction costs.  It is also charging you the average loss that comes from missing the opportunity to re-sell that seat at a higher price.  However, it isn’t as simple as that either.  If the fare is dramatically higher for that same seat when a person wants to give it up and change it, it’s because there is a strong demand for it and if there is a strong demand for it, they’ll likely re-sell it again, too. 

Should a person be able to transfer a ticket into another name?  I would argue that it is probably inappropriate in most circumstances.  I think there are exceptions to that and they should be acknowledged.  For instance, I think it should be possible to transfer a ticket to another name provided that new person lives at the same address and can prove so with a valid ID. 

Are change fees unfair?  To some degree but not nearly as much as many think.  Low fares have driven this change fee and its the price we pay for the lowest fares we’re offered.  What I do think could be done here is an insurance scheme. 

You could offer a structured insurance scheme where for one fee, a person would be allowed to change flights but not destinations.  For another fee, they would be allowed to change flights and destinations for only the fare difference(s).  These fees could be as low as $15 or $20 per ticket and they would help mitigate people’s risks and provide revenue to go towards lost opportunity. 

Or you could just approach it like Southwest and change the model, accept some risks along with your passengers in return for fierce loyalty.

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I went to work on figuring out air fares to travel from Dallas to Chicago as well as from Norfolk, VA to Chicago today and made a startling discovery.

The air fares got a bit more confusing all of the sudden.

Why?  Because American Airlines is no longer being listed (or emphasized at the least) on my 3 favorite travel websites.  And it looks as if the other airlines might just be tweaking their availability on AA routes to take advantage. 

How would they do that?  By offering flights that are connections because suddenly it appears as if they are the only available game on those routes.  I’ve never seen so many different Delta connections at what is a pretty good price between Dallas and Chicago and let me remind you that Delta has no hubs in either city.

I found great fares and, no surprise here, they were on Southwest instead of the others.  In addition, I did check AA fares on their website because despite my strong desire to avoid AA, I may have to fly into O’Hare airport instead.  Their fares are exceptionally low compared to previous times that I’ve checked them.  Off the top of my head, I’d say they’re lower between DFW and ORD than I’ve seen them in 3+ years. 

Also interesting, to me, is that United (with a hub in Chicago) is *not* the cheapest fare between DFW and ORD.  Not by a long distance.  It’s Delta and Frontier leading that pack on online travel agency sites. 

US Air gets the nod now between Richmond, VA (alternate for Norfolk in the case of my other traveling partner) instead of American Airlines. 

American Airlines might say they’re doing fine but I suspect they may not being doing as fine as they say.  The picture presented out there suddenly is a very different landscape and to the traveling consumer who isn’t an airline fanboy or an AA enthusiast, the choices being presented are very much new and different and even attractive.

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At the beginning of each new year, I like to review what I thought would happen over the previous year and where I think things might go in the next year.  Let’s take a look.

North America:

I thought that not much would happen with AA labor in the past year and that pretty much was the case.  We’ve now seen several years of virtually no movement on solving these issues and I suspect that 2012 is the year that we see some kind of movement.  Look for the flight attendants to be the aggressive parties but the pilots to be the leaders.  All they need is a management group that wants to get something done.  This might end up being a make or break year for AA CEO Gerard Arpey and it could well be based on coming to an agreement with their labor groups.

United Airlines (and Continental) really didn’t go where I thought which was the status quo.  Instead, they merged and got going on getting somewhere and I like that.  I didn’t think they would merge and said so at the beginning of last year.  They proved me wrong.  However, I think CEO Jeff Smisek hasn’t considered carefully what he needs to get agreement on to move forward with each phase of the merger.  Look for this year to be good for United financially but bad on getting labor groups to agree on something.  I don’t think they are headed in the same direction as US Airways . . . yet.

This is a year for Delta Airlines to continue rationalizing its routes and aircraft.  They spent much of last year doing so and saw great financial results.  However, their goal of a sustained 10%+ profit margin makes me think we’re going to see some weird stuff out of them somewhere around the beginning of spring.  Probably in the form of new and innovative fees.

US Airways pretty much performed as predicted and I like how they are earning a profit but I hate how they still have no agreement with their flight crews that will permit them to quit operating two airlines in one.  If Doug Parker were to have a New Year’s Resolution, it should be to hire someone who’ll get that taken care of this year.

LCC(s) and Regionals:

I didn’t see a merger partner for Southwest except, perhaps, Sun Country.  Southwest proved me very wrong on that but I like the results.  One concern I have is the somewhat “plodding” progress towards consummating this merger into one company.  Does it indicate a plodding approach to actually consolidating operations?  One good thing is this brings the potential for greater international flights and, hey, Southwest, consider just keeping that Airtran reservations system and then spending some real time to pick or develop a new one that will last another 30 years.  You could do a lot worse.

Frontier/Republic is holding its own and I thought they would hold their own.  I think they’ll hold their own this year but I don’t see them merging with anyone and I don’t see them growing subtantially either.  Brian Bedford could prove me wrong and I hope he does.

Airtran made the Milwaukee market.  They deserve the credit for the huge growth that city has seen in air travel.  Southwest needs to commit to doing the same when they lead the game.

I slammed Virgin America a few times last year for appearing to be afraid to compete.  In particular, with American Airlines.  Finally, Virgin America made the plunge and came to DFW with flights from both San Francisco and Los Angeles.  I liked the move and I think there is room for them to grow here.  Time will tell.  One thing I’ve noticed so far:  AA doesn’t seem to be attacking them quite as badly as one would have expected from AA just 5 years ago.   Mr. Cush, let me suggest that you could really do well with some flights from DFW to the NYC area.  In particular, to Newark. 

Alaska Airlines has moved closer to Delta in the past year and that worries me a bit for Alaska.  They’ve generally been an airline willing to do a deal with anyone that made sense.  Now, they appear to be more and more the Delta lackey and that could harm them in the long run.  Another thing:  Alaska doesn’t have any more logicical merger partners that make sense.  American Airlines may have missed an opportunity here by not getting closer to Alaska instead of withdrawing more and more. 

I don’t think we’re going to see any big mergers in the US this year.  We might see one minor merger and that’s OK with us.  I think this year we’ll see legacy and SuperLegacy airlines attempt to earn as much money as they can to retire as much debt as they can and to bank as much war chest as they’re able.  However, I see competition heating up this summer and I think the LCC and new entrant carriers are going to put pressure on the legacy and SuperLegacy airlines in the form of adding capacity *and* routes.  The question is, will the industry discipline we’ve seen hold strong or will someone crack?

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Expedia has made another move against American Airlines in removing them from their system altogether now.  That means that American is no longer listed on 2 of the 3 biggest online travel agencies:  Orbitz and Expedia.   As I write this, they remain on Travelocity.

American says that they aren’t experiencing any decline in business and that may remain the truth for now as they’ve been in the media enough to remind people to go directly to their website for booking passage to a destination.  But that doesn’t mean this works for AA in the long run.  It’s notable that neither Delta nor United nor any other airline has decided to remove their listings from the big 3 agencies and that might just be because they are enjoying even better bookings all of the sudden.

American says this is about offering a better experience for the consumer by offering their direction connection that will tailor flights to the person shopping.  Online travel agencies says that that methodology means that American controls what the shopper sees instead of giving the shopper the chance to see the lowest fares. 

The truth is, the online travel agencies are more “right” in this fight than AA is.  This is about raising revenues by only letting the customer see what AA wants them to see based on their history. 

Airlines such as Southwest and jetBlue have made their business rely upon their own websites for booking historically and they have done fine with that approach.  Now both airlines are seeing value in being listed alongside others on some of these sites and that is as much based on accessing a larger audience as it is the fact that they have competitive fares.

I suspect we may see a different set of results from either party in another 2 to 4 weeks.  Both sides have to determine the real impact to their business models and then decide if the lost revenue (and believe me when I say both sides are losing money over this spat) is worth it in the short term.

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Southwest got a big hand in the New York City market when it was able to lease slots at Newark Liberty International Airport as a result of the Continental/United merger.  Their original announcement had them flying to Chicago and St. Louis and those were good starts. 

Now Southwest has announced additional destinations from Newark and they include Houston, Phoenix, Denver and Baltimore.  Newark has suddenly become the more important airport for SWA as a result, too.

Those destinations will allow them to fly to their focus cities and it’s notable that 3 of the 5 initial destinations are fairly long haul flights for SWA.  Newark will be the real focus city for SWA rather than La Guardia and here is why:  they’ve already got a bigger toehold and that is going to make it a more and more cost efficient operation but, more importantly, they aren’t range restricted at Newark like flights from La Guardia are. 

Newark lets them connect people to focus cities better and grow the business.  Expect some flights to Atlanta in the future.  Airtran had them and gave them up but that doesn’t mean they aren’t worth it for SWA.  Airtran had just a small handful to Atlanta and mostly on their 717s.  Southwest can increase that frequency and with larger aircraft (come 2012) too.

Will SWA languish at La Guardia?  No but they’ll grow much more slowly and organically because those slots are valuable and they’ll cost a lot for SWA to acquire.  But having Newark in the area lets them form a good NYC base and get the economy scale they need.

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Southwest has indicated its readiness to investigate different fleet types in the future to meet its needs and the driver for this is fuel costs.  Their famous adherence to the 737 was more appropriate even 20 years ago but in this age, they have a large enough fleet and a large enough network to justify multiple types. 

Sticking to one fleet type has its benefits but those benefits don’t grow large when the fleet size expands past a certain point.  There is all kinds of debate on how many aircraft you have to have to make it efficient but I would say that for Southwest, a minimum of 60 to 80 aircraft is probably a sweet spot right now.  Big enough to make maintenance and handling optimum and big enough to offer flexibility through the network.

Does this mean SWA is going to add more fleet types?  No, not necessarily.  It means that it is time for them to put together a different fleet plan for the future.  If there is one thing I’m certain of, it is that SWA will have 737s for a long, long time.  The real question is . . . what kind of 737s?

In addition, SWA still does quite a bit of regional flying on mainline equipment that was efficient with 737s 20 years ago but isn’t nearly so today.  One great example of that is the flights from Dallas to places such as Lubbock and Midland and even Little Rock.  It might be beneficial for Southwest to identify a new fleet type that is smaller (in the 100 seat range) for maintaining frequency to those destinations but also offering better fuel economy and cost of ownership.   And they’ve got choices.

One thing is sure, however:  Should SWA pursue a smaller aircraft to standardize on, it won’t be a Boeing or Airbus.  They’ve got the 717 coming into the fleet via their Airtran merger and they’ll likely play with that aircraft for several years.  However, a 717/737-500 replacement won’t be a Boeing/Airbus aircraft.  It will be one of the semi-mainline regional jets being offered by the likes of Embraer and Bombardier most likely.  And it will be an aircraft that can be punished with high utilization rates.  On the surface, the Embraer E-190 series looks like the best bet to me.

I think their larger, single aisle aircraft will continue to be Boeings and I think that, for the near future, those will be 737s.  It is an almost foregone conclusion that they’ll also be pressuring Boeing for a new 737 replacement more and more over the next 2 years.  That replacement aircraft is liable to start with roughly the size of a 737-800 and have several larger types above it.  Southwest will likely choose to purchase several of the sub-types to meet their needs on various different routes that have wildly different constraints. 

This is about fuel efficiency and keeping down the trip costs.  Southwest has never had amazing load factors but the kind of load factors they’re experiencing today are historically high and they are unlikely to fall much in the future.  They need a larger aircraft than the 737-700 in the future. 

In the near future, they’ve got enough differences to work with.  This kind of talk is about pushing manufacturers to start considering what to offer airlines such as SWA in the longer term.

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