It’s always fun to make predictions about the coming year, right?  Of course, I may well review my predictions in December of 2009 and decide against doing it again.

Boeing 787:

This aircraft will finally experience its first flight and I believe it will occur on or about its new scheduled time (early April).  For Boeing, credibility is now at stake and they really do have to begin meeting deadlines.  Financial analysts are becoming too skeptical of the company for comfort and airlines want their airliners.  Boeing does have a reputation for being able to pull itself together and get something done in a crisis and that should serve them here. 

I also believe we’ll see both static airframes begin their tests and new build airframes begin to flow from Boeing in about 6 months.  My prediction?  The 787 will prove to be a very capable aircraft and will meet or exceed its performance promises.

Airbus A380:

Airbus met its revised schedule of delivering 12 A380 airliners in 2008 . . . barely.  Originally it was scheduled to deliver 13 in 2008 and 25 in 2009.  Now Airbus says it will deliver 21 in 2009.  However, it is becoming clear that Airbus is now quickly learning how to build these aircraft and turn them out.  I predict they’ll exceed their 21 goal in 2009 by at least one aircraft.

Boeing and Airbus:

Both aircraft makers will begin to speak about the future of short to medium haul aircraft again.  With milestones for the 787 and A380 being met, I suspect they’ll become more comfortable in speaking of the future of their aircraft lines.  Look for discussions on both the 737 and A320 aircraft families and what interim technologies might be employed to improve their performance.  I suspect we’ll hear about both weight saving materials being adopted as well as the potential of new incremental improvements on existing engines.  Particularly the CFM-56 engines used by both makers. 

US Airlines:

First, let’s take a look at my deathwatch candidates.  The sudden and precipitous drop of oil prices allowed each of them to take a breather.  Midwest Airlines, however, continues to speak little, fly only a little and its investors have got to be running out of patience.  I still believe that they’ll ultimately go away.  How they do it is the question.  Rather than bankruptcy, I believe it will either be a sale or as a subsidiary airline of Delta/Northwest with the latter being most unlikely.  Who will they be sold to?  Good question.   Perhaps Airtran will get what they wished for and develop indigestion.

Frontier continues to muddle along but faces rather intense labor strife still.  I think their situation improved not only because oil prices dropped but because United continues to offer some of the worst product in the industry and because Southwest slowed its growth and took a breather.  While I firmly believe United will do nothing to improve its product, I do think Southwest will return to its goal of killing Frontier as a Denver competitor some time in the late spring.   I suspect Frontier will emerge from bankruptcy this year but I also firmly expect them to be out of business or acquired by December of 2009.  Who buys them?  I’ll bet on Jet Blue.  The aircraft fleets are compatible and Jet Blue has to start building a hub somewhere else in order to continue to experience strong growth.  Frontier gives them that chance.  The long shot?  American Airlines.  Why?  Because Frontier is working with AMR’s Sabre Reservations system now. 

United Airlines, my favorite airline to hate.  The Cranky Flier loves to rag on Alitalia and I love to rag on United.  United has lost a tremendous amount of value over the last year and continues to have some of the highest hourly costs of any US airline.   They’ve done nothing to improve labor relations, their service product or their fleet efficiency.  Glenn Tilton is hated by airline pilots but I predict he is goint to be hated by investors before the end of summer.   What happens?  I’m really not sure.  The best thing that could happen is for them to liquidate.  However, I think some airline will see some value there and attempt to buy United and make use of its assets.  Who?  The logical choice is Continental but I believe they’ll hold on to their independent streak.  So my next guess is a US Air / United V 2.0 merger will come about.  Could it work?  I doubt it but Doug Parker (CEO of US Air) wants another merger and United offers hubs he doesn’t have and some aircraft fleet compatibility.   I’ll go “all in” and bet that we see a US Air / United Airlines merger announcement by December of 2009.

Moving on from the death watch, let’s look at other US Airlines for a few minutes.

American Airlines will maintain its status quo but will begin to feel pressure to conclude some union contract negotiations this year as financial analysts begin to view their lack of progress less and less favorably.  CEO Gerard Arpey will begin to feel the heat but barring a large mistake on his part, will retain his position as CEO.  One possibility, however, will be bringing on a potential successor as President of the airline.

Southwest Airlines will also mostly maintain its status quo but I will predict that by late summer its new CEO Gary Kelly will be under fire from both employees and investors for his shotgun approach to growth.  It is beginning to look like it is unplanned and what people most value in Southwest is its ability to form and execute a coherent plan.   There will be no mergers, no real growth and a sinking stock price by December but I think Mr. Kelly will hold onto his position until 2010 barring a major unforeseen development. 

Continental, the best kept secret.  Continental will maintain its status quo with, perhaps, very moderate growth in the international sector while it waits to see what happens domestically.  They’ll enter the Star Alliance (exiting from SkyTeam) but discover it offers little value to them as well.   I don’t think they’ll seek to merge with anyone in the next year but if they did, I’d pick them for going after someone like Alaska Airlines rather than United or US Air. 

Stay tuned for Part II.

Filed under: Airline Fleets, Airline Service, Airports, Death Watch by ajax
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USA Today’s Today in the Sky Blog is reporting that Australian news outlets are now writing about an imminent announcement that Delta will begin flying from Los Angeles to destinations in Australia.  Such destinations likely begin with Sydney and add Melbourne and/or Brisbane. 

If true, this will mean that Delta will be the first airline to fly regular scheduled routes to all 6 inhabited continents in the world since Pan American Airlines.  More important, it means competition for QANTAS, V Australia and United Airlines.  

Currently, QANTAS is by far the main leader in that market flying Boeing 747-400 and Airbus A-380 aircraft.  It has been said that about 1/5 of their net profit comes from such routes.  V Australia, an international arm of Australia’s Virgin Blue, was originally scheduled to begin flying Boeing 777-300ER’s in December but had to slip the start to February 2009 due to Boeing’s labor strike this past fall.  United Airlines flies the same routes regularly with 747-400 aircraft that by many accounts are worn and tired and certainly not offering the service options the other two do.

It seems that Delta, if it does fly the route, is planning to use 777-200LR aircraft that are very capable of flying the distances as well as carrying a full load of cargo while doing it.  Ironically, the 777 was originally designed with QANTAS in mind although they never ordered any of the aircraft.  Indeed, with optional fuel tanks and a light cargo load, it is said that the 777-200LR might be capable of flying from Atlanta to Sydney regularly although it is highly unlikely that this will happen.  A more likely choice might be a late build 787-800 which Delta will be receiving as a function of purchasing Northwest Airlines.

This kind of competition is not want any legacy carriers on this route want.  Delta is operating with relatively low labor costs, new aircraft that are the most efficient available for long haul routes and they have a new network (from their merger with Northwest Airlines) that will feed the aircraft to capacity loads.    If Delta does launch this service, look for United Airlines to withdraw from the market.  They are the airline that lacks both the service product and fresh aircraft to compete.  

Filed under: Airline News, Airline Service by ajax
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The current economic climate doesn’t speak well for airlines who depend upon business travelers to meet their expenses on a flight.  For the past several years, airlines have been introducing airline seating that specifically caters to the business traveler and, quite frankly, a product that meets or exceeds anything that represented First Class even in the 1990’s. 

The airlines are always faced with a difficult set of priorities to balance.  On the one hand, catering to the business traveler is essential because they do pay for a good portion of each flight and they must compete for those travelers very aggressively.  On the other hand, filling those last 100+ economy seats is also essential because that is the difference between profit and loss.   Typically, an airline will woo the business traveler with comfort and the economy flyer with price.  In order to compete on price, that means reducing your costs per seat to the lowest possible and offering a ticket price that bests anyone else on a route.

Or does it?  In the late 1990’s, American Airlines began a program of more space in coach.  MD-80 aircraft were reconfigured to offer as much as 34″ of seat pitch and as someone who was flying a great deal at that time, I can confirm that it made a huge amount of difference.   Unfortunately, the post September 11th terrorist disaster forced American to reconsider its configuration and the aircraft were reconfigured back to a 31/32″ pitch.   But how many seats did that gain them?  Only about 9 seats.

The one thing airlines never seem to try to differentiate themselves on is seating.  While some airlines have tried an economy plus seating (offering about 34″ to 36″ of seat pitch), no one really advertises the advantage of more seat room.  It is never heavily marketed like many other airline qualities.   That is a lost opportunity.   I do not believe people would necessarily choose a flight on an airline on the basis of only price if they were fully aware of a more comfortable option at a minor extra cost.   Airlines such as United Airlines often only take the opportunity to tell a customer of these seats after they’ve already made a purchase and only as an upgrade. 

Offering an increased seat pitch and explaining its comfort and, possibly, better position in the aircraft would, I think, be an attractive offer. 

The question is how much extra do you have to price that seat per leg?   I suspect about $20 per flight segment would work.   Possibly as much as $30.  But why not offer it by the hour?  Would you pay $10 / hour for a better seat?  Chances are you would.  However, that upgrade must be presented BEFORE the purchase to be attractive on price and that upgrade must be described in what it offers the customer.  More leg room, a better position in the cabin which makes for easier entry and exit from the aircraft. 

More room does not necessarily have to mean fewer seats either.  I’ve written before about Delta’s adoption of the Thompson Cozy Suite seats on their 767 aircraft.  There are other options as well.  Airtran offers a Recaro aircraft seat on the Boeing 737 aircraft that is unparalleled currently as an economy seat.  Its design offers just a tiny bit more leg room and yet configures easily to the same 31/32″ seat pitch airlines want to use.  It provides a more conventionally thick seat cushion on the bottom and upper half while offering a better contoured lumbar area that while thinner, is much more comfortable and yet offers the passenger behind you that little bit of extra room.

Sicma Aero is concentrating its efforts on a more ergonomic seat but I question that direction because how do you create an ergonomic seat that feels comfortable to both the 5′ tall 100lbs woman and the 6′ 2″ tall, 270lbs man?  It requires adjustability and that quite likely is going to cause trouble both with maintenance and the customer who doesn’t understand how to adjust the seat.

Avio Interiors has taken an approach more like Recaro by offering a seat that is properly cushioned in the right points but sculpted to again offer that small but important extra space for legs. 

 Thompson Solutions offers both the Cozy Suite as well as a more conventional but ergonomic economy seat.  The key to their offering is a staggered or herringbone style layout that allows airlines a 15″ gain in capacity or greater width and seat pitch.  Since aircraft are generally limited by either their load or the maximum seating they are certificated for, Thompson’s solutions (no pun intended) allow an airline to offer a new seat that is competitively priced, less maintenance intensive and vastly more comfortable than a conventional seat.  The key obstacle here is that airlines are afraid of making the investment and facing customer rejection of a design that is admittedly fairly radical in appearance.  With Delta introducing this on their 767 aircraft, I suspect the airline’s fears will be reduced and there will be a push to find similar solutions for new fleets.

Weber Aircraft, based in the United States, is offering a much more conventional product that, unfortunately, seems pointed towards high density seating without any emphasis of comfort.  Make of that what you will.

While airlines will no doubt seek to maximize their loads on aircraft and match pricing from their competitors, it becomes increasingly obvious that market capture can be based on these new seating options provided that the airlines themselves will actually market their product.  People still want comfort and the success of a la carte pricing indicates that people will still pay for what they want. 

The challenge is in airlines changing their marketing model both on their own websites as well as through popular travel sites.  When a customer can make their choices from an a la carte menu and choices include better, more comfortable seating that is well described, airlines will both differentiate and sell their product better.  Airlines even have the chance to sell such a product as a business offering to companies that do understand the value of taking care of their employees but who have to now measure that against the often 4 times greater cost of a business class seat.

Filed under: Airline Seating by ajax
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USA Today’s Today In The Sky Blog is reporting this morning that Delta CEO Richard Anderson and Delta President Ed Bastian have been rewarded handsomely for achieving the Delta / Northwest Merger.  Anderson will receive more than $13 Million in stock awards and Bastian receives just over $5 Million in stock awards.  Both men aren’t fully vested in the compensation until 2011.

While I think it appropriate to compensate two men who obviously worked very hard at making this merger happen, I do think this news comes out at the wrong time and I do think the reward is perhaps premature.  The unions involved in this merger, particularly the IAM, will no doubt bristle at this news despite the fact that Delta / Northwest employees will be receiving stock in the new company.  About 5% for the pilots and 4% for most other employees.  

It would have been better to tie this award to milestones for achieving all of the merger.  First, award some percentage, perhaps 50%, for bringing the two companies under one corporate structure.  Second, set milestones based on the full integration of the company such as pilot seniority lists being fully merged, flight attendant senior lists merged, both sides of the company operating under the same certificate, etc.   There isn’t anything wrong with rewarding accomplishments but I feel this job is only half done at best and there should be some strong incentives to complete the work before granting the prize.

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The Milwaukee Business Journal is reporting a quote from a pilot at Midwest Airlines that the Boeing 717 Fleet may be completely phased out in 2009.  The speculation is that all of the existing routes will be flown using Embaer 170 aircraft leased from Republic Airlines. 

On the surface, this seems bad.  In reality, I see a gleam of hope for Midwest.  The Embraer 170 seats almost as many people as the 717 but cost much less to operate and its pilots are paid less as well.   It’s actually a comfortable aircraft to fly and it would quite possibly allow Midwest to fly profitably the remaining routes it has. 

Fans of Midwest Airlines’ Signature Service will no doubt be upset about losing access to that hallmark service but the reality is that it isn’t profitable and was probably retained way too long. 

I continue to wonder what Midwest Airlines wants to be in the future.  A small regional airline with no real connections to any other airline?  That really doesn’t strike me as a recipe for financial success.  They do have connections to Northwest Airlines (Delta) but I firmly do not see them becoming a “feeder” or “connection” airline for them.  Delta / Northwest simply have too many successful regional airlines already under their umbrella and, in fact, Ed Bastian, President of Delta, has already said that Delta expects to pare down the number of regional airlines serving Delta.

While I do think Midwest Airlines can make some money flying the E-170, I still don’t think they have a viable long term strategy for success.  They stay on the death watch for now.

Filed under: Airline News, Airline Service, Death Watch by ajax
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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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These days there is much ado about various First Class and Business Class services on a variety of airlines.  The introduction of the A380 brought a new level of first class service from Emirates, Singapore and QANTAS.  Even their business class on those aircraft are more in line with First Class on any other. 

A week ago, I visited the Fort Worth air show at Alliance Airport.  While that show (and most others) tends to be oriented around military aircraft, I did get to tour the new Pink Ribbon American Airlines 777.  Like all 777’s tend to be, it was an impressive 3-class aircraft.  At least for First Class and Business Class.   Indeed, I actually thought that the Business Class arrangement on that aircraft was as good as First Class with respect to how I would value it on space and comfort.   AA’s First Class separates you more from fellow passengers but I don’t think its seat or entertainment is necessarily any better.

In any case, what I wonder about is Economy Class.  In this airline world, Economy Class remains largely what it was 30 years ago.  If anything, instead of rising in service or comfort, it has, perhaps, fallen just a bit.  Seat pitch is reduced.  The seating itself tends to be older and less comfortable on most airlines.  There is rarely entertainment and only on international flights.  

In my world, I put a premium first on seat pitch, then seat width and then on seat location (the opportunities to get either a window or aisle seat.)  In almost every case, entertainment means nothing to me.  While I acknowledge that it *does* excite some people, I would wager that if you gave a person a choice between a 34″ pitch seat with no entertainment and a 32″ pitch seat with entertainment, you would sell more of the former.  At least on most domestic flights. 

There appears to be no game changer for Economy Class.  There is no incentive to improve economy class service for almost any airline.  American’s 3-class 777 offers 2-5-2 seating (imagine sitting in one of those 3 middle seats) that is not one iota more comfortable in any way.  The one amenity, that I could observe, was a personal entertainment screen.  That was it.  I sat in the economy seat and it did not seem, to me, to be any different in pitch, width or general comfort than a AA MD-80 seat. 

There really isn’t any incentive for most airlines to improve this experience either.  By operating fortress hubs, the airline knows that most economy class passengers are a captive market.  There really isn’t much choice when choosing an airline for most destinations.  The only incentive for an airline to change seating comes from either being able to fit more seats onto an aircraft or to provide a seat that lasts longer.  

Delta is going to introduce such a seat using Thompson Cozy Suites.  You can see more about it HERE.  It is more comfortable and it does allow Delta to add some seats to their aircraft but they also have contract to use it exclusively (at least for a while).   jet Blue and United do offer some economy plus seating but they market it poorly.  Most passengers are unaware of it as an option to search for and only learn about it at check-in as an upgrade option. 

Wouldn’t it be nice to see a game changer for economy class for once?  A seat that offers some comfort and space even if it costs just a bit more to purchase.   Keep the free soda and coffee.  Keep the entertainment because I can carry a tiny MP3 player for music and I really prefer a book to a TV show anyway.   Keep the food and the pillows and the blanket because I can dress appropriately and probably sleep better with just a touch more room.  Find us a seat that we can sit comfortably in for 3 hours and I’ll buy your ticket every time.

Filed under: Airline Fleets, Airline Seating, Airline Service by ajax
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A fair fare would probably be identified by most people as an air fare that accounts for the true costs of flying from point A to point B non-stop using the right aircraft to supply the capacity.  As a matter of fact, that was what the Civil Aeronautics Board tried to adjudicate when setting fares. 

Now, such a model might sound familiar.  It sounds like what LCC carriers such as Southwest Airlines and Airtran do.  In many sense, yes it is.   Legacy carriers, focused on hubs, hurt themselves with those hubs every time they carry a connecting passenger.   The hub and spoke system demands that they carry more passengers a farther distance using more resources and economies of scale no longer allow them to make a profit doing so. 

Let’s use as an example travel from Midland / Odessa to Albuquerque.   You have 3 basic choices for travel in this scenario.  You can fly Southwest Airlines non-stop for about $260 round trip or you can choose another carrier for a non-direct, connecting route that starts at about $550 round trip.   Another carrier might be American Airlines, Continental Airlines or Delta Airlines. 

If you choose American Airlines, you’ll fly EAST to DFW and then WEST again to ABQ and it will take  . . . wait for it . . . from 4.5 to 6.5 hours to complete your travel.  Since you are connecting via DFW, you’ll be making two take-offs and two landings and one of those landings (remember, part of an airline’s cost is a landing fee) will be at a major hub airport.  Take offs are expensive too.  They are the part of the flight that consumes the most fuel so two take-offs is bad.

If you fly Continental Airlines, you’ll connect through IAH (Houston) and the economics are the same but the distance flown is even greater.   If you fly Delta, you’ll first fly to Houston and then to Dallas and then to ABQ and your price will be in excess of $1000 round trip.  By the way, your total travel time using Delta will be over 10 hours.

Now, if American Airlines or Continental Airlines (let’s just leave Delta out of this because such a scenario is absurd) want to compete for the passengers traveling from Odessa to Albuquerque, they have to offer a fare that is somewhat competitive.  If they do, they’ll come at least close to matching Southwest’s fare of about $300 and that means that their costs are higher and they make less profit or no profit.   Since Southwest has the lowest costs, they get to set the price. 

Now, some people such as Robert Crandall advocate re-regulation of fares in some form.  In a speech to the Wings Club in June 2008, Mr. Crandall offered that this might take the form of mandating a “minimum fare” that is the sum of “locals”.   What he suggests is that a fare between two cities that connects via a hub should be the sum of the fare(s) between Point A to Point B (a hub) and Point B (a hub still) to Point C (the final destination.  In the alternative, he suggests that flights that connect via a hub be required to have a “connection” charge.  His goal is to remove any incentives airlines might have at present for operating a hub.  It becomes officially un-economic to fly that route via a hub.

Quite honestly, I find that a poor solution since he proposes to disrupt the systems of the very airlines that his solution purports to help in the long term.  It disrupts a 30 year institution among legacy carriers and assumes the staff and leadership who have operated in such a manner to be able to adjust to a new model that they have no experience with.  It is, at best, a very awkward solution to the problem and only addresses revenues (once again) instead of the whole equation.  Even more important, it is hard to imagine the political will required for such a change.

No doubt the adjustments have to be made and I would suggest that might need to take the form of actually allowing a large legacy carrier to go out of business (which then removes some barriers to entry for other, more efficient carriers) or you have to find a way to reasonably deregulate costs so that airlines no longer must use hubs to fight for their very existence.  Those costs are principally labor.  The latter solution is better (both in the short and long terms) because it doesn’t necessarily involve massive unemployment or relocation for employees. 

An airline needs to be able to efficiently locate staff at various “base” cities in a way in which costs are not concentrated in one particular city because it is merely a popular place to live.  You don’t want all of your high cost employees (i.e. the senior staff) to locate themselves in Miami where much of your traffic might be low yield leisure travel.   Second, an airline needs to be able to competitively bid for staff on an open market.   A seniority system as used by airline unions ties staff to one airline and forces the airline to “wait out” their term of employment (as much as 40 years) until they can hire new, lower cost staff to fill a particular position.  Further, it denies them access to qualified personnel for expansion because staff won’t leave another airline for a new job because they don’t want to start out at the bottom of the seniority list.

If we deregulated (by legislation) the seniority system in airlines as a first start, airlines could suddenly re-allocate labor and gain more productivity and reduce their costs on routes where necessary.   For a first round, you could even leave in a seniority system for earning pay and determining furloughs but just remove the seniority system as it pertains to bidding for line routes and it would allow the airline to locate their labor (by cost) where they most needed it and gain more productivity.  That change alone might well serve to offer legacy carriers a legitimate opportunity to earn a profit regularly (with all other things being operated effectively).  It would at least be a good first step in trying to solve the problem.

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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Northwest Airlines shareholders approved their merger deal with Delta Airlines this morning.  Delta shareholders meet to approve the merger this afternoon. 

While this is for most purposes a pro forma part of the process, it is another step forward in this merger.

What I continue to wonder about is the new corporate identity.  Will Northwest’s heritage and history survive in some small way?  I’ve seen some concepts done by people that turn the Delta “widget” into point on a compass.  PlaneBuzz has some images that show it looking something like THIS.

And I must say I like the concepts.  I do think the circle on the fuselage is a bit busy but it works on the tail just fine.   I suspect, however, that the Delta identity will remain the same and Northwest’s identity will fade away as airplanes and uniforms are changed over.

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

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

 

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

I’m sure a pattern is revealing itself here.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Filed under: Airline News by ajax
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I saw this video  from Delta Airlines on the RunwayGirl Blog this morning.  This has to be one of the best safety demo videos I’ve ever seen.  Notice the visual cues shown for each part of the video.  The perspectives shown are from a passenger’s view and seem to make the location, purpose or use of various safety items a lot easier to identify.

And the cute flight attendant doesn’t hurt. 

Filed under: Airline News by ajax
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The Milwaukee Journal-Sentinel (newspaper of my birthplace), has this report on Midwest Airlines being late in paying over $1million in gate fees.  Midwest is on my death watch list and this news doesn’t improve their standing at all.  The story mentions that they are contemplating bankruptcy and I should mention that because of changes in the US bankruptcy law, bankruptcy isn’t an easy choice to make anymore.  Those changes in the law are, in part, what drove both Northwest Airlines and Delta Airlines to file bankruptcy in September 2005 on the same day.

Updates to the bankruptcy code now make it more difficult for an airline to file bankruptcy, continue flying and weather debt and fare wars.   Until October of 2005, most airlines used chapter 11 bankruptcy to essentially buy time when competitive pressures put them at a severe disadvantage.   However, Midwest has likely been weighing the chances of obtaining DIP financing (Debtor in Possession) and given their high labor costs, vastly reduced network and fleet, most would not view this as a healthy choice for investment.  In addition to high labor costs, the airline is headquartered and based in Milwaukee, a city known for strong union influence. 

Northwest’s 47% stake in Midwest also makes the airline an unattractive target for a merger to other airlines.  It is possible that Northwest will be ordered to divest itself of its holdings as a condition of approving its merger with Delta but it is not in their interest to do so one day earlier than mandated.  By holding onto Midwest, they make Milwaukee a kind of “fortress airport” that rebuffs other airlines attempts to enter the market such as Airtran.

If Midwest were to go into bankruptcy, it would be very difficult for them to make a case for proceeding alone.  They would have to look for a buyer and while Airtran could be interested, they have already begun to establish Milwaukee as a focus city and other than some assets (namely the B717 aircraft), I’m not sure what else they have to gain by buying Midwest now. 

 To survive, Midwest Airlines would have to enter into Chapter 11, break its labor agreements and obtain enough financing to purchase new (to them) long range aircraft that would support its original network all the while fighting off Northwest, Airtran and any other airline that smells blood.  That’s a tall order for any management team in this industry.

Filed under: Airline News, Death Watch by ajax
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The Today In The Sky Blog has this report today.  Northwest Airlines unions apparently took exception to management directly asking workers what kind of work environment they would prefer in the upcoming Delta / Northwest merger.

The ability of unions to shoot themselves in the foot in this industry boggles the mind.  This union reaction clearly spells stormy weather for Delta in the post-merger organization too.  Between this story and my last post, it becomes clear that union leadership at Northwest is aligned with no one, including their membership, other than themselves and maintaining their current power.  That is not the purpose of a union now or in the past. 

Reactions like this only serve to set up a battle line between the union and the airline and today’s airlines cannot afford such conflict if they are to concentrate on succeeding.  It is, first and foremost, in the interests of the union for the airline to make a profit for when they do, they better further their argument for better pay and work conditions.  It isn’t in the airlines best interest to simply cave into craven demands underlined with childish behavior.

Filed under: Airline News by ajax
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The Dallas Morning News Airline Biz Blog has This Story today.  I’m certain there are a number of reasons why airline traffic will be down for labor day but I’m equally certain that airlines are starting to feel the effects of far higher prices when it comes to travel demands. 

If this is true, LCC carriers such as Southwest and Airtran are probably grearing up to add even more capacity in existing and new markets.  These carriers can offer low prices on a sustained basis in addition to a basic service level that doesn’t quite show contempt for the consumer.  Legacy airlines such as American Airlines, United and DeltaNorthwest has cut service, introduced a number of new fees and raised fares considerably so far this year.  There isn’t nearly as compelling a case for travel on a legacy carrier as there once was. 

In fact, I’m  not sure what the argument is for traveling on a legacy carrier unless you seek a business class accomodation (available on Airtran, however) or a highly convenient direct flight.  Even the basic frequent flier no longer enjoys many of the privileges accorded to him or her in the past.  Fees for redeeming frequent flier miles are now designed to “buy” the ticket and the seats available for frequent flier redeemers is more reduced than ever before. 

At this point, a traveler has about the same or better experience on one of the low cost carriers, sometimes enjoys *better* amenities (Hello Jet Blue, Airtran and Frontier) on newer airplanes all for a fare that is, at the least, competitive with any legacy carrier. 

Many airlines have already begun their capacity reductions and they probably total about 5% in their markets.  So, we have a 5% reduction in travel demand matching a 5% reduction capacity which means there is about the same amount of people (per seat) chasing a low fare as before.   That means that air fares won’t go up anymore and some airlines will likely begin to look at attracting customers by reducing or eliminating these new fees going into the fall/winter season.  My prediction is that one or more legacy carriers will eliminate or reduce the first checked bag fee for travel sometime in November and December.

Filed under: Airline News 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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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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