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.

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.

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.

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.

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?

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.

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.

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.

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.

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.