Never mind that Gailen has been writing about travel experiences for years, including some pretty snarky bits in the past (but all in a good way, IMO). Nope. Now is the time to go after the folks who are doing their job and doing it well. After all, firing someone with 20+ years seniority is way more effective at cutting budgets than cutting someone more junior. And when you’re facing a 20% budget cut, well, the bigger numbers start to look attractive.

This whole thing stinks. Not classy at all, AA. Not at all.

Airlines have continually cut and cut again on air travel commissions to agents, essentially killing them off outright. But Delta is putting some back out there, at least in the short term, in an effort to drive bookings on their new routes. Here’s what the numbers look like:

I’m not sure how much demand there is going to be for the premium cabin on those routes but even a number of coach fares are getting in on the action. Not too shabby.

It is hard to know if this is Delta responding to soft future bookings on the new routes, trying to raise travel agent awareness of the new routes or something completely different. Regardless of the motivation, it is definitely a blast from the past with the commissions.

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Apparently Congress has decided that they’ve had enough. After issuing a rather scathing report in November 2011 on the 10th anniversary of the establishment of the TSA a few have now stepped up to actually act on the recommendations made in that report. One of those recommendations was that the TSA stop stonewalling private screener contract applications. Not surprisingly, the TSA ignored it. And now they are running out of chances.

The new legislation will reverse the burden of proof, requiring that the TSA demonstrate increased costs and decreased efficacy in order to reject contract applications. Given the incredibly high turnover rates and training costs that the TSA incurs, it shouldn’t be too hard for contractors to demonstrate that they can meet those standards. Of course, this doesn’t necessarily mean that things will get better with the screening process. After all, the private screeners will still have to follow TSA-mandated policies and the ludicrous “state your name” test started at SFO which is privately run. Still, there is a small chance that private contractors will be able to better manage their workforce, resulting in screeners who bring guns to the office or get caught on camera stealing form customers actually being fired and prosecuted rather than sheltered by the federal government.

And, yes, I know that much of the reason the provisions were pushed through was to benefit the constituents in Representative Mica’s (R-FL) district, but I’m willing to put up with that for the sake of maybe getting a bit better service for the billions spent. Maybe.

A guy can dream…Here’s hoping.

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The filing comes as the company found itself with very little cash on hand when a customer withheld a $20MM payment. They are also faced with significantly declining demand for services as the US Government is reducing troop movements, meaning fewer charter operations. Combined with declining rates for services the company now sees itself with a glut of aircraft on lease. They intend to reject 16 of 30 active leases, returning those aircraft to the lessors as part of the reorganization.

The net impact of all these moves is pretty minimal on most folks but it does show yet another airline that managed to build an operation on unsustainable ideas and the effects of their failures.

Related Posts:

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The company claims the suspension was triggered automatically by the IATA systems when a technical glitch prevented their scheduled payment from reaching the clearinghouse:

As a result of a recent internal system failure, certain credits did not hit our ICH account in time, triggering an automatic suspension. Kingfisher would like to confirm that all its dues via ICH have been settled in full and it has absolutely no outstanding due as of date,

Despite claiming to be current it appears that IATA has not yet commented or reinstated the carrier to the systems.

Adding fuel to the fire is the announcement today that the planned February 10, 2012 ascension of Kingfisher into oneworld is being delayed, with no revised date yet announced. FlightGlobal is carrying the story, with quotes from both oneworld and Kingfisher executives on this latest development. Said oneworld CEO Bruce Ashby:

These are turbulent times for the airline industry in India and many other parts of the world. We have been working closely with Kingfisher Airlines over the past months and it has become increasingly clear recently that the airline needs more time to resolve the financial issues it is confronting before it can be welcomed into Oneworld. Will work with Kingfisher Airlines with the aim of setting a new joining date once it is through this current period of turbulence.

This delay is somewhat reminiscent of the frequent delays that Air India suffered in their attempts to join Star Alliance over the past few years. Those efforts were eventually scuttled after multiple delays.

Without access to interline booking revenue is seems unlikely that Kingfisher will be able to realize the revenue needed to pull themselves out of their financial morass. With many unpaid or severely delayed bills the future of the carrier is very much in question. It is not surprising that the alliance is not interested in bringing the carrier on board as their liabilities for interline travel could be significant.

This is a serious blow for oneworld, as another member carrier, Malev, ceased operations today, also under financial pressures they could not overcome.

Not a good day in the aviation world at all.

Hat tip to Flying With Fish for the head’s up on this one.

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• Kingfisher set to join oneworld. If they can stay in business.
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• Air India: Shining Star or Black Hole?
• SkyTeam, oneworld announce expansion

Overall the website changes appear to be mostly aesthetic, which is fine. Unfortunately, however, they managed to leave the one bit of the old site that is pretty awful on the old platform. The online check-in process is still the same flash-based mess that it has been since the Sabre migration happened. That was the one bit that really needed help and it didn’t get any. There are other bits of the site, like the airport guides, that have a rather unfinished feel to them. Hopefully those get touched up soon enough.

The mobile app, on the other hand, is a pretty solid offering overall, particularly for a v1.0 product. It offers flight booking, management, tracking and check-in functionality, all the basics that a mobile app should have to be useful. But it also has more.

The flight booking option is a slightly different interface than the other mobile apps I’ve seen, most notably in the seat selection, which comes on a scroll wheel rather than a seat map picker. I’m not sure if it is good or bad, but it is definitely different. It can also use geolocation to display default departure airports based on where you are, which is a neat feature, though not necessarily incredibly valuable.

There are some bugs in the flight booking interface still (remember, it is a v1.0 product), so scrolling down to the bottom of the page can result in seeing things like all the error messages that might be displayed if something goes wrong, but that doesn’t seem to interfere with the actual functionality so not a huge problem. I expect that those will be cleaned up soon enough.

The in-flight entertainment guide is pretty basic, but it includes a list of the DirecTV channels available and the movies showing, along with reviews. The in-flight section also has details on the food and snack options, including wine pairing suggestions such as Sauvignon Blanc with Terra Blue chips (apparently the citrus finish is great with the salty chips).

The highlight of the app, to me, is the "My trips" section. The display of upcoming trips is intuitive and offers up all the appropriate information on a single screen. The online check-in, social media share (Twitter and FaceBook) and "Pick me up" email features are also very nice. The flight review bits on the mobile app are arguably better than those on the main website.

And, there is more available via the trip interface. Tap on the city and you get access to the City Guide section of the app. In addition to airport information the City Guide includes tips on sights, dining and activities in the destination cities. Strangely, I cannot find any way to access that information other than via a scheduled trip, but it is nice to see that the company is working on making that happen. Hopefully they can add more content (it is somewhat sparse right now) and they expose it more directly in the near future. It would also be nice to see this content make it into the main website; it does not appear to be there right now.

Speaking of things that I hope to see in the future, there is a section in the flight booking portion of the site, both on the main website and the iPhone app, called "Add extras." Currently that section only says, "The flights you have selected don’t offer any upgrades," so there is nothing that can be selected but it certainly opens up a number of possibilities for things that might be coming. This is separate from the Even More Space seating option, though that might be something that is listed here. But there could be other things as well. This is definitely an interesting revelation that I’ll be keeping an eye on.

Overall the app is a much bigger leap forward than the website updates. Both are nice, but the app is very impressive, particularly in the my trips section. Hopefully the Android app which is expected soon will be similarly functional and both will continue to improve, fixing the little bugs that are showing today.

The airline is relatively small, but they do hold 27 routes out of Budapest where they are the sole carrier. While it is likely that other carriers will step in to pick up some of those routes such changes will take time and in the interim a number of passengers will be inconvenienced by the service termination.

The move is also a blow to global alliance oneworld, of which Malev is a member. The group is adding other carriers, including Air Berlin and Kingfisher, but those carriers are also struggling somewhat financially.

This cessation follows that of Spanair from last week. Truly a sad time in the skies over Europe.

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• Adios, Spanair
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One of the most talked about bits I’ve seen is the termination of the international route pay scale. Those routes will still draw a minor additional pay bump ($1-3/hour) but not the fully separate pay scale like they do today. I can see this upsetting the FAs but I’m not so sure it is justified. The long-haul flights seem to be the better gigs, with less overall work and they’re easier to max out a monthly schedule without actually flying so many days. Those are real benefits of those trips; getting paid extra to work them seems way too favorable towards the FAs. But I can certainly see why they’re going to be upset with the change. The proposal also cuts the incremental pay that is normally accrued over 70 hours per month.

Beyond that, there are some significant changes to the work minimums that are more serious as I see it. In order to qualify for medical coverage and vacation accrual the flight attendants would be required to work 540 hours annually rather than the current 420. That’s a pretty big jump. It also increases the total minimum number of hours which must be worked annually to remain employed to 200.

The proposed rules would also significantly change the duty hours for flight attendants, making their work days longer, the number of potential hours per month higher and then guaranteed minimum time off between trips lower. Rather than being guaranteed five breaks of two days in a month they’ll get the same 10 days guaranteed, but only in one day increments. Again, all changes that are certainly going to upset the flight attendants.

The company also intends to change the staffing level assignment decisions and hotel choice policies. In both cases the policy will shift from "mutually acceptable" to company-mandated, with input from the union considered. Not a guarantee of downgrades here, but certainly there are some changes the company has in mind where there could be cuts.

Finally, the company plans to cut the pension plan, replacing it with a 401(k). They plan to cut healthcare for retirees over 65, replacing it with a Medicare supplement. The will cut life insurance for all retirees.

All these cuts and yet, when I review the term sheet, nothing in it actually seems all that unreasonable. Yes, the terms are worse than the current contract in many ways. Other than the profit sharing plan there actually isn’t really much in the way of improvements for the FAs in the offer. But it just doesn’t seem that unreasonable to me. Yeah, I know that there are many more hours worked beyond the block time. I understand commuting to the crew base. I get all of that. The numbers still just don’t seem that bad to me. Such is life, I suppose.

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Management finally met with the unions and announced their intentions: cuts of roughly 14,000 jobs across the company in hopes of saving about $2 billion annually, 60 percent of which they hope will come from employee costs. The cuts will come across all areas of the company, including 4,600 mechanics jobs, 4,200 ground service positions, 2,300 flight attendants, 400 pilots and 1,400 in management and support services.

Now comes the fun part for the airline and employees, negotiating the details of the actual cuts. Plus, they have to get the bankruptcy judge in New York to actually approve the plan. This was the primary focus of the original filing and now it is clear just how deep the cuts will be.

The real issue, aside from the potential customer service impact of the cuts, is whether trimming the labor force is actually enough to save the company. There are a number of folks who are not particularly convinced, and I’m one of them. Cutting costs is only part of the company’s problem, and it is the easy half to solve. They will dump the old planes, get newer, more fuel efficient ones and also get out of their pension liabilities. And fire a whole bunch of employees. The cost cuts will happen.

The much harder part will be continuing to provide a high level of service (or shifting to one, depending on how you see the service levels today) with 20% fewer front-line employees. It will be driving revenue levels higher on an ASM basis rather than constantly offering discounts and promotions to sell tickets. And it will be growing a route network, with or without partners, that can compete to capture the corporate contracts the airlines need to generate consistent revenue.

Achieving those goals will be just as important to the success of the carrier coming out of bankruptcy as the cost cutting is. And they’re much harder to actually plan and implement than just firing a bunch of employees. In the mean time, best of luck to the folks soon to be unemployed. It isn’t pretty out there, especially in the airline business.

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Michelle Elridge, an IRS spokeswoman is quoted in that LA Times column as offering up three very specific bits of information about points and their taxability:

When frequent-flier miles are provided as a premium for opening a financial account, it can be a taxable situation subject to reporting under current law.

This part is pretty clear, though not necessarily what most folks want to hear. It suggests that Citi was correct to be sending out the 1099s and reporting the tax liability. The particularly interesting bit is the use of the term "financial account." Not only would this apply to bank accounts, but it could also be reasonably interpreted to apply to credit card and investment accounts as well. After all, those are financial accounts and the points are provided as a premium for opening the account. Not particularly good news for folks who are accustomed to churning CCs and Fidelity/Ameritrade accounts for the huge sign-up bonuses.

As for taxing "regular" levels of mileage earning on CC spend or the actual flying, that’s still safe. The IRS continues to see that as a rebate and not income, so no tax liability there.

A common analogy is buying a $500 television at a retail store and receiving a $50 manufacturer’s rebate. It’s not income, just a deemed reduction of the cost of the television.

The most complicated (and oft-debated) part of the debate might be the valuation of the miles. Many insist that the liability should be the fraction of a cent that the banks pay to buy the points from the airlines. The banks disagree, reporting the value at the full retail price as reported by the airlines. And the IRS is somewhere in the middle.

Under the income tax law the amount of income to the taxpayer is the value of the property received, not the cost that the business paid to acquire the property.

The real gray area there is "value of the property received" which is, by the nature of the property in this case, variable. And it could even be argued that the recipient actually never receives property since the T&Cs of the programs say that the points are the property of the programs. There are others who have explained how to dispute the value reported on the 1099s.

Whatever the approach consumers take, it is clear that the IRS sees these sign-up bonuses as a very different beast from the regular spend earning. And the use of the term "financial account" is very open-ended. The CC churn boondoggle may be coming to an end sooner than we all hoped.