The pilots of Continental and United Airlines have decided to throw a whopper on the table and see if the stink gets them anywhere in their negotiations for a unified pilots’ contract for the proposed ContiUnited merger.  They want an end to all outsourcing of flights.  In other words, they want ContiUnited pilots to fly all the flights.

Never. Gonna. Happen.

Pilots want job security and I can’t blame them.  The investment in both time and money towards their career makes them much more tied to an airline to earn a living than most people experience in their lives.  The seniority system just compounds that issue for them even more. 

But airlines aren’t going to agree to eliminating regional airline partners for their flying.  They can’t.  It isn’t economically viable at the labor rates insisted upon by unions of these legacy airlines.

Each part could give a little on this.  Regional airlines don’t offer just cheap pilots.  They offer flexibility and less expensive flight attendants and even less expensive maintenance.   Both parties need to find a way to offer employees better job security in exchange for more competitive costs.

Given that this is most important for pilots, it seems to me that the SuperLegacy airlines might be better served by “leasing” not only their aircraft but their employees to these regional airlines in down times.  In other words, craft an agreement that allows the SuperLegacy pilots to displace the regional partner pilots when their laid off.  Lease those pilots at the regional partner rate and, at the least, preserve some job security. 

It’s one way to work within the seniority system.  A system that, frankly, pilot unions are using to make their membership become indentured to airines.  It’s a system that I disagree with but if you must preserve it, at least find some flexibility within it.

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Ryanair’s Michael O’Leary has done it again and raised the ire of pilots, agencies and even the public by suggesting that not every flight needs 2 pilots.  He made his suggestions in this Bloomberg Business Week story.

O’Leary suggests that by eliminating one pilot and ensuring that a flight attendant was “trained” to land the plane, airlines could save even more money and offer even cheaper flights.  And, as always, he’s got the media and other interested parties attention with his outrageous suggestion. 

Relax.  It isn’t going to happen.  O’Leary is masterful at getting free publicity with his comments to the press.  Just like suggesting pay toilets and standing room only fares, this one is more about getting in the news than it is actually about doing it.

The truth is, the workload for pilots is at its greatest on the very short flights he suggests pilots are unneeded on.   Even though it is possible for computers to take off, fly a route and land an aircraft, it’s still important to have situational awareness and our traffic control systems don’t provide that level of situational awareness.

Nevertheless, O’Leary is right about one thing.  You have to work at challenging present business models in this industry or you can fall behind.  One thing I do agree with him on:  Passengers aren’t nearly the delicate creatures they are made out to be. 

There is another thing I kind of like about the man.  He got Kate Hanni to bite at his bait on the one pilot concept and now she and her organization, FlyerRights.Org, are running around trying to get governmental organizations to assure her that such ideas won’t trickle into the United States. 

Of course they won’t.  They’re unworkable in terms of flight safety.  They’re unworkable in terms of the sheer legal liability they introduce.  And to pay them attention at all affords O’Leary and Ryanair a win.   It’s one very important way that Ryanair saves money and offers the very low fares that attract its large base of customers.

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British Airways CEO and soon to be chairman of the International Airlines Group, the holding company for the merged BA and Iberia airlines, says he and his company have a large list of acquisition and merger targets as part of a strategy to become the world’s largest airline.

It’s a strategy that would have the potential for really shaking up the airline world because it would be the first real multi-national airline (Air France/KLM and the soon to be BA/Iberia consolidations don’t count given that they are in the European Union.)  Yes, there are already cross-border airline but they’re typically between two countries within an economic union or with strong business ties between each other. 

A real multi-national airline would be much more like something between British Airways and American Airlines or Delta and Cathay Pacific. 

Obviously strong ownership restrictions in many countries would inhibit such a strategy and frankly I’m a bit skeptical of Walsh’s optimism that they can be overcome.  Furthermore, I think that such a grouping is an ill-fit for the current world we live in.  It potentially denies countries strategic capabilities that they both want and need.

Frankly, I think Walsh and the new International Airlines Group would be far better off just making their new airline work profitably for now.  They already have strong cultural problems to solve, I suspect, as well as the need to compete in the present markets they occupy.

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Steven Slater says he quit jetBlue.  jetBlue says he’s no longer with the company and comments no more on the subject. 

Regardless of the circumstances behind Slater’s official departure from jetBlue, it was time for him to go. 

It was time for him to go because he clearly had reached a point in his career where dealing with problematic passengers was more of a problem than he was perhaps prepared to tolerate.  I’ve said it once already but I’ll say it again:  The big shame in this episode is that the passenger wasn’t criticized more for their behaviour and banned from the airline.  All too often airlines accept that kind of behaviour tacitly in the belief that it will scare away customers.  I myself suspect it might only scare away the people you don’t want as customers to begin with.  My strongest suspicion is that it will scare no one away.

It was time for him to go because jetBlue can’t have that kind of liability in the air.  Once Mr. Slater acted out in public like that and abused emergency systems for his grand exit, he was a liability.  What if he did something again and this time is resulted in harm against a passenger or co-worker?  He created a record of not being in control of himself and that’s a liability for his employer. 

That said, jetBlue missed an opportunity to back its other employees and demonstrate that while bad behaviour from employees won’t be tolerated, nor will bad behaviour from passengers.  I truly believe it would have been a strong morale booster and it would have raised respect for jetBlue yet another notch.

But it was time to go.

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In an interview with TheStreet.Com, jetBlue CEO Dave Barger says that jetBlue has earned the right to grow.  His justification for that comes from jetBlue having positive cash flow, steady earnings and it’s contrarian nature that has lead to success at difficult airports.

Personally, I think all airlines have a “right” to grow.  I just think they have to make a busines case for it and as far as I’m concerned, have at it. 

I think this signals something else.  Here is an LCC announcing its attention to grow in almost insolent manner.  In particular, Barger declares their intentions at Washington Reagan National and fails to mention that his opportunity for growth there comes from a partnership with American Airlines that included a slot swap.

But this is somewhat classical behaviour on the part of LCC’s.  They see revenue opportunities on routes that legacy airlines are only, at best, barely managing to cling to and the LCC’s want to earn that money.  Their costs are lower and they can handle going in at a lower fare and capturing the business.  The only tool a legacy has to use to fight off that competition when that happens is adding frequency and matching prices for a sustained period.  It does work sometimes.  From time to time, a legacy airline can fight off an LCC intrusion but it’s hard and it does eat up cash and resources until it’s over.

That was easier to do when there were few LCC’s and they were focusing on peripheral airports and lesser routes.  Now we have quite a few LCC carriers and they want in on the big action.  That’s why we have Virgin American flying trans-continental routes, jetBlue flying from JFK and Southwest Airlines introducing itself at both La Guardia and now Newark airports. 

Can legacy airlines fight these attacts on many more fronts as the airline business recovers in the US?  Maybe.  At least to some degree.  But I suspect they’re going to have to be a bit more choosy on their fights and I think w’re going to see some markets where even SuperLegacy airlines concede, eventually, to LCC intrusion. 

Dave Barger and jetBlue are the first to declare their intentions but they won’t be the last.  It’s notable that all of the US LCC’s are earning good profits and increasing their revenue base (with the exception of Virgin America who has yet to earn a profit).  That makes for a warchest and with their sizes approaching a critical mass, they can afford to take on more and more legacy airlines.

Airtran did it in Atlanta.  jetBlue did it at JFK airport, Southwest did it in Denver and now it’s happening at Washington Reagan National.   It’s going to happen at more and more airports too. 

One alternative defense might be for more and more legacy airlines to strike deals with LCC carriers and offer them some success but access they can control as opposed to an all out fight that results in legacy airlines bleeding red with losses. 

Look for more airlines to declare their intentions and justify those intentions with their current earnings and revenue growth.

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When Delta decided to sell off several subsidiary regional airlines recently, we all noticed that Comair didn’t receive any takers.  It’s costs are higher and its equipment is more dated and now Comair is slimming down to reduce costs in the hope that it might become attractive enough to find a suitor.  Just the reduction in the CRJ100/200 fleet alone will save the airline considerable money but the workforce will be reduced as well.

Comair is unattractive because of its divergence from what legacy airlines need in a regional airline partner:  It isn’t so cheap anymore.  Comair is pretty old when you consider its life and various forms.  It’s had enough time to add on a senior workforce and its found itself boxed in with its equipment (partially because of what it invested in and partially because of scope clause limitations.)  It really tends to be more “legacy” than “regional” in its airline DNA these days.

And that sounds a lot like American Eagle.  American Eagle has an aging fleet, increasing labor costs and a workforce that is aging and gaining seniority rapidly.  So far, it remains profitable on some level but only because of its contract carriage on behalf of American Airlines.

What happens if American Airlines sells this airline and pursues contracts with other regional airline partners to lower its costs?  Suddenly American Eagle doesn’t look at all attractive given the kind of aircraft it is burdened with as well as its labor obligations.  Would American Eagle find a suitor?  Maybe but I somewhat doubt it at this point.  Regional airlines are consolidating and attempting to move upstream.  American Eagle doesn’t bring very much to the table and without those revenue guarantees from various airlines, it doesn’t look all that profitable either.

What I am beginning to wonder is whether or not we’re seeing the end of the first real cycle for regional airlines in the deregulated US market?  In other words, have regional airlines that have their roots in the 19080’s become marginalized by their growth in labor costs and fleet irrelevance much as the legacies found themselves suddenly experiencing in the late 80’s / early 90’s?  If so, that would indicate that new players will find it potentially profitable to enter the market with a young crew and a more modern and relevant fleet. 

If there are new entries, their barrier to entry will end up being scope clauses governing the size of jet that can be flown by a regional.  Some airlines have pretty restrictive scope clauses and some not so much.  Some of those restrictive scope clauses got amended as a result of bankruptcies and, notably, those that didn’t go through bankruptcy in the 2000’s (AA and Continental) have some of the most restrictive clauses.  

At the end of the day, it would appear that AA and Delta are unlikely to realize very much value from their “old” regional airline companies in a sale.  Any buyer with any experience at all is liable to realize that without some sort of guarantee of a revenue stream from the seller, these airlines (American Eagle and Comair) are unlikely to be positioned to earn very much profit going forward.  And who wants to buy a lame duck?

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American Airlines CEO Gerard Arpey has hinted that his company may well use their new 787s (when they arrive) for replacing 767’s and that they would make a good fit for flights between New York City and London.   This is in stark contrast to announcements we’ve heard from airlines such as Continental who are planning New Zealand and Africa flights with theirs.

There is no doubt that putting the newest aircraft and one with the amenities that the 787 promises on NYC-London routes certainly will serve the business class customer well.  However, many analysts have already speculated that the 767 may well continue to be an equal performer (or nearly so) on that kind of route.  The 787 is expected to realize its real benefits on routes in excess of 5000nm. 

AA already has a large fleet of 777-200ER aircraft configured for not that many more seats than their 787s and uses them on its long haul routes already.   Given that you would want to use those aircraft for those profitable routes, you have to find a place for the 787 and that means new routes and growth or replacement of existing airframes.  In this case, many of AA’s 767’s are rather old and a 787 replacement will still yield benefits that should be appreciable.

Nonetheless, it’s disappointing that AA’s hints point to replacements on existing routes rather than growth.  It is early days for that kind of speculation and that may well change.  Currently, AA doesn’t even have a new pilot agreement governing that aircraft as of yet.

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JAL is considering setting up a budget airline with some of the money it was given by the Japanese government to compete against the budget offerings of other airlines in Japan.  For the past 20 years, a number of airlines have conceived of this idea that an airline within an airline designed as an LCC is a great idea.  Continental has Continental Lite.  Delta had Song.  United had Ted and the list goes on.

If it is such a great idea, how come none of those offerings are around? 

They can have some value.  They can show an airline a model for operating differently and more cost effectively and that may be worth something. However, I don’t think the cost of setting up an entire new brand is worth learning those lessons.

Indeed, those budget airlines inevitably end up being a compromise to ensure that labor unions for the Mother Ship don’t spurt blood from their eyes and try to doom the airline.  As a compromise, they’re unsatisfying because they don’t yield the same results a real LCC aka budget airline enjoys.

The best thing a JAL can go is get on with the slashing.  Slash costs, labor and anything else that stand in the way of profitability including vanity routes and vanity aircraft.  Reduce your fleet to as few types as possible and get new labor contracts that ensure productivity that is on par with those you are competing with. 

In other words, rip the band-aid off, don’t tug at it slowly.  Get it done and the quicker you get it done, the quicker you start to show the rewards of your work and, hopefully, some of those rewards should be profits.  It’s very tough to do it and you definitely have to have the right leadership to get it done. 

I question the leadership at JAL if this is truly what’s being considered.  It’s delaying the inevitable and simply burning more cash than necessary.  Cash that came from the Japanese taxpayers. 

Often in the US, a hatchet man is hired to make the hard cuts and slash costs and once he’s done, he’s replaced with a different leader who is tasked with maintaining those savings and leading its staff to a happier place.  Indeed, Glenn Tilton was supposed to be one of those guys but he’s continued to hang on long after he was done. 

What JAL needs is an unconventional businessman who knows how to wield a hatchet.  Someone who is at least familiar with businesses that burn a lot of cash each day and which depend on reliable revenues to survive.   What they don’t need is someone interested in serving political masters who want jobs saved rather than businesses fixed.

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So, yesterday I ran across this story online by Bloomberg that you can read HERE.  The short version is that Tim Clark of Emirates denied that Emirates had any interest in purchasing a stake in American Airlines’ holding company, AMR.

Huh?

No, I don’t think they would be interested in that.  Why would a company like Emirates have any interest at all in purchasing a stake in an airline like AMR which has higher costs and which is partnered with the very airlines it competes against?

I suspect someone needed AMR stock to rise in the markets and started a rumour.  Now, a US Airways / AA partnership might just get some traction but I think we’re a good 9 to 12 months away from hearing about anything happening with US Airways.

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Mexicana Airlines ceased all operations after spending a few weeks trying to restructure and begin to figure a way out of bankruptcy.  It doesn’t really come as a giant surprise that one of the world’s oldest airlines stopped operating.  Unexplicably, Mexicana had stopped selling seats on their flights but kept operating them which left quite a few of us baffled.

Mexicana’s management blames high oil prices, labor and the swine flu outbreak and certainly all three contributed to the problems the airline had.  However, oil isn’t so high and swine flu really stopped being an issue on most people’s minds by late last year.  Labor is the real problem.

I often wonder why it is so hard for labor unions, particularly the kind that Mexicana has had to endure, really don’t seem to be able to grasp that even though an airline made your paycheck for several years, labor costs like that are unsustainable by anyone at the end.  Airlines can often wheeze through such things for years but there is always a reckoning and it always seems to shock unions when it results in a shutdown.  In fact, they always appear to refuse to believe it in some respects.

The maneuverings we saw around Mexicana for the last few weeks were somewhat pathetic to me.  New investors thought they saw an opportunity and moved in but, like many who do so, I think they suddenly learned just how cash intensive an airline is and wisely decided to put a stop to the burn quickly.

Will we see this airline rise again?  I sincerely doubt that Mexicana or its subsidiary companies will raise their wings again in their current form.  It’s possible someone will buy the brand and start an airline under the Mexicana name but it won’t be the Mexicana that just crashed and burned. 

It won’t be a foreign carrier coming to save them.  Mexico’s ownership laws forbid foreign ownership of their carriers above 25% and I think that’s a shame.  Someone like LAN or Avianca-TACA might have been willing to come in and invest, restructure and operate a viable entity.  Sadly, Mexico is more archaic than many Latin American countries these days when it comes to aviation and I sincerely doubt that Mexico’s government is going to move quickly to liberalize their ownership laws.

So, I think this is goodbye to Mexicana.  At least to this Mexicana.  To me, it’s a shame.  I’ve always liked their image and aircraft and kind of thought of them as the Braniff of Mexico.  Their colorful 727’s of the 70’s and 80’s were second only to Braniff’s and I simply also feel fond towards an airline that has a history dating back to the 1920’s and which was once connected to Juan Trippe and Pan Am.

Adios Mexicana.

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As part of the deal to allow Continental and United Airlines merge, the two airlines will be required to open up some space at Newark Liberty International Airport and guess who’s leasing the take-off and landing spots?

Southwest Airlines. 

I think this is smart of ContiUnited.  They could have found any number of airlines that would be acceptable to the Department of Justice and Department of Transportation but that would mean allowing an airline with potentially even lower costs gaining a foothold.

Instead, they did a deal with an airline that, on some level, allows them to compete.  Both airlines have experience competing with Southwest in various markets and both have managed to co-exist with Southwest without being driven out of markets.   In other words, I think they realized the devil they knew was a whole lot better than the devils they don’t. 

For Southwest, I think this is great.  They get enough slots to do 18 daily roundtrips from an airport that arguably is more convenient to Manhattan and they get to build on their operations in the area by operating from 2 of the 3 major airports in the NYC area.  (3 of 4 if you count Long Island’s Islip airport.)

No announcement was made on what flights SWA might operate from Newark but I have a few guesses.  They could connect to Dulles or Baltimore’s BWI for one.  I’m sure we’ll see some flights between Chicago’s Midway and Newark.  I wouldn’t be too surprised to see a flight or 3 to Houston, believe it or not. 

One thing is for sure, they won’t be flights on leisure routes.

When they’re able to, I would expect a few flights from the NYC to Dallas area and Newark would be a great airport operate those flights to and from.  In the meantime, I would not be one bit surprised to see SWA re-jigger their route system to offer a few one-stop flights between the two cities.   St. Louis or Kansas City could be choices for that.

Why do they only give up slots in Newark?  Continental and United have very little route overlap and the one airport that the two had dominance at was Newark.  Actually, Continental had overwhelming dominance at Newark but when you added in United’s flights to major markets, it crossed the line.  This is good news for ContiUnited and expect their merger to close in late November or early December pending approval from a few other agencies.

In the meantime, someone please hand Senator Oberstar from Minnesota a roll of Tums, please.

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The Transport Workers Union of American Airlines has rejected 2 out of 3 contracts that were being voted on.  Only the ”Technical Specialists” guys accepted theirs and before you think that’s something positive, let me point out that a total of 78 members voted on that particular contract.  Rejection by the other two groups also includes a strike authorization.

What that doesn’t mean is that there is going to be a strike.  First, an impasse has to be declared and that is probably, at minimum, months away.  The two parties will enter into negotiations again and we’ll see what happens after that.

Laura Glading, president of the Association of Professional Flight Attendants, decided to chime in applauding the contract rejection and describing the pathway to success as a “struggle” against American Airlines.  Frankly, I really don’t think using language from the 1930’s and adopting an extremely loud and hostile stance towards anyone is going to get anyone anywhere. 

Regardless, I think American has a problem.  Virtually all of the unions are nowhere near agreeing on a contract and even though none of these negotiations appears very close to being declared an impasse, it does present risk to AA as a going concern.  These negotiations will only get tougher if American begins to earn quarterly or full year profits.  A great any of these unions represent frontline employees and embittered or angered employees don’t make for a successful customer service product. 

Even with AA’s recent executive reorganization, I don’t see any positioning being done to get these contracts concluded so the airline can go forward.  Ironically, the one group that has some appearance of perhaps being ready to get  a deal done are the pilots who’ve been waiting the longest to get a deal done. 

Both sides could stand some new leadership.  Sadly, I don’t see much evidence that that is going to happen.

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The Southwest Airlines Flight Attendants say that they don’t want to obstruct SWA from getting a larger 737 at all in response to speculation that this internal debate at SWA went public in order to force the hands of the Flight Attendants union. 

Instead, they simply point out that adding another aircraft, according to their current agreement, opens that same agreement up to renegotiation on issues such as pay and working conditions. 

Huh?

I don’t see any reassurances that they are for or against this still.  Instead, I see language that I would interpret to mean that they see an opportunity to renegotiate their contract earlier than the first date it becomes amendable.  It would appear that this remains a potential obstruction, to me anyway.  At the least, it appears opportunistic.

One thing to come out last year during SWA’s attempt to purchase Frontier as well as during its controversy on codeshares with WestJet and Volaris was that SWA employees wanted to see more flying ( and more employment opportunities as a result of that additional flying) on their metal, not another company’s.

This addition to the fleet of the 737-800 does just that for the Flight Attendants with absolutely no change in their working conditions on a per person basis. 

That would lead me to believe that SWA Flight Attendants do, in fact, present a possible obstacle to the addition of a new 737 type to their fleet.  And until they speak more clearly on their intent, I think they continue to present the most risk to this decision.

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British air traffic control is warning pilots of a vulture that can apparently fly at heights of 30,000 feet or more.  This bird has a 10 foot wing span and supposedly one was encountered by a commercial aircraft at 37,000 feet back in 1974.  The bird is an escapee from a breeding program in Britain. 

Airtran has decided to be another kind of vulture and raise their bag fees.  The increase is $5 more and while it’s cheaper than their home airport rival (or just about any other airline with a bag fee), boo to them.  This just strikes me as greedy more than anything else.

Still another kind of vulture has been operating in the airline world as well.  The Thief Vulture.  Last week, an American Airlines employee was arrested for stealing personal items on aircraft as well as for stealing AA property too.  The man was tracked down when police decided to track a stolen cell phone (Palm Pre) which lead them to his house.  They then discovered so many stolen items, they filled 3 pallets. 

In addition, a TSA screener from Seattle has pled guilty to stealing more than $20,000 worth of items from luggage he was supposed to be screening. 

The irritant about these last two vultures is this is exactly what airlines and the TSA deny happening all the time.  It does happen and it happens, I think, far more frequently than is ever admitted.  I’ve had my own bad encounter with TSA screeners trying to get me to hand over my wallet and then turn away from them.  Another friend recently had a few items stolen from his bag without response from the TSA despite the fact that the suitcase in question HAD A TSA APPROVED LOCK ON IT!  

These are some of the worst vultures around.

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The airline industry is a funny place to work.  Once you’ve worked inside it or lived inside it, it gets into your blood.  It’s hard to walk away from because airlines really are families and one doesn’t walk away from a family very often.  Even the industry is a family.  Two people from different airlines might disagree vociferously on something inside the industry but if an outsider offers a different criticism, you’ll see those two band together like brothers to fight back.  Sound familiar?

Despite the fact that we know most consumers buy on price, there is a strong brand liability that exists out there too.  A customer might choose to fly American Airlines to Europe but if he or she is a Continental fan, you can bet they’ll have nothing but criticisms and comparisons to what they think Continental is.  That customer loyalty, I think, derives from an attraction to the company DNA that was established over 40 years or more. 

American Airlines was always a bit more of a no nonsense airline that appealed to the conservative businessman.  Delta was about southern hospitality.  Northwest Airlines was attractive to that stoic Midwesterner since it mirrored their values.  Continental was always a bit of flash and upstart which attracted the entrepreneur.  Braniff was somewhat similar although there was a certain Texas adventurer to it.  TWA was Hollywood and Pan Am was blue blood.  Those airline personalities attracted similar people and although that has been diluted to a fair degree today, that DNA is still there.

I have to admit that I marveled at how readily people accepted the Delta / Northwest merger.  It was, in my mind, a clash of cultures.  It was as if the Southern Dandy went to Minnesota and married a solid, conservative blonde Swede.  Part of me expected neither family to accept the marriage.  Yet, they made it work.  They not only made it work, they made it look like true love.  I was,  and continue to be,  impressed.   Now and then there is a marriage that works out like that.

But, historically, mergers among airlines don’t often work out like that.  There are still former Republic Airlines employees who will give you a bit of an earful over Northwest Airlines purchase of Republic.   Until TWA’s demise, there were Ozark employees who would still privately confess great irritation at TWA purchasing their home.   Look into Delta and you’ll find Western Airlines employees who feel the same.  It’s usually more a marriage of convenience than a marriage of love. 

Now we have Continental and United marrying.  United, arguably the oldest legacy airline of the United States and certainly of blue blood in the US, is marrying Continental Airlines, a western frontier upstart of a far greater checkered past.  Continental employees are chagrined because they see themselves as proud and independent and the airline who survived the worst and came out of that as one of the best airlines in the world.  United Airlines employees are feeling a sense of loss because despite the fact that their name and headquarters exist, Continental is really the daddy in this union and that just doesn’t seem right to them.  That became clear when John Tague didn’t make the cut in the marriage.  Nor did several other prominent and, quite frankly, strong performing United executives.  It might be United’s name but it’s Continental’s leadership that is going to go forward.

Continental employees wonder why they need United given their success for the past 15 years.  What does United bring to the table that they don’t already have?  United employees speculate that these upstarts are going to be overwhelmed faced with the prospect of running a “real” airline.  The truth is, neither concern is really valid. 

Customers seem to sense the same issues and certainly the home cities of each airlines’ headquarters.  It’s a problem for this merger.  Not an insurmountable problem and I do believe that once the merger is consummated and has time to settle, many of those fears really will go away. 

What airline is a United customer going to be flying after this merger is done?  What airline is a Continental frequent flier going to be a member of when it’s done?  I’ll wager that the average customer just can’t answer that based on the way things have gone so far.  I’m a relatively dispassionate observer to this and I can’t answer that question. 

The problem is that people can sense this fear and they’re reacting to it on many different levels.  It’s a fear that is almost palpable at this point and I think that comes from the somewhat mixed message that the new “brand” is sending.  People see a Continental airplane with a United name and I think that strikes them as an attempt to be all things to all people.  Notice that Delta and Northwest avoided that mixed message. 

You can change the typeface of the name United but you can’t change the mixed message.  Brett Snyder of the Cranky Flier is quoted HERE in the Chicago Tribune as saying:

“I’m a huge fan of making a clean break, unless you’re planning on replicating the service. . . ” and “”I don’t know how you meet expectations from both sides when you’re not really making a clear brand statement.”

Bingo.  He’s dead right.  Expectations aren’t getting met on either side.  This is much more an old school airline merger.  I actually agree that a new brand would have been a far better approach.  Even adopting an old brand that neither had history with would have been better if it set expectations for both sides.  Imagine the reaction if this new union decided to call themselves TWA or Braniff or even National. 

Even a new brand incorporating some elements from both would have sent a better message.  What if they called themselves Flagship Airlines with a new logo designed to evoke the service they intended to deliver?  It would have delivered a much more clear message either way. 

Here is an interesting observation:  Both airlines do have some distant genetic heritage in common.  Walter Varney who founded airlines that were direct ancestors of both United and Continental.  I’m not proposing the name Varney Airlines but I do wonder if there isn’t something in that history that would lend itself to a good name.

The problem is that it’s hard to walk away from the legacies each brand offer.  There are decades of branding invested in the names United and Continental.  There are decades of history behind each name and decades of family history in each name.  Even airline executives have some sort of emotional attachment to their airline and they aren’t immune to being influenced by that despite the belief they are cold blooded people focused on profits.  They just aren’t.  Not even Glenn Tilton who has relatively little history working in the airline industry.

They problem inside each airline is that the employees haven’t been given something to rally around.  How does a Continental employee rally around the idea that their company is losing its headquarters and name?  How does a United employee get excited about seeing his proud airline re-badged in the image of Continental?   A new name would have evoked some rebellion but it would have sent a message about this being a marriage of equals and I think employees and customers might have been vocal about the change but I also think they would have come to accept it relatively quick. . . especially if the new name was a good one that evoked something real. 

You couldn’t introduce a name like “Acura” or “Lexus” or “Lucent”.  That’s why adopting the name of a no longer existing airline might have been better.  It would have given an instant history and acceptance to the name and, yet, signaled a new start.  There are lot of defunct names out there to rally around.  And there are a lot of possibilities when it comes to new names. 

It’s not that I don’t think that this merger will succeed.  I do think it will succeed.  I just don’t think it will go very smoothly and I don’t think people will adjust to it very easily for the next 5 or 6 years.  That leaves them at a disadvantage to Delta and American Airlines. 

The next best thing CEO Jeff Smisek could do is get that entire fleet painted in the new colors faster than anyone could believe possible.  Get those operations consolidated quickly and get the customer facing side of the company unified in appearance asap.  Get something out there that people both inside and out of the company can rally around and accept.  Get the Continental executives up to Chicago as soon as the day of the legal merger and by up to Chicago, I mean have them living there on day one, not commuting.   That’s an important overture to make to the United employees.  Similarly, embed your best Continental managers into United hubs and so that the Continental employees see their influence day to day and don’t feel abandoned. 

This merger is a long way from being done smoothly.  The two entities have to make nice with their union employees and get them to agree on a transition to one contract and none of those employees have a reason to buy into this so far.   One thing is certain:  If the employees don’t buy into this merger and cooperate, this will be a long and painful merger resulting in a huge loss of opportunity in the market place.  The synergies won’t be realized and the financial markets will voice their disapproval fairly quick, too.

Branding is more than just communicating with a customer.  It’s a united front (no pun intended) for employees to work under and without a strong brand to connect to, those employees won’t know who they’re fighting for.

Filed under: Airline History, Airline News, Airline Service, Airlines Alliances by ajax
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According to the Wall Street Journal (and other publications), American Airlines is about to receive notice of a record setting $25 Million fine related to MD-80 (as well as other, smaller issues) maintenance violations in 2008.  Those violations, related to wiring in the nosewheel area, resulted in the temporary grounding of American Airlines’ fleet as well as other airlines also either having to scramble and make repairs or even ground their fleets.

During the Bush Administration, government oversight investigations reported that maintenance enforcement by the FAA was inconsistent and irregular and found that FAA oversight of Southwest Airlines was dysfunctional at best.  The problems and controversies resultings from maintenance irregularities has caused many to question both the airlines and the FAA having a too close relationship and under the new administration, a much more “by the book” enforcement policy was instituted.

AA, at one point, described the wiring irregularities as not being a safety issue and I have to disagree with that position.  It’s not often I do disagree with airlines perspective on such things but when an airworthiness directive is issued by the FAA and the manufacturer has already issued a maintenance directive, it’s a safety issue. 

Regardless of whether the FAA was doing a proper job in its inspections or not, the airlines still have a duty to implement those directives in a safe and timely manner.  In this case, that wasn’t done and even spot checks on aircraft at AA after the grounding revealed that many still did not have the procedure done properly. 

Even though the FAA is working to establish the appropriate relationships with airlines and even though their enforcement is more by the book, airlines’ responsibility for these safety and maintenance problems remains their responsibility.  This wasn’t a case of inspectors telling the airlines to not bother with the work and it doesn’t absolve AA or any other airline from its responsibility to follow the rules, regulations and law when it comes to safety and maintenance. 

Just because a police officer hasn’t stopped you and told you that your tires are too worn to drive doesn’t absolve you from your duty to ensure your tires are appropriate for driving, right? 

I don’t know if a $25 Million fine is appropriate or not.  It strikes me a bit high at first glance and I”m sure it will be negotiated.  But fines should have an impact and for a $23 Billion airline, it might take as much as $25 Million to make a point that lasts.  I’ll point out that such a fine could well be the line between profitability and losses.  That seems to strike a good zone for appropriate. 

Do I think passengers were in imminent danger?  Probably not but who knows?  Out of a fleet of more than 200 aircraft at AA alone, it’s quite possible that a wiring harness was about to become a danger to the aircraft.  It certainly isn’t inconceivable. 

And the costs to do these maintenance and safety procedures is, in part, the price an airline pays for operating a relatively old and relatively obsolete fleet. 

It is heartening to see the FAA appear to be far more interested in doing its job in the airline industry rather than acting almost subservient to the airlines.  I’m sure the airlines are finding this a novel experience but it is what should have been happening all along.

Filed under: Airline News by ajax
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American Airlines is introducing a new fee.  This time, a fee from $19 to $39 can you get you a seat up front in coach including bulkhead seats and it will allow you “group 1″ boarding. 

Personally, I’m all for offering more varied product on aircraft.  That’s the one development among “debundling” that I am in favor of.  However, please offer me something of real value.  Frontier gets it.  United gets it.  Airtran gets it.  Even Southwest Airlines gets it. 

AA doesn’t get it.  A seat that has no more pitch or other benefits except that it is “up front” and I can potentially board earlier (and sit in an uncomfortable seat longer before take-off) isn’t more value.  If the seat comfort isn’t going to change, do I really care if it’s up front or in the back?  Well, maybe I do if I’m on a cranky old MD-80.  Does it afford me more opportunity for overhead space?  No, not really.  Despite reports to the contrary, it’s just not that hard to find overhead space.  Sure, the bins are more crowded but you can still access them. 

If anything, it’s the jokers who put their luggage up front and then take their seat in back that annoy me.

But I’ll gladly pay for more seat pitch and a generally more comfortable seat.  I’d gladly pay $20 / segment to gain 2 more inches of pitch alone.  And I can already get that on an airline of my choice in most cases.  For the prices AA is offering for this “service” you can more often than not get an Airtran business class upgrade.  You can get more seat pitch and more service on Frontier.  You can get more seat space on jetBlue.  Southwest Airlines’ fee for priority boarding affords me a real opportunity to choose one of the best seats in a 737 for a cheaper price and you can bet I’ll have bin space on the SWA flight no matter what since they aren’t fools and charge exorbitant fees for baggage checking.

Perhaps this might have some appeal to a business traveler but I don’t think such a fee is going to be reimbursed as an expense.  That certainly wouldn’t fly at my company, a major aerospace and defense firm. 

How about a $25 fee that A) gets you a exit aisle seat and B) *guarantees* your checked luggage arrives with you?  That might be particularly attractive to AA flyers.

At the end of the day, for any traveler except the most extravagant, it’s money that can be better spent elsewhere.  And if you are that extravagant, you’re probably getting an upgrade to first class anyway.

Filed under: Airline Fees, Airline News, Airline Seating by ajax
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The merger between TAM of Brazil and LAN of Chile offers some interesting possibilities for the new airline group that will be operating under separate names in South America.  One big question is which alliance will the group adopt.  Currently, TAM belongs to the Star Alliance and LAN is a member of Oneworld.  

This new airline will have a bit more bargaining power when it comes to alliances and they have a few choices to make going forward.  The first is to participate in both under the respective brands just as before.  I’m extremely doubtful that that will happen. 

The second is to pick an alliance between Star Alliance and Oneworld.  In this scenario, I would give Oneworld the upper hand simply because in this merger, LAN will control more and it is the Oneworld partner.  American Airlines won’t want to let them go since they fit nicely into the AA system.  In addition, TAM might offer Oneworld quite a bit of access to other parts of South America it really doesn’t have at this point.  However, the Star Alliance has a lot to lose and a lot to gain.  Especially with the Continental United merger going forward.  One could see the Star Alliance attempting to bring the LAN system over to the Star Alliance with some incentives.

Finally, there is SkyTeam who has a lousy representation in South America presently.  SkyTeam a la Delta lost a big fight on the trans-Pacific side when it failed to win over JAL.  A TAM/LAN entry into SkyTeam would be a huge win for that alliance and I suspect we might just see this dark horse try to bring them over to their side.  This is exactly the right time for SkyTeam to woo such a company because there will already be integration efforts going on between the two as they consumate their merger. 

In now way does this new merged company go ignored as a participant in an alliance.  I do think it will be a fight and I do think all 3 alliances will be offering significant incentives to win LATAM over.

Filed under: Airline News, Airlines Alliances by ajax
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American Airlines is in discussions with its transatlantic Oneworld partners, British Airways and Iberia, to consolidate in Terminal 8 at JFK airport.   This would be a good counter-move to Delta’s intention to renovate and expand at the same airport.

It’s about market share in New York and now we find the SuperLegacy airlines moving to own the most they can in that market.  AA (Oneworld) and Delta (SkyTeam) at JFK and ContiUnited at Newark.  It’s a fight that is sure to get bloody over the next few years.

If AA can move to bring its partners under the same banner and make things even more convenient for connections, it may have a grip on JFK that resembles British Airways’ at Heathrow Airport in London. 

It also makes me wonder what ContiUnited might do at Newark.  While Continental plainly dominates at Newark Airport, it also presently stands to have the least pleasant facilities and since it’s new to the Star Alliance, it may take quite some time to bring its Star Alliance partners under its umbrella at Newark. 

While a number of Star Alliance carriers to have flights to Newark, a number don’t.  And things aren’t well organized at Newark for Star Alliance.  Will they be?  I don’t see how ContiUnited can afford *not* to get their act together at Newark to compete. 

Newark is actually a bit more convenient to Manhattan and that is, after all, where the high dollar traveler is going to or coming from.  It makes sense for the Star Alliance to cooperate and consolidate and ensure good feed to those international flights but they’re going to have to get some airlines to move over, I think.  Airlines such as ANA.  

Others, such as Lufthansa and SWISS and Singapore Airlines are all in Terminal B.  Continental has Terminals A and C.  What ContiUnited really needs is a revised Terminal C and/or a portion of B while giving up A to others. 

But will the other airlines cooperate?  Don’t bet on it.  Keeping Newark in disarray would be a good thing.

Filed under: Airline News, Airlines Alliances, Airports by ajax
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Southwest Airlines admits it is considering adding a bigger 737 to its fleet and its the 737-800 that it is interested in.  The 737-800 would give the airline more revenue opportunity used in and out of airports that have slot restrictions such as La Guardia or on routes with ever increasing density but where frequency isn’t justified.

Current SWA aircraft, the 737-300 and 737-700 carry 137 passengers and a 737-800 would probably carry about 175 people in a Southwest configuration.  That’s an additional a potential increase of 38 passengers for those critical routes with costs that wouldn’t be all that much more than their current costs.  A little bit more fuel and an additional flight attendant is all that is really required.  That spells more profit.

And I like the idea.  Frankly, I think Southwest could stand to add all 3 models of 737 to their fleet and I think they ought to seriously examine the potential of Hawaii and trans-continental flights.  But, then, I also think they could stand to look at smaller aircraft for regional routes with high frequency too.  It’s going to be the only way they can continue growth in the future.

However, don’t go thinking you’re going to see a 737-800 in SWA colours next year either.  Southwest likes to mull decisions like this for quite a while and it would require negotiating amendments to their union contracts with the pilots and flight attendants at minimum. 

Take note here, SWA pilots and FA’s, here is your chance to be industry game changers again.  Pilots, you shouldn’t ask for a dime more to fly these aircraft.  They require no extra effort on your part and it keeps the flying in your house, not SWA codeshare partners’.  Flight Attendants, the same goes for you.  The passenger count per flight attendant actually *drops* by two passengers with these aircraft.  Be game players and make this happen.  It costs neither union anything to make this work and most likely will add profitability to the company as well as future stability to your jobs. 

This really is win-win.  Get greedy and it is the beginning of a long end to SWA.

If SWA does adopt this idea, expect aircraft in the fleet 12 to 24 months after the decision is announced.

Filed under: Airline Fleets, Airline News by ajax
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