It’s always fun and interesting to visit a new airport lounge, particularly when it’s tailored specifically for long haul first and business class travelers.  I recently had the opportunity to tour the new Cathay Pacific Airways first and business class lounge, now open at San Francisco International Airport (SFO).  Although Cathay’s premium passengers have traditionally been able to use airport lounges operated by their oneworld alliance and other partner airlines at many U.S. airports, the SFO lounge is the first U.S. lounge that is branded and operated solely by Cathay Pacific.

Formerly, Cathay Pacific premium customers, flying through SFO, used the British Airways, lounge.  Now any oneworld premium passenger is welcome to use Cathay’s new lounge, which opens four hours before each of the airline’s two daily departures to Hong Kong.

The new lounge has 5,600 square feet of space and can accommodate up to 107 travelers, which provides ample facilities for all first and business class passengers on a fully loaded Cathay Pacific flight.

The lounge features seven computer workstations and offers free wifi throughout the facility.  Three shower rooms are also available for premium travelers.  The lounge also features a live “Noodle Bar”, where passengers may order one of Cathay Pacific’s signature noodle dishes on request, in addition to the self service bar and buffet.  During my visit, the Noodle Bar chef was kind enough to prepare a special meatless version of the noodle soup to accommodate my strict vegan diet.

One section of the lounge offers a panoramic view of the tarmac.  The new lounge is located on level four of the A concourse at SFO’s International Terminal.  With the opening of the new lounge, Cathay’s flights now depart from nearby gate A3, just a three minute walk from the lounge.

More information about the new lounge is available on Cathay Pacific’s web site.

Much has already been said of the shrewd strategy of American Airlines to induce a pre-emptive bankruptcy filing when the airline still holds more than $4 billion in cash and is in no imminent danger of default on its debts or other financial obligations.

The bankruptcy will most assuredly put American back on the road to economic parity with its chief competitors (Delta and United Airlines), which already restructured and cut costs in bankruptcy proceedings during the tumultuous decade following the 9/11 attacks.

Additionally, American may also find a willing merger partner, to expand its route network as the other network or legacy airlines have already done in recent years.  Unfortunately, neither bankruptcy court nor consolidation really address two of the greatest challenges for the U.S. airline industry: high and volatile fuel prices and a mountain of insurmountable debt.

In early 2010, I interviewed renowned airline industry analyst, Darryl Jenkins, for a story published in my Business Traveler column on USA Today.com.  In that article, Jenkins highlighted the three biggest issues facing U.S. airlines: 1) high fuel prices, 2) massive debt and 3) the return of overcapacity.  While written one year and half ago, those three great challenges are still every bit as relevant as they were back then.

At the time that article was published, oil prices had climbed to $87 per barrel, their highest level in the last 18 months.  Today oil prices exceed $100 per barrel and, though prices are still likely to fluctuate, there is no long term relief in sight as world oil demand keeps growing.

Ironically, the initial period of prolonged higher oil prices may have actually helped U.S. legacy airlines turn a profit, but this may not be the case much longer.  When oil prices were much lower, low-cost, discount airlines expanded rapidly, forcing airfares downward in every new market they entered and causing their legacy competitors to bleed cash while the low-cost discounters profited and continued their expansion.

The low-cost airline expansion seemed unstoppable until the first prolonged period of surging oil prices in 2008.  With higher oil prices, low-cost airlines could no longer afford to expand their networks or compete on price, and the discounters retrenched and raised airfares just to survive, while legacy airline earnings were still buffered by their highly profitable long-haul first and business class operations.

Initially, Southwest Airlines was the lone holdout in raising airfares, because they had successfully purchased hedges to buy jet fuel well below market rates while everyone else was paying the much higher, current prices.  Now those hedges are gone and Southwest pays the same price for fuel as everyone else, forcing that airline to raise fares to cover their costs, while the rest of the U.S. airline industry eagerly followed along.

In the current period of sustained higher oil prices, every U.S. airline has terminated unprofitable and marginally profitable routes and slashed capacity.  Concurrently, a new round of consolidation among low-cost (Southwest/AirTran/ATA and Frontier/Midwest), as well as legacy airlines (Continental/United, Delta/Northwest and America West/US Airways), has further reduced capacity and driven airfares higher.  Additionally, U.S. airlines have successfully tacked on another $13 billion in annual revenue from ancillary fees, like checked baggage, in-flight food purchases and exit row seat upgrades.

As long as oil prices remain constant and airlines do not restore lost capacity, U.S. airlines may remain marginally profitable.  Unfortunately, there is good reason to believe oil prices will continue to rise as the new middle class in densely populated countries, like China, India and Brazil, continue to thirst for ever increasing volumes of fossil fuels to power their burgeoning, emerging economies.  Periodic disruptions in the oil supply from volatile regions, like the Middle East, Africa or South America, could easily spike oil prices ever higher.  The U.S. airline industry will revert into economic calamity again when the next oil price spike occurs and bankruptcy won’t help American Airlines or anyone else.

Insurmountable levels of debt are another albatross around the neck of the legacy airlines.  While American will likely shed or refinance some of the airline’s debt in more favorable terms while in bankruptcy, the massive debt problem for U.S. legacy airlines is still obscenely out of control.  Prior to the bankruptcy action, American Airlines was carrying at least $10 billion in debt with another $7 billion in unfunded or underfunded pension liabilities.  Sadly, even after bankruptcy, Delta Air Lines is still carrying $14 billion and United Airlines $13 billion in debt and pension liabilities.

The level of debt and rising demand for fossil fuels are ticking time bombs for the U.S. airline industry.  Additionally, sustained poor financial performance following the period after 9/11/01, devastated legacy airline balance sheets, precipitating draconian budget cuts and the deferment of many vitally important capital expenditures, such as fleet renewal.  In many cases, a large portion of the entire aircraft fleet of U.S. legacy airlines is in dire need of upgrade or replacement.

Older aircraft are often significantly less fuel efficient than most newer airplanes, further exacerbating the fuel cost issue and increasing maintenance costs for legacy airlines.  While American, Delta and United have fleets ranging from 12 to 15 years in age, smaller or low-cost operators like Alaska or AirTran have fleets in the range of eight to nine years in age, while Frontier and JetBlue’s fleets are only around six years old.

Even across the globe, major airlines, such as Air France, KLM or South African Airways have fleets in the range of eight to nine years of age.  Asian airlines like Cathay Pacific, Korean Air or ANA have fleets with an average age of around ten to 11 years.  Meanwhile, newer global airlines, like Emirates Airline, boasts a fleet with an average age of around six to seven years, while other rapidly growing Middle Eastern airlines, like Etihad and Qatar,  boast fleets as young as four or five years in age.

All this means that legacy airlines will eventually need to take on even more unaffordable debt to finance the purchase of new airplanes slated to replace the older, gas guzzling airplanes.  While United an Delta have only begun to update a portion of their fleets, American Airlines recently placed a $38 billion order for more than 500 new airplanes.  With the airline now in bankruptcy court, that massive transaction may now be in jeopardy, further deferring the inevitable replacement issue.

While the American Airlines bankruptcy may be a small step in a necessary direction, no U.S. legacy airlines will be able to control their destiny when fuel prices rise again and long term debt comes due.

British Airways’ recent announcement, that the airline’s Open Skies subsidiary will suspend flights from Paris to Washington, D.C., represents the next to final nail in the coffin of a faltering experiment to expand the carrier’s influence beyond its London hub.  When Open Skies first launched in 2008, British Airways (BA) envisioned this new low cost, premium airline eventually expanding to serve multiple destinations in the U.S. from such European hubs as Amsterdam, Brussels, Dublin, Frankfurt, Madrid, Milan and Rome as well as Paris, but most of this expansion never occurred and the experimental airline has been jettisoning its growth plans, almost since its inception.

BA originally launched Open Skies to take advantage of the newly minted open skies agreement between the U.S. and the European Union (EU).  That agreement allows any U.S. or EU airline to fly between any U.S. destination and any city within the EU.  When the new treaty opened access to London’s Heathrow Airport to many new airlines, BA sought to strike back by expanding transatlantic service to the U.S. from other cities outside the United Kingdom (UK).

It was widely believed that the concept of launching a separate subsidiary was a way to avoid labor union contracts and rules that would have increased costs for the fledgling airline.  BA wanted a low cost airline that could attract premium (business class) traffic and it was likely anticipated that the low cost model could be imported to the UK at some point.

But Open Skies was bound to fail from the beginning for a number of reasons.  For starters, it is very difficult to attract travelers, particularly high end business travelers, when the airline is flying point to point against another airline that operates a giant hub in one of those cities.  Flying out of Paris, for example, French businesses are much more likely to contract for preferred airline prices with a carrier, like Air France, which can take them from Paris to almost anywhere in the world.  In Frankfurt, Open Skies would have come up against a similar daunting situation with Lufthansa.  To make matters more difficult Open Skies is not part of any airline alliance.  The alliances tend to lock up even more business traffic.

Additionally, Open Skies was also most likely conceived to compete with a slew of new, all-business class, discount airlines that had begun operating between the U.S. and Europe.  Small start-ups, like Eos Airlines, MAXjet, Silverjet and Avigion (which BA eventually acquired) threatened to steal market share from BA.  Fortunately for Open Skies, these airlines were unable to remain solvent when oil prices began rising in late 2007 and all three airlines had ceased operations by the time oil prices spiked at over $120 per barrel.

With higher oil prices, a faltering economy, the demise of those upstart competitors and the sheer difficulty of garnering high end business traffic in markets dominated by other airlines, it seems like Open Skies was doomed from the start, particularly since the airline is trying to offer a premium product at a deeply discounted price.

Now Open Skies is left with just one remaining route: Paris to Newark.  My guess is that BA will eventually abandon that route and pursue a growth strategy centered within their UK base or through the acquisition of other major airlines, such as Iberia.  For business travelers who have benefitted from lower business class fares as a result of this increased competition across the Atlantic, those low fares are destined to disappear and we are unlikely to see any new entrants in the transatlantic market while oil prices remain at relatively historically high levels.

It is an appropriate time for all Americans to reflect on the horrific events of September 11, 2001, but I am reminded of that terrible week every time I visit Geneva, Switzerland.  On Swiss television, I watched the twin towers burn and fall and I remained stranded in Switzerland until the nation’s air transport system resumed service.

Living very close to the Pentagon at that time, I feel most fortunate, in some ways, to have been so far away from the raging fires, the choking smoke, the chaos and the panic back home.  Yet, stranded abroad, so far from home, while my country was under attack, I was enveloped by a powerful malaise of loneliness, isolation and helplessness.  As an airline employee, it only heightened my pain and frustration to witness four commercial airplanes converted into weapons of death and destruction.

A routine trip to Geneva, to chair a meeting of representatives from some of the largest airlines in the world, quickly became anything but routine that day.  Just after 3pm Geneva time (9am on the East Coast), we took a break from our meeting.  When I spoke by phone with my assistant back in the office he informed me that a small, private airplane had crashed into the World Trade Center.

That sounded like an accident.  I assumed there might have been bad weather or poor visibility in New York.  As we continued talking, Scott received more details on the crash.  The weather was clear.  It wasn’t a small private jet; it was a United Airlines Boeing 737, I learned.

Then he told me a second airplane had crashed into the towers and there were additional unconfirmed reports that a third commercial jetliner had crashed into the Pentagon.  Now we knew this was no accident.  Yet, I just couldn’t imagine any American pilot allowing his airplane to crash into a building.

After the call I found a conference room where a group of Swiss office workers were watching a television broadcast on an enormous screen.  There I saw the twin towers burning and watched the replay of each aircraft crashing into the buildings.  Although the broadcast was in French, I could clearly see two jumbo airplanes, most likely Boeing 767s, with American and United Airlines liveries, crashing into each tower.

Stunned and sickened by what I had just witnessed, I returned to my meeting room where most of the airline delegates were still chatting or milling about the room, unaware of the unfolding events in the U.S.  Regrettably, I addressed the group and conveyed what I’d just seen.  It was particularly difficult to tell the meeting participants from American Airlines and United Airlines that their airplanes were involved in the attacks.

Much of the next few hours were a surreal blur for me, but we canceled the rest of our meeting and I remember watching both buildings collapse and viewing live footage of the Pentagon crash site.  When we learned that a fourth airplane had crashed in Pennsylvania, we wondered how many hijacked airplanes might still be out there.

While most airline conference delegates immediately returned to their respective countries, all six U.S. airline representatives soon realized we weren’t going anywhere any time soon, when all commercial flights to, from or within the U.S., were grounded indefinitely.

With no other option, we returned to our hotel and waited.  On that first day, we sometimes huddled together or sat alone in our hotel rooms, dumbfounded, watching the catastrophic events unfold on CNN, our only English speaking link to the outside world.  For meals, we silently regrouped in the hotel restaurant, not knowing what to say.  As representatives from six normally fiercely competitive airlines, we were often locked in heated debate during our Geneva meetings.  Now we sought solace and comfort from each other, marooned in a foreign land, but united by a common tragedy.

Far away from our loved ones and isolated in a place where the locals surely couldn’t feel the depth of our pain, the usual competitive mood evaporated.  Desperately seeking the company and camaraderie of our fellow Americans, we awaited further information from our government and instructions from our employers.

I felt the greatest sorrow for my colleagues from American and United Airlines, whose airplanes had been commandeered for the attacks and whose fellow employees had died along with their passengers and those on the ground.  Though many travelers view airlines as nameless/faceless, price gouging, evil corporations, I can attest that many airline employees are caring, compassionate individuals, who felt the pain and sorrow shared by all Americans after September 11^th.

Fatal accidents among U.S. commercial airlines are rare, but when they occur, a specially trained team of “crash bereavement counselors”, pre-selected from all departments across that airline, are immediately dispatched to the crash site.  Each counselor is assigned to the family of a crash victim.  They remain on site, connected to their assigned family, offering comfort, handling logistics, fulfilling requests and trying to help those left behind process their grief and get through their nightmare.

My colleague from American Airlines, stranded in Switzerland, was a bereavement counselor.  It broke my heart to see her in tears as she tried in vain to find a way to get to New York or Washington to perform the job she was specially trained and designated to do, but it was a futile effort with the nation’s air transport system shut down.

Email was our only way to communicate with the outside world, as cell and land phone lines were quickly overloaded with calls following the attacks.  When I finally spoke to my co-workers back home, someone suggested we enjoy some sightseeing on an all-expenses-paid European vacation, yet not one of us felt much like going anywhere outside the hotel.  Other than visiting the hotel restaurant and fitness room, I sat in my room watching CNN, browsing the Internet or messaging friends, relatives and co-workers.

After four long days that felt like a month, air travel to the U.S. finally resumed, so we packed our bags and headed back to the airport.  Machine gun toting police and soldiers patrolling the airport in a normally peaceful country, famed for neutrality, told me the world had drastically changed.

Airline employees usually fly for free on a standby basis.  They only receive a boarding pass if they are not taking a seat away from a paying customer.  This made getting home uncertain.  With only one non-stop daily flight between Geneva and the U.S., we all split up and I decided to take my chances connecting at London’s Gatwick Airport.

When my flight landed in London, the scene was pure bedlam.  The terminal was jammed with thousands of revenue paying passengers, also trying to get home.  I immediately knew it didn’t look good for a standby passenger.  I went from airline to airline, flight to flight, willing to fly to any city in North America.  I finally found an open seat on the last Transatlantic flight out of Gatwick that day.  It was an American Airlines flight to Dallas-Fort Worth, but I didn’t really care where I landed.  It was a great sense of relief to finally step on American soil again.

After 28 hours in transit, I was completely exhausted and had totally forgotten all about September 11^th when my Dallas flight finally touched down at Washington’s Dulles Airport.  That entire Switzerland trip just seemed like a bad dream, but I was abruptly slapped back to reality when my taxi drove past the still smoldering wreckage at the Pentagon on the final leg of my journey home.  The Pentagon was surrounded by military vehicles and police cars with lights flashing in the middle of the night.

At that point that I realized that all travel, if not life itself, had changed permanently in the space of one dreadful week.  I now consider myself lucky to have been stranded abroad during such a horrific time, but I relive September 11^th every time I return to Geneva.

I recently had a chance to fly in Korean Air’s Prestige Business Class cabin on their new A380 flight from Seoul to New York.  Korean Air’s wonderful hospitality aside, I have always been a skeptic of the potential success of this behemoth airliner.  How many routes can support an airliner with 500, 600 or as many as 850 seats, depending on the configuration deployed by each airline?  Airbus has sold less than 240 A380’s, compared with more than 1,400 Boeing 747s produced thus far.  Additionally, Airbus had to shelve its plans for a freighter version of the super jumbo aircraft initially when Fed Ex and UPS canceled their original orders.

Another ominous sign, less than 20 airlines worldwide have placed orders for the A380 and no U.S. based airline has purchased the A380 to date.  Yet, six major airlines are now flying the A380, with Korean Air being the most recent airline to join that club.

One of ten A380s ordered by Korean Air

While Korean Air’s version of the A380 contains only 407 seats (fewer than any of the other five airlines now flying this airplane), other airlines have crammed more than 500 seats in their A380s and at least one airline plans to fill their yet to be delivered A380s, with more than 800 seats.

With so many seats to fill, I thought that the A380 would most likely serve markets in densely populated cities in places like China or India, and yet, all six of the airlines operating the 50+ A380 aircraft now in service, fly at least one U.S. route and A380s land regularly at five U.S. airports.  (Los Angeles, Miami, New York – JFK, San Francisco and Washington – Dulles)

Every airline configures their cabins differently and Korean Air is the only airline, thus far, to devote the entire upper deck, a full 94 seats, to Business Class.  With an all business class configuration upstairs, Korean Air’s A380 upper deck contains two lounges where business class passengers can stretch out and enjoy a cocktail or a snack.  The lounge in the front of the business class section is an unattended space while the bar in the lounge in the rear of the airplane is staffed by a Korean Air flight attendant serving up a special menu of drinks and snacks.

The Celestial Bar-Lounge on Korean Air’s A380

The concept of lounges in the sky is reminiscent of the early days of the Boeing 747, where some airlines used the upper deck as a lounge – before times got tough and airlines began to fill that space with more seats.  On my flight, only a handful of passengers seemed to populate the tended bar at any given time while the forward, “self-service” lounge was largely unoccupied when I wandered up front several times during the 14 hour flight.

For those of us who like to get up and stretch periodically on a long flight, the lounges are a welcome addition.  Perhaps the use of the in-flight lounges will grow over time as more Prestige Class passengers become aware of that awesome amenity.

Another unique feature of Korean Air’s A380 is a duty free showcase in the rear of the aircraft on the lower level.  In this space the airline is able to display some actual duty free products, extending and enhancing the duty free shopping experience.

During my duty free showcase visit, I felt like I had stepped into the fragrance section in a Parisian department store when the flight attendant tending the duty free shop sprayed various fragrances on little slips of paper for me to sniff.  Unfortunately, I had to wend my way through a line of economy class passengers waiting to use the lavatory in the shared space with the duty free showcase.

Despite that line of economy class passengers waiting for the lavatories, Korean Air’s A380 economy section holds just 301 total passengers, while other airlines with economy class cabins on both decks of their A380s have crammed as many as 50% more, additional seats on their airplanes.

Like most major international airlines, Korean Air’s Prestige Business Class seats are perfectly comfortable, lie-flat seats and their entertainment system appears to be state of the art, though the Prestige Class seat and product on Korean Air’s A380 is the same product offered on their other long-haul, widebody aircraft.

Korean Air’s Prestige Business Class Seat

While an entire upper deck devoted to business class can offer great advantages over smaller aircraft, it is extremely difficult to retain that special or exclusive feeling afforded business class passengers in a cabin that holds 94 passengers.  Korean Air addressed this problem successfully by partitioning the cabin into three separate sections, creating the illusion that you are in a much smaller business class section.

Although I did not get to try the first class Kosmo Suites on Korean Air’s A380, a unique feature of these suites is a retractable partition to provide privacy on demand, rather than the rigid suite partitions deployed by some other airlines.

On this maiden voyage of Korean Air’s first trans-Pacific A380 route, all but two of the Prestige Business Class seats were filled, so perhaps there may be a lucrative market for this enormous airplane after all.

After many years of debate, several new and pending Department of Transportation (DOT) rules and Congressional bills are changing air travel in ways that are likely to benefit the flying public and eliminate many airline practices that draw the biggest criticism from air travelers.

In April the DOT’s three hour tarmac delay rule went into effect giving airline passengers the option to exit any flight that has been delayed on the tarmac for more than three hours.  Airlines are threatened with stiff fines that could amount to more than $1 million for each flight delay in excess of three hours.

The three hour rule has been controversial.  Critics contend that more flights will be canceled as a result of the new rule, thereby inconveniencing a greater number of passengers overall.  These same critics also believe that sending all these flights back to the gate to offload passengers who choose to deplane after three hours will also increase airline costs, which will ultimately be passed along to travelers.

At this time it is still too early to assess the impact of the new rule particularly since tarmac delays occur in bunches during bad weather events, but DOT reports indicate that tarmac delays in excess of three hours declined from 302 instances in May and June of 2009 to only eight in the first two months after the rule went into effect.

The case for and against the three hour tarmac rule is discussed in my recent Business Traveler column on the impact of the three hour tarmac rule on USA Today.com.

With the three hour rule in place Congress and the DOT are now focused on hidden airline fees.  Pending DOT rules and Congressional legislation could make it mandatory for airlines to disclose all hidden fees at the time of booking so consumers can shop across airlines and know their total ticket price including all fees.

Three airline passenger advocacy groups are largely responsible for the new airline regulations.  The Business Travel Coalition http://businesstravelcoalition.com/, the Consumer Travel Alliance http://consumertravelalliance.org/ and FlyersRights.org http://www.flyersrights.org/ have been instrumental in fighting for these new airline passenger rights.

Disgruntled air travelers who wish to express their sentiments on hidden airline fees can participate in a “Mad As Hell Day!” event on September 23^rd, co-sponsored by the American Society of Travel Agents, the Business Travel Coalition and the Consumer Travel Alliance.  These groups plan to deliver a petition signed by thousands of travelers to the DOT Docket Room on that day.  For further information visit http://madashellabouthiddenfees.com/

To learn more about the pending airline consumer regulation read another recent Business Traveler column on the year airline passengers struck back on USA Today.com.

Following more than a year of dismal economic news, recent numbers released by the International Air Transport Association (IATA) indicate that more business travelers are flying again.  As a result, airlines are adding back some of the capacity that was removed during the 2008 oil price spike and the ensuing recession.  In my current Business Traveler column on USA Today.com there is a chart of data from the Air Transport Association showing how the top U.S. airlines are growing again.  Additionally 1,430 new aircraft will be delivered this year worldwide and only 500 of those airplanes are slated to replace existing aircraft, according to IATA.  Finally, over the last few months another 200 mothballed airplanes were put back into service.

If the capacity expansion can outpace the increasing number of travelers it will be very good news for travelers in several ways.  First, more seats will make it easier to purchase last minute tickets with fewer sold out flights and fewer bumped passengers.  There will also be more frequency on many routes giving travelers greater choice of flight times and less waiting around time.  Some airlines may restore service to destinations dropped during the oil price crisis and subsequent recession.  If capacity outstrips demand there will be more empty seats on board making flying a more comfortable experience again.  Finally, rising capacity will also keep air fares in check and possibly push airfares down again.

Of course everything can change in a minute if oil prices rise, the economic recovery sputters, or there is another man made or natural catastrophe. Anything could curtail this fragile recovery but at least for now airline capacity is moving in the right direction.

The recent announcement that Air Berlin is joining the oneworld alliance signals a major change in alliance strategy and could have a profound impact on the competitive environment in the European air travel market in the coming years.

With most major, full service airlines already part of an alliance, the three global airline alliances are beginning to look at the largest remaining independent airlines, many of which are low cost carriers.  Though not quite of the bare bones mold of Ryanair or easyJet, Air Berlin is still considered a low cost airline in many ways offering a simple one cabin economy class on all except a handful of long haul flights.  For oneworld, adding a low cost airline to its ranks is definitely a departure from the alliance’s longstanding bias towards full service, global players like American Airlines, British Airways, and Qantas Airways.

With Air Berlin joining oneworld, we are likely to see more low cost airlines across the globe signing on with a major alliance in the next few years.  Acquiring Air Berlin gives oneworld a strong foothold in the large German air travel market and another major east-west hub located in the heart of Europe.

Still lagging behind other more mature European air travel markets following reunification of east and west some 20 years ago, Berlin’s two major airports, Tegel and Schoenefeld combined, handle approximately 21 million passengers annually and rank as only the third busiest airport in Germany and approximately 15th busiest in Europe despite the fact that Berlin is Germany’s largest city by population and the second most populous city in Europe behind London.

In recent years Air Berlin has been one of the fastest growing airlines in Europe.  Now, as part of oneworld, it is poised to extend its reach across the globe and serve a rapidly emerging market in its home base.  To accommodate the projected growth in the region, Berlin is building a brand new airport to replace the two older, smaller airports currently serving the city.

When Berlin Brandenburg International Airport (BBI) opens next year the new airport will have 85 aircraft parking stands and a capability to serve as many as 45 million passengers per year, more than doubling the capacity of the two existing individual airports.  Its builders aim to grow BBI into one of the top ten busiest airports in Europe.

The new Berlin Brandenburg International Airport terminal under construction. The new airport will have three runways and 85 aircraft parking stands

Air Berlin will be the largest airline at BBI and is well positioned to operate a major hub that could rival any other major European airport in the next decade.  By joining oneworld, Air Berlin becomes a much greater force on the European continent giving the Star Alliance’s Lufthansa and SkyTeam’s Air France and KLM some serious competition.  Look for more alliance shopping for low cost carriers and a challenge to Lufthansa’s existing Frankfurt and Munich mega hubs.

Many people believe United Airlines initiated merger discussions with US Airways solely to lure Continental into merger discussions as they were really United’s true partner of choice all along.  If United indeed had this ulterior motive, it was a very clever ploy knowing Continental could not stand idly by.

If the airlines had their way, all three U.S. based Star Alliance airlines would combine, but they know Federal regulators would never approve such a mammoth transaction and would view an airline of that size and scope as a threat to competition.

Continental might have been just as happy to remain independent, but with a three way merger not possible, it could not afford to allow United to merge with US Airways.  The problem for Continental may be summed up in one word: Texas.  If Delta/Northwest and United/US Airways merge, the only major remaining player is American Airlines and American is the one airline that cannot combine with Continental because of Texas.  American and Continental are both headquartered in Texas and both operate enormous hubs at their home airports in Dallas-Fort Worth and Houston Intercontinental respectively.

Regulators and local communities would surely block the creation of any airline that would try to dominate the state.  If such a merger was granted, the combined airline would surely have to relinquish one of those hubs and disbanding a Texas hub would greatly devalue and defeat the purpose of the deal.  Additionally, vacating one Texas hub, which would most certainly be Houston, would open the door for other airlines to enter that airport and capture the traffic left behind.

For this reason Continental was forced to pursue a relationship with United which is much more likely to be approved because there are few overlapping routes between those airlines.  Meanwhile, US Airways could combine with American Airlines without arousing similar anti-competitive accusations.

Of course United/Continental Airlines may yet combine with US Airways…a few years down the road if US Airways is still looking for a dance partner and particularly if the two airlines have continued to shrink in the interim as a result of higher oil prices, increased competition from low cost carriers, or the onset of another economic downturn.

I think it’s great news for travelers that Delta has decided to waive baggage fees for those with a Delta branded credit card.  While most travelers, who fly Delta regularly, are likely to already own a Delta branded card or have their baggage fees waived because they are elite members of Delta’s frequent flier program, this represents an opportunity for other less frequent fliers to have a way to avoid baggage fees.

I already carry affinity credit cards for American, Delta, and United in order to keep my mileage balances current even if I don’t make elite status on all of them.  Also, having both a branded American Express card and branded MasterCard/Visa is advantageous as not every card is accepted everywhere.

It will be interesting to see if the other two major, network airlines will follow Delta’s lead.  That could be good news for many frequent fliers and I believe the pressure will mount for the other airlines to match Delta’s offer sometime very soon.

In my current USA Today.com column on the Continental-United merger I talk about the likely impact of the merger on business travelers and a number of cities.  I then lay out some possibilities for additional consolidation that could occur following the Continental-United and Delta-Northwest mergers.

While everyone talks about the likely downsizing that will occur at Continental’s smallest hub in Cleveland, little attention has been given to United’s hubs in Denver and Washington Dulles Airport which also lack immunity to large capacity cuts as the merger takes shape.  In the great mix of goodies acquired by each airline, Continental’s Newark hub stands out as one of the grand prizes in the CO/UA merger.  You couldn’t ask for a better location for an international hub residing in the nation’s largest air travel market at an airport that is still less congested and constrained than the other two NY airports.

The new United is likely to make Newark its premier international gateway to Europe, Latin America and even Asia and the Pacific.  As the new United reshuffles resources among its assets, Washington Dulles becomes a lot less important and strategic.  I believe it’s likely United will severely downsize that hub or even abandon it eventually.

Denver is United’s other problem.  Although it is one of the fastest growing markets in the U.S. Denver has been invaded by low cost airlines in recent years.  Southwest has expanded rapidly in the past couple of years to become the #3 airline at that airport and now holds a 16% market share.  In that same three year period United dropped from 44% to 32% of market share at Denver according to U.S. Department of Transportation data.

In addition to Southwest’s rapid expansion, Frontier Airlines has been revitalized following its recent acquisition by Republic Airways.  Making money in Denver for any network airline would be a challenge in this environment and while Denver is certainly a very desirable location, it will be less important to United as an alternate hub to reroute traffic when other hubs get congested.  With the addition of Continental’s Houston hub, United now has two perfectly positioned hubs in the center of the country and it can easily reroute traffic through one of those hubs when inclement weather impacts traffic at the other.  I will bet United will eventually cut its losses and draw down this hub as the two low cost airlines fight it out.