Joe Sharkey At Large

More competition in air service is necessary and inevitable, but I have to confess to a selfish twinge of “not in my backyard” sentiment in the Transportation Department’s new proposal to auction off slots at Newark International Airport. (An airport, by the way, that had a perfectly fine name until some nimrod(s) a few years renamed it Newark Liberty International Airport, evidently unaware that liberty is exactly what you give up when you set foot in an airport.)

And since Newark is my home airport, I sure would welcome seeing JetBlue or Southwest operate there. Right now, Southwest isn’t even a factor in the New York area, and JetBlue operates out of Kennedy, which is torture to reach from New Jersey and which I avoid unless I have no other choice.

Furthermore, Continental Airlines, which has a bastion hub at Newark, is by my and most other travelers’ estimation the best-run of the major airlines. If the rest of the airlines ran as well as Continental does, at least out of Newark, we’d all be much happier travelers.

So, as I said, I sure would welcome Southwest or JetBlue at Newark, and lately I’m growing more fond of AirTran, which in fact does fly from Newark, though out of the dreadful Terminal B.

But let’s give Continental its due. Here’s their response from Friday to the DOT proposal:

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“HOUSTON, May 16 — Continental Airlines (NYSE: CAL – News) today issued the following statement in response to the U.S. Department of Transportation’s (DOT) announcement to implement slot auctions at John F. Kennedy and Newark Liberty Airports:

The DOT proposal to auction off 10 percent, or approximately 95, of the slots at Newark over the next five years is an unlawful taking of property that Continental will vigorously oppose. Moreover, auctioning slots will do nothing to ease congestion, but will raise the cost of air travel to consumers and act as an effective increase in taxes on an industry already known to bear an unreasonably high tax rate. Additionally, the proposal will result in reduced service to various communities and will create unnecessary market uncertainty at a time when the skyrocketing cost of oil and jet fuel has already created an extremely challenging environment for the industry.

The auction proposal does not address the real need to modernize an outdated and inadequate air traffic control system to increase capacity and meet passenger demand.”

[Update: Here's a rocket on that subject just in from my friend Joe Brancatelli:

“I’d like to see Continental’s receipt for this property that is being unlawfully taken … Last time I checked, the airspace belongs to the U.S. taxpayer, and Continental never paid a dime to buy a slot at EWR …”

…O.K., then…

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—War being the ultimate form of business travel and all, I’m just sayin’: Imagine if Franklin D. Roosevelt (or more to the point, Thomas E. Dewey) said during the election campaign in 1944 – when the U.S. had been involved in World War Two for less than three years — that he supposed we’d be able to end the war and get the troops home by 1951 or so. Didn’t John McCain just get away with saying he thought we’d be able to declare victory in Iraq and bring the troops home — by 2013?

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The morning news:

—United Airlines Still Can’t Get No Respect … This just in from the US Airline Pilots Association (USAPA), representing 5,000 pilots at US Airways:

“US Airways pilots will not support any moves towards a follow-on merger until management finishes the job of our last merger. With $6.8 billion dollars invested and an ATSB restricted contract, the pilots of US Airways are the single largest investor in US Airways. Regarding United Airlines, their financial health is a major concern to USAPA. With mounting losses, and a dismal balance sheet, UAL may not be the best dance partner for US Airways. If synergies mean cutting capacity at US Airways while we experience record load factors concurrent with positive industry yields, we simply aren’t interested.”

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—Not all airlines are basket cases. In fact, the big foreign carriers (itching, incidentally, to buy into the U.S. market big time) are doing just fine. Lookit British Airways fiscal year results, released today. Profit is up 45 percent, and the profit margin exceeds 10 percent. Costs are down 0.7 percent despite oil prices. Premium traffic is up 4.4 percent.

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—Oh. My. God. … End Times are definitely imminent. Peggy Noonan, by far the most readable of the Irish-lady columnists, is starting to make sense.

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Two days after Singapore Airlines started a route featuring all-business-class service between Newark and Singapore, OpenSkies, a mostly-premium airline started by British Airways, got the green light from the U.S. Transportation Department today to begin flying to the U.S. in June.

OpenSkies will commence business with flights between JFK and Paris Orly.

The new airline, run by B.A. veteran Dale Moss, will also operate in a code share agreement with the French all-business-class airline l’Avion, which flies between Newark and Orly.

OpenSkies said it will start selling tickets next week on its Web site www.flyopenskies.com

It will start up using a single 757 configured with first-class and business-class cabins, as well as about 30 coach seats. My hunch is that the code-share with l’Avion is a way to hedge against any routine mechanical delays on that single 757 OpenSkies is using.

A second Boeing 757, taken from the British Airways fleet, is being added later this year. OpenSkies said it plans to add routes between European cities including Amsterdam, Brussels, Frankfurt and Milan and New York.

Singapore’s all-business-class service, meanwhile, will add a Singapore-Los Angeles route in September. Singapore is flying its all-business-class routes using A340-500s configured with just 100 lie-flat seats.

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Travelers are pushing back against lousy airline service and virtually weekly anti-competitive far hikes. It’s now so obvious that there is a significant falloff in air travel that even the bumptious Air Transport Association, invincible defender of the indefensible, is copping to the prospect that “slightly fewer passengers” will fly this summer.

Let’s cut through the PR palaver and look at the numbers. The airline trade group forecast, which uses very optimistic advance data, is that domestic travel will be off 2 percent this summer, which USA Today this morning correctly points out would be the biggest seasonal falloff in air travel since the summer after 9/11.

(The schoolmarms who write those USA Today sub-heads, ever ameliorative, importune all of us here in the USA to “Pack your patience. Airlines predict delays and congestion.”)

Well, this is being written from my outpost in the Sonoran desert, with a sky full of sun. I predict light and warmth.

[Update: While the airlines are hollering about fuel, they sure are using a lot less of it. The demand for jet fuel in the United States fell in April to the lowest level in five years for that month, according to the American Petroleum Institute, in a report today by Reuters. While there were a lot of flight cancellations in April, led by the American Airlines maintenance fiasco, that wasn't enough to fully explain the trend The oil trade group said that April was the sixth straight month that jet fuel use fell, Reuters says.]

Meanwhile, Doug Steenland, the man who helped further demoralize Northwest Airlines’ hardworking pilots, flight attendants and other employees, while blissfully packing his pension package, warns that the imminent Delta takeover of Northwest (and please, colleagues, let us stop referring to this event as a “merger”) will mean still higher fares and a shrinking (domestic) air transport system — because airlines are just paying so darn much for fuel.

…Excuse me for a minute while I consider the situation of some poor trucker trying to make it in face of that $4.67 a gallon price for diesel I noticed the other day at a gas station out by the Interstate….

OK, then. The poor airlines, bailed out with regularity by the taxpayers, blithely strangle vital air-transport service while they wail about gas prices, as if we weren’t all trying to cope with gas prices. They appear to believe they can do this without consequence.

At some point, the Congress we allegedly have in this country might want to take a look at the economic and social implications (not to mention national security implications) of a severely deteriorating national air-transport system — and perhaps hold some feet to the fire. I mean, isn’t that Congress’s job?

Steenland, meanwhile, warns that the already shrunken system will shrink even more than has been announced. Steenland, of course, will be headed to the golf course the minute the Delta people take charge.

Here are some excerpts, with my comment, natch, from the Air Transport Association’s press release on summer travel:

—“ATA forecasts that slightly fewer passengers will travel June 1 through August 31 compared to the same period last year. Approximately 211.5 million passengers are expected to fly this summer, down approximately 1 percent from the 214.2 million passengers who traveled during the summer months of 2007.” (Statement conflates domestic travel, which is being slashed by the airlines, with international travel, which the airlines are boosting).

—“For a variety of reasons, slightly fewer people will fly this summer and planes will be approaching 85 percent full,’” said ATA President and CEO James C. May. (‘Variety of reasons’= Major airlines are yanking more planes out of service, cutting routes to many small and mid-size cities, and generally shrinking the system while raising prices.)

—“`We know that summer travel can be stressful for passengers and airports are well organized to handle unexpected schedule changes or delays,’” said Greg Principato, ACI-NA [Airports Council International North America] president. “`We will work closely with the airlines and the Transportation Security Administration to ensure safe and smooth operations for travelers. In the case of delays, airports will help to provide a full range of business and leisure services to meet passenger needs.’” [True fact. Principato is a good guy and the airports have really been stepping up to the plate to provide customer service that no longer is being provided by the airlines],

—“… with the cost of jet fuel approaching $170 per barrel, airlines will be taking every conceivable step to minimize delays and improve operational efficiencies.” [Correct: You will see airlines pro-actively canceling even more domestic flights, to cut costs, using the lamest of excuses, like party cloudy skies.]

—“Working together we are doing our best to make this summer travel season better than last.”

[Talk about setting the bar low!]

–end

I’m taking odds on how long they can keep this up before leisure demand crashes, but the major airlines have succeeded again in raising fares across the board.

Here’s the update from Rick Seaney at FareCompare.com:

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“By Rick Seaney

This morning at 10 am EDT Continental matched the Delta initiated increase of an additional $20rt and at 12:30 pm EDT both Northwest and US Airways matched — all six legacy airlines have significantly matched the increase across the bulk of their respective route systems.

This brings the fuel surcharge to $130 RT for many of the city pairs across the country (especially prevalent on those city pairs that do not overlap with a low-cost airline).

The only time increases have failed this year is when one of the legacy airlines has not matched — so it is likely the will be the 11th (of 15) widely successful airfare hikes of 2008 (success measured by all six legacy airlines matching across their respective route systems).

I will update our time line at the end of the day Monday if no rollback activity occurs. I look for at least one more increase this month of a similar size.”

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Another airliner lost a chunk off its fuselage, this one an American Airlines flight from Dallas to Paris on April 20, it was learned today.

Shortly after the 767 took off from DFW, there was a loud noise that sounded like an explosion in the belly of the plane, a flight attendant said in an e-mail obtained by WFAA TV in Dallas, which broke the story.

Despite the first jolt and a subsequent one, the pilot continued on to Paris, nine hours away. American Airlines said the pilot acted properly. Some safety experts disagree, as you can see in the WFAA report. (Ignore the description of the 767 as a “jumbo jet,” of course. It’s just an older widebody.)

When the plane landed in Paris, a 2-by-3 foot panel was found to be missing from its belly.

This is the second time in six weeks that an airliner has been reported to have lost a piece of its fuselage in flight. See my post on March 28 about a US Airways 757 that lost a 5-by-7 foot panel at 27,000 feet over Maryland. The panel tore off the left wing and slammed into the fuselage, cracking an outer window, before the plane landed safely — though with what the FAA later called significant damage — in Philadelphia.

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The airlines are at the gate again.

And they’re off! Delta takes the lead. The 15th running of the domestic airlines fare hike is underway.

This update is from Rick Seaney at FareCompare.com:

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By Rick Seaney

This evening Delta Air Lines initiated the 15th attempted domestic airfare increase of 2008 by upping fuel charges an additional $20 roundtrip across the bulk of its route system.

The new total fuel surcharge on numerous Delta city pairs is now up to a record $130 roundtrip ($65 one-way) — oddly enough the total of this fuel surcharge increase combined with taxes and fees is now larger than the actual base airfare on several short haul domestic flights.

With a backdrop of a slowing economy, I continue to look for a tipping point where domestic air travelers begin to significantly push back on record high airline ticket prices. At best the jury is still out on whether we are seeing the first signs of push back, what is abundantly clear however is that legacy airlines are willing to cut back even more capacity as we near this point.

I had predicted at least 2 more increases in May and nothing has changed recently changed to alter this opinion – the torrid pace of airfare increases puts us on track for just shy of 40 increase attempts this year (compared to 23 last year) – while this total is unlikely, it is not inconceivable if oil cracks the $150 barrier and beyond. In related airfare increase news tonight — United Airlines increased airline ticket prices between the U.S and Canada by $86 to $129 roundtrip.

I have updated our 2008 domestic airfare hike timeline as follows:

—1. January 3rd, initiated by United, $10 roundtrip, base airfare hike, successful-

—2. January 11th, initiated by United, $30 roundtrip, fuel surcharge hike, unsuccessful

—3. January 17th, initiated by American, $20 roundtrip, fuel surcharge hike, unsuccessful

—4. January 24th, initiated by Continental, $20 roundtrip, fuel surcharge hike, successful

—5. February 22nd, initiated by United, $10 roundtrip, base airfare hike, successful

—6 . February 28th, initiated by Delta, $10 roundtrip, base airfare hike, successful

—7. March 7th, initiated by United, $10 roundtrip, fuel surcharge hike, successful

—8. March 14th, initiated by United, $4-$50 roundtrip, base airfare hike, successful

—9. March 19th, initiated by Delta, $10 roundtrip, fuel surcharge hike, unsuccessful

—10. March 27th, initiated by Delta, $10 roundtrip, fuel surcharge hike, unsuccessful

—11. April 9th, initiated by United, $4-$30 roundtrip, base airfare hike, successful

—12. April 15th, initiated by United, $10-$20 roundtrip, fuel surcharge hike, successful

—13. April 24th, initiated by United, $4-$70 roundtrip, base airfare hike, successful

—14. April 28th, initiated by Delta, $10 and $40 roundtrip, fuel surcharge hike, successful

—15. May 7th, initiated by Delta, $20 roundtrip, fuel surcharge hike, pending

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..was a lot cheaper than May, June, July and later are going to be. While we’ve been watching domestic fares skyrocket (I hate that cheesy media verb, but it’s actually appropriate in this instance), airlines have been really piling on the fuel surcharges on international routes.

Here’s an update from Tom Parsons at BestFares.com:

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Arlington, TX — Wednesday, May 7, 2008 -  “The cost to travel outside the United States is becoming more expensive due to special add-on fuel surcharges now being imposed by most US and international airlines across the globe” – says Tom Parsons CEO of Bestfares.com, the discount travel website that tracks airfares.

“On several international routes the fuel surcharge is actually higher than the base airfare” – says Parsons. The fuel surcharge compared to last summer on some routes has more then doubled. Parsons gives an example stating, “The base airfare price from Los Angeles to London for departure by May 25, 2008 is as low as $195 roundtrip and the fuel surcharge is $306 roundtrip.”

This week we saw the price of oil hit over $122 per barrel. It’s a traveler beware, as the cost of fuel continues to climb so will airfares. The cost of jet fuel has become the biggest expense for the airlines in recent years and this cost is now being passed on to the customer through fuel surcharges and higher ticket prices. We also expect to see more increases on domestic and international routes throughout 2008. 

“As we enter the busy high-demand summer season, many travelers are seeking out airfares as low as last summer. We suggest that before you start searching on the internet that you take two aspirins to avoid ticket shock ” – adds Parsons.

Listed below are the fuel surcharges charged by most major airlines that offer international service from the United States:

DayJet’s quiet announcement (see yesterday’s post) that it is laying off a portion of its work force (100 out of 260 employees, I am now told) and cutting back crucial expansion plans comes amid some apparent signs of disquiet at Eclipse Aviation, the Albuquerque , N.M. company that developed and is producing the $1.6 million Eclipse 500 very light jet.

The announcement was handled so softly that it barely gets mentioned in the mainstream media today.

I’ve always been amazed at the order figures Eclipse and DayJet, its major customer, have announced. DayJet, which has 28 Eclipse 500s in hand, is on the books for 239 firm orders and 70 options. Eclipse, founded by Vern Raburn, claims it has more than 2,600 firm orders. A total of 158 Eclipse 500s have been delivered.

The big question now is the validity of blue-sky claims about the potential of the very light jet industry. The FAA — never one to shirk from predictions that enhance its importance as the regulator of the air lanes — has said that 4,000 very light jets will be in the skies by 2015. In March, PMI Media published a forecast predicting that 7,659 very light jets will be delivered by 2016, which strikes me as a remarkably precise figure for a prediction.

This blog, Eclipse Aviation Critic NG , reports on trouble within Eclipse. [Update: This is the right link now. I had a bad link in this post earlier today.]

Eclipse apparently is concerned. The Albuquerque Journal, the hometown newspaper, reported on April 22 that Eclipse “has asked a California court to force the unmasking of anonymous commentators who posted on Web sites covering the company.”

The Albuquerque paper said that a subpoena was issued by a California Superior Court in Santa Clara County ordering Google to “provide names, addresses and other information for about 28 commentators” to the blog.

Meanwhile, the Atlantic magazine is out this month with a hagiography on DayJet and Eclipse by Jim Fallows, who’s been writing trenchantly for many years about aviation alternatives, but who may have been caught out (damned magazine lead times!) too far in front of a story that may be banking steeply.

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Hammered by the credit crunch, DayJet said this afternoon that is cutting back on growth plans and reducing its work force. It didn’t provide specific details, except to say that it was unable to raise $40 million in needs to continue growth.

DayJet, the first company to enter the so-called air-taxi business with jets, is the biggest customer for the Eclipse 500 very light jet. Based in Boca Raton, Fla., DayJet began flying last summer, offering on-demand, per-seat transportation. Its initial routes were medium-sized cities in Florida, but the founder, Ed Iocabucci, said that the company’s future depended on expansion into regional flying throughout the Southeast to airports that it refers to as DayPorts.

DayJet has taken delivery of 28 Eclipse 500 jets, which cost about $1.6 million each, said Alana McCarrher, an Eclipse spokeswoman. Eclipse says it has a total of over 2,600 orders for the jets, 158 of which have been delivered to customers.

Including those it has received, DayJet made 237 firm orders for Eclipse 500s, with options for 70 more.

In a statement today announcing the cutbacks, Iocabucci said (excerpts follow):

—”Effective this week, we have made the difficult decision to scale back DayJet’s 2008 growth plan. Because of this change in strategy, the company has reduced its employee base across most areas of its business. … These changes were caused by external economic factors and are not a reflection of a weakness in the underlying DayJet business model.”

—”Our first phase of operations, the “Proof of Concept” phase, has gone exceptionally well. Response … was very consistent with our expectations and we answered many nagging questions: Yes, customers will fly in a small jet; Yes, customers will embrace the per-seat model; Yes, customers will pay a premium for tangible value; Yes, the technology works as planned … All in all, we have signed over 1,500 members, more than 550 of which are active travelers, and nearly 200 are frequent flyers.”

—”[This] is only the first step to profitability. The next step is equally important — growing the network to a density that generates operating margin. Our projections have always indicated a network of 30-50 “line” aircraft serving 20-30 fully developed DayPort markets was needed to reach critical scale. More importantly, this required a $40M infusion of operating capital in the first quarter of 2008. … given the current state of the U.S. capital markets, the timing of our planned financing could not have been worse.”

—”Without the growth capital required to open new markets, the company must scale back to a size that is consistent with the demand … DayJet’s business model is based on operating at a critical mass, requiring investment ahead of growth. We hired and trained a number of employees in anticipation of future growth and always planned for additional capital investment at this stage. ”

—”[This] will not reduce our existing service region. … We will continue to operate and expand our service (albeit at a slower rate) to communities across the Southeast … when the capital markets recover, then we would expect to resume the growth forecast in our original plan.”

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