Self-Serving Post: I’ll Be on TV
April 23 2008
For those in New York, I’ll be on Channel 7 (WABC) today at around 530 chatting about the airline industry.
Archive for April, 2008
Ex-AA CEO: Mergers Are Not the Answer
April 23 2008
Former American Airlines CEO Robert Crandall and I DO have something in common: we both think the idea of airlines merging in this environment to be nutty. In an op-ed in the NY Times, Crandall bashes the proposed (and rumored) mergers writing, “The case for mergers is unpersuasive. Mergers will not lower fuel prices. They will not increase economies of scale for already sizable major airlines. They will create very large costs related to consolidation. And they will anger airline employees, who will perceive themselves to be hurt by the mergers.”
Amen.
Delta’s terrible financial results they announced today do not suggest that a merger is a good idea, it suggests that slamming it together with another airline in a difficult financial position is a miserable idea.
Don’t get me wrong: The CEOs of these companies aren’t idiots - they are very smart people. But no airline has really tried anything drastic yet (remember that Pan Am sold off its Latin, Pacific, intra-European and Shuttle operations piece-by-piece in a bid to save the airline. THOSE are drastic measures.) Ultimately, of course, those measures didn’t save the airline, which had far more fundamental problems than Delta does. But Delta hasn’t tried everything — in fact, it turned down an acquisition offer by US Airways about a year ago. That was supposedly an awful idea (because it was being acquired) whereas the Northwest deal is a great idea (because it is the acquirer). You can’t tell me ego isn’t driving some of this.
Continental 757s Are NOT Almost Running Out of Fuel
April 22 2008
British newspaper The Guardian has a report (via USA Today) saying that Continental’s 757s flying trans-Atlantic routes have “run low on fuel” on 96 occasions last year (Continental flies more 757s trans-Atlantic than anyone else). They suggest that these planes are not meant to fly such distances and that the five-fold increase in “minimum fuel declarations” by pilots and then makes the piece extra scary by tying the story together with a 1990 crash by an Avianca jet that had run out of fuel in New York.
Down in paragraph 317, the article notes that there is a difference between “minimum fuel declarations” and “fuel emergencies” - the former is a scary-sounding moniker that means the flight cannot be delayed any longer without cutting into reserves, while the latter means the plane has to land immediately (thanks to an Ask the Pilot article that gives further explanations about this topic).
As the Ask the Pilot article (and a great deal of other article’s he’s written) notes, stories like this are sensationalized garbage. There is no emergency at hand. No Continental plane 757 has come anywhere close to running out of fuel. I’m guessing this story would never have been written if the phrase “minimum fuel declarations” were called something else. The Guardian should know better…
United Raises Change Fee to $150
April 21 2008
You’ll read about this elsewhere, but United just raised their ticket change fee on domestic flights to $150 from $100. Expect other majors to follow. Remember that JetBlue only charges $40 for a change, and Southwest doesn’t charge anything.
You Will Have Eos to Kick Around Anymore…
April 21 2008
Eos Airlines announced that they’ve secured another $50 million in funding meaning:
a) They’ve blown through about $200 million
b) They won’t be going out of business this summer as I had previously thought
Their press release says that they’ll be profitable next year, but every financial press release they’ve ever put out suggests they’ll be profitable the following year. Given fuel and British Airways’ new product, that’ll be a tough road. It’s really a great product, though…
Passenger Removed from Flight for Praying (Actually, The Airline Was Right)
April 18 2008
A passenger was removed from a United Airlines from from JFK to San Francisco after he refused to sit down prior to takeoff because he was praying. The man (who, for the sake of full disclosure, though the religion doesn’t really matter here, was Jewish) was standing up and praying and would not sit down when the plane was about to take off. Friends of his explained to flight attendants that he would be done in 2 minutes. That was all well and good, but they had security escort him off the plane.
I’m guessing we’ll hear some indignation about this story, but the fact of the matter is this: You can’t stand up when the plane is trying to depart. And in a crowded airport like JFK (or just about anywhere, for that matter), 2 minutes makes a difference. And what if a different passenger wanted 4 minutes. Would that have been OK? Or what if I just wanted to stand up and think about things for a few minutes — is that alright? I’m curious to see the tone of the stories that come out from this, but while everyone has a right to pray, this guy should have davened a bit faster…
Columbus Newspaper Knew of Skybus Shutdown, Didn’t Report It
April 17 2008
A reporter for the Columbus Dispatch knew that Skybus was going to shut down the carrier hours before it actually happened but chose to hold the information back until the airline made the announcement at 9:30pm that evening. The reporter even flew on one of the last flights to Fort Lauderdale so that she could interview people when they were told after landing that they wouldn’t be able to fly home.
You can say what you want about wanting to protect sources and honoring news embargoes, but this was simply the wrong choice by the newspaper’s editors. Telling people would have saved passenger the cost and heartache of dealing with getting home from other cities and allowed their lives not to be turned upside down. How that reporter could sit on that plane and look at people in the eye, when she could have prevented them from wasting cash in this economic environment is beyond me.
I appreciate the need to protect sources, but the public good far outweighed the need to not upset an embargo with a company that was about to go out of business. Poor judgment, Columbus Dispatch.
US Airways to Charge Extra for Some Seats; Hold on to Your Hats for Other Changes
April 17 2008
US Airways announced its Choice Seats program where passengers can pay $5 to get an aisle or window seat in the first few rows of coach.
But that is nothing compared to the changes US Airways’ CEO say are coming down the ol’ pike. You can read Douglas Parker’s note to his employees here, but it suggests that if DL/NW goes through, they will have to merge with someone (they suggest United or American) to survive at all. And as I’ve discussed here before, the US Airways - America West merger still isn’t finished, so combining that airline with another would be a mess.
It’s going to get so much worse before it gets better in this industry. And it’s going to get much, much worse for passengers.
Beware of the Fallacy of the Larger Route Map
April 16 2008
OK, I lied. I have a few more notes on the merger. Today I wanted to mention what I call the Fallacy of the Larger Route Map. One of the key benefits that Delta is mentioning in the merger talk is that there is little overlap in the Delta and Northwest route maps. This would suggest untold growth as the new airline would have a huge footprint in the world.
This is a fallacy. First off, airline mergers don’t fail because of the route map. Routes are important, obviously. But I cannot think of a single merger that succeeded (did any of them succeed?) or failed because of route-related issues. Non-overlapping routes are always mentioned when a merger is announced, but, as the Wall Street Journal points out today, routes and entire hubs are frequently shed following a merger (see AA/Reno Air; US Airways/PSA; United’s purchase of Pan Am’s Latin routes).
Plus, and this is especially true with two airlines in the same alliance, I’m not sure exactly how much new revenue they’re going to be capturing. If you wanted to fly from Minot to Bucharest, a NW/DL combination was your best option before the merger. And it’s the same option now. No new demand is generated. Theoretically you could take some capacity out of the market, but how much? You need the capacity to feed the slew of hubs the combined carrier now has and swears it isn’t shuttering.
No, the Larger Route Map is a canard. Mergers fail because of labor issues, because of operational issues, because of reservation systems, because of cultures. And when it’s two huge airlines these issues aren’t minimized - they’re brought to the forefront. This won’t be a success because they’re capturing Minot-to-Bucharest traffic; this will be a success because (by some miracle) they are able to make NW’s pilots happy, and because they can get the employees to play nice, and because they can keep flights taking off on time, and because they can somehow combine the reservations systems, and because the massive merger undertaking doesn’t cause a collapse during thunderstorm season. And, you see what I’m getting it. Beware the Route Map…
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Plane Crashes in Congo
April 15 2008
A DC-9 crashed in Congo today, landing in a crowded residential neighborhood in Goma. Several people have survived, but there is no indication of how many people were on board the aircraft to begin with. The plane was registered to a private company, not a commercial airline.
Congo has a miserable air safety record, but I wanted to point out that while the US press was overreacting to the non-safety issue of American’s own MD-80s (basically the same plane as the DC-9), people in many countries have legitimate safety issues to worr yabout while no one cares.
