A pox on all of your houses

January 12, 2016 on 11:03 am | In Airports | No Comments

Love Field has been screwed up since Fort Worth Congressman Jim Wright decided to muck with issues involving Dallas Love Field and Dallas / Fort Worth airports.

And no one has had enough political courage to recognize a vastly different reality as compared to 35 years ago.

There is this myth that there is space at DFW airport.  There isn’t.  DFW airport can longer accommodate a major airline entering the marketplace at this time.  DFW airport admits it needs at least one more terminal and is beginning the very long, very arduous process of approving, designing and building a new terminal.

So, yeah, we should have that ready by 2030.

Love Field airport was capacity constrained the day the 5 Party Agreement to end the Wright Amendment was signed.  All of the parties knew it and all knew that they were kicking a can down the road.

And it took less than a year after the restrictions lifted for a major legal battle over access to the airport was begun.  A sure sign the deal was bad from the beginning.

A pox on the City for treating Love Field as a second cousin in the airport game.  Love Field isn’t a luxury and it has provided exceptional competition in the marketplace to lower fares.  Particularly after October 13, 2014.  All of the Dallas / Fort Worth area benefits because while Southwest, Virgin and Delta are driving prices down at Love Field, they’re also driving them down at DFW.  I know this because suddenly it is exceptionally cheaper for me to fly to places such as Portland, OR and Norfolk/Richmond, VA.  More than a hundred dollars less than it used to be.

This is the only market to see lower fares rather than higher fares in the last year.

A pox on Southwest Airlines for knowing that they were kicking that can down the road and then beating everyone up for not getting what they wanted.  Southwest signed the deal and knew the impact of the deal and still made the deal.  Now it would like the deal changed but it has resorted to bullying the City and other airlines in a courtroom.  Take some responsibility for agreeing to a bad deal and be a leader in solving the problem.

And not for nothing SWA, Love Field isn’t your own private airfield.

A pox on American Airlines for forcing such a deal when it had everything it needed already at DFW.  Your desire to constrain trade was so strong that you politically forced a deal that has hurt the city, hurt Fort Worth and hurt other major benefactors to the community (SWA and supporting industries).  That’s No Bueno and you could be a leader in getting this changed but you won’t.  You have your own airport and you’re damned if you’ll help a city or a sister airline in any way.

A particular pox on Aviation Director Mark Deubner for not identifying the risks and addressing them via the Dallas City Counil so as to not impede commerce at the airport.

A big pox on Fort Worth for clinging to the idea that inhibiting Love Field is what’s best for Fort Worth.  Major metropolitan areas have multiple airports.  It wouldn’t be so bad for you to fire up some flights into one and let’s talk about how you built Alliance Airport with the expectation that it could have “overflow” from DFW.  The fact of the matter is that Fort Worth is big enough to support a smaller airport with services.  Your insecurities against Dallas show up time and again in the airport game and it hurts the entire metroplex.

And lastly, a pox on both State and Congressional leadership in this area.  Who are you keeping happy?  This has been a legislatively botched compromise over and over again.  Bringing political solutions to a market area problem has resulted in a mess.  I am not a Republican and I am not a Democrat either.  I believe regulation is good but I believe political constraints on commerce for a single situation in this area is stupid.  Undo the stupid and allow the market forces to develop transportation responses according to genuine needs.

This is a metro area of nearly 7 million people and the only major metro area that is politically constrained by Congressional law in this way.  Let it go, things will work out and I promise you that the city of Fort Worth, a city of 1.8 million people, isn’t going to be forced to drive to Dallas to take an airplane ride.

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Venezuela goes old school

July 9, 2014 on 11:36 am | In Airline News, Trivia | No Comments

Airlines such as American Airlines and Delta Airlines are sharply reducing the number of flights they are flying to Venezuela at this time.  The problem is that while they like the flying, they can’t get their money out of Venezuela.

Most recently, American Airlines has said it has over $700 million that it cannot retrieve from the greedy hands of Venezuela’s government.  $700 million is a lot of money for any company and even for an airline, that’s a lot of cash. News reports now say that nearly $4 billion (with a “b”) is being restricted by Venezuela due to currency restrictions in place.

Venezuela (and some other countries) are greatly restricting the amount of foreign currency that can leave the country at any one time.  Because of rampant inflation and hyper-inflation induced by socialist movements in such countries, these nations now have a severe problem is coming up with enough “hard” currency to pay their global bills.

That’s significant when it comes to Venezuela because this is a nation that has had a profitable oil export going on for years.  Typically that brings in more than enough foreign currency to balance outflows for most nations.

The worst of this is that as these balances grow in these countries, they look more and more attractive to hold on to.  $4.9 billion is a lot of money to a nation such as Venezuela.  In fact, it’s about 1% of Venezuela GDP.

Think about that for a moment.  For foreign airlines alone, Venezuela is intentionally restricting as much as 1% of its GDP.

How is this done?  The nation devalues its currency strongly and regularly.  An airline such as American Airlines sell a ticket for say, $200, it’s paid for (in Venezuela) in Venezuelan Bolivars at the official exchange rate.   That exchange rate is set by the government.  But the government changes that rate arbitrarily and lower before that money gets to the airline.  Here is a simplified example:

SuperStar Airlines sells tickets in Venezuela for Bs 1000.00 (One thousand Venezuelan Bolivars).  Juan Diaz purchases a ticket and pays in cash Bs 1000.00.  The exchange rate is (officially set by Venezuela) set at 4 Bolivars to $1 US.  The airline collects this money into a Venezuelan bank account in that currency.  Now, periodically, SuperStar Airlines would like to have that currency sent back to its headquarters in the United States.  But the Venezuelan government makes this very difficult to do because it’s a large sum of money.  Basically, this currency has to be sold for dollars and the only place those dollars can be purchased (legally) is the Venezuelan government.

So the Venezuelan government “sells” dollars for an exchange rate that is set at Bs 5 to $1 and suddenly the money that SuperStar Airlines has is now worth much less.

What makes this worse is that the Venezuelan government is maintaining several different exchange rates that are “official” and those are egregiously unfair to the businesses such as airlines operating to and from that nation.  In addition, the government is devaluing its currency more in the exchange rates that primarily effect foreign businesses.  Furthermore, it’s only permitting a trickle of cash to be exchanged and sent out of the country at a time.

This results in a condition where it just doesn’t make sense to fly to Venezuela.  Actually, it doesn’t make sense to do any business in Venezuela and one could be tempted to call Venezuela the Alitalia of countries at this point.  When you can’t make money and take it back home periodically at a rate that allows you to earn a reasonable profit, you just have to stop doing business in that country.

This is what many airlines are doing now.   One thing that the former President (of Venezuela) Hugo Chavez understood was that he needed foreign businesses to do business in Venezuela and he kept this game at a tolerable level.  New President Maduro and his government is not making it tolerable because to do so means they cannot throw money at their citizens to stay in power.

And staying in power is important.

This is very reminiscent of how many nations in South America operated in the 1960′s, 1970′s and 1980′s.  And it killed those economies.  Airlines had to be very creative with how they got money out of those countries legally.  Braniff was very good at this but even Braniff would find itself doing very odd things from time to time.  For instance, its leather seats came from leather from Argentina. That leather was “exported” by Braniff because they had to buy something to take “value” out of the country.  Leather was a  way to get “value” out of Argentina.   Other times, executives would travel to the Latin American country in question, buy financial instruments of various types (often bonds) and then stuff their suitcases with them and come home.  I know this because that is exactly what my father had to do at Braniff more than once.

When an airline gets to the point that it says it is untenable to continue business in a nation, that’s pretty bad.  Airlines will do business with just about anyone if there is money to be made.

I strongly suspect that Venezuela’s response will be that their airline will fly people where they need to go.  Except . . . how will that airline gets its money out of those countries when they use retaliatory measures (allowed) against Venezuela?  This is only one chapter of a multi-story chapter.  Stay tuned for more.

 

 

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Long Distance 787 Style

July 7, 2014 on 2:00 am | In Aircraft Development, Airline Service | 2 Comments

I read a story from Forbes recently where the possibilities that the 787 opened up were discussed.  Specifically, how new routes to China were springing up now that the 787 was available to do “long and thin” routes for airlines.

United Airlines opened up a thrice weekly route from San Francisco to Chengdu (in the interior of China) that is 6857 miles in length.  Not nearly the maximum distance a 787 can fly but certainly a distance that isn’t flown often.  That is the equivalent of flying across the United States from coast to coast 3 times.

The reason that route is possible is because the 787 delivers seat costs that are less than much larger airliners (777, 747, A380) despite it being able to seat just over 200 people.  The United Airlines 787 seats just 219 people, for instance.

On that San Francisco – Chengdu route 40 years ago, the route would have been flown from San Francisco to some place such as Japan on a 747 where a smaller but still long-legged airliner such as the DC-8 would carry some passengers onwards to Chengdu, a distance of 2100 more miles.

That is the magic of airliners today:  direct routes instead of spoke-hub–hub-spoke.

It’s why airlines do want range and the idea that airlines will accept less range for a cheaper vehicle is somewhat suspect in my opinion.

It’s why I believe that the A380 is a niche airliner and will forever be a niche airliner.  Why should I fly from Dallas to Dubai to Mumbai on Emirates when I could theoretically hop on an American Airlines’ 787 and fly from DFW to Mumbai direct?  (And very doable on the 787-9, I might add.)

This is the quiet revolution of the 787.  It isn’t the carbon fibre or engines.  It’s the very cost effective airliner for such routes.

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American Airlines Social Media

July 5, 2014 on 2:00 am | In Trivia | No Comments

Am I the only one to notice that American Airlines’ social media has suddenly become both entertaining and fun?  I used to go months without seeing posts from American Airlines on Facebook and now I see multiple posts each day and they are funny and moving and entertaining.  It sets a great tone for this airline and I hope its nurtured.

Some examples are:

  • a post of an airplane wing against a sunrise backdrop in the sky with the words “O beautiful for spacious skies…” on 4th of July.
  • Another sunrise photo with an AA tail at a airport gate with “The early bird gets the worm…”
  • A post on a Wednesday with a photo of a 777 taking off that says “Hump Day? More like #WheelsUpWednesday!”
  • A photo of an AA Captain who happens to be a woman that says:  ““Fifteen years ago, another female captain brought her 7-year-old son on a work trip. Throughout the sequence and on the layovers in the Caribbean, he took it all in. On the flight back into Miami, one of the flight attendants asked if he wanted to be a pilot when he grew up.

    He scrunched up his face and, with complete disdain, said, ‘No, that’s a GIRL’S job!’” – Capt. Kathi Durst, Fleet Captain 737″

 

These posts are fun, saucy and I hope they continue.  Great job, American Airlines

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Houston vs Dallas

June 30, 2014 on 1:58 pm | In Airports | No Comments

Recently, the mayor of Houston, Annise Parker was quoted as saying that Dallas and Houston do compete for international traffic and my only reaction was “Finally, someone willing to admit the truth.”

Both cities are large hubs and both are large gateway cities for the region.  For 40 years, the cities have worked furiously to ignore the fact that each desperately competes with the other for international flights.  In fact, until recently, I would have argued that Houston IAH had more diversity in its international operations than Dallas Fort Worth DFW.

I know for fact of many IT professionals working in the Dallas area under H-1B visas frequently go to Houston by car to travel home because it’s cheaper.

With Houston’s construction of an international terminal at Houston Hobby, it’s about to get even more competitive with Dallas.  For while Dallas Love Field will be unrestricted to domestic traffic in the 48 states, Houston Hobby will be unrestricted . . . completely.

Dallas / Fort Worth has never treated Southwest Airlines as a full partner in the community.  In fact, the metroplex area has always been willing to embrace the employment but never has been willing to truly work with Southwest to find out how to grow the airline in the DFW area.  American Airlines has had something to do with that.

This area is home to the biggest US Domestic Airline by passengers (Southwest) and the largest airline in the world (American Airlines) but Southwest gets very little Love.

Dallas doesn’t drive competition.  It doesn’t drive access and it doesn’t drive diversity in who serves it.  Houston always embraced both Continental and Southwest and worked hard to become attractive to a wide range of international airlines.  As a result, air fares from Houston to destinations inside and out of the United States are more competitive in general.

That’s a shame for the Dallas / Fort Worth area because I think it will continue to favor American Airlines and it will continue to restrict Southwest Airlines.  Love Field will be held in check from any growth because of the latest deal with the Devil (holding the terminal to 20 gates of which Southwest gets to hold 16 and which Southwest must give up gates if it wishes to use DFW. ) It’s a problem that few in the area are really aware of.

Yes, Houston and Dallas compete and Houston generally kicks Dallas’ ass on a regular basis.

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Mergers: Success and Failure

May 15, 2014 on 4:25 pm | In Mergers and Bankruptcy | No Comments

In the airline industry, mergers are a mixed bag of successes and failures.   Continental Airlines, for instance, nearly died twice due to poorly executed mergers.  Northwest Airlines was impacted for years and years from its merger with Republic.

In more recent history, those mergers have been more successful such as US Airways (from America West and US Airways) and Delta (Delta and Northwest).  The jury remains out on Southwest and Airtran (although this is trending towards success) and US Airways and American Airlines.  Sadly, I think the trend on United is that it is failing as a merger.

Delta is the rock star of airline mergers and I think there two great reasons why.

First, Delta engaged in an airline merger that built a powerhouse network.  Delta and Northwest had hubs that were truly complementary and which brought together a strong domestic network and a strong international network.

That union of networks provided genuine revenue synergies that you rarely see in a merged airline.  The networks supported each other and built upon strengths and didn’t merely see capacity reduction on common routes.

The second reason Delta hit the right pace is financial.  This airline watched its capital costs and set financial targets for performance that, for the first time, included paying for the cost of capital at an airline.  Instead of buying all new aircraft, the airline has managed its fleet carefully using aircraft that had low capital costs but which also provided near competitive fuel efficiency.

The airline also managed its revenue appropriately by focusing on doing something that my own father was a vocal advocate for:  treating each city pair and route as a business that should be profitable.  Instead of asking that a sum of routes make some kind of profit, Delta expects its routes to ultimately become profitable or to be removed from its system.

The airline is no loner focused on being the biggest airline nor the airline with the greatest frequencies.  It’s focused on being the most profitable airline and managing to that goal by ensuring what it does brings a return on investment to the company.

And who embodies this same kind of approach?

Definitely Southwest although they continue to be on my watchlist.  Before anyone says it isn’t the same Southwest Airlines from 20 years ago, let me offer this:  I wouldn’t want it to be.

Southwest does watch its routes carefully still and does work hard to ensure it’s city pairs are profitable.  However, they are clearly going more network than ever before and I do wonder if the complexity is going to overwhelm their good senses.  Time will tell.

I think the American Airlines / US Airways merger has the potential to be more profitable than Delta in time.  And I think it will have one key advantage over Delta:  Better aircraft.

Delta is walking a very fine line on its fleet ages and will be in danger of getting into trouble from a fuel spike as a result.  American will have one of the newest, most fuel efficient fleets around and that will help mitigate against fuel spikes quite a bit.

United, I think, is a growing failure and the truth is that while I think this has a great deal to do with poor management, I also struggle to find a compelling argument for merger these days.  The synergies don’t seem to be there and I don’t see the two parts adding up to a sum greater as a whole.  The jury may still be out on this merger but the jury foreman is taking final votes and it’s not looking good presently.

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More on the gates: The City of Dallas blindly drives towards a brick wall

May 7, 2014 on 1:21 pm | In Airports, Mergers and Bankruptcy | 1 Comment

The City of Dallas promises a decision on the Love Field gates held by American Airlines at this time.  Their plan is to have a briefing on the LEK Consulting report, an executive session briefing by the City Attorney and then there will be an open discussion.

In my opinion, the City of Dallas is marching blindly towards major lawsuits from a number of parties.  The City Council has apparently chosen to believe that the sudden demand for these gates means they get to be the big players.

Careful what you ask for.  Airlines have vastly more powerful legal resources and the US Justice Department is never amused at amateur hour getting in the way of a Justice Department decision.

If Dallas chose to acknowledge the lease currently held by American Airlines and permit a reasonable sub-lease, it would be ironclad in its ability to withstand challenge.  Maintaining the status quo, so to speak was its safe and legally appropriate choice.

By choosing to dangle these gates around on the pretext of benefiting The Citizens, Dallas is opening itself up to at least 3 lawsuits by my count.  Lawsuits that will cost Dallas and find Dallas having to bow to a legal settlement that could well be far worse than the present proposed outcome by The Leaseholders (aka American Airlines).

Evidently Dallas has a lot of extra money laying around these days and doesn’t mind the costs to its citizens.  It has already spent $50,000 on consulting to expose itself to these (potential) lawsuits.

If the City of Dallas wishes to promote the welfare of its citizens in this airport, the City should publicly and strongly advocate for a (needed) expansion of Love Field with gates held for common use by all airlines (including Southwest) on a periodic auction basis (annual is best).  That’s what would best benefit the city and certainly that is a “best investment” for The Citizens.

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Envoy: Only a matter of time

May 2, 2014 on 1:25 pm | In Airline Fleets, Airline History, Airline News, Mergers and Bankruptcy | 1 Comment

I honestly think it’s only a matter of time before the American Eagle spinoff, Envoy, is shut down.  Unable to get an agreement with the pilots, American Airlines has decided that Envoy will not receive new aircraft for new flying.

Instead, new aircraft will go to other regional airlines and Envoy now faces a 3 to 4 years dry season and a wind-down of the EMB-140 fleet.

In part, I do think that pilots wrongly played tough in their latest negotiations.  I think that getting an agreement that kept them in the game was a far smarter bet than to reject the agreement and find themselves in a business that has no prospects.

If I were a pilot at Envoy, I would move heaven and earth to get a job with a “major” and move on with life.  Only if I had retirement prospects over the next 2 to 3 years would I hang on.

The choices are slim out there.  Pilots cling to the idea that a pilot shortage will change things.

The so called pilot shortage has been spoken of for 10 years and never really has materialized.  Airlines have figured out how to deal with such shortages in ways that don’t count on pilots. I wouldn’t be betting on a shortage that has never materialized to date.  It’s possible that it will but betting on it only makes you look naive at this point.

I fully expect Envoy aka American Eagle will be shutdown in less than 4 years.  I do not think it has good prospects for a merger either.  They have nothing but a very senior pilot base that has shown intransigence towards the changes in the industry.  Why merge with that when you can just wait for the creature to die?

No, I think Envoy will join Comair (ex Delta) in a very undignified death.

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Dallas and The Gates

April 29, 2014 on 12:44 pm | In Airline News, Airports, Mergers and Bankruptcy | 1 Comment

The City of Dallas’ transportation committee met, deliberated behind doors and then decided to push the Love Field Gate Issue up to the full city council yesterday.  I noticed that one particular person was involved in the hiring of L.E.K. Consulting to determine who should get the gates:  Aviation Director Mark Deubner

Deubner seems intent on making a hash of managing Dallas Love Field in ways that go beyond the norm for this day and age.  Deubner is the same person who made a hash of the negotiations surrounding the Braniff Maintenence and Operations building on Lemmon Avenue last year.   It’s become quite clear that Dallas Love Field won’t be thriving under this man’s direction.

I think that the City of Dallas getting involved in this issue is going to backfire on the city in ways that City Council Members can’t entirely imagine.  First and foremost, it’s unwise to interfere with the United States Justice Department and the disposition of antitrust issues.  Second, the City Council has no legal standing to determine who gets those gets short of crazy arriving on the door step.

And Virgin America getting those gates isn’t crazy.

If the cities of this country want to control their airports better and do more for their local citizens (aka The Consumers), then they need to stop making long term, exclusive leases on gate space.  Auction it off on short term leases or control it on a flight by flight basis.  Keep your flexibility and sell your city like nobody’s business.

But you don’t get to make deals and then revisit just part of them.  If the City of Dallas attempts to control who gets those gates under the present circumstances, they’ll be a part to several lawsuits in which the only sure loser will be the City of Dallas.  And it will cost the city millions of dollars with zero possibility of an outcome that benefits its citizens (aka The Consumers.)

In fact, when Aviation Director Mark Deubner hired L.E.K. Consulting, he exposed the city to a lawsuit right there.  He forced the city into taking a position by virtue of asking a consulting company to establish what was best for the city when the city didn’t have any business asking that question at this point.

So, now it is entirely possible that even if the Dallas City Council leaves the issue alone and permits the gates to be sub-leased, other airlines may well sue the city because it doesn’t fit anyone else’s notion of what should happen.

If Mark Deubner had left things alone and the City of Dallas had left things alone, they would have been fairly protected and any outcome would have at least benefited the citizens (aka The Consumers) marginally more than the present situation.  Neutrality was the smart play here.  And an abiding desire to interfere on the part of City Management has exposed Dallas to consequences that will cost a great deal of money.

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Virgin America at Love Field

April 25, 2014 on 11:41 am | In Airline Service, Airports, Mergers and Bankruptcy | No Comments

Well, in an unofficial official announcement by Virgin America at Love Field Airport in Dallas, Virgin America says it will get the two gates at Love Field.  The airline says it has approval from the Justice Department and American Airlines and needs only to get approval from the City of Dallas.

And I think they will get such approval, too.  Strangely, the City of Dallas has never treated Southwest Airlines with the deference you might expect.  Furthermore, I have long thought that giving the gates to Southwest (legal or not) was probably a step too far in creating an airport monopoly for a single airline.

Is Virgin America the right candidate?  I kind of think not.

I think that they are supported by the Justice Department because they favor LCC carriers and Virgin America purports to be that.

I think they are supported by American Airlines because they are a weak(ish) competitor to American Airlines.

Virgin America will only offer flights that are long haul and to major destinations such as San Francisco, Los Angeles and New York.  They might get a few flights in to Chicago, a route so dominated by American Airlines that they have near hourly flights.

American likely saw Virgin as having the least impact to them in the market.  If that’s true, then it probably isn’t that good for consumers in the DFW area.

Virgin America will be good for people who want to fly to Los Angeles, San Francisco, New York, Washington D.C. and Chicago.   It’s notable that AA is the powerhouse on all of those routes while Southwest Airlines will be starting similar routes out of Love Field on October 13 of this year.

But the frequencies will be low enough that it is unlikely to have impact on fares, I think.  To the contrary, I think that this is great for Virgin America as they will experience high yields from these routes as a result of the other two airlines maintaining course.

And this decision could drive me to write yet one more article on why we should auction off gates and slots at airports that are constrained.

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Competiton in the Dallas area? Probably not this year.

April 22, 2014 on 9:10 pm | In Airline Service | No Comments

There is the prospect of new found competition in the Dallas area when we see Southwest able to fly where it wants domestically starting October 13 of this year.

The problem is, the more I think these developments through, the more I think that we won’t see much of that competition in 2014.

Right now, Southwest is selling itself on convenience and doing well with that story.  I think they will sell their new routes as convenience based options and I’m sure I’m not the only one to notice that their route announcements are focused on the business traveler.

Repeat after me:  Business travelers value convenience over price.

Delta is also focused on the idea of serving Love Field by connecting to Delta’s hubs.  Frankly, I don’t see that being a very good strategy because . . . do you want to fly to Atlanta to connect somewhere else or do you want to fly Southwest or American Airlines and just get there.  Delta, I think, may well not even fly their intended routes.

American Airlines is in an odd place as well.  The airline must focus on integration intensively and can’t afford to pick a fight in Dallas right now.  While they exited bankruptcy in pretty good shape, there are some fences to mend in Dallas over service.  I think that 2014 and, possibly, 2015 will be spent on getting the airline’s act together.

Airlines have figured out that fighting for marketshare is a losing proposition for everyone involved.  Each CEO has made his mark (Gary Kelly, Richard Anderson and Doug Parker) by showing restraint.  That trend should continue for some time.

However, if Southwest is able to lure away the business traveler from the SuperLegacy airlines in the Dallas area on its new routes, I think all bets are off.  That is a target market worth fighting for.

But it will take time for Southwest to make its case to the traveler that it’s a worthwhile choice to fly from Dallas to Atlanta, New York, Baltimore, Chicago and elsewhere.  You have to get a passenger to try the service and Southwest cannot afford to make a mis-step with those passengers.  Service must be excellent and comfort must be of high value.  It will take time to get travelers to try them out on the new routes and Southwest has to figure out how to do that while its local competitor (American Airlines) deploys fresh new aircraft and fixes it service issues at its home hub at DFW.

Look for late 2015 to be the real moment of competition if there is any.

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Pittsburgh is likely to be pi$$ed

January 28, 2014 on 2:00 am | In Mergers and Bankruptcy | No Comments

American Airlines is going to close the flight operations center that US Airways maintained in the Pittsburgh area in favor of the larger, more robust center in Fort Worth.  It’s a sensible move on the part of American Airlines but I fully expect Pittsburgh and Pennsylvania based politicians to, once again, decry mergers and their effects.

It is a loss for the Pittsburgh area.  The center employs about 600 people and while those people will in most cases be offered jobs in Forth Worth, that doesn’t do the Pittsburgh area any good.

There will be other impacts to other areas as well.  I fully expect Phoenix to get hit pretty good, for instance.  The reality is that American Airlines (Old) had a great deal of capacity and infrastructure in place.  There is little good reason to adopt a system from US Airways in the integration because in almost every case the AA system will be more robust.  This will lead to more displacement on the US Airways side.

The area where I think AA takes a hit is in servicing the aircraft.  Operations will see US Airways people come in and re-acquaint AA employees with how to run an ontime operation.  I suspect we’ll see the care and feeding of the A320 fleet be tasked over to US Airways stations in many cases as well.  There will be an integration and it won’t be just AA taking over US routes.  But it won’t be delightful for some operations centers such as Pittsburgh.

 

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American Eagle: Losing a name

January 5, 2014 on 2:00 am | In Airline News | No Comments

American Eagle Airlines is going to be changing its name.

Why?  Because American Airlines wants that name for all of its connector services and American Eagle will be operating connection services with several other airlines for American Airlines.

Put another way, it’s American Airlines’ name to do what it wants with it.  Given what a strong brand it is, I would want to use it for all my connection services too.

What will it be?  You can bet it will be something fairly meaningless and without inspiration.  Because American Eagle will have to become a stand alone airline and operate among all the other regional airlines.

American Eagle is going to have some hard times ahead of it.  It will have to compete for AA’s business as well as business from other airlines and that is a cutthroat business.  Its pilots are going to have to swallow hard on contract changes that will see them go from being an arm of American Airlines when it comes to pay and benefits to becoming “one of the other guys”.

That will be hard for everyone under the American Eagle name today.

But American Airlines is not losing a name.  It will keep the American Eagle name but it will simply apply it to all flights being performed by regional airlines under its umbrella.

And that’s probably as it should be.

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Happy New Year: What’s your brand?

January 4, 2014 on 1:26 pm | In Airline Fleets | No Comments

It’s been a busy holiday season for me and a good one. I hope it has been for you and yours as well.

The Flag Stays! It’s decided, by a pretty narrow margin, that the Blazing Flag tail design that American Airlines released about a year ago will stay. The vote was roughly 49% for the old “AA” tail vs 51% for the new design. Most of us pundits felt that given that choice, the flag would stay.

Doug Parker believes, or says he believes, that livery doesn’t influence a passenger much at the end of the day. He’s the CEO of the largest airline in the world, he may know more than I do.

I think that livery and branding make a huge difference in an airlines fortunes. But I also come from the school of thought that says that a business should stake out a stand on things. I like companies that aren’t all things to all people in their branding but, rather, a company that sets a vision with its branding.

I greatly prefer a company such as Apple who brand and styles itself to be polarizing as opposed to a company such as United Airlines whose branding and styles leave me wondering what they stand for at this point.

American’s is polarizing and that may be good enough.  The one thing AA’s livery is not is boring.  I still think the flag is wrong and I think the flag could be redesigned.  And it may well be redesigned one day but for now, I concede the decision and wish American success.

No offense US Airways people but your livery is actually worse.  You’re getting an upgrade, in my opinion.

It has been tradition for me to make predictions for the new year but I don’t want to do that this year.  I think we’ll keep doing what we do best:  advocating for better companies in the industry and criticizing the worst of the mistakes.

Happy New Year

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Hubs! American Style

December 26, 2013 on 2:00 am | In Airline Service | No Comments

It’s been announced by new American Airlines President Scott Kirby that American Airlines will no longer have kinder, gentler hubs in the near future.  Some time ago, American Airlines de-hubbed its hubs some.  Instead of hard peaks and valleys of activity at airports, it allowed flights to spread out more on arrivals and departure.  Labor was more steadily occupied but it also gave passengers less connecting opportunities.  US Airways doesn’t operate this way and Scott Kirby doesn’t want American Airlines operating this way.

So, we’ll see hubs more concentrated with flights at various times.  Why?  Because it earns more money and it’s all about the Benjamins.  Is this bad for anybody?  Nope, not really.  Not a single person is necessarily impacted in a bad way.  It’s just a different style that earns more money.  Do you see a theme here?

Since hubs got mentioned by AA, I thought I would look at their new hubs.

AAL_Map

Everyone always suspects airlines are going to de-hub a location.  Every airline always promises that won’t happen.  It always happens but in the case of American Airlines, it won’t happen for at least 3 years at most locations.  Which, coincidentally, is about the time it usually starts happening.

I’m going to make some predictions on the AA hubs that are going to annoy some people.  First off, I think there are really 3 kinds of hubs today.  They are true network hubs, focus cities and gateway cities.  The first is the traditional major network hub that offers something for everyone.  The second is similar but more “regional” in flavor.  The third is a city where international and domestic flights interchange in large numbers.  It can also be a network hub.

Here is what I think will happen in the case of American Airlines hubs:

Dallas / Fort Worth:  Largely unchanged.  Seriously.  Nothing much to see here except, possibly, a few more flights to a few more destinations.  DFW is both a major network hub and increasingly becoming a gateway hub again.

Chicago:  The same as Dallas.  Exactly the same as DFW.  Nothing more here.

Charlotte:  The same as Dallas and Chicago.  Exactly the same.  There is no reason to change this location and it won’t be taking the place of Miami.

Phoenix:  The same as Dallas, Chicago and Charlotte.  It will remain a major network hub but probably with less focus on international destinations.

Los Angeles:  A gateway city that will become more gateway.  I think we’ll see an increase of international flights here to South America, across the Pacific and to Europe.  It will be the West Coast Gateway for American Airlines.  But it won’t be similar to Phoenix.  The two are not redundant.  Phoenix will feed Los Angeles and vice-versa but they won’t take each other’s place.

New York City:  This will be the East Coast Gateway, a version of Los Angeles.  I think we’ll see increased flying to destinations in the Middle East, Asia and India.  Europe flights will remain largely the same but possibly see aircraft upgauged to large sizes.

Miami:  A gateway city to South America that will be reduced in importance.  I don’t see opportunities growing much here and I don’t see Miami serving the area as a focus city or network hub.  It’s expensive and inefficient to operate that way in Miami.  We will probably see a few regional flights reduced to this city and maybe a few increased flights to South America.  Possibly we’ll see some flights to Africa.

Washington D.C.  This will remain a major regional focus city.  Nothing changes here at all.  A major presence at Washington National, a minor presence at Washington Dulles.

Philadelphia:  I think Philadelphia will be a focus city with international tendencies.  It’s possible that Philadelphia will become similar to Chicago but I think it will be more regional with some international flights.  Not quite a major network hub, not quite a gateway city.  I think there will be some reduction in flights to and from this city over a very long period on a net basis with possibly some European flights increased.

And then there is the gap.  The Pacific North West.  I think that American Airlines will look to establish a second West Coast Gateway city and I think it will be Seattle.  Alaska Airlines is about 3 years away from having an ulcer, in my opinion.  It’s possible they may choose to focus on Portland and that wouldn’t be the worse choice but I think that Seattle has more “name” to it.  Portland, on the other hand, has more available capacity, better weather and is just as close to destinations across the Pacific as Seattle.  Portland is the more “logical” choice but Seattle is the better brand choice.

Either way, a new Gateway City will be focused in that area sometime between Year 3 and Year 5, in my opinion, and it will be a battleground between both Delta and American Airlines with Alaska Airlines and Southwest Airlines suffering as a result.

 

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Love not War

December 23, 2013 on 2:00 am | In Airline News, Mergers and Bankruptcy | 2 Comments

The flight attendant unions of American Airlines have decided to make love, not war, again.  There is a deal in place for the APFA (Association of Professional Flight Attendants) to represent the flight attendants of the merged airlines of US Airways and American Airlines.  The Association of Flight Attendants (US Airways) is leading its members to the APFA to get a new “industry leading” contract in place.

The AFA (US) gets to have some voice in their destiny in the process.

It’s great that they want to move forward and I have no doubt that working in unity would yield a better outcome than otherwise expected.

But I’m not sure these groups are really going to get along well.  It remains to be seen and I would love to hear from a US Airways flight attendant about their views on working together with the APFA and Laura Glading.

On the one hand, the APFA does very well in marshaling their membership to speak with one voice.  But they do tend to keep talking about 20 years ago and restoring things to the way they once were.

If I were in either union, I would want a union leadership that got me a good deal for today’s conditions in airlines.  And that doesn’t mean a bad deal or a concessionary deal.  It means a deal structured around how the airline industry is working today.  If I were a leader, I would make these my goals:

  1. Workplace flexibility:  The ability to work my job, earn my salary at a living wage and still be able to cope with a modern set of challenges in my family.  How about flight scheduling that is a win-win for both the airline (in terms of productivity) and the flight attendant.
  2. A salary rate based the hours I work rather than the size of aircraft I fly or the distance I fly.   Re-think how salaries should be paid so that the actual effort expended is in sync with the pay earned.
  3. The ability to actually take charge and deliver great customer service to my passengers without fear of retribution for daring to use my mind.
  4. Managers who empower rather than punish.  This is very, very important.  Give the flight attendants a chance to show what they can bring to the company and its financial performance.  They might possibly be the most important part to a turnaround.
  5. A retirement plan based on a modern model (401K) designed to minimize risk to my retirement but also reward my service time.  AA has some of the best financial managers in the world, ask them to go to work at finding a way for my union to experience real growth in my retirement.

And it’s time to realize for everyone, management, all unions and all other employees are all One Team.

Live by each others efforts and die by each other efforts.  Anyone who wants to go to “us vs them” should be sidelined.  This isn’t about just making the airline successful someday.  This is about making the airline successful as fast as possible and sharing the rewards of that success among all the members of the company.  The faster a real, consistent profit is earned, the faster everyone can start sharing in that.

I would want to get to that point quickly because earning more money in 2015 is a whole lot better than earning more money in 2018.

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The Livery aka The Paint Job

December 17, 2013 on 11:19 am | In Uncategorized | 2 Comments

Doug Parker, CEO of American Airlines, has instituted a rather quick vote by the employees of the newly combined airline to decide the fate of the new American Airlines livery.   All employees of the new company (AA and US Airways) get to vote on whether to keep it as it is or to go back to the previous logo on the tail.

There will be no entirely new paint job.  The fuselage and new airline logo being used on the fuselage with billboard titles will remain the same.  The only change up for vote is to retain the new tail or to revert to the old tail.

Reverting to the old tail and in combination with the new fuselage actually has some very real appeal for me and that is coming from someone who never liked the old logo that much either.  But I agree with many who are already saying that the new logo will win.  I think it will too.  I don’t think it will last very long but I think it will be retained.

But let’s see what happens and you can’t fault Parker for not addressing things head-on.  He wants a consensus and this is a good place to start with his team.

The best news, in my opinion, is that there will be some legacy liveries done to celebrate the airlines that make up this new American Airlines.  That’s a lot of airlines and it appears that it will include homage to TWA, an airline that I think got lost as  a legacy when purchased by American Airlines.

 

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Change, it’s coming

December 15, 2013 on 11:37 am | In Airline News, Airline Service, Airports, Mergers and Bankruptcy | No Comments

With the US Airways / American Airlines merger done this past week, everyone is speculating on change we can expect but in the Dallas / Fort Worth area, I think we can expect change in at least 4 different areas and it’s all good for those in this metropolitan area.

1)  American Airlines will slowly return to being the on-time, service oriented airline that it once was.  Parker & Company know how to fix operational issues and get planes going where they need to go.  I also think we’ll see the benefit of code-share flights through the system to destinations that might well yield lower prices.

2)  Southwest Airlines will be unchained on October 13, 2014.  On that day, Southwest can fly where it wants to from Dallas Love Field as long as it is in the domestic 48 states.  This will not only offer us opportunities to fly non-stop to major cities in the US but it will also put some competitive pressure on American Airlines (and other airlines) on routes to and from the DFW area.

3)  Ultra Low Cost Carriers will move quickly to find their toehold at DFW.  There is a lot of low-hanging fruit to be had in this area and Spirit Airlines has figured that out.  I expect Spirit, Allegiant and Frontier to all try to get gate space and establish operations in this area.  Those ULCC airlines will put some competitive pressure on both American Airlines and Southwest Airlines who both could use it in this area.

4)  While I think United has missed a huge opportunity in the DFW area over the past 2 years, I have noticed that Delta hasn’t.  I expect Delta to work itself more and more into the DFW area and I think they will do this both at DFW and Love Field airports.  Delta has been doing very well at establishing point to point flights and encroaching on its competitors territory.  They pursue a modest push into markets with the resources that only an airline such as Delta has.

Most airlines know that there is a limited time left to encroach in this market and if you think that airlines executives aren’t worried about Doug Parker, you are only kidding yourself.  They know what Parker and his team can do with the resources that AA has and that is a big reason why many attempted to sabotage this particular merger.  Parker was never a great threat with US Airways because of the limitations it imposed on him and his team.

I said it two years ago and I’ll say it now:  As soon as American Airlines declared bankruptcy, that was the time to move hard into the DFW area.  Several airlines missed that opportunity to become entrenched (Virgin America and jetBlue) and some saw the opportunity and grabbed it solidly in their fists (Spirit and Delta).

It’s all good for those living in this area or those wanting to fly to this area.  In one year, I believe we will see much better services and air fares that remain competitive.  Don’t kid yourself, however, those air fares won’t be predatory.  They just won’t be exorbitant.  So if you’re waiting for an uber-bargain of the early 2000′s, your wait will be fruitless.

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American Airlines orders new regional jets

December 13, 2013 on 2:57 pm | In Airline Fleets, Airline News, Mergers and Bankruptcy | No Comments

American Airlines didn’t waste time in making a new order for new regional jets.  The order is split between Bombardier and Embraer.

Bombardier CRJ900:  30 orders / 40 options

Embraer E-175:  60 orders / 90 options

The CRJ900 jets will go to US Airways wholly owned subsidiary PSA and, as you can imagine, PSA pilots are thrilled.  The Embraer jets are To Be Determined and, as you can imagine, the American Eagle pilots are way less than thrilled.

I honestly can’t read the motives of American Eagle pilots.  That airline is grossly overburdened with expensive 50 seat (or less) regional jets that will be going away.  Make no mistake, even if the capital costs are exceptionally low for keeping those planes, they are going away.  They are inefficient, costly to maintain and frequently break down at this point.  They are becoming quite old and they don’t fit the modern world model.

American Eagle pilots, represented by ALPA, haven’t found an agreement with American Airlines.  American Airlines president Scott Kirby thinks they can put a deal together and I think that . . . maybe not.  AE pilots are very well paid and many have decided to make a career at that airline instead of doing what most other pilots at other regional airlines do after a few years:  transition to a mainline airline.

I think AE pilots want to be paid like mainline pilots with mainline schedules.  If true, I think that American Airlines has a solution for that problem:  sell or shut down the airline.  In case anyone wasn’t watching, there really aren’t any buyers for expensive regional airlines with old equipment.  Comair anyone?

I feel bad for the AE pilots because they have a lot to lose and they don’t have much bargaining power.  If a deal is made, I would make sure that AE pilots have the right to upgrade into mainline AA operations for the next 10 years.  Pilots who stay in the regional airline game for their career can expect to see bankruptcies, consolidations, strikes and layoffs that are reminiscent of an era already gone in mainline operations.  Fighting won’t change that.

The best favor a union could do for those people is find a way for them to move up and out.

Oh, and those Embraer jets that just got bought?  They aren’t going to be committed to American Eagle until and if there is a contract.  Wait too long and they’ll go to someplace like Republic who already operates them and who already works for American Airlines.

 

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First Steps

December 12, 2013 on 12:53 pm | In Mergers and Bankruptcy | No Comments

Yesterday, I made note that Doug Parker has put the right foot forward at the start of his leadership of American Airlines.  Let’s take a look at those moves.

Parker has promised salary transparency and that will mean a great deal to employees at American Airlines.  US Airways employees are already used to Parker being very candid about his salary but American Airlines employees got a lot of “surprises” over the past 13 years or so.  Surprises that never looked good and always sent the wrong message.  I think that AA employees are going to find Parker & Team very refreshing when it comes to transparency.

Reserved parking at headquarters for top executives has been eliminated.  This will seem like a small thing but it is a wildly different attitude from that which existed at AA post-Robert Crandall (Crandall was fairly egalitarian in his regime but things changed after that starting with Don Carty).

Security guard for the executive offices have been dismissed.  Can you even imagine needing a platoon of security for executive offices?  Yet, that was reality and represents the “fortress” mentality of Gerard Arpey’s reign.  (Mind you, you can’t go strolling into the executive offices to do whatever but that’s basic corporate security at any large corporation and appropriate.)

Before I go on, I want to point out that those three items alone could have been instituted by Tom Horton and his team the day they took control of American Airlines into bankruptcy.  The fact that things like that did not happen is why I never felt Tom Horton was the right man for the job.  Leadership really does start at the front, not the back.

Parker will surprise people with more things similar to this.  For instance, I expect he will make 1 to 2 trips a month out into the field to hold informal discussions with employees.

And expect Parker to ensure his executive leadership follows his example.  You won’t see executives hiding executive offices, never venturing out into the field.

This is why I think Doug Parker can turn American Airlines into a world class leading airline.

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