Joe Sharkey At Large

…They can spell it, but some observers don’t seem to grasp the historical concept in their eagerness to swallow everything the airlines tell them these days.

Way back in April, the tone was set for what is now developing when the Transportation Department announced a six-way antitrust-immunity deal for Northwest and its SkyTeam partners — Delta, Air France, KLM (Air France and KLM are owned by the same company, incidentally), Alitalia (stop that snickering right now!) and CSA Czech Airlines.

This wonderful gift was modeled on an exemption Northwest got from antitrust law in an alliance with KLM 10 years ago, followed by a similar deal Delta got from the feds in an alliance with Air France this year.

Dunno, I’m just a simple reporter who probably spends way too much time in the desert, but I seem to recall that antitrust law, as applied to airlines, essentially prevents them from colluding, especially in the matter of setting prices. International alliances have always operated in a kind of legal gray area in price fixing. But don’t forget, with Open Skies, the borders between international and domestic markets are disappearing.

And today we have word of still a new antitrust-law exemption — the new so-called “alliance” between United and Continental. Continental will join the Star Alliance, yada, yada, yada. All subject to (expected) approval from the feds. No downside at all, the experts proclaim.

O.K., you can call these things “marketing alliances” if you want, as if they’re just more of the same. But I call them quasi-mergers on select routes. And the key component of all these wondrous new partnerships, and the anti-trust exemptions that accompany them, is that the involved airlines will be able to collude to a degree that previously would have been illegal. Two words: Set prices.

I’d also suggest that the successive series of 14 across-the-board fare hikes this year by the major airlines — all done in remarkable lock-step — could arguably be looked at as price fixing. I know they didn’t all get in the same location to do it. With fancy technology and shared assumptions, they didn’t have to book a conference room at the Marriott. Res ipsa, as the tort lawyers say.

As I have said repeatedly, airlines obviously cannot survive charging last year’s fares with this year’s fuel bills. The days of cheap airline fares have ended. More fare hikes are inevitable, and by this fall we will be contending with a domestic air-transportation system that is significantly smaller and less reliable than we have been used to.

But that doesn’t have to mean that the days of airline competition in a free market need to be declared over. Not without some debate about antitrust law, it doesn’t.

I wouldn’t be surprised if Southwest, JetBlue, AirTran, Frontier, Virgin America and some of the other formerly low-cost carriers didn’t start pointing out more clearly some of the nuances of antitrust law which seem to be lost in the rush to ensure that the major airlines can avoid more bankruptcies.

I think they, at least, can spell a-n-t-i-c-o-m-p-e-t-i-t-i-v-e.

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More than any other U.S. airline, Delta is betting the farm on robust international travel. This summer, 40 percent of Delta’s capacity will be seats flying internationally.

Meanwhile, like other U.S. airlines, Delta continues to shrink domestically.

Delta said today that it now expects to reduce domestic capacity 13 percent in second half of 2008 while “international growth remains on track.”

Delta had previously said it would cut domestic capacity by about 10 percent. As previously announced, Delta plans to remove 15-20 mainline and 60-70 regional jets from service by the end of the year.

Some markets are losing service altogether. Delta’s statement said:

“Delta in December began adjusting domestic capacity in light of record fuel costs. Previously announced route cancellations have included service between Orlando and cities such as Las Vegas; Fort Lauderdale, Fla.; and Little Rock, Ark., as well as nonstop flights between Boston and cities such as Charleston, S.C. and Greensboro, N.C.

“While a small number of additional market cancellations are expected as fall schedules are finalized, most reductions are being achieved through frequency reductions and by eliminating a number of unprofitable routes with particular focus on point-to-point flights that can more profitably and efficiently be served via Delta’s hubs. Sample cancellations, effective late summer, include flights between:

— Orlando, Fla. and Nashville, Tenn.; Key West, Fla.; Raleigh-Durham, N.C.; Birmingham, Ala.; Columbus, Ohio; Lexington, Ky.; New Orleans, La.; Panama City, Fla.; Richmond, Va.; Louisville, Ky.; and Knoxville, Tenn.;

—Boston and Jacksonville, Fla. and Norfolk, Va.;

— Las Vegas and Los Angeles;

—Pensacola, Fla. and Fort Lauderdale and Tampa, Fla.

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The only time I flew Virgin America was from San Francisco to New York earlier this year. I flew first class; the service was terrific, the seats were far more comfortable than most domestic first class seats, the food was great — but the back of the plane was half empty.

Those shaky mid-week load factors have always been the big question about this airline, which started flying last August.

I’m rooting for Virgin America. But I don’t like what I’m hearing: Unspecified capacity cuts of 10 percent, for one.

And now this, in the usually reliable Guardian newspaper in Britain.

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As I said, this just gets worse. We are rapidly approaching a very real air-transportation crisis in this country, which depends on air transportation.

And if you hate the flying experience this summer, just wait till Fall.

Northwest Airlines just announced “reduced flying” for the 4th quarter:

—Systemwide capacity reductions, based on available seat miles: a decrease of 8.5 to 9.5 percent over last year’s fourth quarter.

—Fleet reductions: 33 DC-9s, and a combined 14 Boeing 757s and Airbus narrowbodies.

In a statement, Northwest said it “has not yet finalized the specific employee impacts related to the reduced flying. However, vfor the resulting headcount reductions, NWA will first look to voluntary separation programs such as early-outs.”

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I am the first to admit that, whatever public unhappiness might be associated with air travel, the airline industry is in one great, big fat fix — and there are no easy ways out.

This just gets worse.

Oil at $130 a barrel is one thing. Oil at who-the-hell-knows a barrel is quite another. Airlines are up to their butts in alligators. But the airline trade association, the Air Transport Association, fixed today on one immediate and very-hard-to-pin-down problem: oil speculators. Basically, as David Castleveter, the group’s spokesman, told me the other day, the industry needs some firm footing (at whatever level), to make any intelligent plans about how to get a grip on this mounting crisis.

Here’s the full ATA report:

WASHINGTON, June 17, 2008 – The Air Transport Association of America (ATA), the industry trade organization for the leading U.S. airlines, today testified before the Senate Committee on Agriculture Nutrition and Forestry and Appropriations Subcommittee on Financial Services and General Government on the crisis facing the airline industry resulting from record-high jet fuel prices. ATA also called on Congress to act now to impose common-sense measures to ensure transparency and reel back the overwhelming odds now favoring index speculators and institutional investors, particularly those trading on foreign exchanges.

“The impact of these unprecedented jet fuel prices on the airlines is devastating and airlines may see 2008 losses nearing $10 billion, on par with the worst financial year in aviation history,” ATA President and CEO James C. May said. “This year, airlines will spend more than $61 billion on fuel, slightly more than the total fuel bill combined for the first four years of this decade.”

May explained the inextricable link between the nation’s economy and the air transportation system and noted that if airlines continue to spiral downward, so too will the nation’s economy. Already more than 14,000 airline jobs have been eliminated and 100 communities have lost scheduled air service, with more job losses and service cuts inevitable. If oil prices continue their upward path, potentially 200 communities could lose all scheduled air service.

May stressed to Congress the importance of urgent, critical oversight by the Commodity Futures Trading Commission over the energy commodity futures market to curtail excessive oil speculation.

“Leading economic and commodities experts around the world believe crude oil prices today are unnecessarily high and distorted due, in large part, to market manipulation and excessive speculation,” said May. “We are asking for Congress to take steps now – not 60 to 90 days from now – to totally close the loopholes and make the market more transparent and balanced, to ensure a level playing field for all.” May concluded, “If Congress does not act soon, this country will not have a viable airline industry.”

ATA airline members and their affiliates transport more than 90 percent of all U.S. airline passenger and cargo traffic. For additional information about the industry, visit www.airlines.org.

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The 2008 J.D. Power and Associates North America Airline Satisfaction Study, released today, has horrible news for the airline industry. Put simply: the public hates most of you even more than it hates high fares.

(Don’t worry, JetBlue: They still love you.)

Here’s the J.D. Power report:

“Overall satisfaction for the airline industry has declined in 2008 to its lowest level in three years.

The study finds that satisfaction with “people” factors — including knowledge, courtesy and helpfulness of reservation and gate agents, check-in staff and flight crew — has declined dramatically since 2007, and is the leading contributing factor to the overall decline in customer satisfaction with airlines in 2008. The decrease in satisfaction with people factors is more than twice as large as the decline in satisfaction with price factors.

“Across the airline experience, from check-in, to the flight, to deplaning, passengers are being affected by the ramifications of carriers making staff cutbacks and have expressed that performance and attitudes of airline staff are suffering,” said Sam Thanawalla, director of the global hospitality and travel practice at J.D. Power and Associates. “In this unstable industry environment, it is critical that airlines invest in their employees as a means to enhance the customer experience, as there is a strong connection between employee satisfaction and customer satisfaction. Those airlines that focus on keeping their employees informed and motivated will be better able to change negative consumer sentiment and truly differentiate themselves.”

The study measures overall customer satisfaction based on performance in seven measures (in order of importance): cost and fees; flight crew; in-flight services; aircraft; boarding/deplaning/baggage; check-in and reservation. Carriers are ranked in two segments: low-cost and traditional network. Low-cost carriers are defined as airlines that operate single-cabin aircraft with typically lower fares, while traditional network carriers are defined as airlines that operate multicabin aircraft and use multiple airport hubs.

Low-Cost Carrier Rankings

For a fourth consecutive year, JetBlue Airways ranks highest overall and also ranks highest in the low-cost carrier segment for a third consecutive year. JetBlue performs particularly well in six of seven customer satisfaction measures: aircraft; boarding/deplaning/baggage; check-in; cost and fees; flight crew; and in-flight services.

Traditional Network Carrier Rankings

Alaska Airlines and Continental Airlines each rank highest in the traditional network carrier segment, in a tie. Continental ranks highest in the segment for a third consecutive year.

Alaska performs particularly well in five of seven measures: aircraft; boarding/deplaning/baggage; check-in; flight crew and reservation, while Continental performs well in the cost and fees measure.

“While nearly all of the carriers in both segments experience declines in satisfaction since 2007, Alaska Airlines has managed to improve, particularly in satisfaction with the overall check-in experience,” said Thanawalla. “Alaska Airlines and Air Canada are the only two carriers that improve overall in 2008, which is a particularly impressive feat in the current volatile industry environment.”

The study also finds the following key patterns:

— The percentage of flight reservations made online has increased from

87 percent in 2007 to 92 percent in 2008. Among traditional network

carriers, 51 percent of reservations were made on the airline Web site

in 2007, compared with 66 percent in 2008. For low-cost carriers, 78

percent of reservations were made on the airline Web site in 2007,

compared with 85 percent in 2008.

— While complimentary meals are the most-desired amenity for Pre-Boomer,

Baby Boomer and Generation X air travelers, in-flight movies are most

desired by Generation Y passengers.

— The percentage of travelers who say they chose a particular carrier

because of its rewards program has increased to 22 percent in 2008

from 14 percent in 2007. Price is the most frequently reported reason

for choosing a carrier in 2008 at 39 percent, down from 42 percent in

2007.

The 2008 North America Airline Satisfaction Study measures customer satisfaction of both business and leisure travelers with major North American carriers. The study is based on responses from 19,701 passengers who flew on a major North American airline between April 2007 and March 2008.

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Nice try, Virgin America, but the way I read this announcement from you today, I would say you are in serious retreat, 10 months after you started up. Bottom line: Virgin America is cutting capacity 10 percent (I’d read transcon on that, which is where Virgin America has to compete).

And for cryin’ out loud, ain’t nobody in town going to buy this jive about the need to “adjust for seasonal consumer demand.”

The announcement:

SAN FRANCISCO, June 17, 2008 (PRIME NEWSWIRE) — Virgin America, the California-based carrier, today announced it will add flights on select high-demand routes, while reducing capacity on off-peak flights this fall, to adjust for seasonal consumer demand for air travel amid high fuel prices. The carrier will add select flights on new and high demand routes. Other than targeted cuts to off-peak flying, the carrier’s business model remains the same with no changes to fleet or growth plans, planned new routes or cities, or cuts to its still growing workforce.

“These temporary schedule reductions and strategic additions better reflect the industry landscape we anticipate, given that consumer demand for air travel will be affected by seasonality and, potentially, by higher gas prices in the fall,” said Virgin America President and CEO David Cush. “As a small, growing carrier, we can trim schedules from less profitable, off-peak flights and add limited capacity on high-demand routes. These are smart business changes that allow us to continue to offer the high-value service we are known for, and support our plans to expand into new markets and add new routes.”

System-wide, Virgin America plans to trim mid-week flights during off-peak periods.
As a result, the carrier will fly at 10 percent less capacity in the fourth quarter than its previously projected fourth quarter capacity. At the same time, the carrier will add flights and frequencies in high-demand markets and continue to grow into new markets. Its year-over-year growth percentage will still be a net positive of 88 percent.

Virgin America will add daily frequencies on its SFO-LAS route on high-demand travel days. On September 4, Virgin America will launch daily non-stop flights between New York’s John F. Kennedy (JFK) and Las Vegas McCarran (LAS) International Airports. Recently, Virgin America also announced its hopes to launch multiple flights a day from both San Francisco International Airport (SFO) and Los Angeles International Airport (LAX) to Chicago O’Hare International Airport later this year, pending government approval.

“We have a strong business model and financing, the most fuel efficient fleet in the U.S., and an upscale, competitively-priced service that has been embraced by the traveling public,” added Cush. “We are in this for the long-haul, and these targeted adjustments will allow us to grow and remain well-positioned and competitive.”

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Roll-a-Boards: Why Did It Take So Long to Invent Them?

Now that we’re all lugging all of those bags, I’ve always wondered:

Why in the world did it take so long for someone in the luggage industry to figure out to employ a wheel, which strikes me as a brilliant, if somewhat early, innovation. Why did it take so long to invent the roll-a-board?

I remember a time not very long ago (I mean the 70s and 80s) when you had to pick a suitcase up to lug the sucker around — and if you had several, it was a misery and a curse.

So the following question comes from my and my wife’s great and good friend, Kim Scott, our horseriding pal from memorable, rain-sodden treks with the legendary Willy Leahy in privative Connemara, Ireland.

Anyway, Kim is a firefighter in Breckenridge, Colo. She and her husband Bryon and their two beautiful babies live at what, to me, is the astonishing altitude of 11,500 feet — though I am writing this from Tucson where my thermometer this afternoon said 111 degrees at 3 p.m — which Kim would consider equally astonishing.

So here is Kim’s question, which evidently has been passed along in e-mails:

“Why is it that we put a man on the moon before we figured out it would be a good idea to put wheels on luggage?”

I have heard tell that the idea for the perfectly obvious idea of wheels on luggage came from … flight attendants.###

DayJet, the single largest operator of Eclipse 500 very-light jets, continued its air-taxi operations normally today after the F.A.A. ordered all Eclipse 500s nationwide inspected following an incident in Chicago last week.

Anxious DayJet customers worried about their travel plans today when press reports said that the F.A.A. had “grounded” all Eclipse 500s after a throttle problem caused both engines on an Eclipse 500 to become temporarily stuck at full power during a landing. The plane eventually landed safely at Midway Airport last week.

DayJet, which now has 28 Eclipse 500s and more than 200 others on order, flies the small planes on air-taxi routes, selling seats on demand, in Florida and elsewhere in the Southeast.

“We got the directive around 9 o’clock last night, and the F.A.A. required full inspection of the fleet because of the incident in Chicago a week earlier. We were aware of the incident and prepared for the air directive that came down last night, and we fully inspected the fleet and completed that in time to service our customers uninterrupted today,” said Vicky Harris, a spokeswoman for DayJet.

There are over 200 Eclipse 500s now flying. The planes are manufactured by Eclipse Aviation of Albuquerque, which has said it has orders for more than 2,500.

Recently, DayJet said it had curtailed its ambitious expansion plans and laid off about 100 of its 260 employees because of a tight credit market.

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No one really believed those “new financing is on the way and we’ll get back into business soon” reports this week from Silverjet, which finally threw in the towel today, two weeks after it stopped flying its all-business-class service between London Luton and Newark and London and Dubai.

When the latest promise of new financing collapsed, Silverjet laid off its 300 workers and folded up shop.

It was a nice try, and the founder, Lawrence Hunt, was a gentleman throughout.

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