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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Let’s talk about competition, airlines and taxes: Part 1

August 17, 2013 on 1:00 am | In Mergers and Bankruptcy | No Comments

If we use the premise put forth by the US Department of Justice that the US Airways / American Airlines merger is bad for the consumer, then we need to take a very hard, long regulatory look at all of the US airlines, many of its busiest airports and taxes as well.

If anyone was truly concerned about competition in the airline industry, the Justice Department should have continued to block mergers as they did with the original United Airlines / US Airways merger (which was vastly smaller than the one being proposed today).  Instead, they did not.  Rather, a few years later they signaled with US Airways the idea that mergers were necessary in the airline industry landscape.

Quite frankly, I was perfectly happy to see the status quo maintained pre-2005.  That landscape saw:

  • Delta Airlines
  • Northwest Airlines
  • United Airlines
  • Continental Airlines
  • US Airways
  • America West
  • Southwest Airlines
  • AirTran Airways
  • American Airlines
  • Alaska Airlines
  • jetBlue

It was a pretty well balanced mix of airlines of both the legacy and LCC flavors and pretty well distributed across the United States.  Barriers to entry were, compared to today, fairly low.

Then several bankruptcies occurred which included US Airways, United Airlines, Delta Airlines and Northwest Airlines.  One airline (America West) had to get a massive loan after September 11th and essentially reorganize itself to survive as well.  Another airline, American Airlines, got Billion Dollar givebacks from its employees to lower costs instead of performing a bankruptcy.

Of the 11 airlines listed above, 6 suffered exceptional financial trauma.  Another 2 existed on fine line of financial trouble:  AirTran Airways and jetBlue.  Only 3 managed their finances appropriately and saw appropriate returns on investment:  Southwest, Continental and Alaska Airlines.

So we permitted mergers and this is what happened:

  • 2005:  America West takes over US Airways and retains the US Airways name.
  • 2008:  Delta and Northwest merge as equals and retain the Delta Airlines name.
  • 2010:  United and Continental merge as equals and retain the United Airlines name.
  • 2011:  Southwest Airlines takes over AirTran Airways and begins the wind down of the AirTran name.

By 2011, the competitive landscape was dramatically different and American Airlines had to throw in the towel (it should have in 2006, in my opinion) in November of 2011 by filing bankruptcy itself.  In the 2012 / 2013 period, the new airline landscape looks like this:

  • Delta Airlines:  Revenues  $36.6 Billion (2012)
  • United Airlines:  Revenues  $37.1 Billion (2012)
  • American Airlines:  Revenues  $24.8 Billion (2012)
  • Southwest Airlines:  Revenues $17.0 Billion (2012)
  • US Airways:  Revenues $13.8 Billion (2012)
  • Alaska Airlines:  Revenues  $4.6 Billion (2012)
  • jetBlue:  Revenues  $4.9 Billion (2012)
  • Virgin America:  Revenues $1.3 Billion (2012)
  • Frontier Airlines:  Revenues $1.4 Billion (2012)

As you can see, the airlines that exist today are hardly equal despite the perception otherwise.  For instance, Delta and United Airlines both are roughly equal as airlines but the next biggest by revenue is American Airlines which is a staggering $12.3 Billion behind.  If you added US Airways revenues to American Airlines revenues in 2012, you still come in at just $38.8 billion.  Put another way, the new American Airlines Group would operate at roughly the level of United and Delta Airlines.

Southwest would be at a disadvantage seemingly but Southwest’s revenues are based entirely on US based operations and therefore see Southwest operating at parity with the other 3 large carriers.  So, now we have 4 carriers operating at roughly the same scale in the domestic US market.

The remaining four airlines:  jetBlue, Virgin America, Frontier and Alaska Airlines have combined annual revenues of $11.2 Billion or a number that is still less than that of US Airways.  It’s notable that those last 4 airlines are nowhere near national airline scale.  They are all regional or niche in their marketshares.  They can and will survive and at least 2 of them have every opportunity to organically grow much larger.

What my point in all of this?  Scale is critical in this industry and while those billions in revenues sounds healthy, airlines often earn zero profits on such revenues.  The dollars are large, the profits are tiny, at least until very recently.

If you stop the mergers now, you have two giants and three other airlines that would have to be labled as “at risk” over the next decade.  While you allowed that to sort out, the two giants would only become . . . more giant.  And the bigger they grow, the more influence they have on airports and route infrastructure.

So, if you feel the combination of US Airways and American Airlines is anti-competitive and anti-consumer, then you *must* be ready to “break up” Delta and United Airlines.  They don’t have the potential to be dominant.  They already are dominant.  So much so that they dwarf every other airline in the industry.

More on these subjects tomorrow.

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Sunday Trivia: Airline Mergers

August 21, 2011 on 1:00 am | In Trivia | No Comments

Delta Airlines merged with Northwest Airlines in 2008 (hard to believe it’s been nearly 3 years, isn’t it?) to form what was, at that time, the World Largest Airline.  That merger had some oddities to it in that the architect of the merger was Richard Anderson who, although was CEO of Delta at that time, had led Northwest in the past.  Coincidentally enough, both Delta and Northwest purchased iconic airlines based west of the Mississippi in 1986. 

Question:  Can you name the airlines that Delta and Northwest purchased in 1986?

The answer after the fold: (more…)

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Delta and Memphis

March 27, 2011 on 1:00 am | In Airline News | No Comments

Delta is cutting back 25% of its flights to and from it’s Memphis hub and to anyone who follows the industry, this comes as no giant surprise.   The merger between Northwest Airlines and Delta Airlines resulted in two hubs very close to each other:  Memphis and Cincinatti.  Another hub, Atlanta, was also nearby and everyone was pretty sure that both hubs would see a reduction in activity. 

Cincinatti has already been drawn down significantly and Memphis has experienced some reduction.  The thing about this announcement is how it was couched by Delta President Ed Bastian.  He says this will be good for Memphis.

I do wonder if Memphis feels similarly.  Reduction is probably appropriate but one should call it what it is:  rationalization of the network to provide better profit and other benefits to the company.

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Delta wants jets – lots of them

January 16, 2011 on 1:00 am | In Airline Fleets | 8 Comments

It has been reported loudly that Delta is poised to issue an RFP (request for proposal) for as many as 200 jets and this is an order no manufacturer wants to lose.   The rumour comes just days after a record breaking Airbus order from IndiGo of India.

At this point, it’s still rumour but this one strikes me as pretty much dead on.   Delta has a huge fleet (720 aircraft with about 40 orders in place which include the deferred NWA order for the 787) and quite a few of those aircraft need to be replaced now or in the immediate future. 

Delta has the Northwest fleet comprised of the very old DC-9-5o, MD-88, MD-90, 757, 747 and some older Airbus equipment.  The Boeing fleet from Delta’s legacy side isn’t quite as old but there are some 757s and 767s in need of replacement as well.  Considering the widely varying fleet, it would come as no surprise that an replacement order is due.

Oil prices and future fuel prices will also drive the need for this order sooner than later if Delta’s goal of a consistent operating profit is to be realized. 

Pundits think this is Boeing’s to lose and I disagree.  Richard Anderson, CEO of Delta, has much more history with Northwest and he is no Airbus hater.  This will be an extremely heated competition and I will say that if Boeing were to lose this order or a significant portion of it, that will sting Boeing and its product line for years to come.

The prime driver for selection is going to be based on a number of items.  First and foremost, trip costs for aircraft to serve a particular grouping of routes.  We’ll see orders for single aisle aircraft to serve what I would call non-transcontinental routes.  In today’s world, that would be the Airbus A319 and Boeing 737-700.   Having trans-continental capability in the aircraft would be a plus but these aircraft are going to serve the focus cities of the airline with routes stretching out from the cities but not across the country.   The mission that the MD-88s, MD-90s, Airbus A319s and Boeing 737-700/800s are serving today.

The A319s are brand new and so are the Boeing 737-700s/800s.  This is going to be about replacing the McDonnell Douglas fleet.

Then there is a need for the larger trans-continental capable aircraft that remain single aisle serving longer trunk routes that won’t justify a widebody.  Currently, the Airbus A320 and Boeing 757 are serving those routes.  The A320′s arrived in early 1990′s and the 757s date from the early 1980s to the late 1980s.  The options for replacement here are the Airbus A320/321 and the Boeing 737-800 and 737-900ER.    Neither aircraft actually “replaces” a 757 which has great range and great payload.  I don’t think the A320s are going anywhere yet so this will probably involve a 757 replacement and they (Delta) may or may not want it to harmonize with their existing A320s.

Then there are the 767s.  Some are getting old and some are quite new still.  Delta needs an aircraft stretching between what a 757-300 offers and an A330-300 offers.  The 787 fits this and the fact that Delta has deferred its legacy NWA order for these makes me think that these aircraft won’t be candidates for replacement.

The 747s are pretty old and frankly I don’t think these we very well cared for either.  They need to be replaced and I do think we’ll see orders to do this on these aircraft.  None really serve routes that demand 4 engines so I think we’ll see a replacement oriented around 2 engines.

I think it’s anyone’s guess on the single aisle orders.  Airbus will fight like crazy to win this order with their A320NEO options and Boeing may well have to announce a 737 replacement at a great price to win it back.   Boeing should actually have great incentive to get going on the 737 replacement if Delta is truly interested.  With Delta, Southwest and, potentially, Ryanair all wanting a better 737, there is an exceptionally strong business case to get going on this.

If Boeing doesn’t offer a better 737 in this, I think the order goes to Airbus.

As for the 757/767 replacements . . . well, I’d give the edge to Boeing.  I think the 787 *is* a good answer for these aircraft.  They offer the right amount of extra capacity for growth, long haul capability, extremely high efficiency and flexibility.  I do think it possible that an order might be mixed between the A330 and 787 unless Boeing gets off its duff and gets that 787-9 into production.  The 787-9 is the A330 killer.

Since I don’t think the A330s are going anywhere, I don’t see much opp0rtunity for Airbus’ A350 in this mix.  It’s deliveries are too far off and the A330s just don’t need to be replaced for a long time.

I think Delta’s large widebody strategy is likely going to be a mix of 777-200s and the 777-300ER to replace the 747s.  They already have a fleet of 777-200LR with GE engines so I think they’ll order 777-300ERs with GE engines to replace those 747s.  It will do everything the 747 will do only more efficiently.  I do *not* think the 747-8i will enter into this order.  Delta doesn’t need the capacity and the 777-300ER will serve all the routes the 747 is currently serving with no problem.  The A350-1000 is far too far off and its ability to perform is simply way too unknown for this to be serious contender at Delta.

I do not think that Bombardier or Embraer will enter into this order at all.  They just don’t have a product that meets the needs of an airline like Delta very well at all.

Don’t expect an order announcement for about a year.  Delta will let the manufacturers fight it out with best and final offers for quite some time and it will take time itself to do a detailed analysis.   But I can’t wait to hear their decision.

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One thing about mergers

December 28, 2010 on 1:00 am | In Airline Service, Airports | No Comments

Whenever a merger is announced between two airlines, one of the first things to be answered in the announcement is that no city is going to be hurt by this.  Obviously that is a politically driven statement because CongressCritters have a lot of power to make it difficult for airlines in a merger. 

The one thing about mergers is that absolutely flights will be combined wherever it makes sense.  Fuller aircraft make for vastly better profits.  But just because flights are reduced doesn’t mean that that is bad for a particular town or city.  A rationalized set of flights might reduce frequency a bit but result in a better, more comfortable aircraft serving the route. 

Hubs are different thing.  There is always the promise that hubs won’t be reduced but that’s a hard promise to keep sometimes.  You only need so many hubs serving so many regions.  In the case of ContiUnited, it seemed difficult to imagine that Cleveland would continue to exist as a hub in light of the fact that it was bounded by three better hubs:  Chicago, Newark and Washington D.C.

But, again, in this day and age that doesn’t necessarily mean that the city will suffer.  Now, other airlines often see opportunity in cities that are seeing their airport downsized as a hub.  A Southwest Airlines, for instance, may see high fares because of hub dominance and go in was another airline retreats and offer better fares and better flights to appropriate cities.

The Delta/Northwest merger has seen both Memphis and Cincinatti hubs being downsized and rationalized and that’s OK.  The good news is that there are number of strong(er) airlines who may be interested in offering smart services.

The ContiUnited merger had less overlap with just Cleveland appearing to be the ugly stepchild.  The smart thing for Cleveland to do is not fight to keep ContiUnited but fight for new airines to come into their markets.  Competition will lower their fares and a diversit of airlines will ensure a healthier business climate for its native businesses and industries. 

It seems safer to try to keep what you already have but it often smarter to fight to have change and experience better rewards with other airlines.

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Don Nyrop . . . again

November 28, 2010 on 1:29 pm | In Airline History | No Comments

For those interested, here is a New York Times obituary on Donald Nyrop of Northwest Airlines.

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Donald Nyrop

November 19, 2010 on 1:00 am | In Airline History, Airline News, Airline Service, Trivia | No Comments

I have to be honest, I thought Donald Nyrop was already dead.  I was wrong.

Donald Nyrop died on Tuesday, November 16th, at the age of 98. 

I’ll wager that quite a few younger airline fans may not even know his name.  Nyrop was one of the Titans of the airline industry and served as CEO of Northwest Airlines.  He should be thought of in the same category as Robert Six (Continental), Juan Trippe (Pan Am), Jack Frye (TWA) and CR Smith (American Airlines) in my opinion. 

Nyrop was a former government lawyer who ran Northwest as frugally as possible.  American Airlines is known for leaving their aircraft unpainted to save money but Nyrop did it for the same reason.  He kept their headquarters in Minneapolis in a non-descript building near the airport and he often fought with his airlines’ unions during his tenure. 

But he is the man who made that airline what it was and certainly it embodied his spirit in some form or fashion and for good or bad right up to the point it merged with Delta.   Don Nyrop retired from the Northwest Airlines board all the way back in 1984 leaving a legacy of frugality and safety.  Not many men could navigate those two prioties with the success he did.  Northwest was the airline that pioneered things like forecasting clear-air turbulence, for instance.

He wasn’t without his quirks.  Nyrop reportedly became convinced that employees were lollygagging in the restrooms reading newspapers and once had the doors to the stalls removed to stop it.   Like many other airline leaders of his time, he was also known for being very solicitous of his employees and looked after their well being with many simple, undeclared acts of kindness. 

He was tough with aircraft manufacturers and their salesmen and demanded safe aircraft that met Northwest’s needs.  He standardized their operations as much as humanly possible in his time insisting that aircraft all have the same configurations including engines.  He insisted on the best navigational equipment for Northwest’s routes to Asia and employees respected the way he made money in a business where that quality is rare.

I’ve often tried to find a biography on this man.  I always wished that Robert Serling had written about him and this airline because its a story that I suspect hasn’t been fully told.  Serling would have told it best, I believe. 

I find it a bit sad that his obituary appears only in the Minneapolis St. Paul Star Tribune because it should be noticed in so many more places given his contributions to both Northwest and aviation.  It’s even a bit sadder that Nyrop goes unmentioned even in the Wikipedia entry for Northwest Airlines (as I write this anyway).  So, if you happen to see a Northwest aircraft, especially one of the old DC-9′s, raise a hand and wave because it was bought under Nyrop’s leadership and it’s really quite remarkable that it continues to fly on today.

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Delta’s Flight Attendants Don’t Unionize

November 4, 2010 on 1:00 am | In Airline News | No Comments

And I’ll admit that I’m mildly surprised by this development.

It turns out that unionization of Delta flight attendants was rejected by a vote of 53% against the idea.  I speculated in a post found HERE that this might actually happen but I did wonder about the results since those former Northwest Airlines flight attendants are a battle hardened crew.

This is good news.  It’s good news for Delta flight attendants and it is great news for Delta management.  The best thing management could do is to make sure they continue to treat their cabin crew with respect.  Keep them compensated well and ensure those needs are getting met.   Most of all, don’t gloat and don’t threaten.  Management got what it wanted and it is best to be magnanimous about it.

I don’t blame the NWA cabin crew for wanting a union.  They needed one when doing combat with NWA management.  I think that the movement to put a union in place will actually slow some as long as management stays the course. 

In some ways, the people who get dinged the most from this development is American Airlines.  Why?  Because Delta will continue to get better productivity and enjoy more harmonious labor relations than AA and AA has been counting on the new SuperLegacies getting hit over the head.

In addition, to those who believed the new labor organization would be easier at airlines as result of the rules changes, I think you’re wrong.  This most recent vote showed that flight attendants, even ones who weren’t that emotional about the decision, do know how to vote when it counts.

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Lee Moak

October 19, 2010 on 1:00 am | In Airline News | 2 Comments

In the world of airline union labor leaders, there is one guy who has stood out among all the others.  Lee Moak of Delta Airlines.

Captain Moak, leader of the Delta Airlines’ pilots union when Delta merger with Northwest Airlines, has consistently shown that he understands the changing business model of the airline industry.  He has embraced the idea that mergers don’t have to be anti-union and was critical in the peaceful integration of pilot’s seniority lists during the Delta/Northwest merger.   An almost unheard of accomplishment.

Moak approaches his leadership as an obligation to engage with parties as opposed to the far more common tactic of confrontation.   He allows his actions to speak for him rather than rhetoric and that has allowed him to succeed where many others have simply maintained a status quo that hasnt been working for years.

Now he’ll head the national leadership of ALPA and this is good for a lot of airlines.  He’ll have the opportunity to set a different tone and, perhaps, mentor others into his engagement approach. 

When I say it’s good for airlines, I mean that it is good for both labor and management.  All too often, there is little engagement between those two parties and way too much conflict.  Talking is good and moving off rhetoric and talking points towards real compromise and finding solutions to new problems will be good for everyone. 

It should be very satisfying to see him lead ALPA and he’s a critical person to watch in this industry.

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Consolidation or Competition?

July 7, 2010 on 1:00 am | In Airline Service, Death Watch, Deregulation | 1 Comment

For the past 3 years or more, we’ve heard virtually every airline CEO talk about the need for consolidation and the problem of too many seats chasing too many passengers.  Now we have Northwest Airlines fully consolidated into Delta and we’re about to see United and Continetal merge together as well.  But does that really solve the long term problems in this industry?

One the one hand, I admire how the airlines are using their dire straits to argue for greater dominance in their industry.  It’s the legacies doing this and their “poor me” story is working very well among the public as well as among their own employees. 

I would argue that, if anything, we need even stronger competiton in the industry for the long term.  The greater dominance we allow isn’t necessarily going to raise prices all that much but what it will do is make it ever more cost prohibitive for new entrants into the market.  That’s the ultimate goal of consolidation:  keep the new guys out and keep the current competition neutralized as much as possible.

Quite honestly, what we really need is for a legacy airline to go out of business and liquidate.  I had long hoped it would be United who had to do this but, sadly, they scrapped by and made it to the other side.  US Airways is often pointed to as a candidate and while I’ll agree they are potentially the most vulnerable, I’m not sure I want to see them go.

I’d like to see one of our behemoths leave. 

Yes, it would put a lot of people out of work for while.  It would lead higher fares in the short term.  It would also allow room for new entrants who’ll bring fresher ideas, staff, aircraft and, wait for it . . . , lower fares.

It will help break the stranglehold that unionization has on this industry. 

What I’m really proposing is that we need a revolution in the US airline indudstry rather than an evolution of the legacy carriers one more time. 

We need airports to have room for new airlines to enter their markets and establish footholds that result in lower fares.  That means someone has to go.

This country needs to quite looking at each individual airline as an essential industry to our economy.  They aren’t.  Not anymore.  If one legacy went out of business and liquidated, the other airlines would move so fast to establish new business in those markets that it would make our head spin. 

In other words, they would grow the old fashioned way:  through competition.

It’s interesting to me that the airlines who have managed to weather the economic recession so well also happen to be the airlines who didn’t contract but, rather, grew themselves as legacies withdrew from unprofitable routes. 

It is often claimed that we need the legacies because they serve the small communities.  I wonder how the small communities feel about paying a disproportionately high fare in the current systems.  The truth is, there are lot of markets that I question the need for air service in many areas.

Does Waco, TX really need flights from Dallas and Houston?  Probably not.  Those residents should probably be driving to Dallas or Houston for their flights.  It costs about $30 to drive to Dallas from Waco.  Air fares between those two cities are currently advertised from $130 to $600 one way at present.  It’s economically wasteful to take that flight.

We, as a country, should be looking to create more opportunities for new airlines as well as existing LCC carriers who want to enter markets but are bullied away from them at present by the established legacy carriers dominance.

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Delta: Good Goes Around

June 21, 2010 on 1:00 am | In Airline Service | 1 Comment

A close friend of mine is with a touring Broadway show (crew) and has been for over 2 years. As a result, he’s flown some major miles week by week and many of those were on Delta or Northwest Airlines.  Nonetheless, he’s a mid-miles accumulator with them and he decided to use some of those miles to fly his girlfriend from Lansing, Michigan to Los Angeles to visit. 

It was a bad day for that flight from Detroit to LAX.  Held on the ground for over 45 minutes in Detroit, the pilot managed to make up some time on the 4 hour flight but when they arrived, they were held on the ground again for about an hour.  It is notable that weather wasn’t the source for these delays.  In fact, the hold in LAX was because there were no gates available. 

Personally, lack of gates when there is no weather delay and late at night to boot is just bad, bad, bad.  The airline knows the flight is coming in and knows it is a 767-300 and knows they need gate space to accomodate it.  No gate is just one of the worst reasons to be delayed short of really bad weather.

Now, because this friend is crew on this Broadway show, he works every night and a good portion of the weekends on these shows and because of that, he couldn’t pick up his girlfriend at LAX.  So he arranged for a SuperShuttle trip.  The problem is, because of the delays she missed *her* SuperShuttle and had to take one that was much later (way past 12 midnight arrival in the Hollyweird area) and that was the final straw for him.

So he wrote them an email.  He first said:

 

” I booked passage for my girlfriend on DAL1819 from DTW to LAX on June 10, 2010.  The flight was 46 minutes late leaving DTW, and then once it had landed in Los Angeles, it was detained on the tarmac for *fifty minutes* at LAX, due to lack of an open gate. This, I’m afraid, is totally unacceptable after a four-plus hour trans-continental flight.”

and

 

” Need I remind you that you are in a SERVICE industry.  I suggest you re-evaluate your definition of the word “service.”  And quickly, if you want any more business from me.  In this economic climate, I am not required to pay money to companies who do not provide adequate SERVICE.”

I’ll be honest.  If he had asked me in advance, I would have advised him to complain because I don’t think things ever get fixed until people do complain but I also would have advised him not to expect any real response either.  In fact, I would have predicted a canned response only tangentially relevant and not much else.

Well, Delta, you surprised me.  Not only did you respond promptly, you responded in a way that left no doubt that you actually read the complaint, followed up on it (possibly even escalated it to the station manager in LAX) and then delivered a flight credit for the inconvenience and delivered it very promptly.   It doesn’t get better than that.  I’m impressed with the context of the response, the speed and, frankly, I’m impressed that it was a responsed that was neither an under nor an over reaction to the customer complaint.  Here is their response (with names redacted):

Thank you for sharing your concerns regarding irregular flight operations while your girlfriend traveling with us.  On behalf of everyone at Delta Air Lines, I sincerely apologize for the inconvenience
 caused to your girlfriend due to delay of our flight #### on June 10, 2010.

 I am truly sorry for the inconvenience caused when our flight #### was delayed on the tarmac waiting for an available gate.  Be assured I will be sharing your comments with our Operations Control Center and Airport Customer Service leadership teams for their internal follow up.  We want to make every effort to deplane all passengers in a timely manner,especially those passengers with a connecting flight.

 To demonstrate our commitment to customer service and as a gesture of apology for the irregular flight operations, I have issued an Electronic Transportation Credit Voucher (eTCV) in the amount of $75.00 for Ms. <name redacted>.  Please note the voucher number and associated Terms and Conditions will be arriving in a separate email.  Please keep the voucher number and the Terms and Conditions since the number is required for redemption.  It is also important for me to mention that no charge is assessed for reservations confirmed online at delta.com.

 As a loyal SkyMiles member since August 30, 2008, you are an integral part of our customer base and we are always interested in your feedback. I hope I have been able to resolve any concerns you have about irregular flight operations.  Your business is important to us and given the opportunity of serving you in the future, I am confident Delta will not only meet but exceed your expectations.

 Sincerely,

 Yousef M. Sequeira
 Coordinator, Customer Care
 Delta Air Lines/KLM Royal Dutch Airlines

Mr. Sequeira, your response was the epitome of what good airline service should be with respect to a legitimate complaint.  You were responsive without being a doormat. 

Everyone should hear the good as well as the bad.  This is another good story and let’s hope I keep hearing about more good ones.

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Northwest Pilots of Runaway Jet Won’t Get Jobs Back

June 16, 2010 on 3:00 pm | In Airline News | 1 Comment

The Wall Street Journal is reporting that the two pilots of the Northwest Airlines jet who allowed their flight to fly past its destination last year will not get their jobs back.  You can read the story HERE.  Captain Timothy Cheney has chosen to retire in lieu of fighting for his job and First Officer Richard Cole is reported as “no longer with the company”.  Northwest Airlines is now owned by Delta.

Both pilots had their licenses revoked after the incident but reached an agreement with the FAA a few months ago that would conceivably allow them to have their licenses reinstated after certain requirements were met. 

Apparently those requirements won’t be met while working for Delta and I couldn’t be happier.  There was agregious negligence involved in what happened and neither pilot has satisfactorily explained the event.

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Who does AA marry?

April 28, 2010 on 12:30 pm | In Airline News, Airlines Alliances | No Comments

American Airlines is a pretty conservative organization.  It doesn’t hire from outside the airline very often and it manages itself pretty closely.  It is, in many ways, the IBM of the US Airline industry.   Well, the IBM of the 1970′s anyway. 

 

Mergers and acquisitions haven’t been a very successful pathway for American.  One look at the TWA “merger” which was really a purchase and you’ll understand why.  They tend to focus on their core strengths and it is particularly difficult for them to adopt new staff and destinations.  Purchases, for them, seem to be more about keeping dominance in a particular area rather than growing their business. 

 

When Delta and Northwest started off on their merger, it was easy to understand why AA was unruffled by the development.  There was no assurance of success on any level be it financial or operational.  Being the biggest isn’t AA’s game nearly as much as being the strongest and I’m sure their management corps looked at that merger and decided it wasn’t something to worry too much about. 

 

But Delta has had better financial success than AA and it seems to be “right sizing” aircraft to routes and enjoying better yield and that has got to be attention getting on some level.  It got Continental’s attention apparently.  If the Continental / United deal does go through, I have to wonder who AA starts to look at.   It’s one thing to have an aberration in Delta but it is a whole other bag of bananas to have Delta/Northwest and United/Continental next door to you.

 

So, is it US Airways?  They aren’t just the logical choice because they’re the only legacy airline left.  There is a certain sensibility to the idea.  AA has no hubs out west (just a large presence at LA) and, in fact, has no dominance in any of the areas where US Airways does operate.  Well, Philadelphia is close to Washington DC and NYC but it isn’t the DC or NYC market either.    AA has no southeastern presence either.  Miami is a hub but it isn’t an regional hub like Atlanta or Charlotte. 

 

There isn’t much fleet compatibility there and I’m not sure there needs to be.  Delta has shown that as long as you have an economy of scale in the aircraft type, you can have it in the fleet and use it to your advantage by rightsizing your aircraft to the route. 

 

Labor problems?  Well, AA is kind of used to labor problems and their labor unions are so strong that I kind of wonder if they wouldn’t smack all those US Airways EAST/WEST conflicts into shape.  If nothing else, it would give the EAST/WEST unions something to unify over. 

 

Say, did you know that US Airways CEO Doug Parker used to work for AA?  His wife still does.  Guess who US Airways’ President Scott Kirby used to work for?  Sabre when it was a division of AMR, the holding company for AA.   Two more of the executive team come from Northwest Airlines from an era when they really weren’t that different from AA culturally speaking. 

 

Both airlines have a lot of debt.  The US Airways team has actually proven itself to be pretty scrappy in many areas.  They cleaned up the Philly problem from US Airways EAST, managed their finances carefully and have continued to be a player despite unresolved challenges.   Neither has really made money though. 

 

However, a real merger, not just a purchase and dissolution but a merger, has some potential even if AA’s team retains most of the control.  It has some of the same potential that Delta / Northwest had and fewer of the risks that a United/Continental merger has.  It helps the Oneworld alliance as well. 

 

While I think AA could do it, I also think the chances for them to screw up a real merger are far higher than I would give many other airlines.   I think they would approach it as a takeover and attempt to dominante everything.  And as a result, I think we would see the hubs in Phoenix, Philadelphia and Charlotte slowly fade away over time with nothing much to show for its effort after 10 years.

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Analysts Get Rough With AA

April 23, 2010 on 1:00 am | In Airline News | 4 Comments

During American Airlines earnings call yesterday, one financial analyst got a little rough with AA and, more specifically, Gerard Arpey and Tom Horton.  By rough, I mean the question posed was “Is that all you got?”  The Dallas Morning News Aviation Blog has a good description of the exchange HERE

 

They make a good point.  American Airlines has really been a disappointment for a decade and the leadership has frequently leaned on multi-year plans and talks of how well things are going and what can be expected from new deals and new alliances.  Sometimes it is talk of how one time expenses got in the way of a profit, etc.  At the end of the day, you really should deliver something now and then.  I would point you to Continental as an excellent example of this.

 

American Airlines didn’t file bankruptcy.  Everyone talks about how they did the right thing and didn’t file bankruptcy.   The employees gave back 30% or more of their salary instead.   Problem is, when your competition (United, US Airways, Northwest, Delta) does file bankruptcy and does lower its costs and does streamline its operations and does reinvigorate its workforce, they’ve got you boxed in.   All the airlines in that list gained a permanent advantage over AA and regardless of the talk of “doing the right thing”, AA has a big disadvantage. 

 

What’s really frustrating isn’t that disadvantage.  What really irritates people is the leadership’s habit of deferring and delaying to another day many of the problems that do, at some point, need to be solved.  It’s the risk created by ignoring, deferring or delaying the resolutions of these problems that makes one so irritated and, dare I say, now a bit unconfident about AA’s long term future? 

 

They have an old, fuel inefficient, passenger inefficient fleet.  Much of that renewal has been deferred resulting in a fleet of aircraft that is more maintenance intensive, which carries fewer passengers per segment and which burns more fuel doing it.   

 

There isn’t a labor group at AA that isn’t spoiling for a fight at this point.  The risk of one or another getting their way and having a strike is increasing month by month.  For 4 years, we’ve seen AA labor groups have their contracts become amendable, negotiations begin and then . . . nothing.  There is no sense of urgency on AA management’s part to have this settled.

 

These issues and more make it appear as if no one is really solving problems.  They’re deferring them, delaying their resolution or, in some cases, just ignoring them but no one is showing up, raising their hand and saying “We solved this problem.  It won’t be on our plate anymore going forward.” 

 

The thing is, bankruptcy would have done that for them.  There would have been final solutions and the airline would be coping with immediate problems instead of being bogged down with what is really nearly 20 years of baggage.   My point is, I’m not sure bankruptcy *was* doing the right thing. 

 

It’s OK to describe problem resolutions as ongoing for a year or two or maybe even three.  It’s been going on a lot longer than that at AA and JP Morgan analyst Jamie Baker has noticed.  And I think this is just the beginning.

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Delta and the 787

April 21, 2010 on 1:00 am | In Airline Fees | 1 Comment

The Dallas Morning News Aviation Blog has THIS story about Delta possibly deferring or cancelling its (inherited from Northwest) 787 orders for 18 aircraft (and 50 additional options.)  And this kind of makes sense to me. 

 

Northwest probably did need those 787 aircraft for its trans-pacific routes.  Its 747 fleet was adequate for some routes but others just couldn’t stand a 747 and Northwest doesn’t have any 777 aircraft.  The combined fleet of Delta and Northwest is a different matter, however. 

 

If anything, I think Delta might have one long haul aircraft type too many.  That said, they have 767 (Delta) and A330 (Northwest) aircraft for medium haul routes and configured so that each is nearly ideal for passenger density.  They have the 777 (Delta) and the 747 (Northwest) for long haul, high density routes as well.  Frankly, I think Delta might be better off adding the 777-300 to its fleet and retiring the 747 but that isn’t their plan.  They are refurbishing the 747 aircraft and extending leases on them.  Clearly Delta sees a profitable use for them at this time. 

 

The 787 isn’t going to be a trans-Atlantic aircraft.  Certainly not on the first routes for any airline.  A new(ish) build 767-300 or A330-300 can do those routes just as economically.  The 787 is better suited to routes like NYC to Tokyo or LA to Sydney or Atlanta to Rio de Janeiro or even the US to India.  Delta has the right sized aircraft for those routes.  

 

Delta can probably sell those orders profitably at this point.  There are a number of airlines who don’t have new(ish) 767s or A330s and there are several more who need to downsize from a 747 or 777 on long haul routes.  Airlines such as Continental and AA come to mind.  

 

Mind you, the enthusiast in me wishes all US airlines flew the latest and great aircraft.  The practical side of me says we’ll probably only see Continental take up its orders on schedule and even AA will likely take its time adding the 787.

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SkyTeam, OneWorld and Star Alliance

January 23, 2010 on 1:04 pm | In Airline News, Airline Service, Airlines Alliances | 2 Comments

These three alliances have been forming, growing and shifting for some time now and it is almost fair to say that they’ve reached a certain maturity that lets us take a look at what the future might hold.

 

There will always be shifts between alliances as time goes by but the major structures are now in place and let’s be honest in that airlines are not equal partners in these alliances.  There are bedrock airlines and there are airlines who are really more associate partners. 

 

In the Star Alliance, US Airways has definitely been more of an associate member than, say, United, Lufthansa or Singapore Airlines and with the recent addition of Continental and the close partnership its formed with United, US Airways is even more the redheaded step-child in this organization. 

 

SkyTeam really has the strongest core though.  Formed, in part, from the original Northwest / KLM alliance that began in the 90′s, it now has an extremely strong network that spans both the Pacific and Atlantic oceans.  If it has a weakness, it is in South America among South American carriers and I’m not sure if that is really a weakness right now.  

 

The Star Alliance and SkyTeam have both managed to work among themselves in pretty close partnership and develop strong networks playing on each others’ strengths.  Schedules between those partnership airlines are pretty rational and they do tend to treat affiliate partners as having value in the organizations.

 

Then there is Oneworld.  Oneworld isn’t so much a partnership alliance as it is a looser affiliation of airlines.  To be sure, at one time Oneworld’s members represented a very strong core of airlines who were profitable and very strong on a global level.  To a degree, they still are but this has definitely become the weak alliance over time and with the fight over JAL taking place, its now fighting for its life.

 

Oneworld doesn’t know how to work well with each other.  Partners American Airlines and British Airways have dominated that relationship and because of their obstinance over trans-Atlantic routes and slots at Heathrow, they haven’t been able to work closely together over time and develop those relationships that have been grown in other alliances.  Because of their dominance, other potential strengths in their network, QANTAS, JAL and Cathay Pacific for instance, haven’t really been exploited fully either. 

 

Oneworld is, for most intents and purposes, an old style Anglo-American relationship with AA, BA, QANTAS and Cathay Pacific dominating that alliance.  (If you don’t think Cathay Pacific is Anglo, look up its history and its executive team.)

 

If Oneworld loses JAL, I’m not sure this alliance survives in the long run.  It cannot afford to be an alliance with two dominant partners (AA and BA) and it cannot afford to lose even one trans-Pacific partner.  If JAL moves over to SkyTeam, then I suspect over the next few years we’ll see one or more “majors” in that relationship find homes elsewhere. 

 

No matter what Oneworld does, they lose a major network in Japan if JAL leaves the alliance and they have no hope of luring ANA over to their alliance either.   The best they can hope to do is build their routes systems into Japan with more direct flights from outside Japan.  That isn’t very satisfactory. 

 

They already lack a major partner in China itself (Cathay Pacific isn’t quite that kind of partner) and lack a major partner centered in Korea and Southeast Asia/India. 

 

I suspect we’ll see one or more core partners in Oneworld slip away to one of the other alliances.  It wouldn’t be too hard to attract LAN away from Oneworld, for instance.  Nor would it be difficult to perhaps walk Cathay Pacific away from Oneworld.   That would leave three basic Anglo American core partners who have no harmonized strategy and not much to offer smaller affiliate partners either. 

 

What’s more, JAL doesn’t need their money now that they’ve gone into bankruptcy.  The Japanese government is financing them and will provide all the capital they need at this point since they have little choice to do anything else.  That means JAL is free to consider a long term strategy and if it can get some real signal that anti-trust immunity would be granted to a partnership between Delta and JAL and the rest of SkyTeam, that’s their best deal.

 

It has occurred to me that the reason there hasn’t been more worry about the dominance such an anti-trust immunity would grant is that, maybe, Delta has signaled its willingness to draw down its legacy network to and inside of Japan that it gained in its Northwest Airlines purchase.  Northwest Airlines not only had a strong system to Japan, it also had a strong network system of flights originating from Japan to regional Asian destinations.

 

If Delta is willing to let JAL fly that system on its behalf, that may well satisfy regulators in the United States.

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OK, I wasn’t finished.

January 7, 2010 on 9:11 pm | In Airline News, Airports | 1 Comment

It has been 2 weeks since the Underwear Bomber made his attempt to take down a Northwest Airlines A330 en-route from Amsterdam to Detroit.  In that time, we have seen all manner of posturing by the public, government officials and pundits as to this serious security lapse.   My last comments on this are HERE.

 

Since my last comments, I’ve been appalled by a number of people’s statements on this issue.  I’ve been appalled by former Vice President Dick Cheney making political hay out of this.  I’m deeply disappointed at the criticisms and obstruction on the part of Senators Jim DeMint and John McCain with respect to the TSA and its nominated leader, Erroll Southers.  I’m deeply disappointed by President Obama’s administration in describing this as a terrible failure in our security. 

 

The most sensible writing I’ve found on this topic is by Bruce Schneier (which can be read HERE)  and probably because, yes, it agrees with me.  That doesn’t necessarily come easy from me because while I’ve respected Mr. Schneier’s opinions and while I do feel he is dead on right about these security issues (and has been for a long time), I also think he oftens shouts about these issues too loudly. 

 

But he’s right.  This wasn’t a failure in security.  Certainly the terrorists didn’t win either.   Mr. Schneier is correct in pointing out that our security reduced this attempt to a near certain failure. 

 

For the past week, all I’ve heard and read about this issue is that we’re enacting measures to counter an attempt like this in the future.  Well, in some respects, yes, we should do that.  However, many people, including me, Mr. Schneier and others, have pointed out that terrorists, in particular Al Qaeda, *rarely* if ever make the same kind attempt twice.  So, looking for a Nigerian with PETN sewed into his underwear while carrying a syringe on his person is almost certainly going to fail us.

 

Yes, the public does expect something to be done.  And it should.  It is even entitled to see something being done.  Doing something doesn’t mean doing anything.  It means doing something that really does improve both the real and perceived level of security we might experience when traveling.  The biggest part of the problem in this whole debate is that despite excellent security already going on, the public does *not* feel that it either good, real or substantive. 

 

The public is right, too.  At the ground level, we observe too many Keystone Kop events taking place.  Just a few days ago, we shut down one of the largest airports in our country and inconvenienced thousands and thousands of people because a TSA security guard left their post.  Just walked away and allowed a man to enter the sterile gate area unchallenged.  Read about the most recent developments in that HERE and HERE.

 

The TSA says it takes responsibility.  Really?  Frankly, I don’t care.  The TSA and its guards should be one hell of a lot more responsible and professional than that at any time.

 

What is appalling is that TSA video cameras weren’t recording and it took 80+ minutes for the TSA to notify the NYNJ Port Authority (who runs the airports) of the breach and then they had to rely on Continental Airlines’ cameras to try to figure out what happened.   Spokeswoman Ann Davis of the TSA said:

 

Davis said Monday that although the TSA was unable to locate the man, any threat he may have presented was eliminated “by rescreening everyone and re-combing the airport to make sure he didn’t introduce anything to the environment or hand anything off to anyone.”

 

I have an answer.   Having to clear a terminal and re-screen thousands of people and delay untold numbers of flights does not lend credence to the idea that the TSA has a handle on these issues.  It just doesn’t.  Don’t take responsibility for it, do something about it.  Do something real and tangible.  The TSA should be deeply ashamed and shunned for such a lack of professionalism.  Right now, they look like a pack of huckleberries and that is not good.  It gives terrorists the idea that something *is* breachable.

 

Lack of professionalism, good judgement or proper perspective is missing from other quarters as well.  Take this opinion piece by Steve Danyluk on CNN which can be read HERE.  

 

Pilot Danyluk (A first officer for a major US airline) reckons that an emergency alert should have been sent out and a major effort should have been put into action upon this act taking place.  He’s outraged that he learned of the event on his iPhone after flying a 6 hour flight and landing. 

 

That is absurd.  First, there was no evidence whatsoever that this was a coordinated attack.  You should respond in Danyluk’s desired manner if there is such evidence but there was absolute zero evidence that this was a coordinated attack.  None.  Too those who say you can never be too safe, I respond, yes, you can.   To have responded in such a way would have been like presuming an entire neighborhood was under attack after one house experienced a burglary.

 

Second, I wonder what Pilot Danyluk would have done if he had been alerted.  Neither he nor his captain can leave the cockpit and wander among the aircraft searching for suspicious people.  His cockpit door is hardened in such a way that it would probably take more than a fire axe to breach it.  His cabin crew are not the best trained security staff to identify and secure a suspicious person (and I have plenty of that evidence coming up.)   The best thing he could have done was fly his airplane to its destination.  He did that. 

 

Third, an alert would have prepared him no more for an explosion.  Even if he had experienced an explosion, he certainly couldn’t do anything about it any earlier.  And if he had experienced an explosion, he would have been very busy getting that aircraft under control and pointed to a safe landing location.  

 

The truth is, it takes a pretty big bomb to take out a commercial airliner.   Oh, it could have severely damaged the aircraft and possibly hurt or killed someone but the likelihood of someone having enough explosive and a good enough detonator to wipe an aircraft from the sky with our current security in place is extremely statistically insignificant. 

 

Take the example of the DHL Airbus A300 being hit in Baghdad in 2003 by a surface to air missile.  You can read an account HERE.   A large, twin engined, wide body aircraft that had just taken off from Baghdad executing a special rapid climb procedure and fully loaded with fuel was hit by a surface to air missile that was *designed* to take out aircraft and  they still made it to the ground.  Yes, the recovery was due to the professionalism of the pilots and some prior knowledge of how to use differential engine thrust to “steer” the airplane (as a result of the THIS incident) but this aircraft was hit by a flying bomb traveling more than twice the speed of sound with a 6lbs  warhead with a high explosive impact fuse designed to fragment upon impact and survived relatively in tact.  You can’t carry that kind of thing in your underwear. 

 

I understand why Pilot Danyluk is “furious”.  He’s a type A pilot and type A pilots think they can always do something about something.   It’s a nice thought but there really wasn’t anything for him to do that he wasn’t already doing  provided he was following standard security procedures while in flight.   He can stomp his feet and write opinions on CNN all he wants but it does NOT mean that security failed him or anyone else.

 

It isn’t just pilots.  Well, it is pilots (still) but it is also flight crew, ATC and even NORAD. 

 

It would appear that a man became “unruly” on a Hawaiian Airlines flight from Portland, Oregon to Hawaii on Wednesday.   The captain decided to turn back to Portland (probably because it was just as easy to go there as anywhere else) and suddenly the flight is being “escorted” by F-15 fighters scrambled up by NORAD. 

 

You can not make this stuff up.  Read about this incident HERE

 

Can’t be too safe, right?  Wrong.   What is notable about this news story is that this aircraft returned to Portland, dropped the passenger off into the waiting hands of the FBI who, after a short while later, determined that no laws had been broken and released him.    This is very suspicious and sounds much more like a flightcrew having a hissy fit over a grumpy passenger rather than someone who was acting in a manner that justified a 90 minute diversion and meeting the aircraft with FBI. 

 

Certainly it would appear that sending F-15 fighters (and spending thousands of dollars) to escort this diversion was a bit foolish and wasteful. 

 

The best security in any situation including on an aircraft is using good judgement.  Good judgement is not “better safe than sorry” but, rather, assessing a situation for what it is rather than what it isn’t.  

 

The pubic will begin to perceive that we have good security not when things like these events don’t happen but when how we handle them becomes professional, efficient and proactive.  We have a decent defensive security process but what we don’t have is a uniform, professional example of it in the most public of representatives, the TSA. 

 

Leaving all good sense and judgement in the closet and overreacting to events like this serve absolutely no good purpose and even weaken security in the long run. 

 

I welcome comments on this post.

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Welcome To The New Year (part 1)

January 1, 2010 on 12:30 am | In Airline Service | No Comments

Now that it is 2010, what can we expect?

 

Unlike this time last year, probably not much.  There was some momentum for change last year that really doesn’t exist this year.   Airlines will continue to fight to hold their own in the marketplace and with the reduction in capacities, even the worst of the lot will likely cling to life this year.

 

North America:

 

Major airlines of North America have made all the changes they can and all are managing their businesses and cash very closely right now.  I don’t expect much, if any, change to develop in the next 12 months but let’s take a look anyway.

 

American Airlines has some labor issues to address but with the current economic climate, they have been getting away with their efforts to defer those issues.  Labor unions would like to push a few issues with American but they’re smart enough to realize that now isn’t the time.   Most likely they’ll continue their face saving efforts at making a point with their members but I don’t expect any real labor action at this airline this year.  Perhaps, if things get better, we’ll see some movement in the 4th quarter.

 

United Airlines, my least favorite legacy airline, has similar issues that American has with labor but, again, those labor issues aren’t likely to see much movement either.   I suspect that United will continue to move more of their flights over to regional airline partners because its worked (for now) and their customers will find themselves on more and more regional jets.  Since price is the prime driver for customers right now, they’ll accept that move and hate the flights as much as they always have.

 

Delta/Northwest should see more of its operatioins combined and, possibly, a unified single operating certificate by the end of the year.  That doesn’t mean much for their customers since Northwest aircraft are being painted into Delta colors at a furious rate.  The service product is already being harmonized to a fair degree and it’s a good one already. 

 

I don’t see any major aircraft purchases and I remain interested in whether or not they’ll keep their 787 orders.  There has been rumour and innuendo that they won’t but I kind of think they will keep them.  Their 767 fleet is old (except for the 767-400) and I can’t think of a reason why you wouldn’t want to have the 787 begin filling the role of those aircraft.  I’ve wondered if their hints aren’t just an opportunity to get Boeing to get interested in offering a better deal for more aircraft. 

 

US Airways needs two things in this next year.  First, they need their pilots to get together and start operating as a single group.  As dangerous as it is to try to interfere with a union group, I wonder if US Airways won’t wade into the problem in an attempt to have a final resolution.  Certainly they could argue that they’ve been patient enough. 

 

They also need to manage their cash very, very closely.  Cash is blood to an airline and US Airways has a bit of risk in this department.  Should cash holdings be depleted more, they’ll have to start seeking that merger partner again and no one appears interested in marrying with them.  This is another reason it needs resolution for its labor problems.   That said, I don’t see US Airways disappearing or filing for bankruptcy again. 

 

Continental Airlines has felt the hurt this past year and its unlikely to feel much better this year.  Their business model depended a bit more on business class travel and the economy hurt that demand the most.  That said, I can’t imagine a better group of managers for keeping that airline on track through the rest of the downturn.  Things will hurt and belts will be tightened a bit more but I don’t see the service product changing.   When the economic downturn does really turn the corner, Continental will be better placed to succeed than many. 

 

Despite their recent move to the Star Alliance, I do *not* see Continental getting any closer to United Airlines whatsoever.

 

Low Cost Carriers / Regionals:

 

Southwest Airlines continues to manage itself to the tune of its own drummer and the results of their long(er) term thinking are showing left and right.   They’ve managed to make solid overtures to business clientele in areas that, I suspect, count more day in and day out.  

 

I don’t see a merger partner in the future for them except,  possibly, for Sun Country Airlines.  For some reason, I see this as a real winner for Southwest in that it gives them space and routes in Minneapolis / St. Paul, a labor group that is accustomed to delivering Southwest style service and which can be harmonized into the Southwest labor groups relatively easy.  There is no rumour of this purchase but Sun Country has its own problems and it’s a match that fits the Southwest acquisition model. 

 

I think Southwest will remain persistent in its Denver expansion and will work hard to create a network in the upper midwest states of Wisconsin, Minnesota, Illinois and Missouri.   The wild card, in my mind, is the Washington D.C.  area and the NYC/Boston areas.   Shuttle type service is what Southwest knows very well and I wonder if they won’t try very hard to organically grow their flights in these areas.  If so, Southwest needs to find an “in” at Washington Reagan airport.  To do this, they would need to buy a shuttle operation from US Airways and/or Delta.  Perhaps US Airways will be interested in such a sale if their cash holdings erode more. 

 

Frontier/Midwest/Republic:   I don’t know what happens here.  Midwest really isn’t an airline anymore.  It really isn’t even a brand anymore.  It’s a name for selling tickets.  Frontier remains an airline and a brand and Republic seems to want to continue caring for both.  Since Republic is managed by very smart people, I kind of think that they may look for a way to wind down the Midwest name over the next 12 to 18 months and make Frontier the primary airline.   A tasty cookie isn’t a good reason to keep the Midwest name around.

 

Airtran deserves some applause.  This airline has managed to grow itself some, find new markets and earn some money during one of the worst downturns in the airline industry.  

 

Their move into Milwaukee has succeeded and promises to continue to succeed.  Milwaukee is a loyal city, to be sure, but it is a city that appreciates value even more.  Airtran has managed to offer great value, good service and appeal to a city that just a couple of years ago was kind of anti-Airtran.   The one obstacle in their way is the arrival of Southwest, another airline very good at offering value and appealing to the Milwaukee kind of customer.   I think Airtran has the upper hand but they are by no means the sure winner in this market.  Southwest may be able to beat them with frequency.

 

Virgin America keeps showing up and usually right after I become convinced they’ll disappear.  I still don’t know what this airline does best and I still don’t see them as being a scrappy enough operation to fight their way into the cities it needs to be in.   Virgin continues to dance around Chicago (claiming they can’t get space but if they wanted it bad enough, they could).  Their product would servce cities such as Dalllas, Denver, Houston, Chicago, Atlanta, Baltimore, Philadelphia, and, perhaps, Cleveland/Cincinatti very well.  

 

Instead, they added flights from the west coast to Fort Lauderdale and talk about adding service to a Texas city such as Austin.  This is too timid.  The CEO, David Cush, seems afraid to compete against his old employer (AA) and that is a shame since they have a very competitive and attractive trans-continental product.   I would speculate on VA being bought by another airline but . . . why?  They just don’t have much there and seem to have little interest in exploiting real advantages that they do have.   Maybe they’ll just run out of money and get shut down.

 

Alaska Airlines has felt the heat from Virgin America but they continue to do pretty well with their little airline and they continue to do it without being aligned with a major.  I don’t see much changing for Alaska Airlines.  They’ll continue to be a scrappy airline with good service to a limited number of destinations.  And, somehow, that seems OK when it comes to Alaska.

 

Next up, the world.

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Airlines at heightened security

December 27, 2009 on 8:00 am | In Airline News | 1 Comment

After the events of September 11, 2001, I said that in the future, it will be very difficult to take control of or even act against an airliner.  Prior to that day, protocol for such situations had universally been to cooperate.  After that day, it became clear that crew and passenger action against such people would not just be tolerated but welcomed.   That has been true ever since.

 

It’s a lot harder to take down an airliner than most people realize.  Even with bombs.  It takes a powerful punch to put a hole into an airframe and, even then, commercial airframes are very strong and an explosion doesn’t necessarily mean that aircraft is automatically coming down.  Particularly with respect to today’s airliners.

 

I’m sure there will be a lot of speculation on how this Nigerian national managed to conceal an explosive device and carry it onboard an aircraft from, of all places, Amsterdam.   If you’ve ever traveled from Europe, then you know just how strict security procedures are there and, in particular, in national airline hubs such as Amsterdam, Paris, Frankfort, and London.   Right now, it would appear the device was created from items that would nominally pass security although how he concealed PETN explosive sufficiently to pass security remains to be revealed. 

 

I’m equally sure we’ll learn that it was done in a manner that hadn’t received much consideration.   Possibly it was that bad a lapse in security but I somehow find that hard to believe.   I think we’ll learn something new and then we’ll see another round of procedures against attempts such as this one. 

 

I’m sure we’ll not see the removal of the 3oz. rule for carry-on liquids.  Indeed, I wonder if all liquids won’t be banned which potentially causes a huge problem for the airlines since that would likely cause many more passengers to want to check their luggage and airlines are now charging exorbitant fees for such service.

 

In the meantime, I remain confident that our airlines  are safe.  If anything, this event is a great demonstration at just how much safer we are today with people acting quickly than we were 10 years ago.

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