September 8, 2015 on 10:55 pm | In Airline News | No Comments
There has been a federal investigation going on into the actions of David Samson, former chairman of the Port Authority of New York and New Jersey and the man who controlled Newark’s airport.
Today, that probe took down United Airlines Chairman, CEO & President Jeff Smisek as well as 2 other executives (Nene Foxhall and Mark Anderson, both senior vice presidents of the company). Smisek’s resignation was announced as a result of an internal probe conducted alongside the Federal investigation.
Everyone added the words about this resignation not being an admittance of guilt, etc.
Don’t kid yourself. If Jeff Smisek and two other senior executives suddenly resign, it wasn’t because nothing wrong was found. To the contrary. And it wasn’t a resignation so much as I’m sure these executives were encouraged to depart or face consequences far worse immediately.
Samson is accused of using influence to get United to put a flight in between Newark and South Carolina where Samson had a vacation home.
It’s notable that United “owns” Newark Airport so tightly and with such advantage it’s impossible for other airlines to gain any space at all. They have Newark locked down the way Southwest has a stranglehold on Chicago Midway and Dallas Love Field.
What worse, Smisek is an attorney. He really does know better than to allow his airline to influence an executive in that manner.
What happens next? Someone named Oscar Munoz becomes United’s new President and CEO and Henry Meyer (an independent United director) is now Chairman of the Board.
Is that good? I don’t know. Right now, an incompetent fool can make money running an airline. I would hate for these new guys to get the idea that they are airline geniuses. Airline geniuses are defined much more by events seen in 2008 and 2009 than they are today.
This is bad for United. There really wasn’t a need to cultivate such a relationship in this current airline era. Smisek had everything going for him and his airline already and to influence Samson for more would have just been greed.
July 7, 2014 on 2:00 am | In Aircraft Development, Airline Service | 2 Comments
I read a story from Forbes recently where the possibilities that the 787 opened up were discussed. Specifically, how new routes to China were springing up now that the 787 was available to do “long and thin” routes for airlines.
United Airlines opened up a thrice weekly route from San Francisco to Chengdu (in the interior of China) that is 6857 miles in length. Not nearly the maximum distance a 787 can fly but certainly a distance that isn’t flown often. That is the equivalent of flying across the United States from coast to coast 3 times.
The reason that route is possible is because the 787 delivers seat costs that are less than much larger airliners (777, 747, A380) despite it being able to seat just over 200 people. The United Airlines 787 seats just 219 people, for instance.
On that San Francisco – Chengdu route 40 years ago, the route would have been flown from San Francisco to some place such as Japan on a 747 where a smaller but still long-legged airliner such as the DC-8 would carry some passengers onwards to Chengdu, a distance of 2100 more miles.
That is the magic of airliners today: direct routes instead of spoke-hub–hub-spoke.
It’s why airlines do want range and the idea that airlines will accept less range for a cheaper vehicle is somewhat suspect in my opinion.
It’s why I believe that the A380 is a niche airliner and will forever be a niche airliner. Why should I fly from Dallas to Dubai to Mumbai on Emirates when I could theoretically hop on an American Airlines’ 787 and fly from DFW to Mumbai direct? (And very doable on the 787-9, I might add.)
This is the quiet revolution of the 787. It isn’t the carbon fibre or engines. It’s the very cost effective airliner for such routes.
July 3, 2014 on 12:50 pm | In Airline News | No Comments
First Quarter earnings last year in 2013 for United Airlines was a disappointing loss of $362 million. United worked extra hard to deliver even worse results in 2014 with a loss of $580 million.
All of this in the face of historic and near historic profits being enjoyed by airlines across the United States. American Airlines Group is having a banner day but we’ll have to excuse some of that blistering performance as it’s most recently out of bankruptcy and it has yet to stabilized in its merger. Regardless of my dampening the mood on AAG, they have done far better out of the gates than virtually any other airline and that ain’t nothin’.
It bets the question of what will happen to United Airlines and I keep visiting this subject as things keep getting worse. I strongly suspect we will see a change in leadership in the near future at that airline as these results won’t be tolerated for very much longer.
That won’t solve the problem, however. United’s problems are both organizational as well as culture based. This isn’t an airline whose employees want transformative change. In fact, there is a belief that if the leadership would just get out of the way and give them what they want in salaries, the airline will operate profitably. Each union holds the company hostage with poor performances and behavior that is a patient wait for the company to start to teeter again.
Overthrowing leadership rarely gets you what you want. An ailing airline doesn’t provide leadership in salaries, growth or quality of life.
It will take a transforming leader to turn United Airlines around at this point and I think that person will be very hard and very elusive to find. Such a leader will have to gain the trust of both sides of the company (United and Continental) will simultaneously imposing change and bringing about vastly better operational efficiency.
That’s a tall order for that airline. Who do you hire?
It will be tempting for someone to hire a CFO from another airline. United has enough financial management to run 4 or 5 airlines. Those good enough for the job have the dream jobs of their careers already.
And the excellent Continental Airlines leadership is just kind of . . . gone.
It will be tempting to find someone who is already a top CEO or who has retired from an already successful company. I believe United will need someone hungry to lead and transform rather than someone who has the mission to act as steward for the airline.
The right leader is always out there. The trick is to find her or him in time. The UAL Board will have to remove the current leadership, find a steward and then go on a search to find the right person for the company. Waiting very long simply means that the company loses more money. The merger is almost 4 years old now and no modern airline merger had bled red ink like this one.
I would go look at the leadership at airlines such as American Airlines Group (but be prepared to fight Doug Parker hard for any of them), Southwest Airlines and Delta Airlines. I would look hard at Alaska Airlines as well. Find your man, give him carte blanche to execute change and step back to see what happens.
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.
April 26, 2014 on 3:48 pm | In Airline News, Mergers and Bankruptcy | No Comments
Continental and United Airlines announced their merger in 2010 and here in Q1 of 2014, I think that their earnings are shameful.
That’s because they didn’t have any earnings in Q1. Instead, they had $609 million in net losses.
It’s been 3 years since they were able to close on the merger and begin integration. It’s been more than a year since they acknowledged that they had problems in their integration. This picture isn’t getting better, it’s getting worse.
Jeff Smisek famously joked that by having Continental merge with United, he saved United from having to marry the ugly girl. The ugly girl was US Airways.
The ugly girl married American Airlines and reported a Q1 net income of $408 million. With the ugly girl management (Doug Parker & Company) in charge and they’ve barely gone to work on AA operations.
Seems to me that marrying the ugly girl would have been the smart thing.
Everyone looked at US Airways and sneered. Delta, Continental and even American Airlines. But the ugly girl kept earning money. Big money for an operation that was nominally second to every other legacy airline when it came to advantages.
Jeff Smisek worked so hard to avoid the ugly girl that he made a compromised deal and the merger of equals ultimately resulted in a merger where United effectively took over Continental.
Let’s be clear about something: Continental Airlines, at that time, had a great and profitable operation. United Airlines did not.
United needed someone to move it past the Tilton Era and into competition with Delta. Continental didn’t want to lose in the merger game but it had options. At the least, Continental didn’t need to be the most eager bride around. I always thought it prescient that Smisek saw Continental as the bride rather than as the groom. Sometimes our statements speak volumes.
Three years later, United doesn’t have it’s act together and it shows zero signs of getting its act together. I fully expect Jeff Smisek and his team to start getting smacked around pretty badly by financial analysts. Particularly since even Southwest Airlines who merged with AirTran at the same time has now found itself experiencing great joy in the financials game. The airline with the highest costs (Southwest) is beating an airline with lower costs (United). Badly.
What to do?
In an ideal world, Smisek would take stock of whose departments ain’t making it and hire new people. Go hire the best and get them from whoever he can. Pay them what they need to make a jump. And do it now, not 6 months from now.
The ranks need to see a new sheriff in town (even if he looks like the old one) and the executive team needs to get the message that performance does, in fact, count.
United employees are, traditionally, their own worse enemy and they remain so today. They will sink that airline to spite their own faces and the worst part of it is that they will take very good Continental employees down with them.
It will cost to fire some of that executive team. It won’t cost nearly as much as keeping them on. Right now, it’s costing $609 million a quarter.
January 4, 2014 on 1:26 pm | In Airline Fleets | No Comments
It’s been a busy holiday season for me and a good one. I hope it has been for you and yours as well.
The Flag Stays! It’s decided, by a pretty narrow margin, that the Blazing Flag tail design that American Airlines released about a year ago will stay. The vote was roughly 49% for the old “AA” tail vs 51% for the new design. Most of us pundits felt that given that choice, the flag would stay.
Doug Parker believes, or says he believes, that livery doesn’t influence a passenger much at the end of the day. He’s the CEO of the largest airline in the world, he may know more than I do.
I think that livery and branding make a huge difference in an airlines fortunes. But I also come from the school of thought that says that a business should stake out a stand on things. I like companies that aren’t all things to all people in their branding but, rather, a company that sets a vision with its branding.
I greatly prefer a company such as Apple who brand and styles itself to be polarizing as opposed to a company such as United Airlines whose branding and styles leave me wondering what they stand for at this point.
American’s is polarizing and that may be good enough. The one thing AA’s livery is not is boring. I still think the flag is wrong and I think the flag could be redesigned. And it may well be redesigned one day but for now, I concede the decision and wish American success.
No offense US Airways people but your livery is actually worse. You’re getting an upgrade, in my opinion.
It has been tradition for me to make predictions for the new year but I don’t want to do that this year. I think we’ll keep doing what we do best: advocating for better companies in the industry and criticizing the worst of the mistakes.
Happy New Year
November 15, 2013 on 2:00 am | In Airline News | No Comments
United Airlines just announced two new non-stop flights into New Jersey with UA Chairman Jeff Smisek and NJ Governor Christie lending their voices to the announcement.
That would be non-stops between Houston and Chicago to Atlantic City.
That, my friends, is LCC and ULCC territory. But it’s United who is doing it and from their two largest hubs, too.
That’s what a truly large airline of scale can do: Deploy flights on unique routes with flexible resources.
October 12, 2013 on 1:00 am | In Airline Service, Frequent Flier | No Comments
Someone has sued United Airlines for having an algorithm in its frequent flier system that causes more points to be charged to those who have more points when redeeming frequent flier points for hotels.
United Airlines says this suit is without merit.
Curiously, I have often noticed that American Airlines own system often will offer me a “low” price in points for a flight that if I do not take it, minutes later “disappears” and is replaced with a higher price. And keeps incrementing as long as I stay on the site.
Mind you, this is an anecdotal observation and I really have no idea of what strategy is employed by airlines with their points based system. But such strategies have an “airline smell” about them.
And that’s why I think frequent flier points are useless and not be sought when choosing travel.
October 7, 2013 on 11:57 am | In Airline News, Airports | No Comments
United Airlines has announced routes into the fortress hubs of Delta just days after Delta announced flights into UA fortress hubs. United is adding routes from both Los Angeles and San Francisco to Minneapolis / St. Paul and Atlanta.
Delta previous announced routes from Seattle (which is nearing “hub” status for Delta) to Los Angeles and San Francisco.
First, Los Angeles is actually no ones hub but it is a strong focus city for all. Los Angeles serves as a major gateway city for airlines and just like New York City, everyone wants to be dominant there. A few years ago, American Airlines spoke of Los Angeles being a part of its “corners” strategy. More recently, Delta has been building its operations up there.
Los Angeles won’t be anyone’s hub because it isn’t suited to such operations. It will, however act as a gateway city with significant focus city operations just as New York JFK and Newark airports serve the same role in that area.
There is a lot of first class and business class traffic in the Los Angeles area and everyone wants a larger piece of it. Delta is ready to battle it out with United in that market and United is responding.
The two SuperLegacy airlines will trade more and more blows with each other but neither will gain advantage much over the other. However, both will gain advantage over the smaller airlines in those markets such as American Airlines, US Airways and LCC carriers.
The one airline who can hold their own in those cities is Southwest Airlines. They are the equal of UA and Delta from a domestic point of view.
These route announcements are just one more sign of the power the two largest airlines both have and which they will wield to gain advantage in the marketplace.
September 24, 2013 on 1:20 pm | In Airline Service, Airports, Mergers and Bankruptcy | No Comments
In an unrelated story about United Airlines in the New York City area, some interesting statistics were noted by the Dallas Morning News.
The two SuperLegacy carriers, United Airlines and Delta, have 24.7% and 21.3% market share respectively. No giant surprise but let’s look at what the next two airlines are in that market:
American Airlines: 12.3%
Yes, jetBlue beats AA in that market. Let’s look at the next two airlines:
US Airways: 4.4%
If we combined American Airlines, US Airways and Southwest in the NYC marketplace, we would have an airline with just 19.5% share of the market. Still less than Delta and still considerably less than United.
And be mindful of the fact that SWA isn’t even considered a player in the NYC market as they’ve been unable to obtain gates or additional landing slots at the airports.
Care to guess who comes after Southwest? That would be British Airways and Air Canada. Yes, two foreign carriers are next in line with shares of 1.4% and 1.2% respectively.
On the tail end are Spirit and Virgin America with about 1% of the market each.
So when we talk about how there is an imbalance in the marketplace, let’s be mindful of the fact that the top two largest airlines (United and Delta) combine to own nearly 50% of one of the most competitive markets in the world.
And if you combined both AA and US Airways, they would still be at a significant disadvantage with just 16.7% of the NYC market.
I don’t disagree that the combination’s dominance in Washington D.C. should require divestiture of slots by those two airlines.
But the economic pricing power that the two SuperLegacy airlines have today are so great that they will gain more share over time rather than less with the current market conditions. More of that market share means even more pricing power which means even greater increases in air fares.
But, hey, far be it for me to introduce rational thought in the US Airways / AA merger argument.
August 18, 2013 on 1:00 am | In Airline News, Deregulation, Mergers and Bankruptcy | No Comments
Let’s talk about competition among airlines. Has competition been damaged over the past 8 years?
Truth be told, I felt it would be when the Merger Mania started. I really did. I thought that choice would go down, pricing power would go way up and airlines would become even challenging to fly for even business travelers.
That really isn’t what happened.
Before I go further, let’s all acknowledge that the financial crisis, resulting recession and US economy has impacted the airline industry in the worst ways. Airlines have been smacked around on an unprecedented level. Remember how much fuel has risen over the past 8 years? Milk? Even the guy who mows your lawn?
What makes you think those rise in costs are any different for the airlines? Even the cost to borrow money in that industry is exceptionally high relative to prime interest rates. No one believes in the long term viability of airlines much. So, it’s hard for you and it’s hard for the airlines and their prices may be somewhat higher but they are not double or worse. They climbed as did most of your other costs related to transportation. That isn’t inappropriate.
I have railed at the “lock” that American Airlines has on DFW and how much higher people in the Dallas / Fort Worth area pay for air fares to other major cities as a result. Similar situations exist in Atlanta, Chicago, Denver, Salt Lake City, Minneapolis / St. Paul, Detroit and elsewhere. But it has been quite bad in the DFW area for years despite the competition provided by Southwest Airlines via Love Field Airport.
That has changed dramatically now. Airlines are now competing with American Airlines in the DFW area for the first time in decades on many routes. There is now real choice when going to Chicago or Denver. I can fly to Newark (NYC) for fares less than $700 for the first time in a decade.
And the same is true in other cities now. Those cities are seeing airlines which finally have enough scale and network that they are comfortable making a play for passengers in new, non-traditional markets without just buying the customers.
Witness Delta’s recent announced intention to take the West Coast Shuttle traffic away from the incumbents (United and Southwest Airlines.) That would never have happened even 3 years ago.
We often talk about Southwest and the Department of Justice recently referred to them as largely irrelevant in competition when they filed their lawsuit. But wait! Southwest is already competing strongly against airlines such as American Airlines, United Airlines and Delta Airlines in their fortress hub cities and to take them as irrelevant is just silly.
Need I remind people that Southwest has entered non-traditional markets such as New York La Guardia and Newark Liberty Airports? Southwest *bought* its way into the Atlanta market and it gave a world class beating to Frontier in both Milwaukee and Denver. In fact, United got its head kicked in by SWA in Denver as well. Continental was so afraid of Southwest that as United it went to war against them operating (potential) international flights out of Houston.
There is more high profile competition in place today than we have seen in almost 2 decades. Let’s celebrate that for a moment because it *is* good for the consumers.
Even the casual traveler has seen new options in the form of the ULCC carriers such as Spirit and Allegiant Air. In fact, those ULCC carriers are actually keeping LCC carriers such as Southwest (who really isn’t an LCC anymore), jetBlue and Virgin America honest.
Even I can admit that I’m wrong and I admit it. We *do* have considerable competition today and it is more healthy competition in the right ways than in the last 30+ years.
August 17, 2013 on 1:00 am | In Mergers and Bankruptcy | No Comments
If we use the premise put forth by the US Department of Justice that the US Airways / American Airlines merger is bad for the consumer, then we need to take a very hard, long regulatory look at all of the US airlines, many of its busiest airports and taxes as well.
If anyone was truly concerned about competition in the airline industry, the Justice Department should have continued to block mergers as they did with the original United Airlines / US Airways merger (which was vastly smaller than the one being proposed today). Instead, they did not. Rather, a few years later they signaled with US Airways the idea that mergers were necessary in the airline industry landscape.
Quite frankly, I was perfectly happy to see the status quo maintained pre-2005. That landscape saw:
- Delta Airlines
- Northwest Airlines
- United Airlines
- Continental Airlines
- US Airways
- America West
- Southwest Airlines
- AirTran Airways
- American Airlines
- Alaska Airlines
It was a pretty well balanced mix of airlines of both the legacy and LCC flavors and pretty well distributed across the United States. Barriers to entry were, compared to today, fairly low.
Then several bankruptcies occurred which included US Airways, United Airlines, Delta Airlines and Northwest Airlines. One airline (America West) had to get a massive loan after September 11th and essentially reorganize itself to survive as well. Another airline, American Airlines, got Billion Dollar givebacks from its employees to lower costs instead of performing a bankruptcy.
Of the 11 airlines listed above, 6 suffered exceptional financial trauma. Another 2 existed on fine line of financial trouble: AirTran Airways and jetBlue. Only 3 managed their finances appropriately and saw appropriate returns on investment: Southwest, Continental and Alaska Airlines.
So we permitted mergers and this is what happened:
- 2005: America West takes over US Airways and retains the US Airways name.
- 2008: Delta and Northwest merge as equals and retain the Delta Airlines name.
- 2010: United and Continental merge as equals and retain the United Airlines name.
- 2011: Southwest Airlines takes over AirTran Airways and begins the wind down of the AirTran name.
By 2011, the competitive landscape was dramatically different and American Airlines had to throw in the towel (it should have in 2006, in my opinion) in November of 2011 by filing bankruptcy itself. In the 2012 / 2013 period, the new airline landscape looks like this:
- Delta Airlines: Revenues $36.6 Billion (2012)
- United Airlines: Revenues $37.1 Billion (2012)
- American Airlines: Revenues $24.8 Billion (2012)
- Southwest Airlines: Revenues $17.0 Billion (2012)
- US Airways: Revenues $13.8 Billion (2012)
- Alaska Airlines: Revenues $4.6 Billion (2012)
- jetBlue: Revenues $4.9 Billion (2012)
- Virgin America: Revenues $1.3 Billion (2012)
- Frontier Airlines: Revenues $1.4 Billion (2012)
As you can see, the airlines that exist today are hardly equal despite the perception otherwise. For instance, Delta and United Airlines both are roughly equal as airlines but the next biggest by revenue is American Airlines which is a staggering $12.3 Billion behind. If you added US Airways revenues to American Airlines revenues in 2012, you still come in at just $38.8 billion. Put another way, the new American Airlines Group would operate at roughly the level of United and Delta Airlines.
Southwest would be at a disadvantage seemingly but Southwest’s revenues are based entirely on US based operations and therefore see Southwest operating at parity with the other 3 large carriers. So, now we have 4 carriers operating at roughly the same scale in the domestic US market.
The remaining four airlines: jetBlue, Virgin America, Frontier and Alaska Airlines have combined annual revenues of $11.2 Billion or a number that is still less than that of US Airways. It’s notable that those last 4 airlines are nowhere near national airline scale. They are all regional or niche in their marketshares. They can and will survive and at least 2 of them have every opportunity to organically grow much larger.
What my point in all of this? Scale is critical in this industry and while those billions in revenues sounds healthy, airlines often earn zero profits on such revenues. The dollars are large, the profits are tiny, at least until very recently.
If you stop the mergers now, you have two giants and three other airlines that would have to be labled as “at risk” over the next decade. While you allowed that to sort out, the two giants would only become . . . more giant. And the bigger they grow, the more influence they have on airports and route infrastructure.
So, if you feel the combination of US Airways and American Airlines is anti-competitive and anti-consumer, then you *must* be ready to “break up” Delta and United Airlines. They don’t have the potential to be dominant. They already are dominant. So much so that they dwarf every other airline in the industry.
More on these subjects tomorrow.
August 9, 2013 on 1:00 am | In Airline Social Media, Trivia | No Comments
That is not a mis-spelling. Someone has started a parody Twitter account entitled “@UnitedAirlanes” and that account has been drawing the ire of customers for United Airlines.
One such example is:
Customer: OK, I need to be somewhere fast. What is the charge for teleportation? I have one bag, a dog & need a bereavement fare too.
@UnitedAirlanes: Thanks to customer complaints/the law, we’re no longer able to offer teleportation. Not without the password.
It’s funny and funny enough that I do wonder just how United Airlines will try to shut it down.
And I do find this one particularly funny:
@UnitedAirlanes: Today only, get 80% off on Earhart-class tickets – cheap, direct international flights consumed by the infinite ocean and never seen again.
For now, enjoy it here:
August 5, 2013 on 1:00 am | In Airline Service | 1 Comment
Delta Airlines has announced an hourly shuttle between Los Angeles and San Francisco with 14 hourly flights per day using the Embraer E-175 aircraft with 76 seats from partner Compass Airlines.
United Airlines owns that route presently and Southwest is exceptionally strong on that route as well. Both airlines are popular with businessmen and Delta is proposing to step on the toes of both airlines with its own shuttle.
Calling it a shuttle is good marketing. It makes it sound like something that is easier, more friendly to the business traveler.
Will they succeed? Lots have tried to do such things in that market and failed. Delta is big enough and strong enough and settled enough to buy the business. It’s clear that Delta does not respect its competitors in this area and that puts both United and Southwest in a tough spot.
War got declared and now both of those airlines have to respond or likely lose significant market share and, most importantly, significant revenue. The truth is that 5 years ago, I would have predicted success at defending the market by both incumbents. Today, I’m not sure United has the focus to go to work to defend itself and I’m not sure that Southwest has the fire in its belly to defend itself. Southwest is getting complacent.
Only time will tell but it should be interesting to watch.
June 30, 2013 on 1:00 am | In Airline News | 4 Comments
I’ve long noticed that Alaska Airlines has maintained an exceptionally high stock price relative to other airlines. As I write this, Alaska is at about $51 / share while Delta is at about $18 / share.
I honestly do not know Alaska’s strategy for stock prices. This is an airline that does a good job on itself and despite it’s legacy airline roots and relatively high costs, it turns a profit very well. That in itself helps with the share prices.
Yet, I can’t help but keep wondering if Alaska’s high share prices have given it shareholders who tend to invest for a longer view than the typical airline investor. I wonder if it has enough breathing space to make the right decisions and hence the reason it performs so well financially.
United Airlines stock price is pretty high right now at $30 / share but I actually don’t know why. It’s not an airline that has so far shown itself to be capable of benefiting from its merger. I suspect that investors in United are simply hoping that good news will miraculously appear one day soon.
All airline share prices are up but it is curious to me that Alaska has performed so well. It’s worthy of debate and investigation.
June 26, 2013 on 1:00 am | In Travel Hints | No Comments
It pays to shop around and it pays to question whether or not a Low Cost Carrier really is low cost.
Just for fun, I looked around for flights from the DFW area to Portland, Oregon and I used Labor Day weekend as my target as it was a weekend where we should see some restrictions and fairly high travel. In other words, I wanted to make it a popular time to travel that would see realistic fares.
I checked out Spirit Airlines and found a roundtrip all-in fare of $320 and that didn’t seem all that great to me given what we know about their many fees. Next, I checked out my favorite airline, Southwest Airlines, and found a very high fare available for just over $500.
Yes, over $500 to fly Southwest to Portland, Oregon from Dallas and it was a connecting flight. This is way too much.
Like Goldilocks, I found the bed that was just comfortable enough: United Airlines with an all-in fare of just $367.00. It, too, was connecting (through San Francisco) but not with an terrible flight time involved.
Yes, I would pay a fee to check a bag on United but that fee would be less than Spirit’s typically and I would get to fly on a vastly more comfortable aircraft.
United’s 31″ of seat pitch vs Spirit’s 29″ of seat pitch. It makes a huge difference.
So, the Low Cost Carrier wasn’t, the Ultra Low Cost Carrier wasn’t and the legacy airline was the best fit.
June 18, 2013 on 12:58 pm | In Airline Fleets | No Comments
The order games have begun at the Paris Air Show and there is one takeaway you should absolutely get from it:
It means absolutely nothing. For at least this year.
Both Boeing and Airbus will land orders, cry out in joy that they won this customer or that but the status quo will largely be maintained.
Airbus will engage in its silly and, in fact, already has by announcing an order for 20 A380 aircraft by Doric Leasing. Until proven otherwise, this feels like a silly order by a company who isn’t a “name” in aircraft leasing and who perhaps doesn’t understand just how limited the use of the A380 is for most airlines. Without a few airlines named as taking up these aircraft, I’m not sure I believe the order.
Boeing has announced its easiest order ever for this year: GECAS is ordering 10 787-10 aircraft.
Also notable is EasyJet who has ordered 135 A320 aircraft (35 CEO aircraft and 100 NEO aircraft) and it’s notable because I think Boeing might have been able to win this on price. Yet it appears Boeing wasn’t even trying to contend.
And Boeing has officially launched its 787-10 with United Airlines being the US launch partner with an order for 20 of the aircraft. Other “launch partners” are British Airways (an order for 10) and Singapore Airlines (an order for 10).
This won’t be a year of shock and awe and I suspect many will be glad for it as the industry has had enough shock and awe over the past few years to last quite a while.
June 6, 2013 on 1:41 pm | In Airline Fees | 2 Comments
United Airlines would be considered a big player in the ancillary fee department of airlines in the United States. They had really 4 classes of service, for instance, long before most when they adopted Economy Plus. Most recently, they became national news for their decision to raise already high ticket change fees another $50.
If there are going to be fees, I hope more airlines also take United’s approach to offering some value in the process. United is now offering subscription plans that would either allow a passengers to routinely check bags for a year without additional fees or another plan that would permit travel in Economy Plus for a year without additional fees.
United isn’t just offering one plan either. Checked baggage subscription plans offering opportunities to carry one or two bags and also offer the opportunity through widened regions. Their simplest plan (1 bag) in the domestic United States is just $349 and one of their most expensive, two bags checked globally, is $799.
There is value in those fees for the frequent traveler.
Economy Plus works similarly. For a base fee, the traveler would be able to access Economy Plus on a space available basis for $499. It’s $599 if we add in Hawaii and/or Alaska. For global access, it is $699.
But remember that that is on a space available basis and space available comes after top tier elites in that area. There may be value here or may not be.
What’s the catch? Well, top tier frequent travelers already get access to these things and this is really aimed towards the frequent flier that is traveling just a few times a year. It fits a niche.
If fees aren’t going away, programs like these are good values for those who travel more than very occasionally and other airlines would be smart to emulate them.
May 10, 2013 on 1:00 am | In Airline Fleets, Airline News | 1 Comment
United Airlines has ordered 30 E-175 Embraer jets to use in the United Express fleet. The aircraft will have 76 seats and offers 10% savings in costs over their current 50 seat fleet.
It’s a good aircraft for the airline but it also points out something that, I think, might indicate a lack of competitiveness on the part of United.
10% improvement over the current 50 seat jets? Really? If that is the case and if demand is as good as people say it is, why would United not buy Embraer 190 aircraft instead? It’s possible that its labor agreements don’t permit it to and, if true, that will hurt United badly in the coming years.
The Embraer E-175 is a fine airplane but it doesn’t offer the seat costs the E-190/195 offer and this isn’t a “new” aircraft family anymore. It seems like it must be but it isn’t. These aircraft came online in 2002 which makes their design originating from about 1999. That’s 11 years or more in age for these airplanes and a lot has happened in the aircraft world since their rollout.
What United needs is the seat costs that American Airlines will enjoy in about 18 months as new aircraft come online and American is able to contract with airlines to obtain and operate bigger regional jets.
April 30, 2013 on 11:50 am | In security | No Comments
The wife of a September 11th United Flight 175 Captain Saracini is campaigning for a second barrier to the cockpit and reportedly is gaining some traction with congress.
I think this is security theater. Since the September 11th tragedies, there seems to be this belief that we must be safe at all costs. Particularly in an airliner. I couldn’t disagree more.
The reality is that there is no such thing as 100% safe from hijackings and there never will be. Safety comes from vigilance and proper screening. If a hijacker has gained entry to the aircraft and has a weapon good enough to penetrate the cockpit door in flight, you’re security has already utterly failed. More barriers aren’t going to stop that attack or effectively slow it.
I think the 2nd barrier idea looks great as an issue and I’m sure that everyone is attracted to it because at the end of the day, it scores points against airline management.
But airline management is the one who is right on this issue.
It’s not lost on me that this all surrounds United Airlines and appears to be related to both United Airlines pilots’ union maneuverings. I feel the union is maneuvering the captain’s wife in this effort to jab at United Airlines for not doing enough. It’s a way to gain the public eye, discredit management and seemingly get the upper hand.
But what upper hand is really gained? Scoring points on this subject is silly. It’s not a poltiical issue and, frankly, the more security is turned into a political issue, the more it will certainly be deficient.
I would ask the question: Do you want to be secure or do you want to enjoy the illusion of security?
The former means you’ve got to listen to security professionals and properly evaluate your risks and mitigate against them.
The latter means that the wife of a lost pilot from a tragedy that occured 12 years ago and which will be highly unlikely to happen in that manner ever again drives the perception of security.
This isn’t disrespect for the feelings of this wife. She deserves sympathy and empathy for her losses. She also is not a security expert and has no business advocating for security on an airliner against those really do know better. More importantly, the issue here is not “safe at all costs”. It’s an unrealistic requirement in which the only answer is to never leave your home.