SWA, SWAPA and 737MAX

May 19, 2016 on 12:37 pm | In Airline News | No Comments

Southwest pilot’s union, SWAPA, is suing Southwest to prevent them being forced to fly the 737MAX as they believe it’s not covered in the contract.

I understand the move.  This is the pilots wanting a new contract with an industry leading raise.  It’s designed to raise public awareness and tension with the company.

It is a contradiction in so many ways.  First and foremost, the 737MAX is no more than an update to a long existing aircraft flown by the company.   To see it as a new aircraft type and force that issue is a giant stretch at best.

However, we wouldn’t be seeing this if Southwest were able to get a deal done on the pilot’s (and other unions’) contract(s).  Fear of an industry leading contract is reasonable and particularly so for Southwest since they no longer have the lowest costs in the business.  It’s a reasonable fear.

Which means the pilots could stand to have a gut check.  Wanting the most is not unusual.  Wanting it against the specific conditions of your airline and its future is self-defeating.  And while Southwest isn’t bankrupt and isn’t likely to go bankrupt soon, it would be in the interests of the pilots to learn from 30 years of lessons.  Namely that over-reaching has never done an airline nor a union any good in this business.

Failure to achieve a contract is a pox on both houses.  Both can give and both should reach for a contract that starts asap.

The airline and its unions have to come to grips with the fact that the airline is changing, the airline industry has changed and while record profits are seen today, there is nothing in the airline industry that is less volatile than it used to be.   That said, both parties should realize that they enjoy success and wealth today because of the unique special relationship that the airline and unions have historically enjoyed.  That relationship was about getting deals done that benefited both parties without being harmful to either.

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Southwest and Love Field Airport

January 21, 2016 on 3:32 pm | In Airports | No Comments

Southwest Airlines has filed notice of intent to appeal Judge Kinkeade’s ruling that Delta could continue to use gates at Love Field Airport.  Southwest says that Delta is tresspassing and Delta says Southwest has a monopoly and the City of Dallas was last seen taking the last train to Clarksville.

Love Field is a public airport.  I don’t expect it to be infinitely adjustable to all demands to use the facility.

I do, however, expect it to be more flexible to airlines than simply accomodating Southwest and Virgin America.  That’s a No Bueno moment.

We got here because Southwest got greedy, the City of Dallas refuses to push for more gates and American Airlines wants Southwest boxed in. This anti-competitive and a restraint to trade to many airlines.

So let’s turn Love Field into a private airport, sell it to Southwest for a reasonably low sum and let Southwest do what it wants.

Or even better, sell the airport to the highest  bidder and let them fight it out.  If Southwest doesn’t want the faclilty and has “Dallas fatigue”, then they can move over to the new facilities at DFW or even just walk away.

There is another alternative though. . . create more gates, have an annual auction for all gates and highest bidder gets unrestrained use for 1 year.

Things to think about in the airline industry.

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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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Late and getting later

July 10, 2014 on 2:00 am | In Airline Service | No Comments

Southwest Airlines holds the unenviable #12 (out of 14) position for on-time arrivals on the latest list released.  Hawaiian (surprise, surprise) is first and Alaska and Delta follow in 2nd and 3rd place respectively.

Southwest didn’t use to hold that position . . . ever.  In fact, it held #1 positions in on time for a long, long time.

Now, yes, they’re bigger and they’re busier but . . . here is the thing:

Delta is #3.  US Airways is #5 and American Airlines is #9.

Southwest is losing this battle badly and it isn’t just because they’ve entered non-traditional markets either.  When people ask CEO Gary Kelly about a culture loss, these are the things that come to my mind.  He refutes that culture loss but I don’t think that it is fair to believe that culture at Southwest is the same it ever was.

There are operational problems at the airline.  Their systems are creaking under the loads they’ve been placed under.  They have no systemized approach for scaling up to their demand and their not leaving happy employees in their path.

So, when people call out a deterioration of culture at the airline and they really do mean things going down hill such as on time arrivals, it’s best not to say “Oh no.  We’re fine!”  Acknowledge the problem and start to address it rather than acting as if there is no problem.

Otherwise, you start to look like American Airlines circa 2010.

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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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Virgin Gets The Gates

May 9, 2014 on 4:09 pm | In Airline Service, Airports | No Comments

Virgin America appears to be the winner of the 2 gates at Love Field according to numerous reports in Dallas media.  There is no official city announcement to date but reporters are citing two unnamed sources in the City Manager’s office confirming this outcome.  Dallas media is rarely wrong with such sources.

It’s an acceptable outcome for Dallas.  It won’t really increase competition in this marketplace very much except on a few long haul routes out of Dallas but it will be quite interesting to see the effect Virgin America has on those routes as I think it will provide justification for pursuing even more competition in the marketplace.

When I’m asked who I would like to see get those gates, that’s a tough question.  Frankly, after much thought I’ve begun to think that Dallas might have actually been best served with common use and better served by Delta Airlines or American Airlines flying out of those gates.

Let me make an announcement:  There is room in the DFW marketplace for a shorthaul provider using the Q400 or ATR72 to serve markets in the Texas regional area out of DFW.  In my opinion, you could very well make a killing with this airline.

Particularly if you base out of DFW.

From DFW, you could serve:  Houston (2 airports), Austin, San Antonio, Corpus Christi, Brownsville-Harlingen, McAllen, Abilene, Laredo, Midland-Odessa, El Paso, Lubbock, Amarillo, Little Rock, Fayetteville, Tulsa, Oklahoma City, Shreveport, Memphis, and New Orleans.

You can string together low frequency cities for a better load factor and you can do high frequency turns at larger city airports.  And you could probably do a deal with some of the other airlines serving DFW to interconnect.

Your seat costs would be superior, your weather would be more than acceptable and your price would make your competition whimper.

In the meantime, let’s be glad the The Great Gate Fight is over (we hope) and see what comes next.

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City Consultants Point to Southwest

April 28, 2014 on 12:32 pm | In Airline Service, Airports, Mergers and Bankruptcy | No Comments

City of Dallas consultants, L.E.K. Consultants, has come out saying that it’s Southwest Airlines who should get the 2 American Airlines gates at Love Field Airport.  Their rationale boils down to the idea that Southwest will drive the most passenger traffic for the city and that is therefore the most economically sound justification.

Their criticism of the Virgin America lease is that it removes some flights from DFW airport and transfers them to Love Field.

You can’t look at this picture statically.  Driving passenger traffic isn’t necessarily what’s best for consumers.  It may well seem good for the city but it won’t necessarily be good for consumers.

As foolish as I think some of the Justice Departments moves have been in the AA bankruptcy, they aren’t incorrect in the idea that these things should drive competition and benefit consumers.

The consultants seem to be squarely aimed at the idea that what’s good for a business will be good for consumers.  I would disagree with that.

What Dallas has needed most for a long time is competition on a variety of long haul domestic routes in and out of Dallas to a variety of destinations.  Southwest will provide some of that sorely needed competition on October 13th.  And they will provide it regardless of whether or not they get those gates.

Virgin America will provide some of that competition too although I would argue that we could use a more creative and extensive LCC than Virgin America.

What is most needed at Love Field is . . . wait for it. . . . more gates.  20 gates just isn’t enough.  Absent more gates, Southwest should be relieved of its burden to give up gates to get gates at DFW.  The competitve landscape has changed and, unfortunately, that change occurred before the end of the Wright Amendment on October 13th.

But 20 gates at Love Field isn’t enough.  Chicago Midway serving as an adjunct airport very similar to Love Field has 43 gates.  Would I suggest that Love Field should have that many?  No.

But the airport cannot serve any other airlines very effectively despite being open to do so at this time.  6 to 10 additional gates would make sense at the airport.

Barring that, Southwest should not be required to give up gates in order to use gates at DFW airport.  In making the deal to lift the Wright Amendment, the parties involved essentially constrained Southwest Airlines from growth in the DFW area.  In fact, the deal was designed to penalize Southwest if it wanted to grow by using DFW airport.

Isn’t it time to quit taking swipes at Southwest for not moving out of Love Field Airport more than 35 years ago when DFW was opened?  Southwest is a huge employer in this area and a huge tax contributor and excellent corporate citizen.  Why do we want to exact revenge against the very kind of company we should want in our community?

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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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Going International

January 27, 2014 on 1:04 pm | In Airline Service | 1 Comment

Southwest Airlines has announced its intentions to start flying international routes for the first time in its history.  Starting on July 1st, Atlanta, Baltimore and Orlando will have daily (or near daily) flights to Jamaica, Aruba and The Bahamas.  For those of you paying attention, I think this could actually be construed as Southwest Airlines announcing its intention to keep Airtran destinations with a bit of Southwest flair.

This makes sense because it fits within infrastructure that Southwest has today at those destinations.  Southwest can “learn” how to be an international carrier and ensure its new reservations system which is debuting in international form with these additions.

Consider this:  Southwest has been trying to have some form of international flight via partners or itself since 2008.  It’s 2014 now.  Wow, that took a long time.

These are the first announcements, I expect many more international announcements this year and next.  I think Southwest will seek to cover the Airtran destinations it wants to keep first and then will start exploring flights to new destinations both across the Gulf of Mexico and Caribbean Sea as well as to Mexico and Canada.

What this most defnitely is not is a move to a need for a different aircraft.  Southwest’s current fleet plans can handle these flights just fine.  It’s possible that additional foreign destinations may drive more 737-800/-8Max purchases but we expected that anyway.

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Delta wants some Love

December 16, 2013 on 3:14 pm | In Airline Service, Airports | No Comments

According to the Dallas Morning News, Delta Airlines has released a schedule that now includes October 2014 and apparently Delta expects to fly a massive number of flights from Love Field to its own hubs.  By massive, it would appear that Delta has 22 flights to its hubs in Atlanta, Detroit, Minneapolis/St. Paul, New York La Guardia and Los Angeles.  The only two cities missing are Salt Lake City and Seattle.

Delta wants to use the American Airlines gates at Love Field that it rents today for those flights.  22 flights from 2 gates seems a touch optimistic so I do wonder if Delta has something else up its sleeve.

Southwest has 16 gates and no one is entirely sure if they can have more than that.  American Airlines has 2 gates and United has 2 gates.  According to restrictions put in place in winding down the Wright Amendment, no more gates are supposed to be built.  The real shame of that is that there are several gates across the tarmac from the main terminal originally built for Legend Airlines that would be exceptional for use in a Delta operation.

The City of Dallas and the airport authorities don’t want to allow expansion at Love Field.  They want traffic to be focused on DFW airport but . . . DFW airport is actually pretty full at this point.  There will be a few gates at DFW available for use once Terminal E is renovated but not many and they’ll go quickly.

So why not open up Love Field even more?  I wonder if Delta isn’t planning to sue for more access myself.

In the meantime, let’s ponder for a minute the chance to fly Delta to its hubs from Love Field airport in less than a year.

That’s what I meant by Change, It’s coming.

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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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Love Field Gates

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

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

Southwest, of course, wants the gates as well.

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

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

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

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

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

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

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

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

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The Settlement: Part 3

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

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

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

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

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

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

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

My guess:

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

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

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

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The Settlement: Part 2

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

The Slot Race is about to begin.

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

jetBlue can’t be far behind nor Virgin America.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

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Southwest wants a word with the judge

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

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

Surprised?

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

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

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

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

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

 

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Southwest’s Gates

October 31, 2013 on 1:00 am | In Airports | 5 Comments

Southwest Airlines will have 16 gates to operate from at Love Field when the Wright Amendment evaporates on October 13, 2014 of next year. CEO Gary Kelly says that should be more than enough and envisions each gate handling as much as 10 flights per day. Some believe that the 737-800 will take more time at gates than the 737-700.

First of all, let’s not kid ourselves. Southwest isn’t boarding people nearly as fast as it once did and 10 flights per gate seems very optimistic to me in the present day Southwest world.

The 737-800 definitely will take more time at gates and, at the same time, I’m fairly sure we won’t see the 737-800 at every gate either. This is Dallas, a city inside Texas and if you think that the airline is going to cut flights to Houston, Austin and San Antonio, you’re kidding yourself. Those flights will be served by the 737-700s.

The truth is that I don’t think 16 gates is enough and I think the 20 gate limit at Love Field is stupid. The market can demand more and these limits at Love Field are a continuous fail for the region.

That said, I expect that Southwest will get started, show success and argue in the future for more gates. How many more? I’ve long noticed that the new terminal is certainly not limited in space and could add as many as 10 more gates, at my best guess.

I think that Southwest Airlines decided to get the deal, prove itself and ask for more later. Not an unsuccessful strategy.

And speaking of Love Field, has anyone looked at their website lately?  This is, without a doubt, one of the worst around.  And it supports an airport at a major city in the US.   Midland-Odessa’s website is better than Love Fields’ own site.

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Stop thinking SWA should run Atlanta like Airtran

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

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

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

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

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

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

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

 

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Southwest wants DC and NYC slots

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

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

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

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

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

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

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