Love Field Gates

November 16, 2013 on 2:00 am | In Airline News, Airports, Mergers and Bankruptcy | No Comments

Delta wants to take over American Airlines’ gates at Love Field Airport in the worst way.  They say they can run 18 flights a day to major Delta hubs and put operations in place quickly to do so.  Delta argues that it can provide very real, substantive competition at the airport.

Southwest, of course, wants the gates as well.

No doubt others will throw their hats into the ring too.

In less than a year, airlines will be able to operate unrestricted domestic flights from Dallas Love Field to anywhere in the continental United States.  That’s a big market for Dallas suddenly.

But the DoJ wants to foster LCC participation in these give ups and that would preclude Delta (and Southwest, in my opinion) as well as other “legacy” carriers from obtaining those gates.

This is why I think that any airline who has less than 20 percent market participation at an airport ought to be able to have a chance to acquire those gates at Love Field and elsewhere.  It invites the most qualified new entrant.

What Dallas doesn’t need is a ULCC carrier flying into Love Field airport a couple of times a day.  What Dallas *does* need is real competition which an airline such as Delta could provide in very real terms today.

That’s very attractive to me, a person who lives in Dallas.  This city doesn’t have much competition.  It has American Airlines who dominates DFW in a way that dwarfs the dominance at Washington Reagan National that US Airways enjoys.  It has Southwest who dominates Love Field in an even greater way.

So, yeah, real competition from a real, national network airline who can offer real price competition is an attractive idea.

So, let’s not preclude “legacy” airlines.

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Competiton is in terrible shape, no?

November 15, 2013 on 2:00 am | In Airline News | No Comments

No.

United Airlines just announced two new non-stop flights into New Jersey with UA Chairman Jeff Smisek and NJ Governor Christie lending their voices to the announcement.

That would be non-stops between Houston and Chicago to Atlantic City.

That, my friends, is LCC and ULCC territory.  But it’s United who is doing it and from their two largest hubs, too.

That’s what a truly large airline of scale can do:  Deploy flights on unique routes with flexible resources.

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The Settlement: Part 3

November 13, 2013 on 1:01 pm | In Airline News, Mergers and Bankruptcy | No Comments

I smell a small mouse in this mix.  That mouse, hardly a rat, is Virgin America.

From the Department of Justice announcement on the settlement of the lawsuit with US Airways and American Airlines:

“Rights and interests to two airport gates and associated ground facilities at each of  Boston Logan, Chicago O’Hare, Dallas Love Field, Los Angeles International and Miami International.”

I think that someone wants Virgin America to get access at the airports it has openly spoken of.  Virgin America is a service darling in that offers a superior inflight service experience combined with an LCC pricing scheme.

I think that some or all of these cities will find Virgin America getting the use of these at a pre-arranged price.  The DoJ will come off looking like a prince for getting Virgin America, arguably the smallest of LCCs right now, a place at the table.

But the airline, American Airlines, could care less. Virgin America isn’t big enough to introduce pricing power into those markets the way a larger, more established national airline could.  It’s a deal that, if it works out that way, does nothing to impact American Airlines and which does nothing to substantially introduce competition.

My guess:

I think Virgin America will acquire the gates and facilities in Los Angeles, Miami and Chicago.  Maybe Boston as well.

Virgin America already has a proper footprint at DFW airport.  So I do wonder who might be interested in those gates at Dallas Love Field.  It would be egregiously bad to award those to Southwest although I’m sure that Southwest would love to have them.

I actually believe that Southwest is constrained from getting those gates but readers are free to correct me.

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The Settlement: Part 2

November 12, 2013 on 11:03 am | In Airline News | No Comments

The Slot Race is about to begin.

Slot divestitures required in the settlement of the lawsuit between American Airlines / US Airways and the Department of Justice will be the laser focus of all airlines in the US.  Just two weeks ago, Southwest Airlines began publicly maneuvering to be at the front of the line for slots at both airports (NYC La Guardia and Washington DC Reagan National).  Yesterday, Delta announced it would be happy to take on the slots being given up.

jetBlue can’t be far behind nor Virgin America.

So far, I can’t identify exactly what the terms are of the settlement with respect to those slots.  I will offer an opinion on what should happen:

1)  Only airlines with a market share at those airports that represents less than 20% should be eligible to bid on those slots.  Why 20%?  There are currently 5 major national airlines in the United States and they’re becoming 4 airlines.  Falling below the 20% threshold invites new entrants and gives incumbents with a small footprint an opportunity to play in the game.

2)  Gate space at those two airports should be available consistent with the slots.  In other words, new entrants should be encouraged with the ability to get reasonable gate space.

3)  I would specifically bar Delta Airlines from competing for slots at both New York and Washington DC airports.  Delta and US Airways made their deal in a slot exchange in 2011.  That deal gave Delta 132 slots at NYC La Guardia and gave US Airways 42 slots (plus cash and a daily Brazil route authority from Charlotte) in Washington DC.  These two airlines have had their day at the buffet line.

With these assurances in place, I think we’ll see some new competition into and out of those airports.  Will it be good or ideal?  I have no idea.  Part of the outcome really depends on the eligible airlines being willing to not only acquire the slots but also being willing to use them effectively in the markets.

While it grates on me to say this, I do think that finding a way for Southwest to continue to build its presence in the New York City and Washington DC areas is a good idea.  This puts a national airline with a national network into play in those markets.

Allowing airlines such as WestJet or Spirit to operate a few pairs into and out of those cities doesn’t actually provide much competition at all.  Those airlines use and make a big profit from those slots without benefiting the consumer in the form of introducing real competition.

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Low Cost Carrier

November 11, 2013 on 4:52 pm | In Airline News, Mergers and Bankruptcy | No Comments

After thinking about Southwest filing an amicus brief in the AA/US/DoJ lawsuit all day, it has occurred to me that Southwest plans to argue how:

  1. Southwest is the pre-eminent low cost carrier in the country
  2. It needs slots in Washington D.C and New York to wield such an influence in those markets
  3. Only Southwest can deliver competition against these massive giants

And then to complete the bizarre moment, I would imagine that American Airlines and US Airways will then have to argue that Southwest is not a low cost carrier and doesn’t offer nearly as much competition as people think.

At which point, the judge’s head will explode, I imagine.

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The Settlement: Part 1

November 11, 2013 on 9:15 am | In Airline News | 2 Comments

The AA/US v DoJ settlement came more quickly than I expected and I am busier than usual at this time.

However, a few top level comments until I can sit down and do an analysis.

  • I so far see the airlines giving up really nothing that they weren’t already prepared to give up for this deal.
  • The gates they have to give up in the key airports does (potentially) remove barriers to entry for new airlines in those markets.
  • Delta doesn’t surprise me in their loud, vocal expression that they would like to get those Washington D.C. slots.  (This was suggested to me by two sources as being an end game of Delta for weeks)
  • I think it’s great that the Republican candidate for governor, Greg Abbott thinks this deal is a win for American Airlines.  Sadly, he didn’t originally and did very real damage as a result.  Blowing with the wind doesn’t impress me unless it’s an airliner.

More to come.

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Wouldn’t you like to be Delta’s friend? Or Southwest’s?

November 8, 2013 on 1:00 am | In Airline History, Airline News, Mergers and Bankruptcy | No Comments

Southwest Airlines and Delta Airlines and others have been running around playing politics with the US Airways / American Airlines merger in ways that leave a person wondering what, exactly the agenda is.

The truth is that the airline industry has never been good at acting in its own interests.  To the contrary, the US airline industry is expert at just one thing:  shooting itself in its own foot.

And they have a tradition of doing this that stretches back 60 years or more.  This isn’t just a deregulation thing.

Airlines cannot resist interfering in things that may result in some benefit to them.  And the worst part is that they always do it in a very clumsy manner which finds them not only not getting what they wanted but losing too.

Both Southwest and Delta benefited a great deal from mergers.  Both did not have to enjoy friends such as American Airlines or US Airways interfering in the arranged marriages.  (Yes, I’m well aware of US Airways hostile bid for Delta and that is quite different.)

These airlines run the very real risk of impacting their entire industry in a way that would prohibit further consolidation and even invite investigation into divestiture by the very largest airlines.  It’s no small thing that both Delta and Southwest are a part of that club of large airlines.

 

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Southwest wants a word with the judge

November 7, 2013 on 1:00 am | In Airline News | 2 Comments

Southwest Airlines wants to offers its unique perspective on competition in markets affecting the US Airways / American Airlines merger and particularly wants to talk about New York La Guardia and Washington DC Reagan National airports.

Surprised?

Southwest wants to offer that it doesn’t have competitive influence in those markets because it has too few slots.  This, of course, is to angle for an advantage in accessing slots at those airports that will almost certainly be given up in such a merger.

I like Southwest Airlines, I really do.  But this strikes me as a particularly craven move on their part.  The airline has not been willing to pay the market rate for such slots and it has lost opportunities to expand in those markets as a result.

Everyone senses a win coming up for these two airlines and most likely via a negotiated settlement between the Department of Justice and US Airways and American Airlines.  Now everyone wants a piece of the action.  One wonders just how many airline executives at Southwest, Delta and other airlines have been sticking their oars in to gain advantage.

Absolutely slots should be given up.  And those slots should go to high bidders.  If we’re not going to treat slots as a public commodity to be managed, then those who own them should at least get the greatest economic benefit from them.

If Southwest wants more slots, it needs to do a much better job analyzing the value and pony up the money.  It really is that simple.

 

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Avianca: The difference private industry makes

November 6, 2013 on 12:51 pm | In Airline News, Mergers and Bankruptcy | No Comments

South America is a land where countries often prop industries far past what is appropriate and generally to maintain jobs for constituencies.  This has been what Italy has done with Alitalia, what India has done with Air India and what Argentina has done with Aerolineas Argentinas.

It’s what Colombia could have chosen to do with Avianca and didn’t.

The Wall Street Journal has a story about Avianca’s comeback over the last 20 years which is culminating in Avianca’s stock being listed on the New York Stock Exchange and which will raise $500 million for Avianca’s expansion plans.

Avianca is an example of why private industry is what saves airlines, not governments.  There are many examples in the airline industry similar to Avianca but Avianca represents exactly what airlines such as Alitalia need.

Aggressive, entreprenurial restructuring that reduces costs and creates opportunities for genuine growth.  There isn’t a government known to man that has such talent.

Avianca’s salvation came from an industrialist who saw opportunity in the ashes of Avianca’s bankruptcy.

Alitalia isn’t saveable.  But should the airline go away, there is enormous opportunity for airlines to come in and provide employment with thriving enterprises.  The wages aren’t going to be as high, that’s true.  No airline that is competing today does offer the kinds of wages and job protection experienced by Alitalia employees.  And none should experience such.

With all of that said, I also don’t expect Italy or India or Argentina to embrace reality any time soon either.  It’s possible that Italy may be forced to let go but only because of the obligations Italy is under as a function of debt rescue performed by the European Union.

Otherwise, Italy would pour money into Alitalia no matter what was demanded of them by anyone.

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Cold Bay, Alaska

November 3, 2013 on 1:00 am | In Airline News | 2 Comments

A Delta Airlines 767 on its way from Tokyo to San Francisco experienced trouble with an engine and made a diversion to an airport in Cold Bay, Alaska.

 

 

 

 
Cold Bay has a 10,000 foot runway but I doubt its population of just 108 people was truly prepared to handle passengers from a 767. I would bet that a diversion from a Q400 probably taxes its systems.

Delta sent another 767 to pick up the passengers and carry them onwards to San Francisco but I’m sure the passengers were inconvenienced for at least a full half day if not longer.

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iPads On A Plane!

November 1, 2013 on 1:00 am | In Airline News | 6 Comments

The FAA has announced plans to permit expanded use of personal electronic devices on aircraft below 10,000 feet with the provision that during immediate take-off and landing phases, they would need to be stowed in a seat pocket, etc.

Everyone is hailing this as a monumental moment in aviation. And airlines are scrambling to be first to allow it with Delta appearing to be in the lead to win that race by starting it . . . tomorrow.

Here is my reaction: The FAA is staffed with people who are supposed to be very smart and very experienced in making such evaluations. If they’ve come to the conclusion that this is safe, then I stand behind that decision. I do think it would be very, very regrettable to find out one day that “electrons floating in the air” impeded aircraft instrumentation at a critical moment resulting in a crash. So I hope that the FAA has made this announcement on the basis of real science and study rather than political will.

But this doesn’t mean that stupid in the cabin is over. Far from it. The new ruling doesn’t permit phone calls being made and text messages being sent, for instance. You are still supposed to be in “airplane mode” with your PED and you can only connect to the aircraft’s WiFi systems.

How many here think that people aren’t going to text with their phone NOT in airplane mode?

Yes, me too. Because how can you really tell if someone is in airplane mode?

It also isn’t going to prevent a large contingent of stupid from using their PEDs during takeoff and landing phases. Personally, these really are the moments where everyone could stand to have their hands folded in their laps and to be situationally aware of what is going on around them.

Allowing PED use just before landings means that few will put them away and in the even of a crash, we’ll have iPhones flying around the cabin smacking people in the head with fatal results. While that opportunity exists even today, there isn’t any need to encourage it either.

I think the FAA offered something to the public with high perceived value, low real value and which artfully dodges issues around what’s safe in a cabin and even invasions of personal space.

In other words, the airlines still have a lot on their hands with this and don’t be surprised if some just tell you to put your device away until they say so. Much like today.

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Mediation might be a way out

October 29, 2013 on 1:00 am | In Airline News, Mergers and Bankruptcy | 4 Comments

Often the key to getting a deal done is finding a way for one or both parties to save some face.

The worst thing to happen in the Department of Justice lawsuit against American Airlines and US Airways is that the DoJ acted in a manner that immediately backed themselves into a corner.

Since that silly act, roughly 3/4 of the entire world has come out in support of the merger between the two airlines.  I’m pretty sure that Sri Lanka will be filing its amicus brief in support of the merger in a day or two (note:  that’s *humour* in that last line.)

A mediator has been assigned to this case and it is a way out for the DoJ.  With a mediator in place, a deal could be negotiated where the DoJ gets a token concession and is able to exit this lawsuit without appearing to have failed.

It’s failure that people fear the most in these things and lawyers have a big ego that goes against failure.  But this latest lawsuit may be one of the most unpopular acts the DoJ could have engaged in for 2013.

The mediator can help facilitate a deal but it also takes on the onus of having put a deal into place.  The DoJ can be seen as not giving in (entirely) and the airlines get their merger.

The deal that wins is that slots in Washington D.C. are given up and guarantees of service are made for a certain time period in other areas where competition is slim(er) as a result of  the merger.

My personal estimate of probability for a deal prior to the mediator being assigned was about 20%.  I would now raise it to 60%.

One item of note:  Were the DoJ to lose this lawsuit, it could lose all of the lawsuit.  Which means no slot giveups anywhere.  That’s a failure that would look very, very bad to any outside looking in at the DoJ.  There is some incentive for a deal.

 

 

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Stop thinking SWA should run Atlanta like Airtran

October 26, 2013 on 1:00 am | In Airline News, Airports | No Comments

There have been criticisms of how Southwest has played its game in Atlanta compared to how Airtran was working in Atlanta for quite some time.  The obvious comparison that has been made has been departures.

Airtran had a lot of departures out of Atlanta and those have been reduced over time by Southwest as it absorbs Atlanta into its schedule.

Airtran ran its Atlanta operation like a hub and that does mean lots of departures.  If that’s your hub, you want flights going everywhere.  Going everywhere means lots of flights.

Southwest runs focus cities that are connected with many point to point flights.  This means fewer flights.

Southwest knows what it is doing in Atlanta and its transition in Atlanta is about gaining access to business travelers in a market it was shut out from until its purchase of Airtran.  Atlanta will probably gain flights over time at a very moderate pace as Southwest identifies more opportunities.

But Atlanta is not going to be a hub under Southwest.

 

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Southwest wants DC and NYC slots

October 25, 2013 on 1:00 am | In Airline News, Airports | No Comments

Southwest Airlines CEO made it clear during an earnings call that Southwest believes that should there be a merger between US Airways and American Airlines, that slots in both the New York City and Washington D.C. areas should be made available by the combined airline.  And Southwest wants those slots.

In the most recent give-up by US Airways at Reagan National about 2 years ago, jetBlue won the auction for those slots.  jetBlue paid $40 million for just 16 slots.

Southwest has lost several bidding wars for assets over the last several years.  Bidding wars that even today I would argue it should have won by being just a touch more aggressive.  Southwest tends to want a “deal”  much like it got with asset purchases from ATA many years ago.

Those deals don’t exist anymore.  Premiums are paid for such assets and whether we like it or not, the price of entry in those markets is very high.

So, is Southwest prepared to pay to play in those markets?  I think it will.  Southwest’s business strategy has changed over the past 2 years and has an increasing focus on winning business travel.  To do that, it needs more penetration in markets such as New York City and Washington D.C.

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US Airways down a bit

October 23, 2013 on 1:00 am | In Airline News, Mergers and Bankruptcy | No Comments

US Airways 3rd Quarter results were down compared to the previous year and primarily due to expenses that are currently resulting from the anticipated merger between it and American Airlines.

If you think either airline isn’t burning a lot of cash right now due to the hold up from the DoJ lawsuit, think again.  US Airways’ one time expenses were $151 million for the 3rd quarter and while I don’t like talking about “would have beens” related to these kinds of expenses, let’s just pause and consider that a great deal of those one time expenses were related to its “hold” on the merger.

Considering that US Airways has less revenues than Southwest Airlines, the $216 million net profit for the 3rd quarter is exceptionally good and shows that that airline continues its strong record of providing profits.

 

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Billion Dollar Baby

October 22, 2013 on 1:00 am | In Airline News, Mergers and Bankruptcy | No Comments

There have been a number of airline industry watchers who have private and (sometimes) publicly expressed concern that American Airlines’ case with the DoJ on the subject of competition was hurt by American’s ability to turn a profit right now.

American Airlines has indeed earned a Q3 profit and it was a respectable one.

Delta Airlines had a Billion Dollar 3rd Quarter.  $1.6 Billion to be exact.

While you digest that news, consider that Delta doesn’t have the lowest costs around this town.

So, when we consider that the airlines of size (Delta and United) and what they’re able to produce for themselves in profit, consider the size of the warchest that that gives those two airlines.

And then explain how the much smaller American Airlines and US Airways are going to fare against those behemoths.

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Can a deal be made?

October 21, 2013 on 1:10 pm | In Airline News, Mergers and Bankruptcy | 1 Comment

There is now speculation that there might be talks going on between the Department of Justice and American Airlines and US Airways to settle the lawsuit the DoJ has brought against the two airlines.

The speculation is largely born out of the fact that Texas Attorney General Abbott got a “settlement” deal with the two airlines and was made happy.

The truth is that that settlement was window dressing.  The Texas AG got nothing past what AA had already offered in many discussions.  The offer was merely put on paper and signed.

I do not think there is a deal to be made with the DoJ and I think those hoping for it are ignoring the fact that the DoJ has backed itself into an ugly corner by even filing the lawsuit.  There were other choices they could have made in August.  One would have been to enter into negotiations for what the DoJ would think necessary to improve competition.  The fact that that was’t the next step speaks loudly to the intent of the DoJ.

Lawyers are people and the leaders of these lawsuits didn’t get where they are by changing their minds.  The amount of ego that would have to be swallowed by both DoJ Attorney General Holder and the lead Deputy AG Baer would be very large.  It’s hard to imagine either man swallowing such a change and it’s hard to imagine a deal that allows either to save much face in the process.

Look for a trial starting on November 25th.  I still think the airlines win this trial and I think that will be even worse for the DoJ.  The Department of Justice is free to shock and surprise me with a deal but if one comes about, it won’t substantially change the merger between the two airlines except for in Washington DC at Reagan National airport.

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Buh Bye Singapore – New York / Newark

October 20, 2013 on 1:00 am | In Airline History, Airline News, Trivia | 4 Comments

Singapore Airlines did something shocking many years ago.  It took its nearly new A340-500 aircraft and put an all business class cabin in it.  Then it flew this airliner from Singapore to New York City (Newark) on a regular schedule.

This has been a flight of 9500 miles (or 8300 nautical miles) which, when you think about it, is really quite amazing.  The flights are sometimes a bit longer than that because they fly an air track that is most efficient, not always just a great circle polar route.

But Singapore is dropping the flights.  The aircraft used is a 4-engine aircraft that never made much economic sense for most airlines and it is probably becoming too expensive to operate this aircraft even on this route.

Will it be replaced?  It’s always possible but there are no plans to do so today.  A 777-200LR could fly the route with more passengers but who says there are more passengers who want to fly that route?  A 787 cannot fly the route today and there are no models with enough reserve distance in them to make that possible.  So, as a route, it’s probably gone.

The next longest route is Sydney-Dallas/Fort Worth at 7500 nautical miles and it’s notable that that aircraft is also a 4-engine airplane:  The 747-400ER.

The reason both of those are flown with 4-engine aircraft is that they have both the range as well as the ability to fly the most efficient, direct tracks.  Two engine aircraft such as the 777 always operate under ETOPS rules which often require slight deviations to stay within range of a diversion airfield.

I do think we’ll see a flight of 8000 or more nautical miles some day in the future.  I do not think we will see that flight in the next few years.  At the end of the day, such flights are really one-offs that will come and go as demand changes.

Just like the Concorde, it was nice while it lasted.

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Air Marshal photographs up skirts

October 19, 2013 on 1:00 am | In Airline News, security | No Comments

A U.S. Air Marshal was caught taking photographs up women’s skirts with his cell phone and was caught by a passenger who took his phone and then notified a Southwest Airlines flight attendant immediately.  The marshal was arrested by airport police.

The TSA says it is cooperating with the investigation of this man.

Would anyone care to place bets on how long it takes the Transportation SECURITY Administration to describe this as a one-off event and that the officer was terminated and it isn’t anything to be concerned with?

It is events like this that makes me want to create a category in this blog titled “Are you kidding me?”

Let’s examine the problems here.  First, a person who was given great trust violated the public in a manner that increases the public perception that the TSA isn’t there to provide security but, rather, a haven for sex perverts.  If that seems harsh, I won’t apologize.  All too many encounters with the TSA devolve to someone getting groped or inappropriately photographed.

That badly damages public trust and TSA credibility.

Second, the passenger took the phone away from the marshal.  Seriously?  The passenger just grabbed the phone and took control of the situation along with a flight attendant.  Let me point out the irony here:  The passenger and flight attendants did what an air marshal should have done.  Even if the guy was doing something bad, one would kind of hope that he had the presence of mind to not let someone take something from him.

That doesn’t describe the kind of person we want performing air marshal duties, does it?

Third and most important is that these kinds of things happen too frequently.  For several years now, the TSA has promised that it is cleaning up its act.  But, hey, we have air marshals photographing women under their skirts and TSA officers stealing parking placards and re-selling them.  And many more things going on.

If this was the FBI, would we be tolerating this in a security force?

The TSA has not cleaned up its act.  It has not provided security and it is not, by any obvious measure, attempting to build public trust and credibility.

When your security force is assaulting you and stealing from you, my first inclination is that you must live in a corrupt third world country.

But we’re talking about the United States here.

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AA makes a profit

October 18, 2013 on 1:00 am | In Airline News | No Comments

American Airlines has turned in a very respectable 3rd quarter profit of $289 million and say they would have made much, much more if bankruptcy costs hadn’t gotten in the way.  I continue to respond that one time charges and bankruptcy costs happen and should be considered in results.

We’re nearing the second anniversary of American Airlines’ bankruptcy and it is good to see the profits and also see that a significant amount of money has been set aside for employee profit sharing.

It also makes me feel particularly bad for the US Airways employees because the delay in the merger has yanked away the economic benefits they would be experiencing as a result of the airlines’ success together.

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