US Airways Names New President

US Airways has tapped their executive VP Sales and Marketing, J. Scott Kirby, as their new President. As president he get keep handling pricing, scheduling/planning, marketing, alliances, distribution, reservations and information technologies. He pick ups some new responsibilities like airport customer service, finance and labor relations. Screeeeech....Wha? Labor relations? Kirby, did they tell you that before you took the job? Seriously, is there a happy union at US Airways right now?

I key on that point because Mr. Kirby comes from the America West side of the merger. Pilot negotiations at the new US Airways are rather contentious due to pay differences between the two pilots unions. The America West pilots make more. Good luck to you Mr. Kirby.

Delta is Smokin' in a Bad Way

What are the odds...two Delta Airlines flights reporting smoke in the cabin within 24 hours.

The first occurrence was Thursday on a Paris to Atlanta flight causing a diversion into Knoxville, Tennessee. Apparently passengers smelled smoke in the cabin on the Delta 767 but the diversion was considered precautionary. Passengers deplaned at the gate and caught a flight to Atlanta a few hours later. I know I shouldn't make light of this but the thought of a planeload of Parisians in Knoxville's airport kinda makes me chuckle.

The second occurrence was this morning on a Delta MD-80 that had just landed in Boston. The flight crew "detected smoke in the cabin" as they were taxiing to a gate. They immediately stopped and had 40 passengers and 5 crew evacuate using the escape slides. Two people were injured which doesn't surprise me. Anybody that has ever taken a ride down an evac slide will tell you its not all fun and games. Its a lot steeper than it looks.

Boeing Does the Happy Dance With Ryanair Today

All smiles at Boeing today as they closed a deal with Dublin-based Ryanair for an additional 32 737-800s. At "list price" that's worth $2.25 b-b-billion...cha-CHING. This brings Ryanairs total order to 281 737-800s.

Ryanair's business model is a thing to behold as they offer flights for next to nothing but monetize the crap out of every single thing that you might be willing to pay extra for. But it seems to be working. One thing that is central to it all...a single fleet type standardized in every way possible. They have taken this page from the Book of Southwest and lived it to the extreme. One aircraft type, one pool of parts, one way to train flight crews, one way to train mechanics. This equals low cost to operate.

Good News, Bad News for Airbus

The good news: The group tasked with studying wake turbulence on the A380 has found that standard spacing for the aircraft on departure and landing will not need to increase as much as originally feared (ATW link). This helps to mitigate some but not all the concerns from already crowded airports trying to maximize the number of aircraft they can shove through their airspace. The A380 will cause a 2 minute wait for another "heavy" aircraft on departure (same as the 747) but will cause a 3 minute wait for medium and light aircraft (up from the 2 minute wait on the 747). On approach it is going to require increased spacing for all aircraft types. If you read this and found yourself asking what is wake turbulence and why do I care then Wikipedia is your friend.
The bad news: Information continues to trickle out of Airbus that the A380 is sucking up company resources like there is no tomorrow. This resource drain will likely cause 6-12 month delay on the A350 XWB pushing it into 2013 for the first deliveries. If Boeing can maintain their timeline to deliver the first 787-8 in 2008 with the larger 787-3 and 787-9 in 2010 then the story on the A350 XWB could be over before its begun.

Porter Airlines to Start Service in Toronto, Mayor Already Hates Them

Porter Airlines got approval to begin service out of Toronto and boy is their mayor pissed. Normally, politicians celebrate new airlines, trumpeting the value of increased access to their city. So what's rubbing Toronto's mayor, David Miller the wrong way?
First is Porter Airlines decision to use the smaller City Centre (note the Canadian spelling, eh?) Airport versus Pearson International Airport. You see City Centre Airport is on an island near Toronto and Miller apparently had big plans for the water front development. Ever increasing airline service was not in those plans. Just ask Canadian airline Jazz who got kicked out of City Centre and hasn't been able to get back in.
Second is the scuttlebutt surrounding a $20 million payment made to REGCO, the parent company of Porter Airlines. The payment was made after a deal to build a new bridge to the Toronto island collapsed. Miller is screaming back room politics but it appears the payment was made due to contract language. A deal's a deal.
Welcome to Toronto Porter Airlines.

AirTran Delays Aircraft Delivery (But Look at the Capacity Plans)

AirTran's announcement yesterday that they would delay delivery of 8 Boeing 737-700s has a Jekyll and Hyde quality about it. Delaying delivery on aircraft in the face of what they see as softening demand this year makes sense. Dr. Jekyll is making perfect sense. Mr. Hyde lurks further down in the outlook AirTran has for growth in 2007.

After the delays, AirTran expects to take delivery of 14 planes in 2007 and 15 planes in 2008. This represents expected capacity growth of 19 percent to 20 percent in 2007, and 9 percent to 11 percent in 2008, the company said.

This growth is far more agressive than the 5-7% growth the Continental Airlines is predicting over the coming years. I know I keep banging this drum but widespread aggressive growth, i.e. increases in capacity, in 2007 could endanger to the recovery of the airlines industry. I will have to watch for more airlines to make forward looking statements on their plans for 2007. Airlines need to carefully measure their capacity against demand or Mr. Hyde will run amok.

Dangerous Words from Continental Airlines

Continental Airlines announced Tuesday (Reuters link)that they are forecasting an increase of 5-7% in their capacity over the coming years. Continental's capacity has already grown nearly 9% this year due to increased competition at their hubs. Here's what I consider to be the dangerous words from Continental President Jeff Smisek at a company conference for investors that was available by Webcast :

The company responded, and will always respond to incursions at its hubs, with lower prices and more flights..."We will never lose customers at our hubs on price,"

Legacy airlines with a hub system will always protect those hubs like a mother protecting her young...I'm not exaggerating. They will brutalize competitors by pouring capacity and offering low fares even if it means losing money. In a microcosm you would just consider that tough business practices in a competitive environment. But it becomes a vicious cycle in the airline industry that can run unchecked. The result is over-capacity and an inability for the airlines to control pricing in order to make money. Sound familiar? It should because the airlines have just this year managed to get their pricing under control and they did it by reducing capacity. So now, as business improves we will sit back and watch. Have the airlines learned anything at all from their debacle?

Northwest and Flight Attendants Must go Through the Motions

The National Mediation Board (NMB) told Northwest Airlines and its flight attendants represented by the AFA-CWA to get back to the negotiating table yesterday. I think you could almost hear the heavy sigh from the NMB as they rubber stamped this decision. No one expected them to declare an impasses despite being requested to do just that by the AFA-CWA. By the same token I think there are serious doubts by many, including the NMB, that telling the two sides to negotiate again will change anything. The two remain worlds apart. Interesting that neither Northwest or the AFA-CWA issued press releases this morning. Normally both sides have prepared statements canned and ready to rock. Are they waiting each other out to see what the posture will be?

Continental Airlines and the Golden Share

Surely Continental Airlines makes a pretty attractive partner when it comes to all the airline merger-mongering of late. Ever wonder why nothing seems to materialize? I know I was until I read this Reuters article . A long time ago in a galaxy far far away Northwest Airlines owned a boat load of Continental Airlines stock. That is until the Department of Justice sued Northwest in 2001 for anti-competitive practices, ultimately forcing the airline to sell all but one of their shares. Ahhhh but that one share, the golden share. Golden because it gives Northwest the right to veto any merger involving Continental. I am pretty sure Northwest will keep Continental on a short leash. Northwest and Continental have some pretty extensive code sharing arrangements. Plus a Continental merger would put Northwest at a disadvantage.

The NetJets Solution

There's an interesting flying opportunity for the business traveller called fractional ownership. The idea is that businesses, even smaller ones, that have extensive travel needs can afford to buy into a piece of a business jet to support their travel needs. The payback is on the flexibility side. Flights where you want when you want them on a fast aircraft at a fixed cost.

Its not a new idea but, until now, it has been one that seemed to be reserved for larger businesses. But the idea may be coming of age due to a combination of events in the airline industry. Consider that:

Airlines continue to drop destinations and reduce flight frequency. This makes it harder to get where you need to be, especially without a connection. More travel time equals less productivity time. It may also mean that you now have to stay over night, another expense, more lost productive time.

Ticket prices continue to climb, especially the no restrictions type often preferred by business flyers

The perks that business flyers feed on are drying up

Inflight services and amenities continue to be removed or provided at cost, in other words flying isn't as pleasant as it used to be

Hassles at airports are at an all time high

Carry on baggage?...oh my

Against this companies like NetJets offer up a fast clean private jet that will fly you where you want to go when you want to go. No extra connections, no extra over night stays. They guarantee availability. Need to change your plans, they can do that. Need to have a meeting with your travel partners inflight, no problem. These operators will bypass the main terminals in favor of smaller business jet terminals. Sometimes they will even bypass main airports in favor of less crowded regional airports. Hand your baggage off as you get on the aircraft, pick it up as you leave. One can see how this might start to look pretty attractive as a package even if the cost is higher than traditional airlines. If the cost of flying traditional airlines continues to increase then it may make sense on cost alone. Its a trend worth watching.

Looking for Results at the FAA

In 2002 the FAA launched a program named "Results" intended to revamp the process used to procure support services with contractors. The goal? Save money and improve efficiency, simple right? Not so much. The FAA shut down the program early in January 2006 even before the Inspector General's office had completed its audit of "Results". You might think that having the Inspector General's office involved is a bad thing and you'd be right. Reuters reports today that the Inspector General's audit has found that the program was largely ineffective. You might ask, "Hey, what caught the eye of the Inspector General anyway?" Fair question. While the article isn't specific it sounds like it involved whistle-blower accusations that caused some Congressman to request the audit. If I were a betting man I would say that a couple of contractors got locked out of the preferred vendor bid process and raised a stink with their Congressman. Again, just speculation on my part. But the results of the audit do indicate "only 24 percent of the contracts were competitively bid. The review also faulted price analysis on nine of 11 contracts studied" Hmmmm.

What does all of this mean? In my opinion it means that this government agency, like many others, is not good at being a business. All of the layers, forms, cross-checks etc slow things down and sooner or later people are just going to find a way to work the system to get something, anything, accomplished. Business as usual.

Its too bad that the FAA continues to get a fresh black eye every time it turns around. In my experience the FAA is home to a lot of good people who do good work. I can personally attest to the fact that their system for auditing airlines is vastly improved over years past. This proves that at least some of their divisions are capable of change.

Will Wright Ever be Right?

What started as a worthwhile effort to kill off a piece legislation that is no longer needed has turned into its own legislative nightmare. The bill introduced to kill off the Wright Amendment has itself become an abyss attempting to suck the whole effort down with it. The Dallas Morning News dropped an article on it today...its a good review and I don't feel the need to regurgitate it...too depressing.

Anyone with an ounce of logic can see the reasons that spawned the Wright Amendment have long since passed. Dallas/Fort Worth airport (DFW) needs protection from competition like a Navy Seal needs a body guard. Opening Love Field to more routes is good for business and the consumer. Note to Congress: Step back, take a deep breath and get this done. Get the wording right and make it work already. Too much time has been wasted with political jousting on this one.

Life Cycle by Location at a Charter Airline

The Rocky Mountain News has a good article on the ebb and flow of business at Denver International Airport and how that effects smaller charter airlines. My only argument is the article implies that charter airlines are making the primary decision to scale back at DEN. In fact, this is a reactionary move. Charter airlines don't so much choose their locations as they choose the customers that want them to fly there. The primary customer for a charter airline is the wholesaler, from the biggies like MLT or Apple Travel down to the small ones who specialize in spring break or bowl game packages. They find the markets and partner with the charter airlines to serve the need.
Which brings us to back to Denver. For several years DEN was a great location for charter operators like Champion Air and Sun Country Airlines (when they were still pure charter). The vacation market to places like Florida, Vegas and Mexico were under served by the majors. That left the door open for wholesalers and tour operators to offer up low frequency, low cost travel packages to these destinations virtually under the radar of the other airlines in DEN. So what happened? DEN got a new airport and new competition in the form of Frontier Airlines, Southwest Airlines and a resurgent United Airlines. Over time tour operators found themselves competing with scheduled operators who were matching their prices and offering greater frequency. Their little niche had popped up on the radar screen and taken a hit.
Devastating for the charter airline, right? No so much. This is another day in the life for the charter operator and the wholesalers that feed them. Both are small and adept at switching markets lightning quick in airline terms. If they can't do that, they can't survive. You can bet that the capacity once served in DEN will find another home.

Are the "Extras" a Key to Airline Success?

The Chicago Trib ran an interesting article about airlines offering up extra amenities to keep customers coming back to them. I have been told by more than one airline brain that anyone can compete on price, its the service that brings them back. I'm mixed on the theory. Take my recent experience looking for flights for an upcoming vacation. My first look is always for low price leaders. So the frills have not changed my initial shopping strategy. Sun Country Airlines and Northwest Airlines led the way...but only on a brutal red-eye both ways...nnnnnnext. Sorry, flight times matter to me especially when travelling as a family. A small jump up the pricing ladder brought me to Frontier Airlines and American Airlines. Both flights were competitively priced, had decent times and required one stop. So who wins? Frontier Airlines. Why? Because I want to see DirecTV in action, I have heard many good things from parents with happy not bored kids during the flight. So yes, in this case the extras helped but only after my low price stategy failed.
Obviously Southwest Airlines flies in the face of this theory as they are the undisputed low-frill-take-your-seat-and-be-quiet-low-fare-king. They do unbelievably well at managing expectations in that niche as witnessed by their lowest complaint rate in the industry. Maybe that's the point. Instead of challenging Southwest on low fares alone airlines need that something extra and that needs to be more than a frequent flier program. These programs are seriously damaged goods right now as the difficulty in using miles has become legendary at this point. Whether its something like DirecTV or even warm freshed baked cookies (mmmm...Midwest Airlines) its good to have an angle.

Air France Stomps Feet, Want Its A380 First

Apparently Air France is a bit put off by the whole A380 delay thing and is "demanding" that it be the first European airline, ahead of Lufthansa, to receive the new aircraft. According to an article on Hemscott the delays mean that the schedule will not support a delivery for each airline in time for the Olympics in Beijing. So Air France is playing the home field advantage trump card...my bet is they will get their wish.

A Peek Into the Dark Side of Mergers

Negotiations between the merged US Airways and its two pilot unions trying to become one gives us a little glimpse at the dark side of mergers. Specifically the difficulties surrounding the effort needed to combine two unions into one big happy family. The new US Airways has been at this for months. The old America West pilots get paid more than the old US Airways pilots. America West pilots don't want to take a pay cut, US Airways pilots want a raise. The airline doesn't want to do anything that will increase costs. Everybody stand in a triangle and smack the person to your right. There, feel better?

There's a flaw I see in the union's position illustrated in this quote from Tania Bziukiewicz, a union spokeswoman and US Airways pilot:

"To force our pilots into a pay cut is ridiculous, especially at a time when we're making money," said Tania Bziukiewicz, a union spokeswoman and US Airways pilot."

"At a time when we are making money"? Bziukiewicz refers, of course, to the $305 million profit that the new US Airways posted last quarter. Good grief, one quarter is like 12 seconds in the life of an airline and $305 million dollars, unfortunately, is not a lot of money for an airline. I've posted about this before but it merits repeating, its too early to ask for raises. If it money you want then you need offer up concessions on work rules and benefits to offset it. I do not believe that there is room for any airline, Southwest included, to let costs increase at this time. The continued recovery of the airline industry requires a tight rein on costs.

The Old Pan Am is Finally at Rest

Ahhh Pan Am. One of the kings of "old school" airlines. One of the ruler of the skies when the words "glamor" and "mystique" could still be used in the same sentence as "airline". Did you know that the Pan Am globe logo was second most recognized in the world...just behind Coca-Cola. Yeah, they were that big.

Pan Am started their downhill run to bankruptcy in the 80's. Some say the airline's demise started as the industry began shifting. Others will tell you it was just poor management decisions. Whatever the case, their downhill slide to liquidation was accelerated by one of worst air disasters in that era when a bomb exploded on Flight 103 over Lockerbie Scotland. Finally on December 4th, 1991 Pan Am ceased operations. I remember browsing the web in the late 90's and reading some of the websites that had been started by ex-Pan Am employees. What caught my attention was the number of people that had worked for Pan Am their entire career...15, 20, 30 even 40 years. It became apparent to me that when Pan Am ceased a way of life went with it. If you're curious and want to learn more about what an airline of this size means to those who worked for it you should visit here or here.

Your physics professor will tell that a body in motion will stay in motion unless acted on by an external force. Pan Am was a very big body with a lot of momentum and the external forces acting on it took a very long time to stop it. Some 15 years later the final act came this week when the bankruptcy court approved final payments to be made to employees who were owed back pay and vacation pay. As is typical in these things those who are owed money will only receive about 5% of the total sum. Which illustrates what I believe to be one of the largest flaws in our bankruptcy system. The employees are the LAST in line to get paid and when they are its years too late at a fraction of what they are owed. Whatever...Pan Am is now at rest.

NOTE: The Pan Am name and logo has been sold three times since the original's demise. The Pan Am Connection is a small airline operating a few routes on the east coast between smaller airports.

American and Southwest Fly Into Union Airspace

Just a quick note to point out that both American Airlines and Southwest Airlines are headed into negotiations with their individual pilots unions. With all the attention being given to the flight attendant situation at Northwest its easy to miss quiet, civil negotiations. American and Southwest enter into these negotiations from different directions.

American Airlines comes at it as an airline struggling to see a profit again and still looking for every way possible to save money. American has already extracted pay cuts from their unions. Look for them to negotiate heavily for more flexible work rules to help them use crews more efficiently. Look for the pilots to shore up benefits and pensions. American and their unions have tended to butt heads in the past but the recent trend has been one of cooperation. That needs to continue.

Southwest approaches these negotiations having weathered a very long storm while continuing to grow and while posting profits. Southwest pilots are going to need to show some restraint here. It has been widely reported that the Southwest's profits have been possible only because of some brilliant fuel hedging decisions. This kept them in the black as fuel prices soared. As time has passed the strength of these fuels hedges have weakened. Fuel costs have retreated but no one expects them to stay there. Asking for large pay increases might not be the best thing for the long term good of their jobs. Southwest pilots, to their credit, have already granted the airline some of the most flexible work rules in the industry. I see this negotiation as tricky, you step back and wonder what more can be done? Both sides needed to keep the frugal Southwest spirit at the forefront.

Northwest Flight Attendants Set the Tone for Upcoming Meeting

The AFA-CWA wasted no time in setting the tone for the Sept 26 meeting between Northwest flight attendants and the airline at the National Mediation Board (NMB). In a statement today the AWA-CWA states they have asked the NMB to declare an impasses to invoke a 30 day cooling off period prior to a strike. Kinda throws a bucket of ice water on any warm fuzzies you might have had about this meeting next week doesn't it.

I'll point out the rhetoric the AFA-CWA is using because, again, I think its indicative of the desparation of their strike tactic.

"When management unilaterally cut flight attendant pay, benefits and work rules, they mocked the integrity of the NMB's role in promoting consensual resolution of labor disputes," said Patricia Friend, AFA-CWA International President.

So apparently the NMB should be offended by Northwest's actions and its the AFA-CWA's job to point that out? Once again they are casting a wide net trying to gather others underneath the umbrella of their "cause". Airline consultant Michael Boyd, who tends to say some pretty smart stuff has this quote regarding the AFA-CWA's position:

"It moves it closer to a resolution," said airline consultant Michael Boyd. "Frankly, I think the flight attendants have gotten stuck in a difficult situation. They may have maneuvered themselves into a corner."

Exactly.

Besieged at EADS/Airbus

As long as we are talking about Airbus and EADS today lets step back and try to summarize all the fronts they are battling on:

A380 Program: Delays along with recent departures of key individuals from the program

The less-than-amicable departure of long time partner BAE. BAE cites the A380 progam as a contributing factor in the decision to sell off their 20% interest

Depressed stock value (30% decrease since the beginning of the year) thanks in part to the A380 delays and unknowns with the A350 re-design.

The unexpected purchase of 5% of EADS stock by Russian investors and increasing pressure by Russia to gain influence at EADS. All this thanks to the aforementioned depressed stock value.

A350 redesign project due to demands from their customers that they do something to with their current long range aircraft product line. The project is still on the drawing board and only Aeroflot is committing to the aircraft so far.

Heavy competition from Boeing's 787 drawing interest and orders away from future A350 variants.

Increasing interest in the upcoming Boeing 747-8 as a alternative to the A380 causing airlines around the world to re-think their long term strategy.

EADS and Airbus have their hand full but I am not counting them out. Airbus has proven to be a very shrewd competitor to Boeing and has made some good decisions in the past. Unfortunate for them that several issues have coalesced at the same time forcing them to divide their efforts. Stay tuned...

A380 Loses Ground Again

Another delay on the A380 has been rumored for about 2 weeks now and today, finally, Airbus is confirming the rumors (Reuters article). What remains unknown at this point is the impact this delay will have on delivery schedule. Airbus parent EADS issued the following statement:

"Although the company's assessment is still under way, continuing industrialisation challenges with the wiring of production aircraft have been identified and are being tackled," EADS said in a statement.

"Consequently, from what is known today, there will be further delays."

This is all a very nice way of saying that we screwed up the wiring again.

Airbus claims they will still deliver the first A380 to Singapore Airlines in Dec 2007 and that delays will impact deliveries beyond that. My bet is even that delivery is in jeopardy at this point.

Lufthansa Compensates for Late A380

Lufthansa announced yesterday that they are placing an order for 5 A330 to "compensate for the delayed entry into service of the A380,". To me this lends credence to the persistant rumor that additional A380 delays are going to be announced after EADS completes its audit. The A330 will be delivered in 2007 and 2008 to service routes that Lufthansa has planned to handle with the A380.

International Routes are all the Rage

I have posted several times that the trend will be for legacy carrier in the US to build their international routes. Seriously, I said it here, here and even way back here and here. Why? First, they don't have much in the way of competition from low cost carriers. They are competing with other legacy carriers so the playing field is mostly level. Second, international routes have a better profit margin right now when compared to domestic routes where they face intense competition from low cost carriers.

China is one of the big battle grounds for international expansion. Not surprisingly the list of competitors is exclusively made up of legacy carriers. Northwest Airlines, American Airlines, Continental Airlines and United Airlines are all making their cases to the government (and the public) on why they should be chosen for new China routes that are will be awarded. The Cranky Flier has a really nice summary of how this competition is lining up and who may have an advantage. Go check it out.

Aeroflot Decision on Next Aircraft Definitely Not Indefinite

Apparently "indefinitely" is a lot shorter time span than I thought. Just last Friday Aeroflot said the decision on their next aircraft purchase was on hold indefinitely. Then Monday an Aeroflot shareholder decided it made good business sense to lock in the deal for the Boeing 787. But that deal was not blessed by the Russian goverment who are trying to leverage some influence with Airbus parent company EADS. Today, Aeroflot is announcing that they will purchase both the Boeing 787 and the Airbus A350. The purchase would be staggered with 22 787s being delivered 2010-2012 and 22 A350s from 2012-2016. Apparently this decision has appeased the Kremlin and both deals will receive the endorsement of the Russia government.

Airlines and the Aging Aircraft

Reuters posted an article today regarding growing resistance to the FAA's efforts to impose new inspections on aging aircraft. That the FAA would be working on an expanded aging aircraft program should not be a surprise. After all, airlines, aircraft manufacturers and the FAA were taught a brutal lesson on the effects of structural aging and corrosion when an Aloha 737 lost a chunk skin while airborne back in 1988. So the idea of trying to head off future issues related to aging aircraft would certainly be prudent. Why would the airlines fight it?

It's not just an argument about cost which, as usual, the FAA is under-estimating. However well-intended their efforts are the FAA needs to step back and review how these good intentions turn into needlessly complicated nightmares. The airlines don't want to avoid the issue. In fact, addressing the issues head on normally results in more reliable aircraft. Airlines simply need programs that can implemented and managed efficiently.

Reuters is also missing a couple pieces of the aging aircraft puzzle. It's not just about aging structural elements. They should be talking about aging wiring and aging systems as well. These will become increasingly important as well.

Say Hello to my Blogging Friends

I'd like to announce the addition of a couple of new blogs to the Links section. Like me they are focused on the airline industry to an almost unhealthy degree. Make sure to stop by their blogs when you get the chance, there's some good stuff out there...

The Cranky Flier
Aviation Daily on Airports
As The Prop Turns

Drop me a line if you've got a web page or blog focused on airlines, aviation or even aircraft and are interested in trading links. The only test is that you must be able to decrypt the following email address: stateoftheairlines at gmail dot com

Aeroflot Decides to Keep its Place in Line

A 30% Aeroflot stakeholder and seriously rich guy Alexander Lebedev decided that Aeroflot needed to keep there options open on a deal to by 22 787 from Boeing. As I posted just yesterday politics, finance and business plans are swirling at the Russian airline as they try to decide on their next major aircraft purchase. The deal on the table with Boeing is a sweet one with a reported $10 million dollar discount being offered per aircraft. Mr. Lebedev decided to step up and secure both the terms and Aeroflot's place in the delivery line before the terms of the offer expired.

Hmmm...lemme see here, 22 multiplied by $10 million per aircraft...hey, that's a pretty big chunk of change that Aeroflot just saved by making this deal now. This is a good business decision for Aeroflot. Secure the deal and the delivery slots now before the deal gets away. If Russia pressures the carrier into buying Airbus A350s in an attempt to build influence at EADS they should be able to easily sell off these aircraft even before they are delivered. Very shrewd. You will also note that Boeing is not doing their tradition happy dance normally associated with a $3 billion (with a "b", billion) aircraft deal. Another sign that this deal is anything but truly done.

When is Cheap Fuel Bad News?

After months of moaning about fuel prices every airline should be turning cart-wheels as fuel prices dip. Oddly enough, if you're American Airlines, United Airlines or Continental Airlines those lower fuel prices are not great news because you hedged on fuel last quarter at costs that are actually higher than current. Reuters has a good article that lays it out nicely. In summary, the oil companies are thanking these airlines for pre-buying a bunch of fuel at peak prices. So the benefit of this respite in fuel prices is somewhat muted for American, United and Continental. I was surprised to see Continental got caught in this gamble. Continental has stated in the past that they simply do not hedge on fuel. Smackdown quote goes to CreditSights airline analyst Roger King, "It was a complete blank-out on the basics of business management, Business school 101 says you have to hedge uncontrollable costs." Yeah...what he said.

US Airlines Cash in on CRAF

Every year the Pentagon contracts with civilian airlines to make sure they have adequate reserves of passenger and cargo lift when their needs outstrip their own lift capabilities. This is the Civil Reserve Air Fleet, CRAF, and the contracts are big business, $2.3 billion worth of big business this year alone. Competition for these contracts is normally pretty intense. The contract winners have been announced for this year and I'd like to offer up a personal congratulations to the folks at Evergreen Internationl Airlines for pulling in a $1.1 billion contract along with their partners North American Airlines. They, along with FedEx pulled down the lion's share of the dollars. Nice to job to the little guys like MN Airlines (Sun Country) and Grand Holdings (Champion Air) for getting a small slice of the pie too. Every bit helps.

Merger Success at US Airways Creates Tension

Odd that the unexpected success of the America West-US Airways merger is now creating tension amongst the rank and file. But articles in a couple of Arizona papers are saying just that. Their success, along with posting a $305 million profit in the second quarter, has its unions holding their collective hands out looking for a raise.

Note to the folks at the "new" US Airways: Slow down, get a grip. The airline makes what, in prespective, is a very small profit for an airline of this size and employees think its time for a raise. Do you folks read the paper? What gives you the impression that the airline recovery has taken full and complete hold. This recovery is riding a tenuous bubble for semi-favorable fuel prices and surprising restraint on the part of airlines to continue to constrain capacity. Neither of these factors have lasted for very long in this industry. Yes, you all took pay cuts, big ones, to keep your jobs. My suggestion is that you wait a little longer before trying to extract your pound of flesh from the hand that feeds you.

Lawsuits Stop Construction at Blue Grass Airport

A judge has ordered that construction be halted at Lexington's Blue Grass Airport, site of Comair's Flight 5191 accident. Lawyer's representing victims in the accident were concerned that key evidence for their cases could be altered by the construction. This is a tough situation. This construction needs to be completed as soon as possible but victims rights need to be upheld. Thankfully the judge has ordered that all expert review of the airport need to be completed in 30 days. I suppose this is the best compromise for all involved.

Parisian's Searching for...Cleveland?

There are 4 people is Paris right now that are just super happy because Continental has announced non-stop service between Cleveland and Paris. In the meantime folks in Cleveland dusted off their world maps to see just what this means to them. Alright...alright...I know, that was unwarranted and just a bit mean, insert sarcasm tag here. This should actually be a good move for Continental as it opens up Europe direct for a lot of folks that were used to bouncing through a hub to get there. Even better for Continental, international flights are where the money is at right now. So maybe they can drive some extra domestic traffic to Cleveland AND grab some extra gold by hauling folks to Paris from Cleveland.

Editors Note: First time using Paris and Cleveland in the same post...EVER.

China's Low Cost Competition

US airline competing for domestic business need to consider that things could be even tougher if they had to compete with trains. ATW reports China is working hard to expand their rail network and the recent opening of the new Qinghai-Tibet line has forced airlines to reduce fares by 55% to compete. Consider also that these aren't just your run-of-the-mill choo choo trains...these are the trains capable of up to 300 kph (that's 186 MPH my US friends). As China's rail growth continues the pressure for their national airlines to compete for that domestic business is going to increase dramatically. US airlines are lucky that, save for a few regions, they need only compete with other airlines.

Aeroflot Delays Decision on the Next Big Thing

Aeroflot had been poised to make a $3 billion commitement on 22 long range aircraft until it announced late last Friday that this decision would be delayed "indefinitely". The Boeing 787 was seen as a front runner since its most direct competitor, The Airbus A350 is still on the drawing board without any buyers yet. Spin control has local media reporting that Aeroflot doesn't really know what they want. But it seems to me there is a fair bit of politics running amok here. Reuters is reporting that Russia is in "bilateral talks" with the U.S. as it tries to join the World Trade Organization while a Russian bank has just purchased a 5% stake in Airbus parent company EADS. According to the article the Kremlin has been seeking some influence in the business decisions at EADS. So what will win, world politics or state interests?

The Gavel Falls Yet Again on Northwest Flight Attendants

The latest effort by Northwest Airlines flight attendants to invoke their right to strike has once again been thwarted. The courts have overturned the decision made by the bankruptcy judge and have granted Northwest Airlines an injunction preventing its flight attendant from striking. Simply put, No Strike for You!

I think you can measure the desperation in the efforts of the AFA-CWA on behalf of the Northwest attendants. All you need to do is look at the rhetoric in their press release sporting the catchy title "Court Tramples Right to Strike". They have resorted to wholesale condemnation of the legal system and corporate greed. They paint broad strokes in attempt to spread this issue to the protection of the "working family" and "...not only for Northwest flight attendants, but for all flight attendants who will walk in our footsteps". You see words like "fight" and "crusade" sprinkled in for good measure. I think its safe to say that this is the end game for their strike tactics.

Update: Please don't confuse the opinion in this post with support for the tactics that Northwest is using on this or any other union. While I do believe pay cuts are necessary I believe the airlines are given far to much latitude under bankruptcy to impose these cuts. I believe this ham-fisted approach is unwarranted and ultimately counter-productive.

Every Penny Counts When it Comes to Fuel Costs

Everybody knows that fuel costs have bashed the airline industry...its been beaten into our heads repeatedly. So when the military launches a project to test a new 50/50 blend of synthetic fuel/jet fuel the airlines obviously are going to sit up and watch closely. What shocked me in this article was some of the statistics that the Airline Transport Association have put out regarding the true impact of fuel costs. Here are some fun facts:
-Jet fuel jumped from an average of 75 cents a gallon in 2001 to $2.01 last year, when U.S. airlines spent more than $33 billion on fuel...
-Fuel now accounts for about 30% of the industry's operating costs, compared with about 10% five years ago
-Estimates every penny-a-gallon increase in fuel prices adds $195 million in overhead to the industry. Many airlines are passing along the cost, up to $100 for each passenger in some cases.

Its noted in the linked article that the cost to produce this synthetic blend is high but if prices remain at $60+ per barrel then it may make economic sense. Every airline in the world has there fingers crossed.

Airbus Offers Transparent Response to A380 Delay Rumors

Airbus is attempting to downplay the possibility of additional delays on the A380 amid rumors that broke loose all over the internet. Per AP article Airbus claims "...it is too early to say whether the troubled A380 superjumbo jet faces further production hitches, after a minority shareholder said another delay is likely." That minority stock holder would be none other than 20% stakeholder BAE. The same BAE would is trying to sell off their 20%.

I'd like to point out that nowhere does Airbus say "we have no reason to believe another delay is imminent". All they are really saying is "The audit which EADS is doing at Airbus on the A380 is still ongoing." This evasive language along with the departure last week of A380 project lead Charles Champion (awesome name...seriously...how could you not kick ass with that name) tells me that BAE is likely spot on with their prediction of another delay. Time is money baby.

For Airlines Sometimes Down is Up

Here's another good article from Reuters that pulls together alot of the factors at work in the airline industry January through July of this year. First off, the number of flights flown domestically and internationally is down 5% compared to the same period last year. The reduction in domestic flights is actually greater than 5% since international flights actually increased. Despite the reduction in flights revenue is up 1.5% compared with the same period last year. Yes folks, capacity control works.

A380?...Please Standby

The wounds from Airbus' June announcement that delivery of its A380 would be delayed by seven months have hardly healed and now more trouble looms large. ATW's is reporting that another delay is imminent and some sources are saying the delay could be up to one year. Brutal timing for Airbus parent EADS who are (a) not parting amicably with former partner BAE and (b) trying to attract interest from new investors.

I say we nickname the A380 "The Albatross" because the aircraft is quickly becoming just that, an albatross around their neck. Editor's Note: If the whole albatross thing makes no sense then I invite you to click here for a quick explanation. I still believe that the A380 was not a good idea to begin with. Not because I thought it would be so difficult to build but because I don't think the business model makes sense.

Here are some blasts from my past rants on this aircraft
Is this a viable aircraft?
Will the cost model prove sustainable for this aircraft?
Will enough airports modify their runways and facilities to take the aircraft?

Courts to Northwest Airline: 25 Percent Paycuts are a Lockout

The Minnesota Court of Appeals has granted Northwest Airlines mechanics who went on strike last year the right to claim unemployment benefits from the state of Minnesota. While this is really good news for some 1600 mechanics that's not what really drew my attention to this story. What caught my eye was the reason the court made its decision. The court determined that the 25% pay cut that was imposed by Northwest Airlines constituted a lock out. Now that is interesting. Not because it could help the cause of striking mechanics but because of the timing of this ruling in conjunction with an imminent strike by its flight attendants for the same reason, pay cuts.

Things Look Bright for Sun Country Sale

An arbitor has cleared the sale of Sun Country Airlines from one privately held hand to another. Majority investors are selling their interest in the airline to businessman Tom Petters. Yes that Tom Petters, as in Petter's Warehouse, The Federated etc etc. The deal, whose terms are not disclosed, had been held up by minority investors who felt they had the right to contest the sale and make a competing offer after reviewing the books. Well the arbitor told them "ummm not so much" so the runway is cleared for Mr. Petters. It remains unknown if the new owner has any plans to alter Sun Country's current business plan.

Congratulations Tom, hope all goes well because the Twin Cities desperately needs the competition to drive fares down. By the way do you know the best to be a millionaire owning an airline? Start off a billionaire.

Northwest Airlines Can Use Its Compass

Compass..as in Compass Airlines. Northwest Airlines' new subsidiary received the go ahead from the Department of Transportation to start operations. Compass will be the new commuter airline for Northwest after the "Big Red Tail" unceremoniously dumped its long time partner Mesaba Airlines. This along with Northwest using its bankruptcy to halt all payments drove Mesaba to bankruptcy as well. The relationship between the two was often contentious especially when it came to wrangling with the pilot's union to decide which flights Mesaba could actually operate for Northwest. Reports indicate that Northwest intends to start using Compass next March to fly smaller aircraft ranging from 34 to 69 seats.
This is starting to become a trend. JetBlue and Frontier are both planning similar ventures. Could this be the pattern for the new age airline?

With Aircraft Accidents its the Little Things

The recent Comair accident illustrates a point that was made to me early on in my educational process in aviation. Aircraft accidents are not normally caused by one large single point of failure. In most cases it is an accumulation of small things where the dots connect to become an accident. With the Comair accident we see just that. Taxi way construction, runway lights, tower staffing, airport manuals...I could go on. One of these things by itself would not likely cause that aircraft to go down. But when the dots connect you get a tragedy.
If you're in the industry I implore you...remember that the little things matter. Don't let the dots connect. As has been said:

Aviation in itself is not inherently dangerous. But to an even greater degree than the sea, it is terribly unforgiving of any carelessness, incapacity or neglect.

Northwest Flight Attendants May Create Their Own CHAOS

A recent update to the Northwest flight attendant union website is once again encouraging its members to rally to behind plans for a CHAOS (Create Havoc Around Our System) strike. The approach should worry any flight attendant at Northwest that wants to keep a job. Union leadership believes a strike will, in their own words, "level the playing field"

"We remain committed to reaching a negotiated agreement with the company regardless of the hurdles along the way," said Mollie Reiley, Interim Master Executive Council President. "However, at this time it appears that the company is more focused on their legal strategy than meaningful discussions. Until the time comes when they are willing to sit down and negotiate a fair contract, it is necessary that we level the playing field and exercising our right to strike does just that."

I disagree. In the industry today the bankrupt airline has a significant advantage negotiating with any union, strike or not. The trail left by US Airways, United and Delta clearly illustrate this. Yes, Northwest has claimed repeatedly that a flight attendants strike could put the airline out of business. That's necessary language to get the bankruptcy court to delay a strike. In the meantime Northwest is (and has been for months) training any office worker that moves to be a flight attendant. Not an ideal situation but it could certainly blunt the effect of a strike. Either way flight attendant jobs are at risk if (a) the airline can survive without them or (b) the airline folds.

Not Taking "The Path to 9/11"

Just a note on ABC's decision to create "The Path to 9/11". First my disclaimer, I did not watch it. I refused to watch it based on early info that the show was, at best, a dramatization based on the events of that day. Reviews of the show the day after bear me out.

Simply put ABC should have never put out a dramatization for "entertainment" (ie profit) that has anything to do with a national tragedy the magnitude of 9/11. It dilutes the importance of the event, it smears fact with fiction, it belittles those who lost so much that day. As I understand it their portrayal of American Airlines employees was particularly irresponsible. No amount of disclaimers on the part of ABC to call this a "dramatization" is acceptable. It is shameful for a national media outlet to even consider putting this show together. ABC...stop...engage brain...then act.

Just How Important Is the 787 to Boeing?

If you're wondering how important the 787 is to Boeing then just take a look at the lengths they are going to. Faced with exactly zero companies in the world capable of quickly moving massive pieces of their 787 between their worldwide partners they looked to themselves for the solution. What I am referring to is the 747-400CL which just completed its maiden voyage. The aircraft looks like a pregnant version of the familiar 747 and has three times of the cargo volume of the -400 variant. Folks, that is massive...the extended barrel is 18 inches wider that the Airbus A380. The project calls for three of these aircraft to be created. Boeing will use the aircraft to shuttle large assemblies between its facilities in Japan, Italy, Kansas, South Carolina and Washington.

Its a major undertaking to create and certify a special built variant of an aircraft but the 787 is that important to Boeing. They intend to show that an aircraft can be built using worldwide partners for major assemblies. They believe that the 787 will shape the future of Boeing. Per Boeing's website the 377 firm orders are valued at $59 billion so...yeah...its THAT important. Thus the 747-400CL is born.

Pausing to Reflect on 9/11

Since I focus this blog on airlines I would be remiss if I didn't encourage the 5 people who read this to pause and reflect on that day. It was a sad awful day, so many killed, so many lives disrupted. Do you remember where you were?

I remember arriving at work not even knowing what had happened yet. I had listened to a CD on the way to work. Rush-Retrospectives, CD 1, I had just finished listening to Freewill when I shut off the car and headed into the hangar. I couldn't tell you what I listened to last Monday yet I remember distinctly how that day started.

I remember first hearing the news on the TV as I entered the break room and saw the faces...one tower already smoking. The sickening feeling as the second tower was hit...this was not an accident. Then the Pentagon. Then the brave souls who averted a greater tragedy by sacrificing themselves over Pennsylvania.

I remember the odd silence at the airport as we stood in the hangar, our jets having returned from the gates to park. No jet engines running, no props beating the air, no movement on the ramps and taxi ways. Just quiet. The recognition that nothing about our industry would ever be the same.

Five years ago...the memories and the sensations of the day have not dulled for me.

Remembering is important. My industry has been used as a weapon against us by those who sought to bring down not just buildings but a country and a way of life. They failed on the whole but the damage to my country, my industry and so many lives was devastating. Remembering sharpens us. Remembering keeps us focused on what we need to do in the future. It keeps us committed to staying on the tougher path...because it is what we must do.

More on 9/11 via Technorati

AirTran Backs Off Third Quarter Estimates

AirTran had a pretty good 2nd quarter (ok it was the best one in their entier 13 year existance) and they put up record numbers in August. Despite all of that they are revising their numbers down for the 3rd quarter of this year. Even more, they are looking to reduce capacity in 2007-2008 based on what they view as softening demand. This seems to be on par with expectations that the industry, as a whole, needs to keep capacity constrained to maintain some leverage on pricing.
All of this makes Northwest Airlines recent recall of their entire flight attendant work force seem a little out of place to me.

OPINION: Northwest Flight Attendants Need Some Spin Control

Note to Association of Flight Attendants representatives at Northwest Airlines, start proofing what you type, watch what you publish, ask your members to be careful what they say in a public forum. I do appreciate the difficult times you face and the pay cuts that are staring you in the face. Not fun...battle on. But the following statement should not have gotten out the door:

"Most of us don't even care about the survival of NWA anymore. How can a company survive under these toxic conditions," flight attendant Kathryn Swarts wrote in a letter to the judge overseeing its bankruptcy.

I think the majority of folks still employed at Northwest Airlines might have an issue with that statement. It comes across as terribly self-serving and isolates you from what should be the common goal...the survival of an airline for the benefit of all who make their living at that airline. Even if that quote is being taken out of context in this article you need to realize that is the risk of saying it in the first place.

Rumours of a New Canadian Carrier

Speculation regarding the possibility of a new Canadian airline is starting to spin up based on an announcement made by officials at Hamilton International Airport yesterday. Interesting news based on the recent announcement that CanJet would pull out of scheduled service to return to its charter only roots citing increasing business risks. Just last year JetsGo went bankrupt with little notice. But there may be an opportunity for another airline, especially a low cost operator, based on the improving numbers coming from WestJet and Jazz, even if it does appear to be at the expense of Air Canada.

NEWS: Fine...Let's Talk About United and Continental

Everybody's buzzing about rumors of a merger between United Airlines and Continental Airlines so I will weigh in too. Simply put, I think its a bad idea for Continental. Yes, in terms of routing structure the two airline look complimentary. But I think United would simply be a burden on Continental. United still brings a load of problems despite their supposed recovery. Continental on the other hand is managing fairly nicely on their own. One has to admit that United's international routes are a tempting target. I just think those international routes come with too much baggage attached.

One other note. Naysayers to the merger rumors also point out the difficulties of trying to combine unions and its true this can sap the energy in an organization. But America West and US Airways are showing that it is possible and perhaps even a little easier given the increased leverage airlines have in negotiating with the unions.

No Capacity and Liking It

Reuters dropped a good article citing evidence that airlines will likely keep constraining capacity on domestic routes. However glacially the airlines moved they have finally started to arrive at their destination...that being price control via reduced capacity. And its not a new idea. Even I was talking about it over a year ago. ATW had a really good article in June of this year, the title says it plainly enough. "Its the Capacity, Stupid" 'Nuff Said. A final note, capacity constraint does not apply to international routes. The gloves are off as the major airlines continue to press the advantage on their international routes where they are finding higher margins to boost the bottom line.

NEWS: Aloha Airlines Goes Old School on Board Appointment

OK, I'll admit I did not think there would be anything new to post regarding Aloha Airlines at this point in 2006. Why? Because I felt very strongly that they would be out of business. Aloha's CEO, David Banmiller, has a long history of shutting down airlines (Air PDX, Carnival, Sun Country, Air Cal) so I felt the writing was one the wall. But maybe he's onto something here, maybe Aloha has a shot. His latest move is brilliant as Aloha named Gordon Bethune to its Board. Mr. Bethune has got some serious clout. He helped orchestrate Continental Airlines return from the edge of the abyss at a time when nearly everyone had written them off. Aloha can use that kind of expertise on their side...the battle for the islands is not over yet!

NEWS: Surprise! Northwest Needs You

A Northwest Airlines memo announcing plans to recall of all of its furloughed flight attendants and some pilots managed to leaked out yesterday. This is fantastic news for most of these folks and an indicator that business for Northwest is looking better than expected. It is worth noting that there is a decent percentage of flight attendants who took voluntary furloughs. Instead quitting they chose to lay themselves off, maintain a few benefits and see how things went. Northwest has been carrying the cost of keeping these flight attendants current on training, providing flight benefits etc. Now their hand is forced and I wonder if that is part of Northwest's plan. More than one furloughed attendant I have spoken to has mixed feelings about going back to work at this point. Finally, one wonders how this will impact on-going strife between the airline and its flight attendants as they stuggle to hammer out a new union contract. Still its hard not to see this news leak as a positive overall.

NEWS: Seeking a New Frontier

Frontier announced, ala JetBlue, that they too plan to purchase regional jets. I've got mixed feelings on the strategy. The low cost airline template usually means picking a (as in one) fleet type and sticking with it. Different inventories, manuals, training needs can all drive greater costs. But Frontier's approach is different than JetBlue's. Frontier is saying that they intend to create a subsidiary to operate the RJs. That could be an important difference. The thing I like about this idea is that Frontiers headquarters, Denver, is surrounded by on all sides by what are normally under-serviced smaller airports. There should be a good opportunity for them.