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Sep 30

Two new economic indicators in a time of mounting trouble:

First, the long-booming market for business jets is softening, says Forecast International, the aerospace analysis company.

Forecast International says it expects annual business jet production to reach nearly 1,400 units in 2008, and exceed 1,600 units in 2009. But the company projects that annual production will then suffer a three-year decline, dropping to a level of 1,515 units by 2012. Growth is expected to resume in 2013, with yearly production exceeding 1,700 units by 2017, the final year of the time period covered by the study.

Overall, Forecast International projects that 15,936 business jets, worth an estimated $223 billion, will be produced from 2008 through 2017. This total includes about 5,600 Very Light Jets (VLJ). “The VLJ sector is expected to be a very dynamic portion of the market,” Forecast said.

I’d exercise real caution, by the way, in very-light jet projections, given the flame-out earlier this month by DayJet, the air-taxi startup that was the biggest customer for the Eclipse 500 (with 28 deliveries and 1,400 orders representing about half of the Eclipse order book).

Eclipse, which recently announced a new manufacturing deal in Russia, has also been saddled with production problems in the U.S. affecting deliveries of the jet, whose price for available delivery in 2010 is now $2.15 million, according to the Eclipse Web site.

On his Web site, Michael Boyd, the aviation forecaster, recently said that the very-light jet “revolution” has ended, though the various models of VLJs are attractive small planes. One big problem, Mike says, has been the disappearance of the “breakthrough low-acquisition cost” for VLJs and especially the Eclipse 500, which originally was marketed at just under $1 million.

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Meanwhile, more bad news in Las Vegas:

According to the AP, Morgans Hotel Group cut its capital commitment to its portion of the already sidelined $4.8 billion Echelon mega-development, creating another serious setback for the joint venture project with Boyd Gaming, the casino company.

Boyd stopped work on the Echelon project on the Strip in July, citing the credit crunch — and in doing so, Boyd exacerbated fears in Vegas about a growing economic turndown. Boyd said that construction on the project might resume in a year or so.

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Sep 29

Two years ago today, I was quietly working on my laptop on a Legacy 600 business jet flying routinely at 37,000 feet over the Amazon in Brazil when hell broke loose.

With a horrific crash that I still feel in my bones today, the business jet collided in mid-air with a Boeing 737 operated by Brazil’s Gol airlines. The 737, its left wing shorn off, went down in the jungle, killing all 154 on board. The Legacy, its left wing severely damaged and its horizontal stabilizer chewed up, flew on somehow, losing speed and altitude until its two pilots, through a stroke of breathtaking luck, found an airstrip in the jungle and wrestled the plane down.

Through skill and courage, those pilots saved my life and the lives of the four other passengers on the brand-new, $27 million, 13-seat private jet, which was on the first leg of a delivery flight from its Brazilian manufacturer, Embraer, near Sao Paulo. (The pilots, Joe Lepore and Jan Paladino, pointed out, as pilots will, that they also saved their own lives.)

When the crash occurred, no one on board knew what had happened. Both planes were flying on a collision course at 500 miles an hour each. At such closing speeds, you just don’t see it coming.

Three hours after our landing, while in custody at the obscure military base in the jungle, word came that a 737 had gone down.

For Joe and Jan, the world collapsed.

After what seemed like endless interrogations, the other passengers and I were released two days later, but the pilots were kept in Brazil for over two months. After a judge finally ordered their release, Brazilian military and police authorities hastily cobbled together criminal charges alleging that the pilots had been negligent.

It very quickly became clear to me, shortly after the landing in the jungle, that a coverup and a scapegoating was under way. The accident occurred two days before a heated presidential election in Brazil, with a subsequent lengthy runoff period where Anti-American hysteria was palbable in the rush to criminalize the accident and blame the U.S. pilots.

It also quickly became clear to me that Brazil’s air traffic control system was notoriously unreliable, an assertion made to me by more than a dozen international pilots and since confirmed by the evidence. The system, strangely operated by the Brazilian Air Force, depended on unreliable equipment and poorly trained controllers. There also are well-known radio and radar blind spots over the Amazon.

Both planes were flying where they’d been told to fly by air traffic control. A separate element was the malfunctioning on the Legacy of a piece of equipment called the transponder, which triggers the anti-collision warning that would have been the last chance to avoid the hideous accident.

For 18 months, I wrote extensively and too passionately about all of this on the now inactive Brazil portion of this blog. I have no desire to revisit that commotion now or re-fight those awful battles.

But I do need to provide an update, because people keep asking me: What ever happened to those two pilots? The story, real all the time to those of us who lived it, quickly disappeared from the U.S. media’s radar screen.

Joe still works for Excelaire, the Long Island charter company that owned the Legacy. Jan left the company to work for an airline.

Both pilots are still on trial, in absentia, in Brazil. If they are convicted of the charge of negligent homicide, they will become international criminals. If they are convicted, the United States will not extradite them to Brazil because we don’t have a treaty covering that. But they will need to be careful, for the rest of their lives, about where they travel.

The Brazilians are about to release their long-in-progress report on the crash, and it is expected that the pilots will be squarely blamed, although it is also expected that a small group of Brazilian air traffic controllers will also be blamed and some concessions will be made about faults in the Brazilian air-traffic system.

Once the Brazilian report is officially released, perhaps as early as this week, the National Transportation Safety Board in the United States, which has been conducting its own parallel investigation, will be able to release its report. The N.T.S.B. report is expected to be far more fair and accurate.

I’ll make note of it and post both reports here when they are available.

Two years ago, with adrenaline pumping in the initial surge of survival, the seven of us who survived pledged that we would meet every year on the anniversary.

We never kept that promise because, as time passed, there has been no closure (I cringe to write that awful word) — and there is, of course, no joy, because so many died while luck favored us, for no good reason at all.  There is survival for the lucky ones — for me, for Joe and Jan, David Rimmer, Ralph Michielli, Henry Yandle and Daniel Bachmann, for the the Amazon 7.

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Sep 29

Everyone who’s written about Delta’s announcement that it is adding a first-class section to the MD-88s it uses on its Shuttle operation — myself included — has overlooked one obvious reason for the move, pointed out to me today by Joe Brancatelli: Fleet flexibility as the Shuttle market shrinks.

“With a standard configuration of first/coach, the planes no longer have to be dedicated to the shuttle runs,” he notes. Instead, they can be redeployed, as needed, on the regular fleet for longer-route service.

As I said on Friday, the roundtrip Shuttle fare between New York and Washington or Boston is nearly $700. Whoa. This, of course, is exactly what individual fliers and corporate travel departments have been saying as well, and Shuttle traffic has been softening. The Wall Street collapse will only add to that.

I don’t think Delta’s move had much, if anything, to do with the extra $100 to $200 it might theoretically wring out of Shuttle users for first-class seats, because the coach fare is already so daunting. As Delta made a big point of saying, the new first-class section will enable elite-status fliers to get free upgrades.

So it’s a perk and a ploy.

As to the bus: Obviously, a cheap ride on one of those new bus shuttle boutique services is an option for business travelers, but it takes half the day on the bus, so it’s not for someone who has to rush to Washington (or New York) at the last minute, which is where the core of the Shuttle market is — or was.

Amtrak isn’t a lot faster than the bus, but it’s a lot cheaper than either the Delta or US Air shuttles. And, of course, it’s a lot greener than either.

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Sep 26

In the go-figure file, add this:

Delta is reconfiguring the MD-88 planes in its Shuttle fleet to accommodate 14 seats in a new first-class section. There will be 128 coach seats. It’s effective Dec. 1 and here’s the Delta announcement.

Who is going to pay for first-class seating on the Shuttle’s short hops between La Guardia and Reagan or La Guardia and Boston? (The New York-Washington route, on the other hand, is the most popular route for private jet use, also under the go-figure file.)

Well, Delta seems to make a big point in this announcement of saying that “SkyMiles Medallion members will be eligible for complimentary upgrades on Delta Shuttle fleets.” Sounds to me like Delta is adding an elite-status perk to juice Shuttle traffic.

By the way, the Delta Shuttle roundtrip fare (still all-coach, remember) between LaGuardia and Reagan right now is a thought-provoking $689.

For further reflection, I refer you to this piece in the Escapes section of today’s New York Times, about the popularity of new boutique shuttle-bus services on the same routes served by the Delta Shuttle.  These buses are starting to attract business travelers, says the Times article — which I am assuming got urgent attention this morning at Delta headquarters in Atlanta.

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Sep 25

I think this guy at Stifel Nicolaus has it generally right, that the airlines that survive this shakeup will emerge with a fundamentally different model, selling a mid-priced product for the moderately affluent and affluent, rather than a cheap transportation commodity.

Based on that assumption coupled with generally declining oil prices, the brokerage issued a buy order on American, Continental, Delta and United. That’s not a bet I’d be rushing to make, but still, the assessment of the new air-transport model seems about right to me.

With airlines slashing domestic capacity, we’re witnessing the end of a 25-year-long era of dirt-cheap, wildly abundant air-transportation options. And it’s not going to return.

Totally left un-addressed in Washington: What kind of a national air-transport system will we be left with, once the new model emerges? Who gets left out? What options will they have, if any? What is the overall effect on the hugely important tourism industry?

Airlines are busily parking planes. Mostly, it’s regional jets and older single-aisle mid-sized jets that are ending up in the Sonoran and Mojave deserts — each one reflecting a diminution of domestic capacity that won’t be replaced.

Meanwhile, airlines are now figuring, anxiously, that they might be able to reconfigure themselves and make it, barely, if oil dips to around $80 a barrel. But as Kevin Mitchell, the chairman of the Business Travel Coalition, told me the other day: “Operating with $80 oil, nobody is going to be replacing fleets.”

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Sep 25

In another sign of growing concern among airlines about the softening trans-Atlantic market, American Airlines is offering a free companion ticket for travel later for customers who fly between the U.S. and the U.K. before the end of the year. The offer is restricted to purchasers of first-class, business class and higher-priced coach seats (Y, B or H).

This is another small tick in a story to watch. The trans-Atlantic markets are glutted with capacity, and a fare free-for-all is brewing until it all shakes out.

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Sep 25

Sun Country Airlines says it’s “business as usual” despite an FBI raid at its parent company, Petters Group Worldwide. Petters is a holding company that also owns Polaroid, Fingerhut and other enterprises.

Incidentally, I suppose this has been remarked on before, but what’s an airline based in Minnesota doing calling itself “Sun Country?” Oh, wait, I get it: The pitch is we’ll take you out of this miserable weather to some place where there’s sun.

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Sep 24

Here are some rankings from the annual Conde Nast Traveler business-travel awards, based on a readership survey:

Top Trans-Atlantic Business Class
1. Virgin Atlantic
2. Singapore Airlines
3. Emirates
4. British Airways
5. Continental

Top Trans-Pacific Business Class
1. Singapore Airlines
2. Cathay Pacific
3. Air New Zealand
4. Thai Airways
5. Korean Air

Top U.S. First and/or Business Class
1. Virgin America
2. Alaska Air
3. Continental
4. Hawaiian
5. Delta

Top U.S. Hotel Chains
1. Peninsula
2. Four Seasons
3. Ritz-Carlton
4. Mandarin Oriental
5. Park Hyatt

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Sep 23

Delta Air Lines is offering double miles for flights between New York or Los Angeles and London and, with code-share partner Air France, between New York and Lyon and Salt Lake City and Paris. The offer is good for flights through Dec. 15. Here are the details.

And here is my current take on the transatlantic market: Traffic is falling, especially on the U.S.-European routes and especially to London, including premium traffic. The breakdown on Wall Street and the resulting shock wave in London’s financial markets have airlines that invested heavily in first-class and business-class capacity very, very worried because the financial industry has been the most resilient in buying premium seats.

Look for widespread business-class fare sales soon.

Delta itself admits that London is an industry problem. “Heathrow is a bit of a bloodbath currently,” Ed Bastian, Delta’s president and chief financial officer, said last week at the Calyon analysts conference.

However, Delta, which has been expanding its international capacity at a heady clip for a year, is in effect hedged somewhat against the ongoing softening on the North Atlantic routes with its concentration on routes to Africa, the Middle East and Latin America, which Bastian said have “dramatically higher growth rates” than the European market.

Delta’s projections for the rest of this year continue the international expansion and the concurrent reduction in domestic capacity. According to Bastian, international capacity is up 15 percent and domestic capacity down 12 percent in the third quarter, which ends next week. For the fourth quarter, Delta projects international capacity to also be up 15 percent and domestic capacity down 14 percent. Comparisons are to the 3rd and 4th quarters, respectively, of 2007.

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Sep 22

The Air Transport Association takes note of today’s remarkable jump in the price of oil and says it’s the smoking gun proving its contention that speculators are intensely manipulating the oil market.

On the other hand, the Financial Times has a more nuanced explanation.

Here’s the ATA statement:

“The Air Transport Association (ATA), the industry trade organization for the major U.S. airlines, today reacted to oil’s largest one-day price gain in NYMEX history, stating that this record increase reaffirms that speculation is playing a significant role in driving up the price.

“Reversing recent price decreases, today oil spiked at $130 per barrel, closing at $120.92 per barrel – the largest one-day price gain in NYMEX history. Although ATA recognizes the impact of the financial crisis on Wall Street, the weak dollar and the aftermath of Hurricane Ike, the unprecedented 16 percent jump over the weekend – from $104.55 per barrel last Friday to $120.92 per barrel today – also reflects the impact of excessive energy speculation.

“‘The market’s extreme volatility suggests that speculators, who withdrew tens of billions of dollars from the commodities markets when Congress threatened to tighten oversight of excessive and harmful speculation, breathed a sigh of relief last week when action in the Senate seemed unlikely, and returned to the energy markets in full force,” said ATA President and CEO James C. May. “Well, speculators are back and prices are up.’”

“May again called for a bipartisan approach to reining in excessive energy speculation, stating that Congress must pass a comprehensive energy plan or all Americans will pay the price as oil prices return to or exceed this summer’s record levels.”

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