State of the Airlines

State of the Airlines is Now Aviation Views

2007-01-03T11:55:00.000-06:00

Make sure to update your bookmarks and RSS feeds to point to the new site...

Aviation Views

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MAY I HAVE YOUR ATTENTION PLEASE

2007-01-02T18:59:00.000-06:00

State of the Airlines has become Aviation Views

Yes, yes, all 5 of you readers. I have finally gone and done it…I got a domain name and with the help of my friend Brian I am up and running. Blogger had treated me well but “other” issues were preventing me from posting when I wanted to…so its off to Aviation Views. Much has happened with both airlines and aviation in general so I am looking forward to getting back into the groove.

An Ominous Start to Vacation?

2006-10-13T21:26:00.000-05:00

Well it took all of about two seconds to have our first vacation miscue courtesy of Orbitz. See I used Orbitz to book the tickets and did my seat selections via Orbitz as well, seats 5A through 5D...perfect. WRONG!

I attempted to use Frontier's website to get boarding passes to no avail. So I called...turns out Frontier does not release rows 1-7 and exit rows for seat selection until the day of departure. Thus my row 5 seat selections via Orbitz were rejected. Did Orbitz let me know this...nnnnnnnnooooooo. LOSER!...MOVE ON!

Get your crap together Orbitz, if your going to offer seat selection it should play by the rules the airlines have in place. If it fails you should notify the person who just dropped a chunk of change via you website. If you simply cant make it work accurately then don't offer it. Seat selection is kind of a big deal to those of us travelling with kids.

For Frontier's part I got the impression early on in my conversation with the representative that she annoyed that I had the nerve to mention Orbitz. "I'm sorry sir, I have no idea how Orbitz works" "You could try to call back later to see if you can get your seat selections". I know that doesn't read too bad but trust me...it was delivered with some snap.

I've sent an email to Orbitz, I'll report back on their response.

Vacation is Calling and I am Answering

2006-10-13T21:17:00.000-05:00

New posts will be sparse for the next 8 days because me and the whole fam-dam-ily are on vacation. I'll be back with trip reports and other stuff as appropriate soon. I am sure all 8 of you will find something else to read in the interim.

Boeing 757's are Still Sexy

2006-10-12T14:12:00.000-05:00

God help me but airplanes are cool. I freely admit that there are certain aircraft that I classify as "good looking" and the Boeing 757 is one of them. I don't know what it is...maybe the combination of a long sleek hull with big engines hanging off the wings...but its one cool flying machine made even cooler when Northwest put winglets on them.

Northwest has big plans for these putting the 757 into a not so traditional role, international flying. The Cranky Flier has a good update on this as does IAG here. Photo credit goes to IAG as well. Nice!

Politics Complicate the Future at Airbus

2006-10-12T08:08:00.000-05:00

Its clear now that politics are going to play a huge role in any corrective action taken by Airbus. As the French and Germans prepare to meet today its plainer than ever. Rumors have surfaced that Germany, yes...the country, is considering buying a stake in Airbus parent EADS in an attempt to guarantee a hand in the decisions regarding Airbus. This comes in the face of other rumors that five German based Airbus facilities could be sold off. Meanwhile, the new head honcho at Airbus, Louis Gallois, is trying to assure everyone that everything will be handled fairly in terms of national interest. Finally EADS tells us to not expect any decisions on restructuring at Airbus for the next few months. That which puts us into 2007 before we'll hear how Airbus plans to pull out of this A380 induced nose-dive. Sounds like great politics but poor business strategy to me. Airbus needs to start making decisions now now now.
The press is drawing comparisons between Airbus' current dilemma and the problems that faced Boeing in the mid to late 90's. Its a fair comparison. The difference is that Boeing was and is a business first and a major national manufacturer a distant second. Boeing was able to enact its recovery plans without far less worry for which countries were involved (though political interests and alliance did work in the background). The unprecedented level of multi-national outsourcing on the 777 and the upcoming 787 are evidence of that. Generally speaking, governments are not good at being successful businesses. The government interests in EADS and Airbus need to quit meddling and let Airbus be a business.

Virgin America Introduces Jefferson Airplane

2006-10-12T07:30:00.000-05:00

Virgin America's attempts to gain approval to operate in the US may still be in a holding pattern but they are working the campaign trail. The airline unveiled its first aircraft, an A320, at San Francisco International (SFO) on Wednesday duly name "Jefferson Airplane" in honor of its San Francisco roots. Virgin America even managed to get Grace Slick to come out for the presentation of the aircraft.

Controversy still swirls regarding ownership of the airline despite the fact that they can clearly show that Virgin brands kingpin, Richard Branson's share is 25%, the maximum foreign ownership allowed under US law. It seems that the US Dept of Tranportation is taking its sweet time in the approval process. One reason for that is that several US airlines are bending the ear of the DOT and every Congressman that will listen and these airlines do carry some clout in Washington DC. One only needs to look as far as the recent Wright Amendment compromise to see that clout in action. Its a fair bet that they would all like to see Virgin America either fade away or have Virgin's start up delayed as long as possible while they shore up their defenses. Terrific post here. But Virgin does not appear to be going anywhere as they are poised to launch the most heavily captilized start up airline in US history. I think the investors backing the airline realize Virgin's name and their ability to generate a lot of swagger and PR make sticking with the process a good bet. Certainly high risk but high reward if it works. Will Virgin America be a west coast version of JetBlue?

PS. Hey, when's the last time you heard "Grace Slick" and "virgin" in the same sentence...yeah...that's what I thought.

How the Dots Connected at Helios

2006-10-11T07:29:00.000-05:00

Investigations into the August 2005 crash of a Helios 737-300 have been completed and finding revealed (ATW). Once again we find that is was not single large fatal error but a collection of small things that led to a tragedy, the dots have once again been connected.

Boeing: "ineffectiveness of measures taken by the manufacturer in response to previous pressurization incidents in the particular type of aircraft."

Helios, now Ajet Airways: found to have "deficiencies in...quality management and safety culture."

Helios Maintenance: "Maintenance workers were at fault for failing to return the pressurization mode selector to the "auto" position after performing nonscheduled maintenance.

Helios Pilots: "not recognizing the cabin pressurization switch's incorrect setting before takeoff

Helios Pilots: ""nonidentification" of warnings once the plane was airborne"

Dot to dot to dot...the crew passes out from hypoxia due to the lack of pressurization on the aircraft and after 90 minutes on auto pilot, fuel exhausted, the engines flamed out. The aircraft descended rapidly and crashed into hilly terrain just 33 km from Athens Airport killing all 121 people on board.
So there they are, the dots connected and the accident happens. According to the report new policy and procedures in place but it sounds like a corporate culture needs to change too. It bears repeating: the little things matter.

Airbus CEO Resigns...Really...I'm Serious This Time

2006-10-10T07:21:00.000-05:00

EADS has finally announced that Airbus Chief Exec Christian Streiff has well and truly resigned and that his resignation has been accepted by EADS and that his replacement will indeed be ex-Aerospatiale and current EADS co-chief exec Louis Gallois. In other words, everything that EADS and Airbus tried to refute over the last few days has turned out to be true. Everything...seems like a lot of wasted effort. Speaking of wasted efforts Streiff's departure after a mere 100 days should be viewed as an alarm that grows louder everyday. Consider Streiff's parting shots given to France's Le Figaro newspaper:

"I hope that (my resignation) will provide a salutary shock that forces a rethink about how Airbus is governed,"

"The organization and governance of EADS have as major objectives the preservation of a delicate balance between men, power and positions," Streiff told French daily Le Figaro on Tuesday. "This formula can work in normal times, but it is not appropriate for a firm that is going through a serious crisis."

the "governance of Airbus" would not allow his cost-cutting plan to succeed. "It is not a problem of men," he said, explaining that he personally had no issues with Gallois or EADS co-CEO Tom Enders. Instead, Airbus suffers from "a problem of structure," he said, asserting that EADS needs to give the manufacturer more autonomy to make decisions and carry out initiatives. He added that Airbus's production facility in Hamburg, where A380 assembly is centered, has "problems" and is the company's "weak link."

Normally I stay away from "industry" sources but they were all dead on regarding this situation so I will offer up this commentary:

An industry source who closely watches EADS said Streiff's position had become untenable after he exposed deep flaws in Airbus's industrial methods and raised the prospect of sensitive job cuts without adequate political cover.

And therein lies the rub. Streiff apparently made the mistake of offering his honest assessment when he called the Hamburg Airbus plant as "the weakest link" in the A380 production process. A smart business assessment, perhaps. A political bomb, absolutely.

My read on Streiff's departure is that the mix of business and politics at Airbus/EADS made the recovery of the A380 program impossible to achieve in the timeframe being demanded. Faced with an inability in enact the plans he felt necessary to bring about the needed changes Streiff seems to have seen the writing on the wall.

The funny thing is that time may bear out Streiff's assessment. New Airbus head Gallois has wasted no time in stating that their will be job cuts, its his first day on the job folks. He also states that cost-cutting will be evenly distributed between French and German operations. Take careful note, Gallois did not say that job cuts will be evenly distributed, he said cost cutting measures...the two are not necessarily equivalent. People...Streiff is the third CEO to depart Airbus since May 2005...maybe he's not the first to recognize the deep issues at Airbus.

UPDATE 5 - September Airline Results Extravaganza

2006-10-10T07:15:00.000-05:00

Here's a quick summary on all the airline results that I have seen so far:

AirTran
Sept RPM=950 Million (+11.6%) Load Factor=61.8 % (-9.4) ASM=1.5 Billion (+28.6%)
YTD RPM=10.4 Billion (+24.7%) Load Factor=74.1 % (-.2) ASM=14.0 Billion (+25.0%)

Alaska
Sept RPM=1.4 Billion (+5.9%) Load Factor=73.6% (+1.2) ASM=1.9 Billion (+4.2%)
YTD RPM=13.6 Billion (+6.0%) Load Factor=77.5% (+.9) ASM=17.5 Billion (+4.7%)

American (without American Eagle)
Sept RPM=10.6 Billion (-1.4%) Load Factor=75.5% (-.7) ASM=14.0 Billion (-.5%)
YTD RPM=106.2 Billion (+1.1%) Load Factor=80.5% (+1.8) ASM=131.8 Billion (-1.1%)

ATA (Scheduled Service)
Sept RPM=299.0 Million (-37.6%) Load Factor=74.5 % (+3.6) ASM=400.0 Million (-40.6%)
YTD RPM=3.1 Billion (-43.4%) Load Factor=80.0 % (+10.2) ASM=3.8 Billion (-50.6%)

Continental (Mainline and Regional)
Sept RPM=6.9 Billion (+11.5%) Load Factor=78.6% (+1.2) ASM=8.8 Billion (+9.9%)
YTD RPM=67.7 Billion (12.6%) Load Factor=81.0% (+1.7) ASM=83.6 Billion (+10.2%)

Delta
Sept RPM=9.1 Billion (-3.4%) Load Factor=74.6% (+1.5) ASM=12.2 Billion (-5.4%)
YTD RPM=88.2 Billion (-4.5%) Load Factor=78.8% (+1.5) ASM=112.0 Billion (-6.2%)

Frontier
Sept RPM=616.5 Million (+11.3%) Load Factor=67.6% (-3.4) ASM=911.6 Million (+17.0%)
YTD RPM=6.4 Billion (+17.7%) Load Factor=77.8% (+1.4) ASM=8.2 Billion (+15.7%)

Hawaiian
Sept RPM=548.8 Million (-4.0%) Load Factor=83.1% (-6.0) ASM=660.3 Million (+2.9%)
YTD RPM=5.1 Billion (+2.1%) Load Factor=86.8% (+0.1) ASM=5.9 Billion (+2.0%)

JetBlue
Sept RPM=1.6 Billion (+8.2%) Load Factor=72.6% (-5.1) ASM=2.3 Billion (+15.8%)
YTD RPM=17.5 Billion (+16.5%) Load Factor=78.8% (+1.5) ASM=21.3 Billion (+22.9%)

Northwest
Sept RPM=6.2 Billion (-5.5%) Load Factor=81.3% (+1.3) ASM=7.6 Billion (-7.1%)
YTD RPM=59.1 Billion (-6.5%) Load Factor=84.7% (+3.0) ASM=69.8 Billion (-9.8%)

Republic
Sept RPM=534,827(+49.0%) Load Factor=66.9% (+1.9) ASM=799,018(+44.7%)
YTD RPM=1.8 Million (+56.8%) Load Factor=72.9% (+4.7) ASM=2.5 Million (+46.5%)

Spirit
Sept RPM=299.0 Million (+15.0%) Load Factor=70.0% (-2.4) ASM=427.0 Million (+18.8%)
YTD RPM=3.4 Billion (-4.0%) Load Factor=72.4% (-1.0) ASM=4.3 Billion (-2.7%)

Southwest (System)
Sept RPM=5.2 Billion (+9.8%) Load Factor=67.2%(-.2) ASM=7.7 Billion (+10.1%)
YTD RPM=50.9 Billion (+12.9%) Load Factor=74.0% (+2.9) ASM=68.7 Billion (+8.4%)

United (System)
Sept RPM=9.3 Billion (+1.3%) Load Factor=79.5%(-.7) ASM=11.6 Billion (+2.3%)
YTD RPM=89.0 Billion (+3.5%) Load Factor=82.8% (+.9) ASM=107.6 Billion (+2.3%)

US Airways (Combined US Airways, America West and Regional)
Sept RPM=4.8 Billion (-4.8%) Load Factor=72.2 % (-.5) ASM=6.6 Billion (-4.2%)
YTD RPM=48.1 Billion (-6.8%) Load Factor=78.8 % (+2.1) ASM=61.1 Billion (-9.3%)

Update 1 - Added JetBlue
Update 2 - Added Frontier and Spirit
Update 3 - Added Southwest and alphabetized
Update 4 - Added Northwest
Update 5 - Added Hawaiian

Northwest and Mechanics Have Tentative Agreement

2006-10-09T13:35:00.000-05:00

Northwest Airlines and its mechanics represented by AMFA have finally reached a tentative contract agreement (Yahoo!). The agreement could provide monetary relief to striking mechanics in one of two ways. First, they can accept layoff status and pull in layoff pay, one week per year employed up to 5 weeks total. Doing so also makes them eligible for furloughed status for up to two years. Or they can choose termination and receive one week per year employed up to 10 weeks total. Nothing changes regarding the mechanics now working for Northwest though mechanics accepting the layoff option are eligible to apply for open positions. Finally, Northwest would agree to halt the appeals process on a recent ruling that allowed striking mechanics to claim unemployment benefits.
Despite the possibility of monetary relief for the mechanics most of this agreement is really a final victory for Northwest. Look at the way the terms skew the payouts. It sweetens the pot for senior mechanics take the "I quit" option. You can bet that this offer is going to cost Northwest less than it would to continue unemployment benefit payouts while racking up legal fees trying to appeal the ruling of the courts on that matter. The agreement doesn't do anything to change current contract terms for pay scale or benefits and doesn't bring any jobs for striking mechanics. Moving on...nothing more to see here.

US Airways Showing Their Pilots Tough Love

2006-10-09T09:08:00.000-05:00

I've posted that the pilots union at US Airways needs to be careful with the negotiation tactics. The airline has shown some slim profits but overall US Airways is still trying to bring their merger and their recovery to full fruition. In that post I cautioned that any demands for increased pay need to be balanced with some give backs on benefits and work rules.
So it shouldn't be a shock that US Airways just handed the union a laundry list of concessions they would like from their pilots. US Airways CEO, Doug Parker "...has repeatedly said the company cannot afford to increase its overall labor costs,...". The airline will take a tough stand in order to be a viable airline. But the pilots union is plenty mad about it saying US Airways "tossed the most onerous sick-leave policy in the industry across the table." Furthemore, the union is accusing the airline of backing out of a tentative agreement on sick leave and other benefits.
So where's the truth. As with most negotiations its somewhere in the middle. The whole thing is complicated by the fact that US Airways must find a way to unify the two pilot unions...pilot unions with very disparant contracts. Its going to be a long road.

Emirates Buys Some Big Boeings

2006-10-09T07:32:00.000-05:00

Emirates Airlines announced a firm order for of ten Boeing 747-8 freighters and options for an additional ten aircraft. This is a $5.6 billion warning shot across the bow of Airbus who are struggling to deliver the A380 as promised to Emirates. The airline's plan to expand their cargo opration hangs in the balance so they are supporting those plans up with the new 747-8. And the warning shot is two fold as Emirates also needs a new mid-range aircraft, i.e. the A350 XWB or the Boeing 787. Airbus has cautioned that the A350 XWB could be heavily delayed, Boeing's 787 is going to beat it out the door by 2-3 years at the current date. Airbus is in a very tough position.

Airbus Head Has Has Not Resigned

2006-10-09T07:12:00.000-05:00

The difficulties in running a multi-nationally controlled company like Airbus came to the forefront late last week as we watched rumors flying about Airbus head Christian Streiff. Things kicked off with reports that Streiff has offered his resignation followed by denials from Airbus and EADS that his resignation had been accepted. It appears that Streiff is making a statement. To me that statement is to let him run the company and take the actions he deems necessary or accept his resignation. Because the job he has to do is going to be unpleasant and is going to stir up a lot of nationalism and politics. Airbus needs to cut costs to blunt the effect of the money being poured into the A380. There are talks of outsourcing and re-organizing Airbus divisions. Airbus partners Germany and Spain are already trying to assure workers at plants in their countries that all things will be considered before making decisions. Officials from the French and German government will be meeting so now things will get very sticky. Mixing business and politics is tough and often slow. Streiff needs to act fast to stem the bleeding at Airbus. Good Reuters article here.

A Couple of Thoughts on September Airline Results

2006-10-06T10:55:00.000-05:00

A couple of things caught my eye as I looked at the September and year to date results rolling in from the airlines. See my results extravaganza here

Overall capacity growth looks fairly controlled, load factors looked better as did revenue generating traffic.

~~Delta's results smell like a carrier still struggling with recovery~~ I'll take that back. Bankrupt Northwest and Delta have reduced capacity but revenue generating traffic has fallen to a lesser degree and load factors have improved some. I think those are steps in the right direction.

Latin America figured heavily in the improved numbers at United, a region that is a traditional American Airlines stronghold.

JetBlue's continued expansion shows in its numbers as capacity (ASM) grew faster than traffic (RPM)

Southwest's numbers continue to look healthy

Frontier's numbers for September were a little off, YTD doesn't look bad but their shares took a beating on Wall Street yesterday as they significantly reduced their 2nd quarter earnings per share forecast. They blame the foiled terrorist bombing plot. Cutting your earnings forecast from 10 cents (some analysts had it as high as 18 cents) to 1 to 5 cents makes me wonder if something more is at work here.

More later as I continue to absorb the info.

JetBlue Likes O'Hare, Gary Likes JetBlue

2006-10-06T08:57:00.000-05:00

Gary as in Gary/Chicago International Airport. I recently posted on JetBlue's attempt to wedge itself into Chicago O'Hare airport but I came across this interesting little piece on the Northwest Indiana Times. Seems that Gary/Chicago International Airport thinks they would be a good alternative to O'Hare especially if JetBlue's bid fails. Even if JetBlue were to get into O'Hare I think that Gary will continue to lure JetBlue their way. Its a very good article and it provides some nice details on JetBlue's plans to invade Chicago one way or the other. I suggest you head on over and read it.

go! Can Still Sell Tickets in Hawaii But Not Necessarily Out of Hot Water

2006-10-06T08:12:00.000-05:00

Hawaiian Airlines attempt to throw upstart and general rabble-rouser go! (no that's not a typo its really lower case...moving on) airlines off the islands was turned down in court yesterday. At issue was Hawaiian's claim that go!'s parent Mesa used confidential information provided by the Hawaiian when the airline was shopping for investors. Hawaiian claims that Mesa used that information to build their own marketing and sales plans for go!. But its a two part equation according to the judge:

"Mesa probably breached the confidentiality agreement," as Hawaiian alleges. But Faris said that Hawaiian failed to meet the second part of a two-part test because Hawaiian failed to show that Mesa's action caused Hawaiian irreparable harm.

Despite the fact that go! will still be allowed to sell tickets for island travel the judge has some harsh words for them. Here's a choice quote from U.S. Bankruptcy Judge Robert Faris who presided over this case:

"the evidence raises real doubts about the propriety of Mesa's conduct." Faris levied particularly harsh comments against Mesa's executive vice president and chief financial officer, George Murnane III, calling his "self-contradictory testimony ... profoundly troubling."

The judge goes on to point out the Murnane essentially lied in court and then had to backtrack and admit that he did actually use the info obtained from Hawaiian to benefit go!'s startup. If I was Mr. Murnane III I would be packing my bags because the litigation is not over yet. I think Mesa and go! are gonna hang Murnane out to dry in an attempt to distance themselves from this impropriety.
PS - Want more background on this nasty little battle? Go visit The Cranky Flier

New Agreement on EU Passenger Data

2006-10-06T07:52:00.000-05:00

A follow up to my previous post regarding the ongoing efforts to put a new plan in place for sharing EU passeneger data with the US government. You will recall that the EU courts have thrown out the previous agreement in May of this year and asked that a new one be created by October 1st. The BBC is reporting that the two sides have reached an agreement in prinicipal and are hoping to have formal approval next week.
One big change is that the data will only be "pushed" to the US via airline computer systems versus the previous system which allowed the US to "pull" the data anytime they wanted it. Another change will have all data going to the US Dept of Homeland Security who will then have authority to distribute to other agencies as required. It appears that there were concerns over the ability of other folks, lets say the FBI for instance, having access to this data at will.
On the face of it this appears to be a decent compromise. More control and security over the data for the EU and continued access to the data for the US. It also maintains the ability to share the data amongst the US federal agencies responsible for fighting terrorism. The US Dept of Homeland Security has a difficult task in efficiently distributing this data while trying not not filter or restrict too much of the information being fed to them. Let's hope that extra layer doesn't create a bottleneck on critical info. Timing is everything.

United Says No Fair to JetBlue in O'Hare

2006-10-05T14:52:00.000-05:00

JetBlue has publicly coveted service to Chicago for quite a while so yesterday's announcement that it is has formally requested landing rights at Chicago O'Hare (ORD) comes as no surprise. However, this unabashed attempt to step into the backyard of two of the biggest airlines in the US, United Airline and American Airlines, did not go unnoticed. United has quickly flown the protest flag but not for anything related to business or congestion at O'Hare. Instead, United appears to be arguing on a technicality by stating:

"JetBlue must operate in accordance with the regulatory rules of the road, just as all other carriers must do. Because its current request ignores those rules, it must be denied,"

While that may be true it is, at best, a delaying tactic. If the FAA sides with United then its only a matter of time until JetBlue refiles the right way. So what will the United's next protest be? JetBlue's colors clash with the ticket counters in the terminal? Okay that's kinda unfair and over-simplistic but still...

Does Airbus Need to Decide? A380 or A350

2006-10-05T11:11:00.000-05:00

The impact of the besieged A380 project came into stark focus today as Airbus admitted it has fallen ten years behind Boeing. Everyone following this debacle knows that the A380 is bleeding resources and finances from their other major projects, namely the A400M and the A350 XWB. Is it time for Airbus to reconsider the their projects and their future?
Airbus says the A400M, a military airlift aircraft, has no cushion left in its timeline to absorb further delays and will not make money unless costs can be cut. Ouch...double whammy.
The A350 XWB is no stranger to this blog...an aircraft that Airbus intends to pit against the Boeing 787. Airbus parent company EADS is now stating that they will not let this project move forward until the company demonstrates that they can manage the A380 and have the finances for the additional project. I am suggesting that maybe EADS needs to reconsider their priorities. Should the A380 take precedence over the A350?
I have suggested that the A380, even in concept, was doomed to be a small player in the airline business. Just a handfull of airlines flying it to the few airports that will spend the money so that they can handle the aircraft.
In my mind the timeline of the A350 XWB makes that project dead in the water unless Boeing makes some large errors in delivering the 787. I see this as an even bigger problem than the A380. Consider this quote from a Reuters article:

After several false starts, Airbus has come up with a new wider design for the A350 to try to halt a surge in sales of Boeing's rival 787 Dreamliner. Both planes exist only on paper, but the mid-sized market has become the biggest battleground between the two firms despite public attention to the A380.

Nobody's saying it yet but I am beginning to wonder. Should Airbus consider killing the A380 in favor of getting the A350 back on track? Should they devote themselves to bringing making the A350 XWB a reality and push the timeline back on the A380? Is the A380 simply ahead of its time or will its time ever come?

DIGG This!

Mesaba Unions Offer up Concessions Deal

2006-10-05T09:26:00.000-05:00

Its no secret that Mesaba Airlines is one sick puppy right now. That'll happen when your biggest stakeholder, Northwest Airlines, decides to goes bankrupt, doesn't pay you , sends a big chunk of your airplanes back to the leasing companies that own them and...oh yeah...opens its own regional airline to compete with you.

Mesaba is now working its own bankruptcy recovery and has asked the court to allow them to terminate existing labor contracts with pilots, flight attendants and mechanics. Initially the courts approved that request but the ruling was quickly overturned. While management at Mesaba regroups a coalition group representing the pilots, flight attendants and mechanics unions has presented their own plan to, in their words, "with an unprecedented joint offer to save their airline, their jobs, and their contracts".

Interesting approach, certainly a refreshing one given some of the antics from other unions. At face value it appears that the "Mesaba Labor Coalition" has done the homework and is taking a balanced approach. It certainly places pressure on Mesaba management to take a careful look at the plan before rebutting it. No doubt the bankruptcy court will be watching closely how Mesaba handles this. Mesaba's previous effort to throw out the union contracts was overturned with a fairly strong rebuff that "...Mesaba had failed to demonstrate that its proposed contract spread the burden of reorganization fairly among all affected parties.". Game on!

Sorry Folks...Back Tomorrow

2006-10-04T15:41:00.000-05:00

Sometimes life and/or my job interferes with my daily posting regime. That's the case today. Tune in tomorrow. I should be back at it

A380 Customer First to Report on Delay...What's Wrong With This Picture

2006-10-03T08:54:00.000-05:00

Does anybody but me find something wrong with the customer reporting the bad news? 'Cause that's exactly what is happening with the latest A380 delay. Last week EADS concluded their board meeting and left everyone, including their customers, wondering just what the latest delay on the A380 would be. In fact they were rather nonchalant about it in their press statement:

"Today the EADS board of directors met in Amsterdam to -- among other regular topics -- discuss the A380 situation. The board of directors will continue this discussion in the near future,"

Yeah, like this was just a bullet point in the agenda. If the A380 delay didn't dominate that board meeting then things are more disfunctional at EADS than I thought.

So we find out today, not from Airbus, not from EADS, but from their biggest A380 customer, Emirates Airline, that the latest delay will add another 10 months to their delivery date. The following is not the quote of a happy customer:

Our first aircraft will now arrive in August 2008. This is a very serious issue for Emirates and the company is now reviewing all its options," Emirates President Tim Clark said in a statement.

. Furthermore, Emirates is mulling over their next mid-range aircraft, the A350 or the 787. Rumors estimate that deal to be worth $15 billion. Which way would you go? Yeah...that's what I thought.

What a debacle. Will the A380 become a modern day Spruce Goose? At this point I say no but I am willing to go out on a limb with this thought. If Airbus does not halt this backslide the A380 may be doomed to be a bit player much like the Concorde was a bit player. Just a few airplanes flying to the few airports that can actually take the aircraft. Specialized service for specialized routes. It is becoming evermore doubtful that the A380 will be the revolution that Airbus envisioned.

Wright Amendment Set to Fade Away

2006-10-02T08:48:00.000-05:00

SURPRISE! After an inordinate amount of wrangling legislation to repeal the Wright Amendment has been approved by Congress and sent on to President Bush. Even last week it appeared this legislation was doomed due to a lot of unnecessary language aimed at insulating American Airlines and Southwest Airlines from anti-trust worries. That language was struck in favor of some much more vanilla statements in order to get the bill moving.
In an ending fitting of the whole process the Wright Amendment will not go out in a blaze of glory, no no no, that would be too simple. Instead, for the next 8 years flights to and from Dallas Love Field will still be restricted as follows:

...Southwest would immediately be able to sell through tickets for Dallas flights to and from any other cities it serves, as long as those flights stop at another Texas airport or airports in eight other states covered by the Wright law: New Mexico, Oklahoma, Kansas, Arkansas, Louisiana, Mississippi, Alabama and Missouri.

Asinine compromise in my opinion, what a bunch of monkey motion. But proof that big business swings a mighty big hammer at our capital. Sure, its smart business for American Airlines to try and delay anything that would benefit a competitor but how did Congress get talked into 8 years? Ah well what's done is done and hopefully President Bush will sign this quickly so that the countdown can begin.

EU Airline Passenger Data Still up in the Air

2006-10-02T07:59:00.000-05:00

In May the EU's highest court ruled that a a data sharing agreement between the US and EU airlines had no legal basis and needed to be re-worked. That agreement had airlines providing the US with 34 pieces of data on each passenger within 15 minutes of departure for any US bound flight. Since then the two sides have been working to create a new agreement against a court imposed September 30th deadline. My calendar say October 2nd and, yeah you guessed it, no agreement has been reached yet. Reports ranged from "talks collapsing" to "everything is fine we just need more time". Good grief, how many i's need to be dotted and t's crossed?
In the mean time it appears that the wrath of the EU court system is not going to swoop down on anyone nor is the US likely to make good on its threat to impose a 6,000 per passenger fine on any airline that does not provide the data. In fact it sounds like airlines will keep transmitting the data until further notice...business as usual.

Here's the polished, shiny, politically correct statement issued by the European Commission. See? Everything is fine.

Mid-air Collision brings down Gol 737

2006-10-02T07:17:00.000-05:00

Sad events this weekend as we learned that a Gol 737 collided with a Embraer Legacy 600 over Brazil last weekend. The Legacy 600, operated by ExcelAire, landed with a damaged wing time shortly after the collision. The consequences where far greater for the 737 which crashed into dense jungle. The Brazilian Air Force is now confirming that no one survived...149 passengers, 6 crew perished.

I've posted recently about how accidents are normally a sequence of little things that build up to a disaster, dots connecting if you will. Early information gives no clues as to how two modern jets managed to find the same airspace over Brazil. So we must wait as searchers and analyst try to piece together what happened...how did the dots connect on this one?

In the meantime my prayers are with those who lost friends and family.

US Airways Names New President

2006-09-29T08:54:00.000-05:00

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

2006-09-29T08:38:00.000-05:00

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

2006-09-29T08:15:00.000-05:00

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

2006-09-29T07:22:00.000-05:00

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

2006-09-28T08:39:00.000-05:00

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)

2006-09-28T07:59:00.000-05:00

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

2006-09-27T09:11:00.000-05:00

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

2006-09-27T08:57:00.000-05:00

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

2006-09-26T14:00:00.000-05:00

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

2006-09-26T07:56:00.000-05:00

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

2006-09-26T07:12:00.000-05:00

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?

2006-09-25T11:50:00.000-05:00

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

2006-09-25T11:17:00.000-05:00

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?

2006-09-25T07:34:00.000-05:00

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

2006-09-25T07:20:00.000-05:00

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

2006-09-22T10:14:00.000-05:00

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

2006-09-22T08:29:00.000-05:00

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

2006-09-21T14:35:00.000-05:00

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

2006-09-21T14:10:00.000-05:00

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

2006-09-21T07:38:00.000-05:00

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

2006-09-21T07:26:00.000-05:00

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

2006-09-21T07:15:00.000-05:00

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

2006-09-20T09:17:00.000-05:00

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

2006-09-20T08:38:00.000-05:00

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

2006-09-19T21:14:00.000-05:00

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

2006-09-19T08:40:00.000-05:00

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

2006-09-19T07:11:00.000-05:00

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?

2006-09-18T21:09:00.000-05:00

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

2006-09-18T20:47:00.000-05:00

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

2006-09-18T09:27:00.000-05:00

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

2006-09-18T09:14:00.000-05:00

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?

2006-09-18T08:38:00.000-05:00

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

2006-09-18T08:07:00.000-05:00

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

2006-09-18T07:40:00.000-05:00

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

2006-09-15T13:38:00.000-05:00

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

2006-09-15T09:45:00.000-05:00

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

2006-09-15T09:07:00.000-05:00

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

2006-09-14T15:11:00.000-05:00

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

2006-09-14T13:41:00.000-05:00

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

2006-09-13T10:40:00.000-05:00

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

2006-09-13T10:24:00.000-05:00

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

2006-09-13T10:06:00.000-05:00

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

2006-09-13T08:49:00.000-05:00

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

2006-09-12T09:00:00.000-05:00

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"

2006-09-12T08:16:00.000-05:00

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?

2006-09-12T07:42:00.000-05:00

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

2006-09-11T07:35:00.000-05:00

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

2006-09-11T07:17:00.000-05:00

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

2006-09-08T08:26:00.000-05:00

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

2006-09-08T08:04:00.000-05:00

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

2006-09-08T07:36:00.000-05:00

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

2006-09-08T07:18:00.000-05:00

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

2006-09-07T08:01:00.000-05:00

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

2006-09-07T07:31:00.000-05:00

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

2006-09-07T07:14:00.000-05:00

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.

NEWS: House Drags its Feet on Pension Reform

2005-12-06T16:43:00.000-06:00

The House of Representatives made the next move the political chess game that is pension reform. The House has simply decided not to vote on the Senate sponsored "Pension Protection Act" (HR 2830) before the current Congressional session runs to a close. This bill garnered wide support in the Senate (approved 97-2) and has the backing of several majors airlines and a fair number of airline related unions. My aren't they a noble group...or not...because their support is based on the fact that the reform bill cuts airline some slack by giving them more time to deal with their underfunding problem. Of course, the House has another pension protection bill being introduced by the Education and Workforce Committee and the Ways and Means Committee so all this wrangling makes perfect sense...right?. Click Read More! for why Congress needs to quit playing political ping pong with this legislation.

Meanwhile, back at the ranch, the Pension Benefits Guarantee Corp (PBGC)finds itself the proud owner of defunct pension plans that are $22 billion underfunded. Two airlines, United and US Airways caused a significant chunk of that deficit and two more might like to add to the problem (Northwest and Delta). Then there's the whole matter of existing pensions across the US that are underfunded to the tune of....wait for it...$450 BILLION. Congress needs to pass something NOW that clamps down on underfunding and increases the fees paid to the PBGC in a effort to prop it up before you and I, dear tax payer, get caught holding the bag.

NEWS: EU Open Skies...Maybe

2005-12-05T13:28:00.000-06:00

The United States continues to grind out talks with the EU on a new "open skies" policy and the latest incarnation appears to be on hold while the two sides fall back and give it a reality check. There are some big terms to be ironed out, not the least of which is the EU's desire to see foreign ownership restrictions of US Airlines eased. On the US side of the pond there are several big airlines that would love to see the deal go through. Click Read More!.

No doubt Richard Branson, head of everything "Virgin", would be delighted if the US would ease up on foreign ownership restrictions. He has struggled mightily to wangle the right financing packaging for his planned US airline, Virgin America. He's close but I wonder if he might drag his feet a bit to see if the EU can swing some better terms for him.

"Open skies"is an important deal for the big US Airlines who feel that profit margins are better on the long haul flights. They would like to expand in that market to shore up their bottom lines. Delta Airlines is especially interested having been locked out of the coveted Heathrow market while watching American Airlines and United Airlines operate there via rights purchased from TWA and Pan Am. Its noteworthy that Glenn Tilton, President of United Airlines, has also come out in favor of an open skies policy.

NEWS: AirTran Grabs a Little Midway

2005-12-05T13:07:00.000-06:00

AirTran is taking up some of the slack created by ATA's departure from Chicago-Midway airport adding service to both Minneapolis-St. Paul and Boston. You will recall that Southwest recently used its advantage with ATA to grab up another 4 gates at Midway in preparation for their own expansion in that market. Southwest's advantage lies in the fact that they own about 30% of ATA via a loan to keep the airline afloat in bankruptcy.

NEWS: Airbus is All About China

2005-12-05T12:38:00.000-06:00

Airbus just landed a $10 billion order for 150 narrow body jets (A320 family). It follows deals China made earlier in the year for 70 Boeing narrow body jets (737) and up to 60 of the yet to be built 787. What may be even more interesting are the other opportunities being handed to China by Airbus and France as a whole. The competition for aircraft sales to China has moved way beyond aircraft price and services. Click Read More!

A Reuters article lists some of the recent business deals between Airbus/France and China. Folks there's a lot of "business" being done here. They include:

Airbus will consider expanding its assembly lines by building a site in China to build narrow body jets.

Airbus has offered China a 5 percent share of the fuselage work for the yet to be built A350 aircraft on a risk-sharing basis.

An agreement with Airbus's sister company Eurocopter to co-develop a heavy lift helicopter for the world market.

Bilateral agreements with France, China for construction of its high-speed Shitai railway link.

China ordered a satellite from telecoms equipment maker Alcatel Alenia Space

Like I said, there's a lot of "business" going on here.

ACRONYM: Bankruptcy Fun with EBITDAR

2005-12-05T12:16:00.000-06:00

The airline industry has its share of acronyms (EGPWS, METARS, IFR...I could go on) but the financial world is not to be outdone. Today's acronym is EBITDAR which stands for "Earnings Before Interest, Taxes, Depreciation, Amortization and Rent". Why is this important to the airline world? Weeeelllll, EBITDAR is used as a key performance measure during bankruptcy and the airline world has more than its share of bankruptcy. The important thing is that EBITDAR strips out all of the financial hocus pocus (especially depreciation and amortization) that can cloud what you really need...a good measure of revenue to cash flow. Still awake? Great...then click on Read More!

Last Friday, Delta's hired financial gun, Timothy Coleman, senior managing director at The Blackstone Group, took the stand and talked about, amongst other things the airlines EBITDAR margin (once again from the AP):

"The airline's EBITDAR margin, which estimates the amount of operating cash flow generated by each dollar of sales, fell from 23.3 percent in 1999 to 3.2 percent in 2004, Coleman said.

"The biggest event is the margin has collapsed. When you are at a low percentage you are not a viable entity," said Coleman.

Next year the airline expects to see revenues of $16.08 billion, and the pilots' wage cuts would help the airline achieve an EBITDAR margin of 11.4 percent, Coleman said.

Well, duh! Everybody knows that.

And finally lets not forget that EBITDAR is the more refined but not as popular brother of EBITDA and EBIT...stepbrother to EBITDAX...wahoo! I'm dizzy.

NEWS: Judge Tells Delta and Pilots to Get Back At It

2005-12-05T12:03:00.000-06:00

Judge Prudence Carter Beatty (awesome judge name) presiding over Delta's banktruptcy has told the airline and its pilots union to go back to the negotiating table. The other option would be hand it over to a mediator but Beatty says "I have never had much luck with mediators.". Delta maintains their ready to negotiating anytime and the pilot's union says "yeah us too" but questions whether the airline folks really understand the term "negotiate". Union chairman, Lee Moak was quoted by the AP as saying, "What she (Beatty) was suggesting is that the other party could learn how to negotiate," he said. "It's hard to negotiate if one party does not move off one position." Delta claims they are just asking for the minimum cuts they need to stay afloat. I think the next sit down with these two groups could end up being pretty brief.

NEWS: LAX Expansion Plans Get the Smack Down

2005-12-05T09:22:00.000-06:00

An $11 billion dollar LAX modernization plan has been halted by a tenacious grassroots effort. After 10 years of planning and court battles LAX has conceded and agreed to a deal that will limit passengers served and will actually reduce the number of gates at the airport. $150 million has already been poured into the planning of the project and now its back to the drawing board. The question in my mind is, what does this do to the plans to rework LAX for the Airbus A380? LAX is already under pressure from future A380 operators that are threatening to take their business elsewhere if the airport cannot keep needed improvements on schedule.

NEWS: Better Financials for Airlines in 2006?

2005-12-02T15:50:00.000-06:00

The whole airline sector dogged it all the way through 2005 but Lehman Brothers airline analyst Gary Chase thinks 2006 will be better. He notified client that they have raised price targets for many airlines, including legacy airlines, noting that "a recent disconnect between energy prices and airline shares" has created "upside opportunity." Perhaps what Mr. Chase points to is simply an investment opportunity based on share price but I would not take it as a revelation that airlines are set to get back on track in 2006. Click Read More! for my opinion on the matter.

The airline business model in the US has not changed in any significant fashion. Most airlines still feel the best way to combat profit stifling fuel prices is to whine about them continuously and loudly in the hopes that the government will give them a handout. If that doesn't work the next best option is to file for bankruptcy, clear out the labor contracts, shove new lease and debt terms down everybody's throat and then exit so they can pick up where they left off. All they have done is cut costs and that is not enough to support their penchant for capacity dumping and fare battles in the name of "preserving" their market share. What good is market share if the prices in that market are so depressed that you can't make money. Its a vicious circle and I, for one, am dizzy. Please stop the ride.

So sure, maybe there is some Wall Street market play to be made here, but that has nothing to do with the health of the industry.

NEWS: Old Ghosts Haunt the "New" US Airways

2005-12-02T15:25:00.000-06:00

The ghost of broken rules past came to visit the "new" US Airways today in the form of background check violations that occurred at America West in 2002-2003. The TSA has given them formal notification that they will be fined nearly $180,000 for failing to background check people working in secure areas at their airport facilities. Ummm...oops? A few things hit me regarding this:
-Its 2005, damn near 2006, what took the TSA so long to figure this one out!?!
-I wonder what, or who, put the TSA onto this trail in the first place.
-Why do I feel good about posting something involving an airline and a $ sign without having to add the word "million" or "billion"?

NEWS: This Just In...American Airlines in Love!

2005-12-01T13:30:00.000-06:00

American Airlines has issued a brief statement indicating that they will be begin the process to apply for service out of Love Field in Dallas. The press release simply states the move was prompted by the recent passage of a bill that exempts Missouri from the restrictions of the Wright Amendment. Notably absent from the release was the marketing spin pomp and circumstance that normally accompany an airline starting service at a new, or in this case...old, location.
UPDATE 1: They better get it done fast...Southwest is expanding again at Love Field. Run Forest run!

UPDATE 2: Quote from Southwest spokesman Ed Stewart, "It's one of the most ridiculous business moves I've ever seen,". Click Read More! for additional comments

RRRRRRiiiiggghhtt. Next Southwest will be saying "Pay no attention to the man behind the curtain"...or waving their hand in Jedi fashion "This is not the airport you seek". Come on Southwest. I mean seriously did you expect them to just walk away from Love Field at this point?

But check out American spokesman Tim Wagner as he steps up to the plate with this hum-dinger, "We agree that it's a bad choice, but we think we're making the best of two bad choices: To abdicate those passengers to other airlines or to compete for those passengers at Love Field"

Sit down...this is just getting good.

Folks, adding the state of Missouri back into the Love Field equation is not what's at the heart of the matter for American. In a larger sense its tacit acknowledgement from American Airlines that they believe the Wright Amendment is going to suffer a slow piece by piece death over some extended time frame. I think you will continue to see exemptions work their way through Congress until the Wright Amendment is effectively legislated out of existence. American recognizes they'd better get their foot back in the door before every other low fare carrier in the nation tries to get with the Love too. But that's just my opinion...what do I know...I never thought United would make it out of bankruptcy...oh wait...they haven't yet...but they say they will soon.

Good article here.

NEWS: Delta Airlines Loss is Breathtaking

2005-12-01T12:54:00.000-06:00

If Northwest's post bankruptcy losses put you a bit off-balance then make sure you're sitting down for this one. Papers filed in bankruptcy court by Delta Airlines indicate that it lost $1.1 BILLION between Sept 15 and Oct 31. Once again there's some bankruptcy related financial wrangling going on but taking that out of the equation still leaves you with a $472 million in losses...$10 million A DAY. With those numbers its painfully obvious that the $3 billion in cost savings that Delta is pursuing in bankruptcy will not save it. Something more is needed.

NEWS: Northwest Airlines Continues its Losing Ways

2005-12-01T10:18:00.000-06:00

Losing ways as in losing money...a lot of it. The latest court filings show the airline has lost $346 million since filing for bankruptcy on Sept 14th. A quick math check tells me that comes out to about $4.4 million a day. I'll say that again...A DAY! If you scrape the normal bankruptcy induced financial chicanery off you still end up with $136 million and that's STILL $1.7 million a day. Sure, fuel costs weigh in heavy but people, really, something else is wrong if your business model cannot compensate for changes in normal operating costs (that would be fuel amongst other things). Airlines have been droning on about fuel costs for a year or more yet no one has figured out how to get around it save Southwest who simply bought a bunch of fuel in advance. Get on with it boys and girls, get this figured out or just admit defeat.

NEWS: Southwest Adds Missouri to its Love Field Repertoire

2005-12-01T10:01:00.000-06:00

The ink is barely dry on a bill freeing up airlines to fly to Missouri from Love Field in Dallas and Southwest is all over it. Southwest has announced new service to both St. Louis and Kansas City starting Dec 13th. While the good folks of these two cities will surely welcome the low fare competition American Airlines is taking a double hit. American picked up market share in St. Louis and Kansas City when they absorbed TWA and have enjoyed a competitive advantage there. Now Southwest is set to pilfer that business from both ends...the other end being Dallas. On a final note...I just used the word "repertoire" in a post...kick ass!

NEWS: Mexicana Sold Off, Aeromexico...Not So Much

2005-12-01T09:21:00.000-06:00

Mexico's "state airline entity" Cintra approved the sale of Mexicana leaving AeroMexico as the final state run airline still in need of a new owner. I had posted previously on the difficulties Cintra was having in ridding itself of both airlines auction style. Grupo Posadas is the new owner of of Mexicana (details here)in a deal that also included low fare carrier Click. This is a pivotal time for Mexico based airlines. Click Read More!

Can AeroMexico be repackaged and sold off in time to compete with a privately run Mexicana which should benefit from an infusion of private dollars? More important, can the Mexicana's new ownership make it successful? There's been much debate regarding Mexicana's inability to make money with some attributing this failure to being "state run" while others point at the internal workings of the airline itself. When I look at this whole process and the fact that major players like Spain's Iberia and Icelandair backed out of bidding on these airlines I have to wonder. Mexicana may indeed be dysfunctional to a point where the larger players didn't want the headache. Finally, any airline trying to operate out of Mexico faces a lot of competition from airlines based north of the border. In my opinion, Grupo Posadas has it hands full.

NEWS: Aloha Airlines Completes a Tri-Fecta

2005-11-30T08:21:00.000-06:00

Aloha Airlines is having a good week announcing its flight attendants have ratified a new contract and that it has reached an agreement on contract terms with its pilots. Completing the tri-fecta is the announcement that the bankruptcy court has cleared them for exit from bankruptcy as soon as December 15th. That puts their bankruptcy turn-time at less than one year...lightning fast in airline terms.

NEWS: A380 Customers tell LAX to get Crackin'

2005-11-29T16:47:00.000-06:00

LAX lags in accommodating the A380 Los Angeles International airport, LAX to you and me, is being leaned on to pick up the pace on modifications needed to accomodate the massive A380. Both Singapore Airlines and Virgin Atlantic are telling LAX to get things moving or they may look to other airports. The improvements needed are major and local efforts aimed at slowing or even halting growth at LAX have turned out to be more formidable than anticipated. In the end LAX hopes to handle around 2 dozen A380's a day in 2010...approximately 15000 passengers...a DAY.

NEWS: Frontier Airlines Caught by Bad Timing?

2005-11-29T13:42:00.000-06:00

UPDATE 1-Frontier Air could face serious cash crunch Dang! Timing is everything and Frontier Airlines may have gotten caught a little over extended. Frontier has been trying, unsuccessfully, to secure financing to cover purchase commitments on 4 shiny new Airbus A319's at the same time as Southwest Airlines is prepping to launch a frontal assault on Frontier's home turf, Denver International Airport, in January. When you couple new competition from Southwest with continued competition from a bankruptcy protected United Airlines it looks like you get a situation that makes potential investors want to sit back and...ummm...observe. Click Read More!

According to the article Frontier is warning that no financing may mean no new jets which could hinder their growth plans. Growth may be key for long term liquidity. No new jets for Frontier means no direct path to add new capacity into the mix and would force them to re-think current routes and plans.

Fares will almost certainly drop as Southwest dumps in new capacity to Phoenix, Chicago and Las Vegas. This will likely be made worse by United who may decide to dump in their own capacity in an attempt to minimize Southwest's success in Denver. On the other hand, United is still pretty cranky about their inability to run Frontier out of Denver, a traditional United stronghold. So they might end up using Southwest's entrance into Denver as an opportunity to take another shot at Frontier's well-being.

Setting Up Feedster Account

2005-11-29T09:36:00.000-06:00

No Need to Click Here - I'm just claiming my feed at Feedster

NEWS: More on Delta's Financial State

2005-11-28T16:33:00.000-06:00

Delta warns of possible pilots strikeMSNBC has a nice wrap up on the information Delta released today regarding its financial state. Predictably its bad...really bad. I say predictably not just because the airline is in bankruptcy but because this is an airline seeking $325 million in concessions from its pilots. It is trademark cookie cutter airline bankruptcy stuff to release this info in parallel with any big negotiation. Click Read More!

Also threatened is the pension plan which Delta estimates needs about $3.4 billion, (b-illion, with a b) in funding to cover 2006-2008. Wow, suddenly $325 million from the pilots doesn't seem like nearly enough. Hello...Pension Benefit Guaranty Corporation?...This is Delta Airlines calling...