NEWS: Continental Airlines Scores Labor Concessions

Unions representing pilots, flight attendants, mechanics and dispatchers at Continental Airlines have tentatively approved a sweeping round of concessions today. The wage and benefit concessions, if ratified by the union membership, would save Continental $500 million a year. The airline had already cut close to a billion in other costs but was one of the last majors to ask for concessions from its employees. The announcement comes on the very day that Continental said they would run out of money if concession were not granted...funny about that. As if to underscore the severity of the situation Continental had also recently reported that they lost $1.5 million a day in January.

Whatever the case, the unions are stepping up and Continental Airlines is getting a much needed cost reduction. It should help their immediate liquidity issues and put them in a better position to renegotiate some long term debts. There's this little matter of $642 million dollars in debt that will come due this year, something they would like to re-structure.

NEWS: Air Fares Rising - Finally

It would seem the major airlines are finally venturing to raise airfares in response to the continuing torment of high fuel costs. Northwest Airlines, Delta Air Lines, American Airlines and America West Airlines have all raised ticket prices. However, US Airways, United Airlines and Continental have not followed suit yet. We are not talking a huge increase either. Northwest, for example, will add $5 or $10 to ticket based on the length of the flight. But only time will tell if the majors will stick with the increase or back out of it.

NEWS: FLYi - Make a Deal?

Investment group East Texas Capital Partners is encouraging FLYi to seek opportunities to merge or sell the valiant but struggling Independence Air. East Texas Capital owns about 1% of the carrier. They are not the first investment group to encourage FLYi to pursue this course. Par Capital Management, a 10% stakeholder, suggested this very idea last November. Both groups feel that looking for a way to merge or sell the airline is the best way to protect the shareholders interests...shareholders....oh right that would be them.

Sadly they may be right. It was a bold move for Atlantic Coast Airlines to strike out on its own as Independence Air instead of being a regional feeder for United. Times were not great but they saw a reasonable opportunity. But fuel prices were the wild card they did not count on and competition is coming at them from all angles. Even Delta is positioning itself to compete. So, perhaps, Indy Air must go.

NEWS: US Airways to Park Some 737's

US Airways has decided to park 11 of their older 737's as they continue to restructure themselves. Total fleet size will go from 282 to 271, something made possible due to concessions reached with the pilots union last fall. Prior to that agreement the contract required US Airways to operate a minimum of 279 aircraft. Its likely that US Airways will take the opportunity to park some older aircraft that are coming up on more costly maintenance requirements.

The net effect of removing these 11 aircraft from service is a reduction of 14 flights...I'll pause while you ponder that. Now, am I the only one that thinks if you can take 11 aircraft out of service but only lose 14 flights that maybe, just maybe, you have a few too many aircraft period? People this is the first time since entering bankruptcy last September where US Airways has finally made a move to shrink its operation. Here US Airways is at the doorstep of the Spring and Summer flying seasons and they are just getting to cutting some dead routes? I mean what took them so long to pull the trigger on this? But I digress...

The odd thing is that US Airways' seat capacity is expected to increase 4-6% in May despite shrinking the fleet 5%. On the surface that seems good as it would indicate a more efficient operation...but does the industry really need more available seats?

NEWS: Bankruptcy's Looming Spectre

Fresh from the AP wire come warnings of impending doom for the airline industry. Standard & Poor's credit rating agency warns of the possibility of multiple new bankruptcies based on increasing pressures on the industry. This pressure takes the form of higher fuel prices, excess capacity and increased low fare competition. There is even a feeling that we could see a domino effect with several airlines moving into bankruptcy in an attempt to lighten the load (especially pension obligations) and compete on a more even playing field with the newer low cost carriers. Read More! = Rant More...click if you dare.

I've said it before, the bankruptcy system is broken. The majors not in bankruptcy can't help but notice the concessions being made to those airlines in bankruptcy. The tone of article indicates that airlines may enter bankruptcy simply to help them shed obligations because thats what everyone else is doing. This is skewing the competition in the market.

Its also aiding and abetting the over capacity problem in the industry. As an airline I would be looking for merger opportunities if only to try and simply kill of the competition that way.

Its time to force US Airways and United Airlines back out into the cruel world to see if they survive. They have been protected for too long and have no better vital signs now that a year ago. Let the market and their creditors decide. Losing them will not cure the industry but the decrease in couldn't hurt.

NEWS: Reduced Fares are NOT Killing the Airlines

Today's Hero is Jamie Baker of J.P. Morgan Chase who also gets the quote of the day award. But first...the back story. I recently ranted on the whining and complaining from other major airlines about the impact Delta's Simplifares would have revenue. Today's news supports my position. Airline revenues have beat analyst predictions for January by actually edging up over last years performance while average fares fell. This is with Delta's supposedly devastating revenue impailing fare cuts in place for nearly the whole month. Now...back to Today's Hero Mr. Baker, who is quoted from his research paper Wednesday:

"Perhaps mimicking the domestic pricing philosophy of low-cost carriers and improving the value proposition of business travel though reasonable fares isn't as stupid as recently suggested by one airline management,"

Well put Mr. Baker! I believe this puts the ball back into the court of Jeff Smisek, Continental Airlines President.

Jeff Smisek, Continental Airlines President, was the target of this quote because he called Delta's Simplifare plan "simply stupid" with God and country listening via the Wall St. Journal. I'll be interested to see if Mr Smisek will step up to the plate on this one. Perhaps having a quote in the Wall St Journal that gets knocked down and stepped on will make him a little gun shy about further quotes. Round 1 goes to Delta.

Finally, I'd be remiss if I did not point out that, despite the increase in revenue, the airlines still had a dismal January with with lots of losses. Fuel prices and overcapacity are still taking a brutal toll.

NEWS: ATA Airlines Cut Back

ATA Airlines announced that it will cut 267 positions in Indianapolis (133 ticket agents, 19 mechanics and 115 ramp agents). These things tend to happen when an airline rolls back operations from more than 40 daily flights to four. This is exactly what ATA intends to do on April 11.

So what was John Denison's first day as ATA's CEO like. Congratulations Mr. Denison...can you please sign these pink slips? OK, maybe it didn't work out exactly like that but it still seems like a tough first day.

NEWS: US Airways and Air Wisconsin?

One of the wonders of bankruptcy court is that it reveals plans that might otherwise sneak by. In this case, papers filed in bankruptcy court by US Airways indicate that the airline has struck a deal with Air Wisconsin. Under the terms of the deal Air Wisconsin would fly 50 CRJ-200 regional jets for US Airways. All of this on the heels of a $125 million financing deal struck between Eastshore Aviation and US Airways. Eastshore is owned by Air Wisconsin. Very interesting.

Apparently the actual number of jets that Air Wisconsin will fly for US Airways may vary based on its other obligations. Other obligations you ask? Wellllll...Air Wisconsin provides regional service for United Airlines as well throwing some $700 million in revenue to United Express in 2004. What I am not clear on is why Air Wisconsin has the spare capacity. Is United scaling back their use of them?

I wonder if Air Wisconsin has people to race to the bank with their checks from United and US Airways...just to make sure they clear the bank.

NEWS: International Expansion for US Airlines

American Airlines and Continental Airlines have both received tentative approval for new direct flights to China. This is the first award of this kind in over twenty years. American could begin service in 2006 but Continental could begin much sooner...like March 25 of this year. Both airlines will end up with the right to fly up to 7 flights weekly. This is big news for both airlines. The right to fly to China is a prize since little competition exists on the routes. Northwest Airlines and United Airlines are the only US carriers serving China right now. Delta Airlines code shares with a Chinese carrier.

This is another trend we can expect to see from the major airlines here in the US. They are looking very closely at international routes for the best opportunities. China is one of those opportunities. The lack of competition should give the airlines that fly there the ability to set fares at the appropriate level. You know...fares that allow them to make money. What a concept.

NEWS: ATA Airlines Elevates Denison to CEO

In late January, ATA Airlines brought in John Denison to assist in the restructuring efforts for the bankrupt carrier. I posted that I wasn't the slightest bit surprised that it just so happened Mr. Denison is a retired executive from Southwest Airlines. You will recall, dear reader, that Southwest Airlines bought up 30% of ATA which gave the struggling carrier much needed cash. But I have always proposed that this move was simply a prelude to something larger. And now today's news...ATA Holdings have named Mr. Denison the new CEO for the airline. You'll forgive me if I am, once again, not surprised.

Somehow I feel as though I am watching a chess game. Each move made by Southwest, no matter how innocuous on the surface, seems to hint at the end game. Anybody remember when Southwest Airlines bought Morris Air in 1994? Southwest bought them to facilitate further expansion. Granted the situation is different, Morris Air was a healthy airline with all the same aircraft making it an easy move for Southwest. ATA is ill and their fleet contains some aircraft (Boeing 757's) that don't fit the Southwest mold. So their approach to ATA is more cautious. But I truly believe the end game is the same, continued expansion for Southwest Airlines. ATA will become yet another piece of the Southwest machine.

NEWS: Independence Air Get Financing Deals

It would seem my thoughts concerning Independence Air's ability to avoid bankruptcy were a little premature. Flyi, the parent company for Indy Air, has pulled a big re-financing deal out of their...uummmm...hat that should give them the ability to avoid Chapter 11. The deal is pretty complex for my financially impaired head but some of the key aspects include (a) returning 24 CRJ regional jets (leaves 58) and 21 of 30 J-41 turboprops while allowing them to take delivery of 6 new Airbus A319's (b) lots of payment deferrals and (c) lots of Flyi stock issued to the companies making the consessions

While its not being addressed directly I assume that all of this somehow takes care of the interest payments that Flyi missed at the end of January. The way I heard it Flyi had 30 days to take care of that problem or be considered in default on the financing.

Finally, it would seem that Independence Air has found a silver lining in this whole debacle. The carrier is still trying to re-shape itself from regional feeder for United into a low cost carrier. These latest deals, though made under duress, actually help push them closer to that low fare model. It allows the airline to rid itself of smaller regional type aircraft while continuing to pick up Airbus A319's, the current darling of the low cost carrier along with the Boeing 737. Nicely done.

NEWS: Computer Issues Delay United Airlines Flights

A 45 minute reservation system failure caused over 50 flights to be delayed or impacted in some fashion on Monday morning. Flight delays ranged up to 70 minutes and most of the effected flights were in Chicago or Denver. Well that's nice...With all of the attention given to labors unions, cost cutting and bankruptcy we get a little reminder of the "other thing" that keeps the airlines flying....computers.

This computer problem was relatively benign compared to others that have grounded entire fleets. It stills serves as a reminder that airlines need to spend dollars to improve system reliability and to build in redundancy. This is a tough thing to sell right now...airlines have cost cutting on the brain...its all they can think about. But even a small computer problem can add up to big problems. Big costly problems. Sadly, most wait until these problems whack them upside the head before the react. In reality the decision made on these computer systems are every bit as important as trying to figure out how much to pay the people who fly the aircraft

NEWS: Continental Airlines Add International Code Shares

Continental Airlines will begin a codeshare agreement with Air France on Feb 26. Its an interesting deal that will allow Continental flyers new access to 12 destinations served by Air France from Paris. Of course, members of Continental's frequent flyer program will earn points and all that fun stuff on these routes as well.

I think we might see more moves like this from the major airlines with international partners. They see opportunity with these arrangements to increase their reach using a partner's network...no muss no fuss. A quick shot in the arm.

On the flip side Air France gets a reciprocal deal that will give their passengers new access 21 destinations in the US. I know its cruel but I couldn't help but snicker when saw some of the destinations. Why do I have a hard time believing that somewhere in France right now someone is wishing for an easier way to get from Paris to Oklahoma City or Albuquerque? But hey...whatever works for them.

NEWS: USA3000 Airlines Pops up on the PR Radar

Pennsylvania based USA3000 Airlines have poked their head up announcing additional service to their flight schedule. Flights will be added between Orlando and Chicago, Baltimore to Ft. Lauderdale and Ft. Meyers to Washington Dulles. The discount airline said it will add flights between Orlando McCoy International Airport and Chicago O'Hare International Airport beginning in May. USA3000 flies A320's on both scheduled and charter routes. Looking at this flight schedule I guess you can add USA3000 to the list of airlines picking away at US Airways market share.

Some folks may not be familiar with the business model being used by USA3000. The idea is to establish some basic scheduled routes and then market yourself to travel agencies. So the next time you see a fabulous 3 day 2 nights in Orlando everything included package it just might be someone like USA3000 providing the air travel. Its not a bad plan either. There are several carriers doing this in the US and it tends to work well for airlines of this size.

NEWS: US Airways Finds a Benefactor

US Airways announced today that it has secured a $125 million financing deal with Eastshore Aviation. Now for the interesting bit..Eastshore Aviation is an investment entity owned by Air Wisconsin Airlines, a privately held regional airline. The money comes at a key time for US Airways and will be used to help finance their restructuring.

OK, I'd be lying if I said that I'd like to congratulate Eastshore Aviation on their investment. It doesn't seem like sound business practice to me...at least not on the surface. But I find it rather interesting that a company wholly owned by another airline would be the one to step in and offer up some cash. I don't have to stretch my overactive imagination too far to wonder if somebody is thinking that US Airways is ripe for a merger.

NEWS: Comair Mechanics Turn Down a Raise

Mechanics for Comair have rejected the latest contract offered by the airline. The rejection comes despite the fact that the offer would have granted a 2% raise and kept more work "in-house" to be performed by Comair's own mechanics thus keeping maintenance facilities open. Oh yeah, let's not forget that the pilots and flight attendants are being asked to freeze their pay. Did I mention the mechanic's own union leadership recommended that the contract be approved? Mechanic can traditionally be a tough group to work with but this caught me by surprise.

I'm not quite sure what got into the mechanics at Comair. Airlines are almost universally cutting labor cost, lowering staffing and looking to outsource maintenance. Maybe the mechanics at Comair have watched one too many Texas Hold 'Em games on TV. Maybe they think they are obligated to reject the first offer because that's just part of the "game". Here's my advice to the Comair mechanics, now is not the time to bluff...take the offer and run.

NEWS: United Airlines Gets a Break on Debt, Looks for Fall Bankruptcy Exit

The bankruptcy court has approved a change in the debtor in possesion financing for United Airlines. A debtor is possession is what you become when a company that owes you a bunch of money goes bankrupt. You sign up with the bankruptcy court and hope that you are going to recover some of that money. The debtor in possesion list for United Airlines includes some pretty big name like JPMorganChase, Citigroup, CIT and GE Capital. This change in financing is significant on at least two fronts. First, United gets an extension on when they repay their loans from June 30 2005 to Sept 30 2005. Second, they get a lower interest rate on the loan. Other changes include waiving the January earnings benchmark and lowering the minimum cash requirement from $750 million to $600 million. All of this ties to United Airline's other announcement today. They are looking to exit bankrupcty this fall...just a mere 3 years after entering bankruptcy

No one can ever say that United Airlines has not been afforded every opportunity to pull themselves away from the abyss. I mean seriously, three years in bankruptcy! Despite all of the brave faces and posturing at United I still believe they are likely to liquidate. United's CEO has also been talking about mergers this week saying that he expects to see some. I agree and it may be that United would be in this position, though I see them as the target of a merger...not the one doing the merging. It'll be much the same as American absorbing TWA.

RANT: Grumbling on Delta Airlines SimpliFares

OK its been a while since I posted a good old fashion rant so step back from your monitor and read on...

Jeff Smisek, Continental Airlines President, is quoted in the Wall St. Journal as calling Delta Airlines "Simplifares" fare structure "stupid". He goes on to state that the estimated loss of revenue for matching Simplifares is somewhere around $100 million a year. Doug Steenland, Northwest Airlines CEO and Gerard Arpey, American Airlines CEO are right there with him. I am tired of this whining and if you want to hear why then click the Read More link.

Its time for the leadership at Continental, Northwest, American and others to STOP WHINING. Delta is not obligated to play by your good 'ol boy old school rules that allowed everyone jam yeild management down the consumers throat. Southwest, JetBlue and AirTran are driving a stake in that old and busted business plan. Delta sees that and are trying a new way to compete.

If Delta's Simplifare plan is a bad business plan then just stand back and watch it implode. Delta will either have to back out of the plan, adjust it or just quit. Then you are back where you started. If you can't manage to match their fares while this sorts out then that's too bad. You lose.

On the other hand if Delta is on to something that works for them then you all need to shut up and find a way to compete. But please, stop walking around in circles with a "The End Is Near" sign over your shoulder. Simplifares is not going to bring on the ultimate demise of the airline industry. It may bring about the demise of a couple of airlines but that, my friends, is just business.

The reality check is that Delta does not have the cash reserves to stick with this plan long term if it does not work. They have freely admitted that they will see an initial decrease in revenue but are looking long term for growth to compensate. This should not take too long to play out.

Again...to the other major airlines...stop complaining...it just makes you look bad.

NEWS: AirTran Airlines Moves on Charlotte

Seems Southwest Airline is not the only carrier about to announce new service this Thursday. AirTran Airlines is expected to announce new service from Charlotte, NC, starting in May. Destinations look to be Atlanta (4 times a day) and Baltimore (2 times a day). Things are really heating up on the east coast, competitive pressure is increasing everyday. Low fare carriers are claim jumping the traditional strongholds of struggling majors (yes, that means US Airways in this case)

But in this case it also means increased pressure on a low fare carrier...namely Independence Air. Indy Air is currently the only low fare carrier servicing Charlotte. My guess is that they won't throw a welcoming party for AirTran. It seems every direction that Independence Air turns that someone is looking to carve them out of their own niche.

NEWS: The Bankruptcy Vortex Pulls at Independence Air

Flyi, parent of Independence Air, disclosed today that they have skipped an interest payments due in January. Flyi has been busy trying to restructure its lease deals with several creditors to ease the immediate debt burden. Unfortunately they've only worked out a deal with GE to date. That leaves them needing deals with several other lendors to cover another 27 aircraft (sorry make that 26). In other words they've got a lot of work to do in a short period of time. 30 days to be more precise. See lenders tend to get a little testy when you don't cover the interest payments, especially really big ones. So if Flyi can't get new lease deals that relieve some financial burden and make good on the interest payments in the next 30 days then their next move will be involve the number 11...normally preceded by Chapter.

There are a couple of important questions. First, what's the market value on the aircraft that Independence Air is operating. Industry analysts seem to think not so much...which is a good thing for the carrier. This puts them in a better position to get more favorable terms. Second, should Indy Air have to go into bankruptcy what are their chances of exiting. Not good in my opinion. Independence Air faces increasing competition from AirTran, Southwest, JetBlue and even Delta. Fuel prices remain brutal. In fact, I'm of the opinion that even if they dodge this bullet that their days are numbered.

NEW: EU Moves to Protect Passengers

The EU (that's European Union folks) has approved a new set of rules designed to protect the airline passenger. The new rules define situations under which an airline must provide refunds and/or penalties payments to their passengers. These situations include overbooking, mechanical problems and weather problems. This breaks new ground by imposing rules on things that are outside the airline's control (mechanical failures and weather). Predictably the airlines that operate in the EU are none too pleased about this but say they will begin complying with the new rules that go into effect tomorrow.

I normally avoid covering airline news outside the US...the US airlines give me plenty to keep up with. But I think this has the potential reach across the pond and impact the US airline industry. I think that consumer protection groups in the US are going to pick up on this and try something similar. While I feel the US airlines have a strong lobby to combat this type of legislation I am not sure they could stop it. There is growing discontent with the quality of service being offered by the airlines and their often draconian fare policies. I would be remiss if I did not acknowledge that, up to this point, fare refund policies for all airlines have been structured very much in favor of the airlines with little recourse left for the passenger. Legislators may have no choice but to address these issues.

I'm mixed on the whole thing. Should airlines be held accountable for overbooking? Absolutely. Should they be held accountable for mechanical problems? That depends on how they handle the situation. What about weather? I freely admit I do not understand what the airline can do besides refund a ticket when weather plays a role. When should penalties be imposed? I am not sure.

One final admonition...nothing good is free. The impact of this type of rule making hits an airline right in the pocketbook. My bet is that the EU airlines are busy figuring out how to work this new wrinkle into the ticket prices if that haven't done so already. The reaction would be the similar in the US. What I am trying to say is that Joe Consumer will end up covering the cost of these types of rules.

NEWS: Southwest Airlines May Add to Pittsburgh Service

The Pittsburgh Tribune-Review has an article that may be giving a preview of Southwest Airlines' continuing assault on the northeast market. According to a member of a Pittsburgh business group Southwest is looking to add five new destinations from their fair city. One destination mentioned specifically is Chicago-Midway. Industry analyst feel that Baltimore, Las Vegas or Phoenix, Tampa or Orlando are other likely destinations that could be added from Pittsburgh. Southwest CEO Gary Kelly plans to officially announce their plans at a local press conference on Thursday.

The US Airways pull-out from Pittsburgh is giving Southwest a very good opportunity to get a foothold in the northeast sector of the US. Obviously, Pittsburgh business is very hot on getting them to increase their service. It goes to show just how vital easy access to local business is to the folks who run those businesses.

US Airways is very exposed to this sort of expansion from Southwest in my opinion. I am betting JetBlue, Delta, AirTran and others aren't exactly welcoming the competition either.

Watching Southwest Airlines go to work on the northeast reminds me a bit of a thing called "island hopping" that the military used in the Pacific Theatre in WW II. They would skip over islands that geographically were "next" and get a foothold further down the line. Without losing everyone on the strategy behind this I'll just comment that Pittsburgh seems like one of those footholds for Southwest and leave it as a point to ponder.

NEWS: Delta Airlines Gets a Nod

Today's hero is Calyon Securities'airline analyst Ray Neidl. Mr. Neidl has attained this lofty status because he, like those named Today's Hero before him, agrees with my opinions. In this case, Mr. Neidl has upgraded the firms outlook on Delta Airlines after meeting with management to discuss their plans. He states in his notes regarding the upgrade that "After meeting with management, our confidence that Delta can execute its plan to address its cost structure and overly leveraged balance sheet has increased". Neidl goes on to say (using a lot of complicated financial guy language) that he believes Delta's plans to cut costs and improve its operation and fare structure will bear fruit. I couldn't agree more.

The 9 people who have seen my blog know that I jumped on the Delta bandwagon when I saw what they were doing to simplify their fare structure. I actually took a seat on the bandwagon when they announced Operation Clockwork. The bottom line is that I think Delta Airlines is taking a measured,focused logical approach to the changes they believe will carry them into the new airline world order. And now at least one analyst agrees.

NEWS: Aloha Airlines Clears Another Hurdle.

Aloha Airlines advanced another step along the road out of bankruptcy with the announcement that the bankruptcy court has approved three union contracts recently ratified by their respective members. This leaves only two more for the court to approve. Aloha has been able to keep the union negotiation process moving along at a brisk pace which is helping them towards their goal of $40 million in annual labor savings. Their progress looks especially good when you compare them to their nearest competitor, Hawaiian Airlines.

Aloha Airlines appears to have an advantage on Hawaiian Airlines in terms of union relations. There has been some ill rhetoric between Hawaiian's management and their unions and talk of needing to involve the bankruptcy court to solve the problem. On the other hand Aloha has managed the process with a minimum of fuss and in fairly short order.

I can't help but feel that the first one of these island airlines to exit bankruptcy wins. By win I mean the first airline out will grab a substantial piece of the market share in Hawaii leaving an untenable sitatuion for the other. So far Aloha is catching all the right waves. (I know...stupid sappy pun...I couldn't help it...I need counciling)

NEWS: Northwest Airline Pilots May Offer to Freeze Pension

The pilots Northwest Airlines, represented by ALPA, are paying attention to what's happening at their airline and in the industry. They realize that their current pension plan is probably going to end up under-funded as many other pilot pension funds have in the industry. That means the retirement benefits those pilots are planning on might not be there for them in their golden years. So the union is proactively looking into freezing the pilots pension plan. A freeze normally means new members will no longer be accepted into the existing plan and the airline will no longer make contributions to that plan. New members will get picked up under a new pension plan that the airline can afford. Keep in mind that this a general statement, the details regarding what ALPA and Northwest plan to do have not been released.

Couple of important things to recognize here.

First, kudos to ALPA for getting proactive on this. This is what a union is supposed to do, protects its members by working with the airline. They are doing so in a manner that builds a working relationship between the airline and the union...something that has been lacking at Northwest in the past.

Second, let's not forget that part of the reason the pension plan is in trouble is because a good portion is funded by airline stock. From the airline's perspective this makes sure that the pilots have a stake in the well being of the airline. But it also means that external forces can decimate pension fund values. Then again, so can a bad business plan. Its a tough, but common, situation that is impacting everyone in the airline industry.

NEWS: ATA Pilots OK Temporary Reductions

ATA Airlines pilots, represented by ALPA, approved a four month deal that will reduce wages and benefits to a greater degree than the contract offer the rejected just about one month ago. This is the same group of pilots that up until recently had openly expressed their lack of confidence with ATA management. According to ALPA leadership this new decision shows that the pilots are gaining confidence in the management now that Southwest Airlines is involved. The approval margin was an impressive mandate with 78% of the pilots voting in favor of the agreement.

I find all of this pretty impressive actually. The rhetoric being traded between ATA management and its pilots last month seemed rather terminal. But the reality check is that its a buyers market when it comes to pilots right now...so its better to try and save what you have than to throw it all away. Not that this deal is going to save ATA, there's much work to be done. They still need a permanent contract with the pilots and ATA is still trying to strip costs out of the airline to become competitive again.

NEWS: US Airways Uses Another GE Lifeline

GE, the largest creditor to US Airways, has agreed to give the airline another month to file a draft bankruptcy plan. So lets do the date dance. US Airways originally told GE they would file a plan by Feb 15th that would have them exiting bankruptcy by June 30th. In the mean time the bankruptcy court told US Airways that they need to have a plan in place by March 31st. Now US Airways has asked GE to give them until March 15 to have a draft plan filed..you know...the same one that the court told them to have done by the 31st. Confused yet...I am.

You'll have to forgive US Airways if they seemed a bit pre-occupied with GE. US Airways owes enough money to GE that GE quite literally controls their destiny. If GE tires of trying to prop up US Airways they could simply quit extending deadlines and call them on the money they owe. But it seems that GE does not feel a US Airways implosion is in their best interest so we all get to enjoy the US Airways bankruptcy thrashing a little longer.

NEWS: ATA Airlines Gets an Extension

ATA Airlines received an extension from the bankruptcy courts on their exclusivity period. Extending this period allows the airline more time to execute their exit plans without fear of competing plans being introduced. ATA's exclusivity period was due to expire at the end of February.

And why not get an extension? All the cool bankrupt airlines like United Airlines and US Airways are doing it. Based on the way the bankruptcy courts are handing out these extensions I don't think you can draw any conclusions about how good ATA's chances are to successfully exit bankruptcy. But I'll take another opportunity to remind you that ATA's sugar daddy is Southwest Airlines. This move must fit into their master plan somehow.

NEWS: United Airlines Lining up Possible Financing

Despite all of its efforts at cost cutting United Airlines still needs a shot of cold hard cash to help it realize its dream of exiting bankruptcy for the first time since December 2002. The airline is reporting that it has four offers for up to $2.5 billion dollars worth of debt financing. That's billion folks, you know, the "illion" with a "b". However, before United can lay their hand on that kind of cash they need to complete all of their labor deals including further work on restructuring their pension plans as well. Estimates are that all of this will start coalescing in around 90 days.

They will likely take the easy way out on the pension plans by trying to dump them much like US Airways did. Despite all of these efforts I just don't understand how a financial institution can look at United Airlines and think "hey, lets loan them $2.5 billion dollars". They must be the same folks who keep sending me credit card offers. I just don't see anything coming out of United right now that indicates they are viable in the long term.

NEWS: Travellers Fickle with Low Cost Carriers

The Wichita Business Journal recently published a little article on how AirTran is fairing at Wichita's Mid-Continent Airport. Three years ago AirTran added scheduled service to the midwest airport causing air fares to plummet and traffic to increase. AirTran's success in Wichita did not go unnoticed and soon the competition arrived in the form of legacy carriers looking to take back marketshare. So over three years the airport has seen a 12% increase in traffic yet AirTran's traffic has decreased 10% for the same period. Why is this struggle in the heartland important in the big scheme of things? Because it illustrates, in a microcosm, a scenario that plays out time and time again for low cost carriers in markets throughout the country.

Low costs carriers make their name by marching into a market that is being overcharged and/or underserved by a legacy carrier (or two). They are air fare super heroes and everyone loves them despite the lack of frequent flier programs, bonus programs or any of that other legacy carrier hoopla because the fare are great. But then an ugly thing happens. The legacy carriers begin matching fares and pumping up incentive programs to regain their stolen popularity. So does the traveling public stay true to their low fare saviors? Sadly the answer is no, not usually. The fickle public tends to drift back to the big names with the loyalty programs. Often the low fare carrier ends up leaving the market, fares go up and the whole vicious cycle starts again. Ain't this business grand?

NEWS: The Grim Repo Man Visits Independence Air

Flyi, parent of struggling Independence Air, revealed that one of the carrier's aircraft had been repossesses late Friday. The airline had failed to make a lease payment last month triggering the lender to file suit and subsequently take the aircraft back. Flyi has not named the lender who got themselves wrapped around the axle but have stated that the loss of the aircraft should not impact their operation. The real questions is are any other lenders going to take the same action?

Independence Air recently renegotiated their aircraft deals with GE Capital to keep themselves out of this type of situation. But that deal did not cover all of the aircraft in their fleet. The airline has not announced any deals to renegotiate the remaining $83 million in aircraft lease payments due in January. Now it appears that at least one other lendor doesn't feel as forgiving or have pockets as deep as GE Capital. Something tells me they won't be the last to take this action. Something tells me that Independence Air is pretty close to Chapter 11. Then again they might just liquidate straight away.

NEWS: Aloha Airlines Closes the Week on a High Note

Aloha Airlines may be fighting through bankruptcy but they managed some pretty good progress this week. Both the mechanic's union and the flight attendant's union ratified new deals with the airline today. The flight attendant deal will run through Feb 2007 while the mechanics have a five year agreement. Best of all airline management was able to reach these agreements without having to throw the threat bankruptcy court intervention at the unions.

Working out deals with the unions quickly and without raising tensions is a good thing. Aloha needs to get on with the business of trying to figure out what they want to be when they grow up and how they're going to pay for it.

NEWS: Alaska Airlines Heads for Texas

Alaska Airlines will begin flying to Dallas/Fort Worth offering service to both Seattle and Anchorage beginning July 19th. Two flights a day will be offered. The press release hints that this expansion "was facilitated by another carrier's recent suspension of service between Seattle and Dallas/Fort Worth". For those playing along at home that would be Delta Airline's recent shut down of their Dallas hub.

So Alaska has decided to test the waters in the Dallas market. I'm sure the folks at DFW were hoping for something more than a couple of new flights. But there has not been a rush of airlines looking to backfill the void left by Delta so Alaska's announcement is better than nothing.

NEWS: Continental Airlines Starts the Year Down

Continental Airlines revealed that January was a very tough month in a DOT filing Friday. The airline lost $47 million in January which works out to around $1.5 million a day...I'll pause while that sinks in. Now for the sucker punch. Shares of ExpressJet, Continental's regional carrier, made a big contribution to the airline's pension fund which helped mitigate the overall loss. Without that contribution the loss would have been about $3 million a day. A quick visit to the calculator says that works out to $93 million. Folks, Continental lost $203 million in the whole 4th quarter last year. Obvivously, not the start they work looking for.

January is typically a tough month for all airlines but Continental is not resting on that excuse. They have targeted another $500 million in labor savings by the end of February but have only achieved $169 million to date. The bottom line is that Continental needs to stem the losses quickly before it saps their cash reserves and puts them into a liquidity problem.

NEWS: Ted Turns 1

Ted, the low cost spawn of United Airlines, will have its first anniversary on Saturday. United claims Ted is successful in allowing the airline to compete with the likes of JetBlue. But its hard not to see that a major thrust of the Ted plan has been in Denver where United has been locked in battle with low fare carrier Frontier Airlines. Whatever the case the whole Ted-United thing seems a bit disfunctional because of the control United exerts on its low fare spin off.

In fact spin off is a misnomer. Subsidiary or operating unit is probably more accurate. All of Ted's financials and operating results are integrated into United's bigger picture. All of Ted's operations seem to be part of a bigger attack plan driven by United. It's almost as if United is using Ted as a low fare hammer to try and drive out competition as needed. It makes it very hard to judge how well Ted is really doing and harder to discern what their focus is as an airline. So what are they going to be...break out low cost carrier or a weapon of destruction on the competition. My vote is the latter unless we see Ted spun off as truly independent airline. If Ted is spun off then we will really see what its made of.

NEWS: America West CEO Sees Mergers

America West Airlines CEO Doug Parker sees mergers as the next logical progression in the industry. He's goes as far as saying that what will remain is two or three tradition carriers (i.e. United Airlines, Delta Airlines, Northwest Airlines etc) and two or three low cost carriers (i.e. Southwest Airlines, JetBlue, AirTran and...oh yes...America West). Interesting to note that Mr. Parker lists America West among the low cost carriers. I tend to agree that the industry will see a merger or two. But I also think we will see a liquidations or two.

Either option would help ease the capacity problems that continue to plague the airlines.

His prediction on the number of airlines that will remain standing after the melee is is bold. Two or three airlines in each category doesn't leave much room for the current group of players. He is also not directly saying which side of the equation America West falls on, merger or mergee. But America West did take a shot at ATA before Southwest Airlines stepped in on that action. All of this tells me that America West is shopping...is anyone looking to sell?

UPDATE: Found better information and fixed a mistake regarding America West making a profit last year...I had that wrong.

NEWS: Independence Air Picks on the Big Guys

Low fare carriers do make a difference, even when they a little ones like Independence Air. United Airlines has reduced fares to compete with the new service out of Dulles announced by Independence Air. We're not talking small fare reductions either. Fares on competing flights have fallen as much as 84%. Its not an epic battle in terms of scale but it does encapsulate the basic struggle in the industry...two troubled carriers, one looking to steal market share as a low fare carrier, the other looking to maintain market share by matching fares. Who wins?

There are a few winners here in my opinion.

The first is Dulles Airport. They win no matter what. More low fare competition means more traffic, more traffic means more money for them.

The second is the consumer flying out of Dulles. They get lower airfares to selected destinations served by Independence Air. Not a huge win but better none-the-less. The problems is if United can manage to hang long enough they might shove Independence back out of those markets then airfares will return to their previous levels.

Finally the third and most uncertain winner. Which airline can serve these markets at this price? Independence Air is probably able to make money with the airfares they are charging. Its doubtful United can cover costs at this level. But its not that simple. Independence has to convince the flying public to CHOOSE THEM over United. Not an easy task and one that has killed off more a couple of low cost start ups. All things (like airfares) being equal people tend to choose a brand they recognize...United in this case. They might find a way to peacefully co-exist. United had to learn to tolerate Frontier Airlines in Denver. Maybe the same thing happens here. Too soon to call in my book.

NEWS: Not So Fast Virgin America

It looks like Branson's latest venture, Virgin America will not be making that mid-2005 start up as their flashy website purports. Apparently its taking them longer than expected to finalize the investment money and to answer the 20,000 plus questions that the Dept of Transportation (DOT) asks new airline applicants. Seriously, I'm not kidding, 20,000 questions! So now it looks like 2006 before Virgin America will launch.

As I look at the buzz surrounding Virgin America I can't help but draw comparisons to JetBlue. This looks to be a well funded start up that wants to deliver a lot of bang for your low fare buck. Like JetBlue, Virgin seems to be hinting that they will deliver lots of high end goodies and services.

I wonder if this is going to be the next big thing for low fare carriers? How much product can you squeeze out of that low fare? Maybe this type of business model is going to be the one that finally challenges Southwest Airlines. As low fares and low fare carriers become increasingly common place it may be the "extras" that attract customers.

NEWS: US Airways Profit Propaganda

OK, before I even start I am asking everyone to act like an adult when I post this.

US Airways is predicting that it will finally turn things around next year and make a profit of $50 million (all of you in the back stop snickering). They predict a $288 million dollar loss this year and then say they will be in the black for the first time in seven (yes...seven) years. I'm not buying it. Why? Because it directly contradicts testimony given by US Airways ex-CFO Dave Davis who said the carrier would lose money in 2005 and 2006 and would not be profitable until 2007. And that was taking into consideration the billion dollars in savings they had gotten via salary, benefit and work rule changes. Any guesses why he is ex-CFO?

I can't prove it but part of it may be that Mr. Davis wasn't helping to pump out the propaganda needed by US Airways to garner more investor dollars...something they desperately need. I have seen estimates that the airline needs anywhere from $250 million to $500 million to help float its bankruptcy exit plan. Let's not forget that US Airways says they need another $500 million from the employees as well. My opinion is that Mr. Davis' story is closer to the truth than the one currently being told by US Airways.

We will continue to see this from US Airways...more "news" about how they are turning things around and how things will be better after the 1st quarter blah blah blah. But here is a harbinger...traffic IS rebounding for US Airways as it is for most carriers but revenue IS NOT. US Airways is under intense low fare carrier pressure in nearly market they serve. They simply do not have the cash to stick it out in this environment. Nor do they have a business plan that can compete.

NEWS: Happy Birthday JetBlue

Hard to believe but JetBlue is turning 5 on Feb 11th. The festivities at their birthday party (being hosted at JFK) include the delivery of their 71st aircraft. Five years ago JetBlue came blasting into the industry as one of the best capitalized start ups ever and proceeded to set the mark for level of service in the low fare carrier segment. Their leadership has been focused and their business plan works. All of this has allowed JetBlue to graduate from the ranks of "start up" to "major" airline in a very short period.

So JetBlue is all grown up which is good because every major in the industry is trying to revamp and compete directly with them. My only concern is the decision to add a second fleet of regional jets in addition to their A320's. Two fleet types means additional training, maintenance and inventory requirements...in other words costs go up. But the folks running this airline are pretty bright so I will give them some latitude and just sit back to see what happens.

Here's the "Background" from the JetBlue press release:
"JetBlue is a low-fare, low-cost passenger airline, which provides high-quality customer service. JetBlue operates a fleet of 69 new Airbus A320 aircraft and plans to add 15 additional A320s and 7 Embraer E190s to its fleet in 2005. Based at New York City's John F. Kennedy International Airport, JetBlue currently operates 276 flights a day and serves 30 destinations in 12 states, Puerto Rico, the Dominican Republic and The Bahamas.

All JetBlue aircraft feature roomy leather seats, all equipped with an in-seat digital entertainment system offering up to 36 channels of free DIRECTV(R) programming and, on many flights, a selection of first-run movies and bonus features from FOX InFlight Premium Entertainment."

NEWS: United Airlines Wants to Back Out of Pension Obligations

As predictably as the sun rises in the east United Airlines is following the lead of US Airways. United is going to cut payments of about $6.1 million monthly for unqualified benefits impacting 3,100 retired pilots. This is all while they wait for the bankruptcy court to rule if, how or when United will be allowed to terminate their pension plan completely.

I was plenty upset when US Airways pulled this little manuever. In that post I warned that United was taking notes. So now we see the airline simply stopping payments on some benefits. Furthermore, United is indeed pressing the court to have the federally run Pension Benefit Guaranty Corp. take over the pilot's pension fund. This is the same organization that got saddled with the terribly underfunded US Airways pension fund. I'd like to see the bankruptcy court tell United that they have to cover the pilots pension plans but you and I both know that's highly doubtful.

NEWS: Southwest Airlines Holds a Fund Raiser

Ok...not a fund raiser. Southwest Airlines has issued $300 million in unsecured notes that will mature in 2017. Since Southwest is a shining star in an otherwise dismal industry the notes have gotten a warm reception from those who analyze this kind of thing. Just another day on Wall Street you say? Not so fast, let's step back and ask the obvious question. What's Southwest need with $300 million all of a sudden?

Now step back further and take a look at the industry and some plausible theories can be seen.

First of all, Southwest recently bought a chunk of ATA Airlines and no matter what you'd like to think they didn't do it out of the goodness of the hearts. Sure, Southwest benefits via some code sharing with ATA but there's no way that's all they are looking for. Perhaps, after getting a closer look at the bankrupt airline Southwest sees an opportunity to do something more with ATA sooner than expected.

Second, with US Airways tottering on the abyss perhaps Southwest is preparing to really make a move on their territory. They've been dabbling at it by backfilling where US Airways has reduced service but a complete implosion will leave a gaping hole in the market. Southwest will want to move fast if the opportunity presents itself. No doubt they are keeping a bedside vigil for United Airlines as well.

NEWS: Comair Awaits Mechanic's Union Vote

Comair mechanics will vote next week on a proposed new contract that will cover them for the next 5 years. Yeah, yeah...I know...another union contract...what's the big deal. Be patient, I'm getting to it. The new deal will take maintenance work back from third party providers and give it to mechanics at new facilities and also give the mechanics a 2% pay raise. See, I told you it was news worthy.

Here's an airline that is actually not planning to outsource and is willing to give a group of unionized employees a raise (albeit a small one). This is especially surprising since they are asking the flight attendants and pilots to freeze their wages. Interesting decision, let's see how it plays out.

NEWS: US Airways Retirees Looking for Options

Add this to the list of things are are so very wrong with the bankruptcy system. Some 10,000 US Airways retirees are looking for health care coverage after the bankruptcy court allowed the airline to reduce their benefits. It so comforting to know that the benefits that were promised to you, that you worked years for and finally were depending on in your golden years can be yanked out from underneath you in an effort to save a two time loser of an airline that, despite all of these efforts, STILL has the worst prospects of survival in the industry!!! GAAHH! (Yes, I know its a run-on sentence but it mimics how it can streaming out of my mouth).

And let's just say for the sake of arguement that US Airways not only survives but does well and begins to prosper (stop laughing and wipe that smirk off your face). Why shouldn't they have to take back all these obligations? I'll say it again, this whole system is busted.

OUTLOOK: Virgin America

When Richard Branson, Chairman of Virgin...well...Virgin Everything, looks across the pond at the airline industry he sees something beyond the chaos. He sees opportunity. Which is why he is quickly and quietly putting together his first foray into the US airline market...Virgin America. A visit to the Virgin America website does not reveal a whole bunch but here's a couple of things that caught my eye. Launch is slated for "mid-2005" and plans are to operate Airbus A320's. Virgin America has options for up to 105 A320's. Obviously, they won't start up with that many but they are not thinking small either. Destinations and schedules are not even hinted at yet but it looks like they will headquarter in New York and have a primary base of operations in San Francisco.

This, to me, says that they are thinking coast to coast as opposed to regional. The website alludes to the fact the "state and local governments offered remarkable incentives". No surprise. San Francisco International Airport (SFO) would like to hedge its bet since a United Airlines collapse is still a very real possibility. United has already scaled back operations at SFO leaving lots of vacant maintenance facilities and office space. So why not offer up some sweet deals on choice facilities and throw in some tax incentives to boot. Finally, keep in mind that Branson will not own Virgin America. Laws prohibit foreign ownership of a U.S. based airline. He will, however, be providing "some funding" for the start up. Some funding may be an understatement. Branson rarely goes small on anything. Expect Virgin America to be a well capitalized airline cut from the same flashy cloth as his other ventures. More later once Branson cranks up the media machine.

NEWS: Delta Airlines Fares Still Pressuring the Competition

As promised Delta Airlines is holding to its new fare structure. Liz Fedor over at the Minneapolis Star-Tribune has put together a good article that covers the continued impact that the Delta plan is having on the competition. Northwest Airlines, American Airlines, United Airlines are among the major airlines that are being forced to play in Delta's new scheme. Most of these airlines are whining about the lost revenue and even Delta knows that, short term, they will take a hit on revenue. But Delta seems confident that, long term, their plan will generate additional ticket sales to counteract the reduction in fare prices.

They also know that the weaker players are going to have a difficult time sustaining their operations at these levels. I'm sure that having an airline or two leave the industry would be just fine with Delta.

NEWS: Why is Southwest in Love

For those that have missed prior references, Southwest Airlines is currently trying to have the Wright Amendment repealed by the Texas legislature. Why you ask? See back in 1979 when DFW was a brand shiny new airport someone got this little piece of protectionist legislation passed to help the airport grow...at the expense of the area's other airport, Love Field. In a nutshell, the Wright Amendment severely restricts the destinations that can be served by Love Field.

Anybody who really wants to be a player in the Dallas-Fort Worth airline game is pretty much forced to use DFW. This really bugs Southwest Airlines because it forces them to play the game on someone elses terms ...and turf for that matter. Southwest has a long tradition of choosing smaller alternate airports to serve a major market. That way they avoid the higher prices of a major airport and the direct competition with a major airline for airport resources. Its the old saying, its better to be a big fish in a small pond than a small fish in a big pond. Anyway...Gary Kelly, CEO at Southwest wants this thing pretty badly. Its going to be an interesting battle.

NEWS: DFW Battles Love

Dallas/Fort Worth Airport is going on the offensive to battle the repeal of the Wright Amendment. DFW airport officials have actually started a website to get their message out that repealing the Wright Amendment would be bad for just about everything and everyone in Texas and might actually tilt the earth the wrong way (ok...I made that last bit up). They have even sent studies to the legislature that predicted how many jobs would be lost when Delta pulled out of DFW. How that connects I am not quite sure but hey more paper is better...right? On the other side is Southwest Airlines who are pushing (i.e. funding) the effort to get the legislature to repeal the amendment.

The legislature is in a tough spot here. The continued support of the amendment shows favoritism towards DFW and, by extension, the airlines that are based there (American). Repealing the amendment would actually make the Texas government's policy neutral on the whole deal but the act of repealing the amendment would be perceived as favoritism towards Love Field and those who operate there (Southwest). American and Southwest are both considered "hometown" airlines in Texas...what's a legislature to do? Grab a seat folks its just getting to the good part.

OPINION: Nobody Complains About Southwest Airlines

So I clicked on over to the DOT's website to take a first hand look at the 2004 airline results. Here's one thing that jumps right out at me. The top 5 when it comes to lowest complaint rate is dominated by low cost carriers. The best of the best is Southwest Airlines with a miniscule .09 complaints per 100,000 "enplanements", followed closely by JetBlue at .19. To put that in perspective United Airlines is roughly midpack with a .88, Delta Airlines on the high end at 1.06 and US Airways is way outta line with a whopping 4.06.

I think I understand why JetBlue would rank well up in the standings. This is a low fare carrier offering up some pretty nice service and by all accounts they do it well. But how does Southwest do it? This is strap-their-butts-in-a-seat-and-sling-'em-peanuts service. Why does this NOT rub people the wrong way? I say its because they manage expectations. Southwest does not pretend to be anything they are not. They take great pride in offering low budget transportation to the flying masses. Their image is self perpetuating at this point. Thus, the people pay peanuts get peanuts and thats just fine with them because they just saved money.

NEWS: Delta Airlines Change goes like "Clockwork"

You may recall that last week Delta Airlines unleashed Operation Clockwork, one of their biggest single day operational changes ever. The plan is designed to spread out aircraft arrivals and departures over the day as opposed to clustering flights around "peak times". Delta has announced that the first week under Operation Clockwork was very successful posting some of their best dispatch and on time arrival number.

I know what you are thinking...this is kinda like a parent calling their 1 week old kid a genius but the numbers are pretty good. The logic behind the plan is very straight forward and makes a lot of sense. Spreading out you operation evenly lets you use labor more effectively and makes your schedule more "delay tolerant". Here's another wrinkle that Delta brings up. Taxi time is down 25% under the new operation which should cut fuel costs. This is the type of stuff that looks good to people itching to invest money in an airline (seriously, there are still some of them around)

NEWS: American Airlines Picks Up the Slack in DFW

Recent events seem to be conspiring against Dallas-Forth Worth (DFW) Airport. Delta Airlines jilts them, Southwest Airlines turns then down and a long list of incentives have failed to attract other carriers to fill in the void. Despite all of that American Airlines and its regional airline American Eagle has found a silver lining. Bookings are up 12% since Delta left town and the two are looking to increase their already considerable activity at the airport.

And why not? They should take advantage of their good fortune while they can. Southwest Airlines has not given up their battle to change the laws that currently limit the destinations that can be served out of Love Field in Dallas. Currently, this law limits the destinations that may be served from Love Field. Funny enough that law was enacted in 1979 to help develop the then new DFW airport. Who would have thought it would still be serving that purpose in 2005? Now it is also protecting American Airlines. Should Southwest succeed in having the law overturned it will be a very different game.

NEWS: More Doubts on US Airways

I've made it clear that I do not believe US Airways will make it so I'll avoid all that rhetoric again. But I haven't spent much time talking about how the carrier could exit the scene. Along those lines I would like to point you to a really interesting article over in the Pittsburgh Review-Tribune. This article compares the viewpoints of two analysts who offer up two different scenarios.

The first, and most obvious, is a complete liquidation. The airline is simply sold off in pieces and the money distributed. There are plenty of airlines that would like a particular piece of the US Airways operation. You know little things like prime gates at Boston Logan, LaGuardia and Reagan airports.

The second and more interesting is the prospect that another airline might buy the whole operation and absorb it. United Airlines was tossed around as a possibility early last year but, please, let's be serious. Mom always said two wrongs don't make a right. But they mention the Branson's Virgin Airlines (coming soon to a US airport near you) as a possibility. Now that would be interesting and a more plausible idea in my book.

NEWS: Airline Performance Down but Still OK

The Department of Transportation (DOT)have released their airline performance statistics for 2004. Its a mixed message with airlines performing well overall when compared to historical numbers but down when compared to just 2003. Customer complaints were up and on-time performance was down significantly in 2004 from 2003 but still ranked among the better performances historically. So what is changing here?

Are airlines just getting better and more honest about reporting this information to the DOT? I doubt it...ok...seriously, you can stop laughing now. Are we starting to see the effects of airlines trying to operate at levels beyond what their staffing levels can support? Could be. 2004 was a banner year for slashing payroll and positions. Or is it just easier than ever for consumers to complain? Might be some of that too. Website feedback forms and email make it easier than ever for customers to complain. They can do it anonymously, without needing to take any grief from a customer service rep. Do the airlines need to care about these numbers? I think so. They tend to sway public perception. 2005 will be a difficult year. Those airlines that inflict the least pain and suffering on the flying public stand to gain once ticket price becomes less of a factor (and it will).

NEWS: Hawaiian Airlines Comes Out on Top

Hawaiian Airlines seems to be bucking a trend. We are accustomed to airlines fighting through bankruptcy not performing very well on the operational front. Hawaiian however was #1 in punctuality, #2 in baggage handling and boarding reliability and was in the top five on consumer complaints for 2004. This is all based on the standard DOT filings required for scheduled operators. Good work Hawaiian.

OPINION: The Urge to Outsource

Every airline in the US is scouring their costs, looking for every penny of cost that they can squeeze out of the operation. Invariably the eyes of the financially minded are going to be drawn to one the biggest cost centers at nearly every airline...aircraft maintenance. It doesn't take these folks to long to arrive at what they believe to be the obvious answer...outsourcing. The question will be asked by those who mind the bottom line: Why should the airline have a maintenance division when there are MRO's (Maintenance & Repair Organizations) out there willing to take on that work? Why should the airline bear the cost of the facilities and inventory associated with a maintenance division? Why should the airline pay higher labor rates internally when they can get a lower rate at an MRO? No brainer...right?

Here's the reality check. Having an internal maintenance force allows the airline to control its destiny and the quality of work being performed. Controlling your destiny means being able to adjust maintenance schedules to react to operational changes. It means that when your aircraft breaks on the gate with 200 people on board that you have someone to call and that your problems are the most important thing for them. Quality of work means having a work force that is accountable to the airline, a work force that participates in continuous improvement. Control and quality translates into more reliable aircraft. Reliable aircraft mean more available flight time, fewer delays and lower costs. Unfortunately this is damn near impossible to prove up front. It normally ends up being a "post mortem", a study that happens after maintenance is outsourced.

NEWS: A380 - Flying Cruise Ship or Super Economy Model?

USA Today has a good article regarding some of the hype surrounding the Airbus A380. Specifically, industry analyst are questioning plans to put high end amenities like work out rooms, casinos, beds and duty free shops right on the aircraft. Not surprisingly, Richard Branson, Chairman of Virgin Atlantic Airways, is at the center of that hype. Instead the analysts believe airlines who operate the A380 will need to fly it very close to its 840 passenger limit to make money on it.

Branson's plan would put him somewhere in the 500 seat range. Airbus believes most operators will average around 555 seats with 3-class (first/business/economy)set up. That's a really wide discrepancy between what the analysts think and what the Airbus marketing plan says. I tend to think it will end up somewhere in the middle with the analysts being closer to reality. I do not believe that this aircraft will be even close to cost effective for the first few years of operation and will be only marginally successful after that. It will be a niche aircraft much like the Concorde...just slower...and with way more people.

NEWS: Gordon Bethune Says Airline Industry Needs Balance

Today's hero is Gordon Bethune who, until recently, was the CEO of Continental Airline. In an interview for NPR Mr. Bethune wisely states that the industry still needs to find a balance between supply and demand. He also indicates that this is not a magic cure that will fix all that ails the industry. Airlines still need to do their part by continuing to cut costs and focus on their operation.

Mr. Bethune knows what he's talking about. Many credit him for pulling Continental Airlines back from the brink of the abyss during their difficult years in the 90's. Having had the opportunity to listen to him speak I would say that credit is due. Mr. Bethune "gets it" when it comes to airlines.

NEWS: United Airlines CEO Comments Chafe Union

Recent statements from United Airlines CEO Glenn Tilton make it abundantly clear that he intends to play hardball with AMFA (mechanic's union) to get the deal that he says the airline needs. Note to Mr. Tilton, be careful how many times you poke at these folks...they might get really irrated. AMFA national director O.V. Delle-Femine (wow, nice name) issued a statement saying "It was unnecessary for Mr. Tilton to threaten us before we enter extended negotiations. His rhetoric only exacerbates and inflames the tensions and distrust our members already have towards UAL management."

I agree. Mr. Tilton needs to devote some of his time and energy to rebuilding the relationship with one of the key groups that can make or break his airline. By not marching out on strike after the court imposed temporary wage cuts the mechanic's demonstrated that they have a grasp on the gravity of the situation. So move on Mr. Tilton and try to get a deal done, its overdue.

NEWS: Continental Airlines Sports New Website Features

I'm tired of talking about US Airways and United Airlines and the general malcontent in the industry. So I went searching for some positive news...it took a while. Here we go:

Folks booking flights via the Continental Airlines website have been able add hotels, cars and vacation packages for a while. They can now add cruise packages to the list.

This is a smart move. Travel agency have made big business on cruise packages for years but they tend to use smaller charter airlines for the flight portion of the deal. So why shouldn't Continental jump into the game?

Their route structure puts them in several cruise embarkation (yes...that's really a word) points so why not try it. The cruise industry jumped at the opportunity to partner with a major airline based on the list of cruise operators working with Continental.

NEWS: US Airways Forces Overtime

US Airways is telling their baggage handlers at Reagan Int'l Airport to either sign up for overtime or it will be assigned to them. Apparently the carrier is understaffed and not prepared to handle the additional 50 flights they intend to start operating this Sunday. But hey, they are going to have a job fair on Thursday so everybody just head on down, I'm sure they'll sign anybody with a pulse.

First of all, how inept is this? Its not like the decision to operate more flights out of Reagan Int'l snuck up on them. They are just getting to a job fair now? Its the little things like this that re-inforce my belief the US Airways does not deserve bankruptcy protection. Second, I am recommending a "How to Make Friends and Influence People" refresher course for the management at US Airways. Walking around with a hammer beating on people for months on end (figuratively speaking) tends to suck the morale right out of an organization.

NEWS: AirTran Airways Speeds Up at Indy

AirTran Airways has decided to speed up their launch into Indianapolis on the heels of ATA's decision to reduce flights from their main hub. AirTran's new plan (hey..that rhymes) is to start service on April 9 instead of May. This dovetails nicely with ATA's plan to cut back to just 4 departures daily from Indy on April 10. AirTran isn't the only one looking to exploit the vacuum left by ATA.

Northwest Airlines has also been adding flights since they started smelling blood in the water last summer. All of this should be good news for the folks in Indy and for the airport officials who might have been wondering how they would make ends meet.

NEWS: No A380's For Atlanta Airport

Hartsfield-Jackson Atlanta International Airport (what a mouthful) has announced that they do not intend to make the necessary modifications to deal with the massive Airbus A380. The reaction from Airbus was a predictable equivalent of "yeah...well...we never wanted to land there anyway". In the mean time its reported that Airbus is leaning on some airports to get moving on preparations for the aircraft. To give you some perspective Orlando International Airport will spend $20 million dollars to upgrade taxiways and facilities to accomodate the behemoth. $20 million to be blessed with the opportunity to try and service 500-800 people dropped on your door step all at once. No thanks.

Finally, I'd like to note that tucked away in my January Archive is a post titled "The A380 Gamble" where I ask the question, "How many of them [airports] will decide its just not worth it?" The answer, so far, is at least one.

NEWS: And the Hits Just Keep Coming at US Airways

US Airways announced the first round of cuts for their mechanics, cleaners and stock cleaners...802 people in Pittsburgh hit the bricks today. I say the first round because the their plan calls for approximately 1800 people to be laid off nationwide. There is a little good news here in that US Airways did commit to keeping the Pittburgh maintenance center open and thus save some 600 plus jobs in the area. But its not a very comfy time for these folks right now. My prayers are with you all.

NEWS: January Airline Traffic Jumps

American Airlines, Continental Airlines and Southwest Airlines all announced increases in load factors and/or overall traffic. Its likely we will hear similar news from several other airlines before the week is out. I serve up this tidbit to put you on notice...don't be sucked in. Most airlines are still going to lose money in the 1st quarter, a LOT of money.

Something is just busted in this whole nutty industry. Traffic and load factors are up and have pretty much recovered to pre 9/11 levels. In the words of Jerry McGuire...show me the money. Somebody has GOT to start making money besides JetBlue and Southwest.

NEWS: US Airways Gets a Pension Pass

The federally run Pension Benefit Guaranty Corp. has assumed control of the woefully underfunded US Airways pension plan. The PBGC has now assumed a sum total $3 billion dollars in US Airways pension plans including the pilots pension plan in 2003. that's the second biggest claim ever. Worse yet, the pensions are only 40% funded with about $1.7 billion to cover $4.2 billion. I can't even describe to you how wrong I believe this is.

I mean seriously, US Airways wasn't even trying to cover this. Why is US Airways allowed to just walk away from this? Where is the accountability? So apparently I can go into business and allow my payroll and pension plans to escalate unchecked well beyond my ability to support it with my crappy business plan and then just go into bankruptcy and walk away from my obligations to my pension plans because the Feds will pick up the tab. Am I getting this right? If you, my dear reader, are not at least a little upset then please check your pulse because this is just so wrong on so many levels. And make no mistake, United is headed the same way. This type of crap must stop.

NEWS: JetBlue Big on Boston

JetBlue has announced that they intend to expand their operation at Logan Int'l in Boston. The plan is to grab five gates in May and then continue to grow at one gate every six months for the next three years. Another good example of an airline moving forward in this difficult market.

No word on what they intend to do with these additional gates but JetBlue's continued growth on the East Coast will keep pressure on the legacy airlines operating in that region.

Update: Some of this growth may go hand in hand with the recent announcement that JetBlue intends to add new daily nonstop service from Boston to Las Vegas, NV and San Jose, CA effective May 3.

NEWS: Analyst Says US Airways Doomed in 2005

Today's hero is Roger King, debt analyst specializing in airlines for CreditSites. Hey...no shortage of subject matter is there Mr. King. King shares my sentiment that US Airways will liquidate on 2005. In a nutshell there are just too many stresses on the airline. King also indicates that Delta may still need Chapter 11 protection in 2005 based, perhaps in the fall.

Its no secret to the 6 people who have read my blog that I like what Delta is trying to accomplish and that I hate, in general, the way bankrupt airlines are allowed to linger. But here's the difference...Delta is an airline trying to move forward and become a viable airline that can compete. Bankruptcy to give them time to fully implement that plan makes sense versus what is happening at US Airways and United. US Airways and United are airlines rocked back on their heels by heavy blows dealt to the industry and are still tottering without giving any sense that they know what to do next(aside from cutting costs...bravo).

NEWS: Delta Airlines Unveils Latest Facet of Operational Changes

Delta Airlines announced another piece of their ongoing effort to re-make themselves. Its called Operation Clockwork and its designed to flatten out the operational peaks and valleys associated with hub flying. Most airlines, in response to the customer, will jam large numbers of flights into particular hours of the day. This creates an operation that is not terribly efficient, difficult to plan labor for and prone to failure when problems occur. The new plan spreads out departures more evenly throughout the day. Delta expects to save something on the order of $100 million annually with the new plan.

I've said this before but it bears repeating. This is why I say Delta, despite there huge 2004 losses, stands a better chance of surviving than United Airlines or US Airways. They recognize the faults in their current operation and are focused on improving it. What is going on at Delta is so much more that just fare cuts and cost cuts.

NEWS: American Airlines will Guarantee Fares

Well...at least American Airlines is trying to do something to lure passengers back. The idea isn't terribly original but they will begin offering low fare guarantees for tickets purchased through their web site. Other carriers as well as Orbitz.com offer similar deals. I hope American has something better than this up their sleeve.

I don't think a second hand idea and a media blitz are going to be enough. It does not seem to be a substantive change to the way they do business. And I think they do need some real changes (aside from cost cutting) to allow them to effectively compete with low fare carriers. But hey...what do I know.

NEWS: United Airlines Brinksmanship with AMFA

United Airlines marched into the bankruptcy court and asked the judge to grant them the wage cut that the mechanic's union recently rejected. The judge answered by granting United their wish...kind of. The judge granted a temporary wage reduction and told both sides to get back to the table and work this out. For their part, the mechanic's union has decided to not take any "labor action" (that's a strike to you and me) even though their members had authorized it.

Should things not work out they could still strike at a later date. More delays in United's attempt to exit bankruptcy sometime this fall. I really wonder if thay can work it out with the mechanics. I still say it just needs to end.