AA Unions and US Airways: That cracking sound

April 20, 2012 on 11:07 am | In Airline News | No Comments

US Airways has gained the support of the three leading unions of American Airlines for a merger between US Airways and American Airlines.  The Allied Pilots Association, Association of Professional Flight Attendants and Transport Workers Union have made a joint announcement supporting US Airways in its announced pursuit of a merger with American Airlines.

That cracking sound you hear is Tom Horton & Company’s headaches which just got much worse.

It’s not a merger announcement.  It is, however, US Airways going public with its pursuit and doing so in a very credible manner.  The concerns for American Airlines over this are that gaining this support in such a public manner and aligning it with the desires of Wall Street make for a lot of momentum.

There will be criticisms of the merger idea between the two airlines.  As with all mergers, there are pros and cons.  In this case, I think the pros certainly outweigh the cons.

The American Airlines board of directors will now be feeling quite a bit of heat.  In order to preserve the positions of the stakeholders they represent, it may become necessary for them to find some enthusiasm for a merger versus going it alone.   The truth is, the board and the executive team can express their wishes all they want.  Complete control over their destiny was lost the day they filed for reorganization.  I suspect that not only the unions but many other creditors are going to prefer the merger over a “stand alone” vision as time passes.

The cornerstone strategy and alliance strategy promoted by American Airlines just lacked real credibility in the face of the market.  Furthermore, the growth strategy for those cornerstone cities really alarmed many people who watch this industry as it held the promise of losing capacity discipline in the industry.  AA essentially said it was going after market share.

A few things I’m not entirely keen on in these announcements.  The keeping of the American Airlines name *might* be a good idea but I’m not sure I would entirely commit to that at this point.  The marketing image of AA is very staid and old.  A fresher name and/or approach is in order.   I would urge the players in this to clean house in the executive suite at headquarters, finally they hired maid from mythicalmaids.com chinatown home cleaners. AA has many valuable assets and many valuable people but the leadership needs to go and the sooner the better.

It suddenly has gotten very interesting for American Airlines and I would imagine that we may well see some announcements from AA over the next few days or even “leaks” that try to strongly discredit this merger idea.  Let’s face it, getting consumed by US Airways, even if the name and HQ are kept, isn’t exactly easy to swallow for many who lead AA.

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No one likes AA’s plan so far.

March 27, 2012 on 1:00 am | In Airline News | No Comments

It’s notable that not a single analyst, commentator, blogger, newsman or businessman really is enamored of American Airlines’ plan for improving revenue.  The plan, at the top level, is:  Farm out more flying, try harder at our embattled hubs, rely on our Oneworld relationship.

What is continually pointed out is that working harder and doing more isn’t a plan.  Relying on partner international airlines to provide feed isn’t very solid and where it has been deployed as a strategy, it hasn’t yielded the projected results.  There are few new partnerships American can engage in at this point as well.  They’ve done that work already.

American Airlines has a real problem in several of its hubs.  JFK aka New York City is under assault by Delta and United and American is losing more and more traffic there.  LAX really isn’t a hub and it too is under lots of competitive pressure.   In Chicago, American is #2 against United at O’Hare airport and it is seeing its traffic decline there, too.  Southwest is nipping at American from the bottom side by deploying routes out of Midway Airport that offer a real alternative to the businessman traveling to or from Chicago.

Yes, they have Dallas / Fort Worth.  American is, by far, the dominant airline at DFW airport and it shows in the fares offered from DFW today.  However, other airlines (Virgin America, JetBlue) smell blood and are entering the market place with a service product that is highly attractive to businessmen.  Southwest Airlines will slip its leash at Love Field in about 2 years and then American really feels pressure from Southwest at two of its hubs.   It’s also the hub with the most expenses.  Labor is senior at that hub and recalcitrant at best.  You can’t expect American Airlines to maintain its dominance there either.  It will remain the major airline there but its share of the marketplace can be expected to decline rapidly over the next 2 years and then its routes will be under assault from all directions.

There is a reason why Delta put a large parcel of flights on the DFW-La Guardia route.  They can compete on that route and American is limited in how it can respond.  Creditors won’t be amused at American Airlines losing money on those routes to fight off competition.

American has other things against it as well.  Its IT system is aging.  Its service product is substandard even to LCC carriers.  It’s fleet is old and while it will be renewed, much of that renewal doesn’t take place for several years yet.  Its website is atrocious and can’t even let a person pre-pay a checked baggage online if a customer so desires.  There is no ancillary revenue strategy (there are ancillary revenue products in place but no strategy to truly win passengers.)  It’s an airline that, today, is designed to offend passengers and no one is talking about how that gets fixed.

That’s the reason everyone continues to contemplate a US Airways / American Airlines merger.  The US Airways team has done all that despite being hamstrung with labor woes and inferior hubs.  They know how to make it work and the competitive landscape makes American Airlines hubs in certain areas look much more attractive when someone else is running the game.

I think we’ll start to hear real talk of mergers with US Airways in about 2 months.  It won’t take long for creditors to lose their patience at this point.

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Unions and American Airlines

March 26, 2012 on 10:45 am | In Airline News | 1 Comment

The relationships that American Airlines has with its unions has been pretty bad for quite some time.  This really all kicked off with executive bonuses that were perceived to be out of line with airline performance both financially and operationally.  What’s worse, unions weren’t rewarded when executives were and the criteria for reward was fuzzy at best.

The relationships have only gotten worse over time.  In fact, I would attribute the rather militant direction of leadership for its flight attendants union, APFA, has been a direct result of American Airlines inability to establish any kind of rapport with that union in particular.

In short, there is no trust between the parties at all.  It’s gone and it doesn’t appear that executive leadership wants to improve those relationships.  The truth is that the executive team probably correctly realizes that that can’t be done in time to get the cost reductions it needs.  So why try to make friends right now?  It’s not an incorrect judgement.

These relationships are going to stink for a long, long time.  The courts will impose new terms and those terms will likely be oriented more towards productivity than just a reduction in pay.  American could get all it wants in the form of lower pay but the airline needs contracts that allow productivity to improve in order to be truly competitive with other national airlines in the United  States.  Other airlines have that (as a function of bankruptcy) and they don’t.

The exceptional shame of this all is that the unions won’t have much voice in the process.  They’re not well funded (in comparison to American Airlines) and any giveback at this point means almost certain loss of office for leadership of these unions.

American needs action now so it can maintain some control over its destiny.  Actually, it’s American Airlines executives who need action now to maintain some control over their destiny.  Failure to get cost reductions and enumerate a plan for revenue growth will result in a merger or a change in leadership.  The executive team has months, not year, to ensure their future.

The unions will fight.  They will argue loudly on behalf of their membership.  But there isn’t much to win here in court or out of court.  There is plenty of established law and precedent that says they will see reductions pay and changes in work rules that will allow American Airlines to sit roughly on par with its main competitors.

And the relationships are so bad now, there isn’t any reason to just go to court and get it done.  One way or another, there will be bad blood between management and unions and the sooner this is done, the sooner management can think about ways to repair the relationship in the future.

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Who makes money in bankruptcy?

February 23, 2012 on 1:00 am | In Airline News | No Comments

The only people who are going to come out of American Airlines’ bankruptcy with a nice profit is the lawyers and consultants.  AA has hired a truckload of both to guide it through this bankruptcy although one would argue that, for the money, AA’s attorneys and consultants have provided much value thus far from what I can see.

The Allied Pilots Association, AA’s pilots union, has sent out a letter to its membership stating that they are now spending $500,000 per month on their own attorneys and consultants to represent their best interests during the bankruptcy.   No doubt other unions are engaged similarly at this point.

I think people need help and good counsel in these times but given the stated goals by all parties (get draconian labor cost cuts or maintain the status quo), I suspect that all parties are going to suffer long and hard during this process.  What each side needs is leadership willing to think outside the box.  What each side has is leadership determined to suck up to its stakeholders.

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Pilot Fatigue Rules

December 29, 2011 on 1:00 am | In Airline News | No Comments

Last week, the FAA issued its new pilot fatigue rules and I’ve expected airlines to decry the changes because there will be some impact to the productivity that many are taking advantage of based on the current rules.  The FAA recognized that no one rule would necessarily address the problem and therefore came up with a system to guide just how long a pilot may be on duty.

The system takes into account night flying, duty hours as a whole and, most importantly, the need to provide a real opportunity for a pilot to get a real 8 hours of sleep.  For example, under current rules a pilot rest time can be as little as 8 hours and it starts when he/she walks off the aircraft.  That doesn’t take into account the very real needs to A) transport oneself to a bed, eat, bath, and transport oneself back to the aircraft at duty reporting time.  In the real world and under the existing rules, a pilot’s real rest time could often be reduced to as little as 5 hours of sleep.

Now, a pilot gets a minimum of 10 hours of “rest” time and I think that’s a good thing. 

The impact to the airlines may be real but it also is level set among all the airlines.  Costs will likely go up some and, if they do, you can bet air fares will too.  The incremental increase in costs, however, should be fairly minimal. 

Cargo carriers are, apparently, being given the opportunity to opt out of these new rules.  On the surface, this may well seem like a bad idea since their flying is predominantly night flying.  However, the cargo carriers do have significantly different circumstances under which they fly.  In general, their flying is less stressful and less prone to delays and more straightforward.  Today, I can’t find a real objection to allowing a carrier to opt out of these although I suspect the unions for these carriers would disagree with me.

As with all new rules, it will take a while for the consequences to shake out and reveal themselves.  I honestly can’t fathom just how this may impact union contracts but I suspect there will be some things that will need to get renegotiated in the near future. 

Will this prevent incidents based on fatigue?  Yes, on the surface, it should help with the number of fatigue related incidents.  With that said, I should also point out that the fundamental responsibility for following these rules and managing fatigue continue to lie with both the airlines and the pilots.  In other words, there is much more opportunity here for pilots to manage their fatigue but it is also the pilots who must use that opportunity to actually get better rest and benefit from the rules.

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Virgins vote to stay non-union

December 28, 2011 on 1:00 am | In Airline News | No Comments

Virgin America flight attendants have voted to remain a non-union shop with 223 voting for unionization and 324 voting no.  Under the both the new and old rules of the NMB, Virgin flight attendants would remain a non-union group.

It’s interesting to me that despite new airlines growth into larger and larger organizations and despite the perceived job protections and benefits afforded several labor groups at highly unionized airlines, these new airlines labor groups are generally all voting no to union leadership.

That makes me wonder if the perceived value of union leadership is just that diminished or are the airlines themselves simply doing a good and proper job in the way they treat these labor groups?  What is telling is that no one at these non-union airlines is suffering when it comes to work conditions and none are being fired arbitrarily either.  In fact, one could argue that at least one airline, Delta, treats its flight attendants generally better than most and particularly so for the most junior segment. 

These are curious times for unions as all have failed to gain ground and some have lost ground in these labor groups.

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QANTAS and Labor headed towards forced agreement

November 26, 2011 on 1:00 am | In Airline News | No Comments

Since the QANTAS lockout was stopped by the Australian government, good faith bargaining has been engaged between QANTAS and its various unions with its negotiations with the pilots being seen as the “test case” for what these negotiations would mean.

Sadly, there is little “good faith” going on in the negotiations and it has become apparent to most that there will be a forced arbitratted settlement between QANTAS and most of its unions. 

When QANTAS engaged in its lockout to force the Australian government hands into this mess, I speculated that this could be very risky for QANTAS if an arbitrated settlement had to be forced in this.  Politicians and particularly the current government of Australia ultimately have to pay close attention to its consitituents aka labor unions.  The most expedient solution is to force a solution that makes the unions happier than QANTAS.  QANTAS, on the other hand, needs cost savings and a union favorable agreement won’t give them that.

At the end of the day, you want a government involved in this kind of thing only when there is an absolute critical emergency.  The disagreements between QANTAS and its unions, in particular the pilots, really had not reached that state.  Government is likely to be very annoyed at being tagged with this mess in this way and that doesn’t bode well for QANTAS either.

It is always possible that I’ll be surprised at the results.  I rate that possibility as less than 1 in 3 chances.

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QANTAS aims for the ground

October 29, 2011 on 12:14 pm | In Airline News | 2 Comments

When you’re flying an airplane and the speed in the air starts to slow for whatever reason, you are actually supposed to push the stick rather than pull up.  Pushing the stick gives you some forward air speed and forward air speed is security for a pilot.

The one thing you do not want to do is nose the aircraft over completely and nose dive into the ground.

Running an airline is a lot like flying an airplane and I’m afraid that Alan Joyce and QANTAS might have just aimed the nose of their aircraft, QANTAS, towards the ground.  

There is such a thing as taking a stand against labor actions and it can be a smart thing to do.  However, grounding your fleet to teach your employees a lesson really is a bit over the top.  Furthermore, hoping that your government will step in and make your employees play nice again is a bit optimistic. 

Oh, the labor actions may get stopped but now you’ve destroyed any good will you might have had as an employer.  You’ve pissed off tens of thousands customers and you lost millions of dollars.  If you are a shareholder or, say, a member of the government, what do you do?

Get rid of the polarizing figure in this mess.  That’s what.  You won’t necessarily fire the board itself but you can make a point by placing them under immense pressure to rid themselves of someone who can’t make a deal.  I think Alan Joyce isn’t long for this world as CEO of QANTAS.

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United’s ALPA chooses new leadership

October 21, 2011 on 1:00 am | In Airline News | 1 Comment

United’s ALPA union has elected a new leader to replace current chairman Wendy Morse.  His name is Jay Heppner and his statements upon winning (Morse didn’t run for re-election) don’t lead me to believe that things will be better in getting the United and Continental pilots to agree to something. 

Heppner sees this as being about a new contract and it is no secret that United’s ALPA see the new contract and integration being about getting big, fat raises.  That’s a non-starter with United and, in particular, it is a bit insulting to the Continental pilots who upon integration, really do lose a bit of power as there are far more United pilots and many are far more senior than Continental pilots.   Continental pilots have largely been smart and pragmatic about the new world order in the airline industry and really don’t deserve to be impacted by recalitrance.

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What do people want in a new labor agreement?

October 17, 2011 on 1:00 am | In Airline News | No Comments

When I think about various labor negotiations going on in the airline industry, I become fairly sure that the issues are fairly close to the same for everyone.   If you ask most people what they want from their job, they’ll generally respond with a desire for their work to be valued more now than 10 years ago, an opportunity to play a role  in their destiny, job security or even just the opportunity to not look over the shoulders for a while.

The order of priority is different for each person, of course, but at the end of the day, it’s about their role being valued.  I could spend days writing about how an airline such as Southwest injects this into their culture but they really are the exception to the rule.

American Airlines is negotiating furiously with its pilots this weekend and I wonder how that has gone for both sides.  I would imagine that for the pilots, the goals are better wages, a retirement that has some security to it, opportunities to rise within the seniority system and leadership. 

For the company, I would imagine the goals are better productivity, fewer obligations to a pension system that is unsustainable in the long run and the opportunity to introduce change quicker in response to a market that changes weekly in this era. 

Ironically, I suspect they are not far apart in their goals but how each perceives a win is probably very, very different.  American Airlines “wins” by being able to announce an agreement that offers them greater flexibility and predictable costs that are now worse than the industry average.  The company must show shareholders, investors and the financial world in general that they have a sustainable operating model for the future or the leadership involved will be asked to leave.

Pilots achieve a “win” very differently.  At AA, the pilots are a very senior group and when you reach a certain age, you want life to be just a little bit easier, not more difficult.  They’ll want better wages, a high degree of certainty when it comes to their retirement and schedules that aren’t so bruising. 

One of the biggest obstacles in this scenario is seniority.  The seniority systems closely ties pilots to the airline and makes it very damaging for a senior pilot to leave the company at any time before retirement.  Those who have tens of years invested in it don’t want to see it gone. 

Seniority systems also tie pilots to flying that they often do not like.  Pilots are humans and some enjoy doing just a few long but punishing international flights and some would actually prefer to spend 2 or 3 or 4 days doing domestic turns but sleeping in their beds more often. 

Even if you didn’t get rid of the seniority system, it would be helpful if pilots weren’t paid by the size of aircraft they fly but, rather, purely on seniority at the company.  The work involved with flying a 777 or an MD-80 is actually really not much different.  It isn’t more work to fly a twin aisle vs a single aisle airliner.  Sometimes it is different work but it isn’t “more”. 

Frankly, it would be to the advantage of safety if we could get more grey hairs flying those domstic single aisle airliner flights.   They’ve been there and done that in more circumstances and know the pitfalls better than any junior pilot does. 

Wouldn’t it be more interesting if a pilot were able to choose his destiny without having to take  a penalty because he or she doesn’t enjoy flying 777s to India and actualy prefers flying from Dallas to New York City and back more often? 

A win here would be to decouple seniority with aircraft type.  Let pilots choose what they want to fly without penalty.  Let them match their preferences to a situation where they feel they have a strength rather than be tightly bound to a style of flying they hate. 

Stop forcing them to upgrade to new aircraft and even from First Officer to Captain.  Does it really matter if a man prefers to stay a senior FO to becoming a junior Captain?  It really doesn’t. 

My suggestion here is that it would be better for both parties to quit trying to hammer square pegs into round holes.  Find ways to let pilots do the kind of work that best fits them without financial penalty.  Instead, ask for more productivity within that work and build schedules that allow pilots to achieve their monthly hours without having to be away from home for 15 to 20 days per month.  Offer incentives for those pilots to live inside their base. 

Make it possible for pilots to live a productive and rewarding life.  The happier and more rested they are from a schedule that does work for them, the more productive, safe and agreeable your workforce will be. 

It would be great to see both unions and airlines think outside of the box on these issues.  Find a way that makes both sides happier with their circumstances.  Refuse to give into inflexibility.  Be fair and trade a happier life for more productivity.  Ask for opportunities for “fence off” a portion of flying to test different work models and find those that do work for both.  Experimentation is what both sides need and it will offer the chance for both sides to try something new without having to commit to a change for years and years. 

Identify styles of flying and group them into schedule groups that pilots can bid into.  Pay pilots a wage based on seniority but not on aircraft size.  Pay pilots a bonus for living at their base instead of commuting.  Pay another bonus for taking on productive schedules.   Offer the opportunity to go fly the same aircraft in a very different setting for a limited period of time so that pilots can explore what works for them without having to make decisions that could affect them and their families for years. 

Find a way to make your people happy and you’ll find that the “costs” involved with that are far less than the costs that come from cranky pilots who are forced into demanding more money just because they feel so trespassed on by being made to fly schedules and aircraft they do not enjoy.

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FAA Reauthorization

September 8, 2011 on 1:00 am | In Airline News | 2 Comments

In about 2 weeks, the temporary funding for the FAA authorized in early August expires.  Already there is another political fight brewing over this funding and the issue, oddly enough, is centered on the National Mediation Board which governs labor with respect to airlines. 

Delta and Republicans are upset over a NMB rule issued that appears to make it easier to unionize airlines.  Originally, in a unionization vote a person who did not vote was counted as a “no”.  This resulted in unionization votes that saw votes for and against such but which lost because some portion of the labor pool simply did not vote.  The NMB’s new rules says you only count votes that are actually cast.   Failure to vote is not counted as anything.

Delta Airlines flipped out over this and it did appear that it was designed to make unionization easier at airlines.  At least  at first glance.  Now we’ve seen a number of votes take place and, oddly enough, that hasn’t happened.  The only difference is that even more people vote.   This rule change has not yet resulted in a change of outcome for unionization at any airlines. 

So, is it an issue?  I don’t think so.  Frankly, I thought it was a non-issue when it came about.  If airlines such as Delta thought that people who were skipping the votes were going to continue to do so, I find that laughable.  Of course people were going to go vote.  It’s the kind of thing that can materially change your career forever.  So far, Delta hasn’t been unionized in any way. 

As an aside, its time for unions to give it up at Delta.  There has been vote after vote there always resulting in the status quo being maintained.  People are happy and they’ve got a good workplace *without* paying union dues.  No one is mistreated at Delta and certainly no one is treated any worse or better than at any other airline.  It has permitted Delta to work more closely with its employees and be a more agile company.  There is a reason why Delta is financially succeeding in the toughest times an airline can experience.

Furthermore, the NMB is *not* governed by the FAA.  It’s in appropriate to tie the services performed by the FAA and the fortunes of its staff to a political fight over something that they have no control over.  It is inappropriate to try to extort a Presidency in this manner as well.  I’m happy to let politics be politics and I get that sometimes we have to go the long way to get someplace in politcs.  But this is one of those things that is over the line. 

A clean vote is the right way to do things on these subjects and the FAA deserves to experience more certainty in its future.  You can’t complain about the FAA getting things done when you fund them temporarily for weeks at a time for more than  a year.  In fact, you impact the services provided in a great way because no effective planning can be done. 

And to Congresscritters on both sides of the aisle:  play this fair or expect another steaming load of disgust coming your way from the citizens.  No one has time or patience for these shennanigans.

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AMR and its future

July 23, 2011 on 1:00 am | In Airline News | No Comments

In addition to its blockbuster aircraft order, American Airlines also announced it was “spinning off” American Eagle airlines to free AA up to use other regional airlines.  I’m not sure how you spin this as good news either.  Your mother company doesn’t want you anymore because your too expensive now.  How do you sell a company that no other airline will want to use?  By issuing stock to existing AMR shareholders. 

American Eagle is in bad shape to compete in the real world.  It lacks a fleet that other airlines would want and it burdened with quite a few ERJ-140 aircraft that no one wants.  They aren’t useful anymore and they’re getting kind of old for a regional airliner these days. 

The good news for pilots there is that they have an escape path from this train wreck in the making.  Existing American Eagle pilots will have the right to “upgrade” to American Airlines as American Airlines has need for new pilots.   Let’s take note that there are first officers flying the MD-80 aircraft who’ve been on reserve for 10+ years.  It sounds good that they have an escape path but that escape path is currently blocked. 

Yes, American Airlines probably should use other, more cost efficient regional airlines.  No, they aren’t really going to get much money for American Eagle.  They’ll be rid of it but that’s the best that can be said. 

Anyone notice that AMR lost money again?  $250million plus compared to other mainline legacy and SuperLegacy airlines who have, once again, earned good profits in a crappy economic climate.  American has improved its cash holdings by arranging a sale and leaseback of 30+ aircraft and that will give them some breathing room but there are lingering problems that don’t appear to be getting addressed by the board of directors.

First and foremost, what about your labor problems.  How can a company operate healthy if most of its service staff are angry, sad, bitterly disappointed, hateful and resentful they work in the airline industry?  You don’t earn profits despite that condition, you earn them when you fix that condition.  Why this isn’t a public discussion for AA, I do not know.  Directors aren’t requiring that the hard work be done.  Instead, they appear to continue to bless the existing conditions in the hope that one day other airlines will have just as crappy a situation as they do.

That isn’t sustainable.

And that goes to the other problem.  AMR leadership.  Many saw the “historic” aircraft order as “bold” leadership.  I’ll point out that A)  this was long overdue by a few years and B) it cost they virtually nothing to make the order.  There was no “risk” or “vision” involved.  That isn’t bold leadership.

We haven’t heard about how AA is going to focus on profitable routes and a profitable network system.  We haven’t heard how AA plans to compete against 2 mega-carriers in its midst who are operating profitably and who are addressing their problems (successfully and unsuccessfully, the point is that they are addressing them).  We haven’t heard a word about how AA plans to deal with a coming storm of competition with Southwest Airlines  who will be able to operate what flights it wants to domestically from Love Field airport in just a couple of years. 

Partnerships with others don’t fix problems.  Aircraft orders don’t fix problems (although I’ll concede that if they had these aircraft today, they would be a lot better off).  Selling off assets to improve cash  holdings doesn’t put you in position to win against your competition, it just allows you to fight a holding action longer. 

What does turn around an airline (or any other business), is strong management and leadership from the front.  American Airlines hasn’t got that.

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The New United gets slammed for flight numbers

May 21, 2011 on 1:00 am | In Airline News | No Comments

As the new United airlines has worked towards integration between United and Continental, two flight numbers got reinstated:  Flights 93 and 175, the United flight numbers of planes involved in the September 11, 2001 attacks.  Typically after a disaster, an airline “retires” flight numbers to simply avoid the controversy that might erupt around them.  And United had avoided these but in “harmonizing” schedules, these two appeared available to sync with Continental flights that do use the numbers.

United’s flight crew unions immediately slammed the airline for this and have expressed their outrage over such a mistake.

“How could these flight numbers have been ‘inadvertently reinstated’ as the company indicates?” asks Capt. Wendy Morse of the United branch of ALPA. “The pilots of United Airlines expect accountability of how these flight numbers were considered in the first place.”

I’d like to suggest that everyone take a breath.  First, this was a mistake and an understandable although regrettable one.  Second, it was corrected immediately upon discovery.  Third, United’s corporate response to this was nothing but brief and deferential. 

You have to wonder at unions who want to make such a thing political when it comes to those flight numbers.  It’s militancy at its worst and more distasteful since United’s was a mistake the union’s moves are intentional.

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SWAPA and ALPA agree on something.

April 18, 2011 on 1:00 am | In Airline News | No Comments

Southwest Airlines’ and Airtran Airlines’ pilots unions have agreed to agree on the process for integrating their seniority lists. This isn’t an agreement on merging the lists but simply an agreement on how they’ll go about doing so.

They’ll first negotiate and then if they don’t get an agreement, they’ll have mediated talks and if those don’t work, they’ll have arbitration with a binding agreement. Standard stuff between unions but what I like is the fact that they’ve set deadlines for all these processes and those deadlines all fall within 2011. Good on both of them.

This process is governed by the McCaskill-Bond Act which was passed by Congress after the AA-TWA merger and the flight attendants union simply stapling on employees to the bottom of their list.

A curious question comes to my mind on US Airways as a result of this. I believe such a process was followed by US Airways and America West pilots unions. The result was an arbitrated result that the US Airways pilots didn’t like. The process was hijacked by US Airways pilots who initiated a vote amongst *all* pilots for new union representation. Since US Airways pilots outnumbered America West pilots, they got their way at the end of the day. At least until America West pilots sued. It would seem to me that federal law may well have been violated in this. If any readers here know the status of this, please comment.

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Oil Crisis?

April 13, 2011 on 1:00 am | In Airline News | No Comments

Both the CEOs of American Airlines (Gerard Arpey) and Southwest Airlines (Gary Kelly) decried rising oil prices as a crisis at a conference in Dallas last week. 

“We’re all very worried about what’s happening in the oil market,” Arpey said. “If the economic recovery dampens, it won’t be good for traffic.”

It’s true that rising oil prices will again challenge airlines to earn a profit and it is also true that the volatility in the oil market(s) makes things very unpredictable for airlines.

However, we have created another problem within the airline industry that goes unrecognized so far.  We haven’t allowed a major airline to go bankrupt and liquidate since Eastern Airlines.  Instead, we’ve allowed continually bankruptcy reorganization that has permitted uncompetitive companies to become marginally competitive again for a brief period of time.  Some of those companies figured out that they had to change the way they did business (Continental) and some haven’t. 

Mergers haven’t really eliminated airlines.  They have re-branded them with a new name.  Delta didn’t eliminate Northwest, it absorbed it and it continues on today.  United didn’t eliminate Continental, it continues on today. 

The reason we need to permit an airline or two to truely fail is that the barriers to entering the airline market are exceptionally high.  When we prop up the legacy and SuperLegacy carriers, we make it an order of magnitude more difficult for new new, leaner airlines to enter into the market place. 

We also don’t regulate anticompetitive behaviour very well.  In this country, it’s perfectly acceptable to allow an airline to flood a route with capacity and below cost pricing to eliminate a new entrant from that route.  The consumer is hurt in two ways:  They see potential for new, low fares show up for a very limited time and they see an new, better airline potentially eliminated from the marketplace.

After more than 30 years, we still haven’t done anything about the anti-competitive nature of unions in the airline business.  The airline industry got deregulated but labor did not.  The current scenario makes change in rapidly changing conditions all but impossible for airlines facing higher costs elsewhere. 

I’m not in favor of eliminating unions but I am in favor of eliminating years long talks between airlines and unions on new contracts.   Billion dollar business negotiate mergers and consummate those mergers in as little as one or two years.  It can take far in excess of 2 years for a union and airline to come to an agreement on a new contract that by the time it is voted in, market conditions have changed again.

This puts both unions and airlines at a strong disadvantage in this industry.  It is as big of a crisis as any oil crisis at this point.  This industry has no agility and is constantly lagging behind changing conditions. 

It’s interesting to me that the only airlines who earn profits and who do negotiate things like high oil prices with any agility at all are the newer airlines who have contained other costs such as labor and equipment or those airlines who have figured out that working with their employees to get agreements quicker is the right business decision. 

A depature from the marketplace of a major airline would be healthy and good for the airline industry.  It would put executive teams at various legacy and SuperLegacy airlines on notice.  It would put unions on notice as well.  The status quo isn’t working and the industry remains fairly stagnant.  Legacy airlines inch along while low cost carriers earn money for investors. 

We now even encourage airlines to become even larger monolithic companies that are even harder to turn around in the face of trouble.  That’s our real crisis in the airline industry, not oil.

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United Flight Attendants Vote

April 4, 2011 on 1:00 am | In Airline News | 1 Comment

United Airlines flight attendants (comprised of about 15,000 United employees and 9,000 Continental employees) will be voting on which union will represent them in the merged companies I like to call ContiUnited. 

United (old) flight attendants have been severely unhappy with United since they lost their pension in bankruptcy in 2002.  The blame has often aimed at United Chairman Glenn Tilton and employee groups at United (old) have made it clear they intend to get what is theirs with this merger including the Flight Attendants.

It’s been my observation that Continental crews haven’t viewed their merger with United with great enthusiasm either.  Continental crews have had pretty good working conditions, good industry salaries and have been rewarded with the company’s success.  That experience has been seen to be at risk since United (old) employees typically outnumber Continental employees in the same jobs.

This vote will be won by the United (old) flight attendants and expect Continental flight crews to be displeased by this.  Jeff Smisek, CEO of United and formerly CEO of Continental, has been exceptionally quiet during this merger and hasn’t put much of a “one team” spin on this merger in the public in my opinion.  As times passes, this merger appears, from the employee perspective, to be less and less a merger of equals and more and more one of Continental executives taking over United operations.

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Unions are rejected by Delta employees

December 11, 2010 on 1:00 am | In Airline News | 1 Comment

Unions attempting to organize Delta employees have been rejected over and over again and to the surprise of many.  While some elections have been somewhat close, the results were pretty clear in every case.  Despite new rules favoring organizers, unions have had no real traction at this airline.

Unions can claim intimidation all they want but that doesn’t really fly in the airline world, pun intended.  Airline employees are well accustomed to unions, even those at Delta, and I’m very skeptical that even Delta can intimidate employees away from asking for a union if they really want it. 

Furthermore, I think the idea that Delta offering criticism of these unions isn’t intimidation.  If the unions can call Delta management dirty names and criticize their performance, it’s only fair that Delta management be allowed to throw a little mud themselves.  It’s notable that one union thought it effective to liken Delta CEO Richard Anderson to Adolt Hitler and that just goes a bit too far.  Among US airline CEOs, Anderson is one of the best and certainly well respected. 

The truth is, the employee environment at Delta is working for both the employees and management for whatever reasons may exist.  A union is only going to add value when those employees feel they aren’t getting fair treatment at the table.  Obviously that condition doesn’t exist today.  Why pay union fees when you’re interests are being accounted for?

Union organizers would be better off waiting a few years rather than continuing to rabidly fight this battle.  In fact, unions carrying on with this are likely to put off employees rather than win them over at this point.  Witness the fact that Delta flight attendants are asking the AFA to leave them alone.  These people are annoyed now, not enchanted.

That isn’t to say that Delta management has a free hand now either.  It means they’ve won, for now but they’ve got to remain on their own best behaviour to keep these conditions.   Attempts to be arbitary in their treatment of these labor groups will result in a change of heart.  Right now, I think Delta management gets that and they’ll keep their eye on the ball.  Should that management corps turn over, it may become a different situation.

These unions would be better off attempting to organize some regional airlines that are non-union.  These are employee groups that may well see value in them and it’s a better place to start at this time.

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Pilot Fatigue Rules

November 17, 2010 on 1:00 am | In Airline News | No Comments

When the Air Transport Association offers nothing much but criticism of new pilot fatigue rules, I have to call foul.  Pilot (and cabin crew fatigue) is something that has gotten worse and worse, not better over the past few decades.  In the drive to increase productivity, union rules and contracts have been renegotiated over and over resulting in less and less rest for crew members.

There was a time when getting that increased productivity was a reasonable thing because other factors affecting fatigue weren’t nearly the issues they are today.  One of the biggest issues is commuting and its a necessary evil in the airline world.  Pilots often have to commute from their home to their home base and that can mean flights anywhere from a short hop to a transcontinental flight. 

When that home base is stable, arranging and managing those commutes can be done.  However, home bases are often anything but stable these days as airlines have expanded, contracted, expanded, merged and even grown into entirely new regions.  Pilots are being moved around like inanimate objects and that leads to fatigue.  Fatigue doesn’t just come from lack of sleep.  It comes from commuting, stress, poor food and difficult schedules.  

This stuff just has to be managed better and I throw a red flag at the ATA.  Don’t just criticize, solve the problem.  Being a player in getting this issue solved.  Behaving as if nothing has changed over the past 2 decades is sticking your heads in the ground just as badly if not worse than the unions have at times.  Find ways to offer some stability and productivity and get those people better rested.  We’ve had one air disaster that clearly saw fatigue playing a role.  The fact that it was a small commuter aircraft that time doesn’t mean it won’t be a large widebody next time. 

I’ll add this:  unions need to get smart.  Demanding everything in terms of rest, wages, etc without finding a way to offer more productivity is a losing game and puts you in the penalty box with the ATA.  If you don’t find a way to come to some understanding on this, it will fall to the government and not a single person out there will find the solution satisfying or effective.

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Delta Labor

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

 USA Today had a story on how Delta is about to see several union votes in the coming months. Historically, Delta has been the one non-union legacy airline in the United States with just the pilots unionized.  Accordingly, Delta’s labor groups have enjoyed great flexibility and have avoided some of the rather harsh and (in my opinion) unfair treatment that many other groups at other airlines experience. 

Flight attendants at Delta don’t spend a decade unable to hold a line, for instance.  All employees have shared in the wealth of the airline in good times through both raises and stock plans.   As legacy airlines go, Delta is a pretty great place to work all in all.  No company is without its warts and no company avoids the odd period of poor management and Delta has both. 

Changes in labor union law for airlines have now made it a bit more advantageous to try to unionize groups one more time.  In the past, failure to vote (for any reason) was interpreted as a “no” vote.  Now, simple majority of those who did vote are all that is required to win a vote.  In the past, Delta flight attendants have rejected attempts to unionize both by explicitely voting no as well as just not voting.  Labor leaders think that this time, they can win.

And perhaps they can.  Delta now has Northwest Airlines’ 7000+ flight attendants under the same roof now and that is a very militant group.  It’s possible that combined with the rather stark minority of Delta flight attendants they could win this if anti-union flight attendants don’t explicitely vote “no” to this latest attempt.  Frankly, I don’t think this is as sure a thing as labor leaders seem to think.  Flight attendants may be many things but one thing they aren’t is stupid.  I think that instead of just not voting to say “no”, they’ll simply vote “no”.  They appear to remain in the majority right now and there is one thing that perhaps is being overlooked.

A lot of those Northwest FAs have now experienced the Delta Way.  They may be battle hardened and militant but I wonder how some may feel after spending some time in the Delta system and discovering a kinder, gentler company that rewards performance.  There may actually be some erosion in those ranks.

Make no mistake:  The risk for Delta is mighty here.  If there labor force becomes all union all the time, costs will go up considerably and for the world’s largest airline, that could reverse current profits pretty fast.  Those costs won’t go up just because of renegotiated labor contracts raising salaries either.  I’m certain the unions will introduce work rules that limit the flexibility that Delta current enjoys.  Limits equal higher costs. 

So far, Delta’s management is doing the right thing.  They’re making the argument that employees are treated exceptionally well at Delta and that changing something that has been very good for both parties can almost certainly result in something that is ultimately bad for both parties.  In fact, their arguments seem both articulate and intelligent and don’t appear to insult the intelligence of Delta employees nor do they appear to threaten either. 

Time will tell in this arena.  You can bet that both ContiUnited and American Airlines will be watching closely and even celebrating with glee if the worst happens.

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SouthTran

September 28, 2010 on 1:00 am | In Airline News | 1 Comment

If nothing else, mergers today give me an opportunity to come up with monikers for them.  While the merger between Southwest Airlines and Airtran is being described as an acquisition, it is a merger with the Southwest brand surviving.  And this is a pretty big bite for Southwest. 

Southwest has made purchases before but never one nearly so big.  Airtran is a pretty big airline and pretty successful too.  Let’s take a look at the questions we all have.

The Boeing 717:  I think SWA will keep this in fleet for a while anyway.  The airplane works well within the Airtran model and I think SWA has been searching for a smaller aircraft it could operate for a while now.  The 737-500 never really worked that well for them and the -600 just had too high operating costs to be worthy.  This aircraft gives SWA an opportunity to play with their mix a bit more and its easy to integrate into scheduling because there are enough for a pilot base and it doesn’t change their flight attendant mix on other aircraft.  I think this aircraft will stick around for  a while and I think that if SWA does get rid of them eventually, we’ll continue to see a smaller aircraft in the SWA fleet a la the 717.

Flying from DFW.  CEO Gary Kelly says the Wright Amendment prohibits them from flying from DFW and so the integrated airline will cease DFW operations.   I can find nothing that prohibits SWA from flying from both airports and if Airtran departs DFW, this is going to be a pretty big blow to consumers in the area.  Airtran provided so much needed competition on some routes from DFW and if those go away, I think we’ll see fares from American Airlines rise astronomically.  DFW needs to explore this with these two airlines.

Union integration:  I think this is going to be a bit tricky.  On the whole, the SWA pilot and flight attendant contracts are much better than the corresponding contracts at Airtran.  If the SWA unions are willing to integrate somewhat fairly,  perhaps this won’t be too much of a problem.  I think those unions will be a bit fussy about bringing over the Airtran crews and I wouldn’t be surprised to see them try to simply “staple” the Airtran lists to the bottom of the SWA seniority lists.  Gary Kelly needs to do more on behalf of Airtran employees in this area and perhaps he will.

Milwaukee:  I think we see routes shrink in this city and fares go up.  Airtran won over Milwaukee and that wasn’t easy to do.  I don’t know if Southwest will succeed as well as Airtran in that market and suddenly I wonder if Frontier doesn’t have an opportunity in this city.  They know how to hold their own with SWA.

Management teams:  Expect to see a few Airtran executives move over to SWA.  Expect most to depart.  Southwest is a pretty insular company but even more so when it comes to its executive corps.  I wouldn’t be surprised if some Airtran executives are working on their “flare” this morning.

International flying:  I think Southwest will maintain the existing Airtran international routes and I think they’ll awkwardly explore ways to expand it in the distant future.  To withdraw it all at this point would be a big loss.

Airtran’s Business Class:  Say Buh-Bye.  Southwest will dump this product quickly.  Southwest never sees the value of business class and I think this will potentially be a mistake.  Airtran’s business class is pretty nice and very attractively priced.  Retaining it even if just for some markets might not be a bad idea.  Think NYC – Washington, D.C. here.

I think this merger will happen and I think it will ultimately result in a stronger airline.  However, I think it will also be very awkardly executed.  SWA does things its own way and always has.  It always stubbornly clings to its own methods and madness and that works pretty well for them.  However, they are a big boy airline now and it wouldn’t hurt to start looking a little more closely at how their fellow competitors are doing things.  I’m not suggesting change for the sake of change.  I’m suggesting that Airtran figured out how to do pretty well with products that are pretty different from SWA.  Others have too.  It’s worth looking at the other guy’s success before you throw out the bathwater. 

Sadly, I think SWA won’t do this and I think SWA will have some labor problems and I think this will take longer and be more awkward than it has to.  I do think SWA is every bit capable of losing some of the advantages that buying Airtran brings.   Like losing a reservations system that knows how to do things like codeshares and international flights.   This is a risky deal for SWA.  One they can conclude and profit from but I think this will be harder to do than many seem to.

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