Posted by Seth on February 2, 2012 under News | 
As part of yesterday’s announcement that American Airlines plans to lay off a whole bunch of employees they also issued new offer sheets to their main unions, stating their opening negotiating position for the collective bargaining contracts. The offer to flight attendants is open to the public for review and it makes for an interesting read. I’d be pretty upset as a flight attendant reading it over.
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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Posted by Seth on February 1, 2012 under News |
In the weeks since American Airlines filed for bankruptcy protection they haven’t really done all that much. There were a few planes retired and that semi-awkward admission about the multi-million dollar housing in London. Oh, and plenty of bonus miles opportunities to keep customers from completely abandoning them. But not much in the way of announcements on what the restructuring would actually look like. That changed today.
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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Posted by Seth on January 26, 2012 under News |
There have been a few stories today about the unveiling of the American Airlines 777-300ER cabin interior configuration. Most of them (including Ben’s) have been rather effusive, raving about the new Business and First class cabins. And, no doubt, the press photos of those look pretty nice.
But there is a third photo included in the press release, the shot of the economy cabin:
The good news is that the photo shows a pretty nice individual IFE screen, universal power plugs and a handset to control the IFE, meaning reduced likelihood of someone tapping on the back of your seat the whole flight. And those are all good things, but there’s one really big bad thing, too. The seating configuration appears to be incredibly tight. Based on this point of view it appears that the cabin will have a 3-4-3 configuration, bringing American in line with Emirates and Air France for offering one of the most cramped coach cabin configurations in modern aviation. The aisle actually looks ridiculously narrow, too, making me wonder if this is even a real shot of the cabin, but if it is that looks like a VERY uncomfortable coach experience.
Some back of the napkin math based on the size of the power ports and the representation of things in the image suggests that the seats are about 17" wide, maybe a tiny bit less. That’s quite a bit tighter than their current economy products, especially compared to their current long-haul configurations. And they’re articulating – or "slidey" – seats, which means the legroom gets worse when reclined. Ouch.
There was some suggestion that there is going to be a "Premium Economy" product rolled out as well, but no details on that in these photos or in the release. That leaves me a smidge skeptical. Adding that to match their oneworld alliance partners would make sense in many ways. It is also the fastest growing segment of seating in the industry. Then again, when starting from zero relatively recently, it is easy to make "fastest growing" show up. It would be a first for a US-based carrier, so it is worth keeping an eye on.
The premium cabins look quite nice. Matching Cathay Pacific for the business class seat is particularly nice. But most passengers are going to be stuck in those economy seats and it looks painful. I hope it is better than that makes it appear.
It also seems that American has decided in the past 8 weeks to shift the planes from the originally announced service to London, putting them on the Dallas-Sao Paulo route instead. That’s a pretty inefficient utilization plan for the newest, nicest, planes, so they must think they’re going to drive some serious premiums on the route. Good luck.
Posted by Seth on January 23, 2012 under frequent flyer, News, points |
The partnership with Hawaiian Airlines marks a number of firsts for JetBlue. While all the details are still not yet available there is enough information in the press release about the partnership to identify these developments, all of which seem to be quite positive.
For starters, Hawaiian will be, subject to government approval, adding their code to some JetBlue flights. None of the previously established interline agreements have included such a marketing offer. This is not particularly significant from an operational perspective but for pricing reasons this should allow fares to be sold that are not necessarily additive via the connecting city. That’s a big step for JetBlue and a great benefit for the customers in terms of pricing.
The other major first is that the deal will permit not only accrual of points in both programs – on all flights, unlike the limited partnership with American Airlines – but it will also permit redemption on all flights:
Hawaiian and JetBlue have reached a preliminary agreement to allow members of each carrier’s frequent flyer program to earn and redeem loyalty points or miles for travel on either carrier. Under this agreement JetBlue’s TrueBlue members will soon be able to accrue points on any Hawaiian-operated flight, while HawaiianMiles members will be able to earn miles on any JetBlue-operated flights. Similarly, frequent fliers will be able to redeem their points or miles for travel on either carrier’s network, bringing new, much-requested destinations to each program’s loyal members.
The details on earning and redemption rates are scarce at this point. And the two programs are quite different, with Hawaiian operating a more traditional model (points earnt by distance flown; redemption calculated by zones) while both earning and redemption rates in the JetBlue TrueBlue program are more tightly tied to the fare on the flight. Obviously there will need to be some reconciliation between these two schemes along the way.
The arrangement also marks the first time that a JetBlue partner will operate from the JetBlue terminal at JFK airport. There is at least one gate in T5 which can support the Airbus A330 aircraft that Hawaiian will be flying in to New York City, though it remains to be seen what the impact is on the waiting areas with a 294-passenger aircraft using the space; the JetBlue A320s max out at 150 passengers.
Still a number of questions to be answered, but lots of positive developments so far.
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Posted by Seth on January 23, 2012 under frequent flyer, News, points |
Hawaiian Airlines and JetBlue will announce today a partnership for both travel and their frequent flyer programs. The deal comes on the heels of the recent announcement of new service by Hawaiian Airlines with the upcoming launch of non-stop service between New York’s JFK and Honolulu. While the Hawaiian service doesn’t start up until June, the deal will start sooner, with the carriers routing passengers via Los Angeles for one stop service on interline itineraries.
JetBlue has been steadily growing their roster of interline partners but one one of those – American Airlines – has any form of points reciprocity set up. This deal will include at least some reciprocity on the frequent flyer side. Full details are yet to come, but it is nice to see benefits in both the flight and loyalty programs coming to fruition.
More details to come as they are made available…
Posted by Seth on January 18, 2012 under News |
American Airlines is changing their beverage service policies, adding free wine and beer to the menu for economy cabin passengers on long haul flights starting in February 2012. The policy will apply to flights between the USA and Europe, Asia, Argentina, Brazil, Chile, and Uruguay.
"Offering complimentary beer and wine to our loyal customers in all classes of service allows American to better align our product offering with fellow oneworld® alliance members and is another example of our commitment to enhance the travel experience," said Rob Friedman, American’s Vice President – Marketing. "Our customers asked for complimentary beer and wine, and we listened. Starting Feb. 1, when a customer travels internationally onboard American, we invite them to have a drink on us."
This makes a lot of sense with respect to aligning the product with oneworld members where the flights are covered by the antitrust immunity deal which is supposed to give passengers the same experience, regardless of which carrier operates the flight.
Bottoms up!
Posted by Seth on January 10, 2012 under Flying, frequent flyer, News |
As part of their bankruptcy reorganization efforts American Airlines has announced that they are cutting the longest route in their network, the flights between Chicago and Delhi, India. The flights are being terminated as of March 1, 2012. Live from a Lounge (a local on the India side) and One Mile at a Time (a quite vocal AAficionado) have both weighed in on the topic, mostly with disbelief. To me the surprise is really that it took the bAAnkruptcy to do the route in.
At least one analyst out there says the route was losing $40MM annually. And naturally you’re going to cut anything that isn’t profitable in a reorganization, right? The problem with that approach is that, at this point, nearly everything American touches is not profitable; they’ve got the inverse of the Midas touch. The real question should be whether a route can be profitable, not whether it is right now. And in the case of the Delhi flight, the answer is still no.
It is the longest route in their system, roughly 7500 miles in the air each way. That’s a whole lot of fuel that needs to be carried so the plane can make it to the destination, and that fuel has increased significantly in cost since the route was launched in 2005. It seems that even if the company could get the labor costs down, their stated goal in the bankruptcy process, the other fixed costs of the route are still too great.
The same analyst who asserts the $40MM annual losses also suggests that there are a few other routes which are hemorrhaging cash and which seem primed to be cut: New York-London, New York-California, Chicago to Delhi, Beijing and Shanghai and Miami to Buenos Aires. Seems unlikely to me that all those are going to be touched. The London routes gets the advantage now of ATI, something that was far too late in being granted by the authorities on both sides of the Atlantic. That should help significantly for margins on that service. The transcon market is an interesting one and I could see some changes come, but I doubt they’ll fully retreat. And the South America service seems to have way more potential than the Asia routes, putting it squarely in the "potentially could be successful" category.
Could the Beijing and Shanghai routes be on the out? Loads to China are down and the yields are likely following. At the same time, however, getting back into that market is incredibly challenging. Plus, there aren’t particularly great onward connections if you look to partners. It seems much more likely that the China routes could be profitable and that they’d stick around a least a bit longer.
The other consideration for American, more than individual routes, is the combined effect of cutting too much on the route map. Their international network was already somewhat anemic outside of Latin America and further cuts won’t help that. Even with partners and the ATI agreement, it is hard to market and sell flights to corporate contracts when you don’t actually have service to the destinations they need to serve. And a merger with US Airways, JetBlue or Alaska Airlines isn’t going to solve any of those problems.
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Posted by Seth on December 20, 2011 under frequent flyer, News |
Kingfisher and global alliance oneworld have set a date for the Indian carrier to join the alliance. But there still appear to be many hurdles that must be surmounted for that to actually happen. Assuming everything goes as planned the join date is February 10, 2012.
But that’s a rather significant assumption given the way things are going for the carrier lately. They’ve been slashing routes, struggling to pay fuel bills, seeing flight cancelations and otherwise having trouble running their operations. As if that wasn’t bad enough, it was reported today that the company has not been paying its taxes. They’re in the hole $25MM – two years worth of payroll tax withholding – to the Indian government, on top of all the private debt they’re holding. Supposedly there are investors looking to offer a new loan but they’re awaiting reports on the viability of the company. This latest news certainly won’t help those reports.
Not good news at all, either for the airline or the alliance. Oh, and for oneworld there are also the issues of the American Airlines bAAnkruptcy, Air Berlin’s financial struggles and new ownership stake from Etihad and the labor strife at Qantas. Really a lot of uncertainty in that alliance these days.
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Posted by Seth on December 17, 2011 under News |
The answer to that question just got a lot easier for most flights on American Airlines. Like more airlines American offers flight status information via their website. But, until today, only Continental Airlines has been able to offer up where the inbound aircraft for a flight was rather than just the current departure schedule. This is most useful when a flight is listed as delayed and it isn’t clear if they are likely to move the departure time around a lot or not; it is very hard to conjure up a spare airplane, particularly at outstations, when the inbound is delayed.
The inbound flight tracking option goes away once the flight departs so you cannot track an aircraft back multiple stops to see where the problems might have started (OK,not really useful but something I’ve been known to do when I’m bored). But that’s the only minor issue I can see with the offering.
Still, overall this is a great upgrade in terms of transparency to the customer. United Airlines has already committed to expanding the feature to all flights in their system post-merger as they integrate onto a single operations platform. Delta may be able to tell you where your bags are but not where the airplane is.
Posted by Seth on December 16, 2011 under News |
I had a bit of a preview of the announcement for new Delta service from LaGuardia last night. The official release is out and it looks like the preview was accurate, but there are a bunch more routes also on offer coming up. The changes will happen in two waves, one in March and one in July.
Map from the awesome gcmap.com. Red is phase 1, blue is phase 2.
Here’s how the schedules line up (numbers are new service only, not including existing frequencies):
Effective March 25, 2012:
- LGA-ALB; 1x daily
- LGA-BTV: 3x daily
- LGA-BUF: 6x daily
- LGA-DAY: 2x daily
- LGA-DFW: 6x daily
- LGA-GSO: 4x daily
- LGA-MHT: 2x daily
- LGA-MIA: 4x daily
- LGA-NAS: 1x daily
- LGA-ORF: 5x daily
- LGA-RIC: 5x daily
- LGA-ROC: 4x daily
- LGA-RSW: 1x daily
- LGA-SDF: 2x daily
- LGA-SYR: 5x daily
Effective July 11, 2012:
- LGA-BGR: 1x daily
- LGA-BNA: 1x daily
- LGA-CAE: 1x daily
- LGA-CHO: 1x daily
- LGA-CLE: 5x daily
- LGA-CLT: 5x daily
- LGA-DEN: 2x daily
- LGA-GSP: 1x daily
- LGA-IAD: 4x daily
- LGA-IAH: 4x daily
- LGA-ILM: 2x daily
- LGA-IND: 1x daily
- LGA-JAX: 1x daily
- LGA-MCI: 1x daily
- LGA-MKE: 3x daily
- LGA-MSP: 1x daily
- LGA-PHL: 4x daily
- LGA-PIT: 6x daily
- LGA-PWM: 1x daily
- LGA-RDU: 1x daily
- LGA-ROA: 1x daily
- LGA-STL: 1x daily
- LGA-YHZ: 2x daily
- LGA-YOW: 3x daily
- LGA-YUL: 5x daily
Not a whole lot of surprises there. I had forgotten about the Denver exemption to the perimeter rule so that means those aren’t such a big deal to add. As for Delta "attacking" other carriers, there are two ways to look at the situation. One is that they are going after the hubs of their competitors. Flights to DFW, MIA, CLT, PHL, CLE, DEN, IAH and IAD are all going after a hub from American Airlines, US Airways or United Airlines. And BUF, ROC, SYR & BTV are all strong JetBlue markets from JFK. But that doesn’t necessarily mean Delta is really attacking those airlines, especially with the frequencies they’re offering.
The other view is simply that they’re taking the LaGuardia slots and connecting the largest business markets they can to New York City. From that perspective the moves are completely rational and not so much attacks as a logical growth to the market. So there will be some competition on a number of the routes, but that is likely good for customers. Particularly in the IAH, CLE, MIA and DFW markets where competition has been more or less non-existent recently this competition will likely bring some fare discounting.
There will be losers, of course, with the changes as well. With many of the slots shifting to major business markets there will be fewer slots devoted to smaller markets. These are markets currently served by US Airways ex-LaGuardia that Delta does not have on the schedule:
- LGA-ACK
- LGA-AVL
- LGA-BDL
- LGA-BWI
- LGA-CHS
- LGA-CMH
- LGA-ITH
- LGA-LEX
- LGA-MDT
- LGA-MVY
- LGA-PVD
US Airways may keep some of these but odds are the connections for these customers are going to be worse.
Conspicuously they’re skipping service to Toronto. Maybe because WestJet is adding that one or maybe because they don’t see much business there (unlikely). But the 10 daily frequencies to Canada otherwise is a reasonably strong statement there.
Overall it is definitely a big shakeup in the market. The next year should be a lot of fun in the New York City aviation market.
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Posted by Seth on December 15, 2011 under News |
Delta has scheduled a big event to announce their plans for the new slots at LaGuardia now that the deal with US Airways is finalized. They’re expected to announce, among other things, many of the details for the routes they plan to serve with the new slots. Funny thing is, the information is already loaded in the timetable. So if you don’t want to wait for the press release, here are some of the new frequencies to look forward to:
- LGA-DFW: 6x daily
- LGA-MIA: 4x daily
- LGA-BTV: 3x daily
- LGA-GSO: 3x daily
- LGA-ORF: 4x daily
- LGA-RIC: 5x daily
- LGA-BUF: 6x daily
- LGA-ROC: 4x daily
- LGA-SYR: 5x daily
- LGA-MHT: 2x daily
- LGA-SDF: 1x daily
- LGA-DAY: 2x daily
The first two are going after American Airlines hubs and it will be interesting to see how that plays out. The Miami service will be on MD88s (useful for keeping the AA folks comfy, I suppose) while the DFW service will be on E70/E75s which is probably right for the market size but it may be hard to shed the "regional" stigma, even if it isn’t really so bad with a first class cabin and in-flight internet on those planes (both works in progress, but both happening). In related news, perhaps my theory that jetBlue should use all their LGA and DCA slots to attack American at DFW is looking like even less of a good idea.
There are a few other destinations also coming, including Wilmington, DENC (Damn, that was an awkward mistake), which adds that state back on to the Delta route map. Of interest on the ILM route is that they seem to think the LaGuardia flights are useful for international connections. Apparently they don’t hate the Van Wyck nearly as much as I do.
These numbers represent only about half of the frequencies that Delta acquired so there will certainly be more to come as things shake out.
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