Posted by Seth on January 18, 2012 under Flying, frequent flyer, News | 
I’ll be the first to admit that I was definitely betting against Philadelphia scoring service from Virgin America in their announcement yesterday. There were a couple other destinations on their "short list" which seemed more likely to me. Alas, I was wrong, and the carrier will be launching five daily frequencies starting in April.
As part of the launch release Virgin America pulled no punches, describing their competition in less than flattering terms. Said company CEO David Cush:
Travelers deserve more options than just the typical legacy airline cattle car, and we hope our unique brand of low fares and inventive service will be a breath of fresh air for Philadelphians.
I didn’t expect Philadelphia to be the new market based mostly on the fact that transcons are expensive and it generally takes a lot of capacity to compete in those markets; once daily service, especially between larger cities, is often frowned upon by customers. Virgin America is coming in big, however, adding three flights to Los Angeles which will increase the daily frequencies from 7 to 10, a reasonably significant capacity upgrade. Similarly, the frequencies on the San Francisco route will increase from 8 to 10 with the two new Virgin flights.
But are there enough passengers – profitable ones at that – to make the service work? Virgin seems to think so, suggesting that roughly half of the passengers on each of those routes takes a connecting flight rather than a nonstop option. So maybe there are enough people looking for nonstop options; the question is whether they’re profitable. Time will tell.
With all the hating that goes on against US Airways, this route might seem like a perfect assault. But attacking them at Philadelphia with only a couple non-stop destinations seems unlikely to be the way to go. Even Southwest, which attacked many more routes, is pulling back in their assault there, suggesting that US Airways is reasonably stable and willing to fight their competitors.
One thing it might do, however, is convince US Airways to compete on pricing for the routes. A one-way fare is currently $850 on US from Phillly to LA; the new numbers with Virgin in the market look to be a bit lower:
Interestingly, while US hasn’t been matching Delta fares on the route (or United Airlines on flights to San Francisco) they appear to be taking the Virgin entry into the market a bit more seriously. They aren’t completely matching the fare, but they are much closer, at least for San Francisco. Apparently they’re banking on their frequent flyers or the more frequent schedules demanding a $20ish premium for the route.
For Los Angeles, however, the price disparity remains, at least as of this morning.
It is also worth noting that elites in the US Airways Dividend Miles program can confirm that $850 fare into the first class cabin at the time of ticketing. Virgin is selling their first class cabin – admittedly MUCH nicer than that of the US Airways A321s – for about $1,000, a premium for elites, though still $200 less than the non-elite upgrade fare from US. Both are significantly higher than Delta’s first class fare on the route.
What does it all mean? I have no idea. But there are enough interesting bits at play here that it is worth watching. Oh, and prices on some of the inaugural flights are still pretty reasonable, so I might be headed to Philly for some fun in early April.
Tags: Delta, elite status, Flying, frequent flier, frequent flyer, Los Angeles, Philadelphia, San Francisco, Southwest Airline, United, United Airlines, upgrade, US Air, Virgin America
Posted by Seth on January 3, 2012 under News |
US Airways has announced their intentions for new service at Washington, DC‘s National Airport thanks to the 42 slot pairs they received from Delta Airlines in exchange for the slots at LaGuardia. The carrier will be adding service to 11 cities, 8 of which do not currently have flights to DCA. These are the first of two sets of routes which will be added by the carrier.
The routes in green – Little Rock, Birmingham, Pensacola, Fort Walton Beach, Tallahassee, Fayetteville, Jacksonville and Islip are all cities with no service to DCA currently. The cities in blue are additional frequencies from US and the red are new to US but with other competition on the route.
I’ve gotta say, comparing this map and the one Delta put together for their LaGuardia service, that this looks pretty pathetic. Maybe I’m completely ignorant in the world of route yields and these are all markets with huge amounts of pent up demand for service which will result in great revenue premiums on the routes. I’m betting more that they’ll be cool lines to fly once for the aerophile in me.
Oh, and US Airways has also indicated that they’re increasing from 175 current daily flights to 230+ as part of this swap, though the swap only included 42 slot pairs. It is not clear where the 20 missing slots are coming from.
Related Posts:
Posted by Seth on December 30, 2011 under News |
Filing a lawsuit against a company for causing you to feel ashamed and distressed is an interesting claim. It seems an especially ridiculous one, however, when the claim is based on having gotten in a fight with a gate agent at the airport following a missed connection. It is doubly so when the basis of demanding better service from the agent was throwing your elite card at them and expecting them to "hop to" and move worlds because of that. And yet even more ridiculous when you cannot even properly do that, instead presenting your debit card to the agent.
The woman demanding $150-300,000 for having spent 15 hours in jail as a result of being such a block-headed, self-absorbed, over-entitled moron doesn’t even deserve the $10-30,000 that Delta supposedly offered in a pre-trial mediation.
I know that it will cost delta more than the settlement cash offered in legal fees to see this one out. Hopefully the plaintiff learns another hard lesson here. What a moron.
There’s also a chance that I’m completely misreading the situation and that she really was maliciously prosecuted by the company for quite calmly asking for help and the debit/Medallion card thing was completely made up by the gate agent. But I’m betting against it.
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.
Related Posts:
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.
Related Posts:
Posted by Seth on December 15, 2011 under frequent flyer, News, points |
As part of the revamp of their Divided Miles program scheduled to take effect in 2012 US Airways has announced new fees – in addition to the miles required – for upgrades on flights. The upgrade fees will apply to all flights, not just their Envoy long-haul product and the rates are based on the length of the flight.
The good news here is that they are also cutting the miles required in many cases, making the overall upgrade proposition slightly better on the shorter flights. But for anything over 1500 miles or outside of the Continental US and Canada the numbers are not attractive at all.
The fees are waived for all Dividend Miles Preferred members or passengers on Y/B fares.
In addition to the new fees US Airways also announced a couple cuts to their Silver Preferred status level. Those passengers will only be able to check one bag for free going forward, matching a policy change first made by United Airlines a few weeks back and also recently matched by Delta. And the company changed their "quick ticketing fee" cutoff for award reservations from 14 days to 21 days, with a charge of $75 for that service. Silver Preferred members will not be exempt from that fee, though Gold and higher will be.
All in all, a whole lot of downgrades for the Dividend Miles program, though it still isn’t the worst out there by a long ways.
Posted by Seth on December 8, 2011 under Flying, Internet, News |
Since they first started offering in-flight internet service gogo has been toying with various pricing schemes to try to attract more customers. After starting with just a single flight option they’ve increased to multi-flight deals, day passes and two different monthly passes, one for a single carrier and one of all carriers where the service is available. Now they’ve added another option: a full year of service on Delta for $400.
Yes, this price is a discount from the cost of buying the service on a month-to-month basis. But only $20, or less than 5% savings. Take a month off – like maybe a vacation or something where you leave the country – and you’re actually paying more for the internet under the yearly plan. Ouch.
I get the idea of bundling up products and offering bulk discounts. I think that, when done right, they are a great way to increase sales for a product. But I also see very little value in paying such a high rate in advance, especially when the chances to realize the value of the discount are potentially limited. Too much risk and not enough potential savings.
Then again, my travel patterns are sporadic enough that committing to something on the same carrier for an entire year is never a good idea. Even my status earning comes from many partner flights. I suppose if you really are stuck on the same carrier every trip of every month (and that carrier happens to be Delta) it might not be so horrible. But still some real risk there.
Posted by Seth on December 2, 2011 under News |
Airbus CEO John Leahy is claiming that United Airlines is likely to order the A380 according to a story being carried by Aviation Week. Putting aside the fact that they have been advertising the story with some incredibly misleading headlines suggesting that the order is imminent, there are still issues with the story. Not the least of which is that Leahy actually states that the order is not imminent, though he absolutely seems convinced that the order is coming.
I’m not saying there is an order soon, but United understands that if it wants to have a major presence in Asia it needs the A380.
Airbus has already given up on Delta; the company has indicated it will pursue a policy of smaller widebody aircraft, so United is the only North American carrier left for the manufacturer to try to bring on board.
That leaves United as our target.
There are so many things that don’t add up here. For starters, United has committed to ordering the A350-900. Assuming that shows up eventually it will meet the needs of a multi-hub carrier on many routes that the 747-400s currently operate on. And United has more A350s on order than they have 747s currently in service. On top of that, United has a whole bunch of 787 Dreamliner orders in the pipeline, with initial deliveries currently expected at some point next year.
The A380 is great if you have a huge number of customers that need to be moved between two points – namely hubs – and from which you will then move them on smaller planes after the fact to their eventual destination. The numbers seem to work quite nicely for single-hub carriers where all the passengers can be funneled through a single point. But an operation that has nine hubs needs more flexibility in terms of routes and frequencies.
On top of that, the implication that it is needed to provide service in Asia doesn’t seem to match United’s current route map or indicated plans. There are scarce few intra-Asia routes and those are mostly tag-ons. Replacing those with non-stop 787 service from North American gateways seems much more likely to actually address the demand than flying larger aircraft to the Tokyo hub or Hong Kong.
Oh, and Leahy’s observation that the US airports are already too crowded, while accurate, ignores the fact that much of that congestion is slot hoarding by regional aircraft, flights that are easy for the carriers to scrap if they decide they want to fly bigger aircraft, and the entire premise of the demand Leahy is drawing falls apart pretty quickly.
Oh, and if they really do want a bigger plane don’t forget there’s that Boeing 747-8i out there that is desperate to rack up a few sales to keep the program alive.
The headline certainly got a lot of attention and got folks to read the story, but that doesn’t mean an order is coming any time soon.
Posted by Seth on November 29, 2011 under frequent flyer, News, points |
So American Airlines‘ parent company AMR has filed for Chapter 11 bankruptcy protection. They’re saying "business as usual" (no real surprise there) but what does the filing really mean? There have been plenty of major airline bankruptcy filings in the past couple decades and much can be learned from them. But this one is rather different than the others and there are some interesting things that might come out of it.
Miles & Tickets
Nothing is really going to change in the operations for the near future. The points aren’t going anywhere anytime soon and neither are the flight operations. At least not on most routes. There will be some additional schedule changes in the coming months but nothing that wasn’t already likely to happen. In short, there really is nothing to worry about as a customer, at least not yet.
As for the miles specifically, I did get a chuckle out of this bit in the email from AA today:
The AAdvantage miles that you’ve earned are yours and will stay yours, subject to usual policies…
The irony here is that the "usual policies" explicitly states, "Accrued mileage credit and award tickets do not constitute property of the member." Glad they cleared up that little confusion.
Big sales and promos
The past few Chapter 11 bankruptcies that have happened in the industry were accompanied by major sales and promotions to keep customers flying in the face of uncertainty. There are many suggesting that will happen again here. I’m not so convinced. Unlike most of those recent bankruptcies this one is not a debtor-in-possession filing. That means that there isn’t a major bank along for the ride pulling the purse strings. Yes, there are still major creditors anxious and working to make sure that they will get their cash, but there is no significant investment of new money right now from a party looking to insure that new investment. Plus the $4Bn+ in liquid assets offers a decent run rate for the company. In short, no need for a fire sale so one seems unlikely.
Breaking the union
Reading the quotes from the new CEO this morning it seems clear that this move is focused on breaking the unions. Management has decided that their cost structures are too high and they’re going to attack the one bit they have a way to force change on – labor. American does have some high labor costs, partly because they still have their pensions funded, but their total costs aren’t actually that far out of whack with their competitors from what I’ve seen on recent data. So even if they do manage to renegotiate the union contracts down they’re still in a pretty tough spot. There’s only so much you can cut on the cost side if you’re not actually generating revenue.
At the same time, a work slowdown or "work-to-rule" action by the unions could cause trouble. It will be interesting to see just how quickly the contract negotiations happen and how big the cuts are. That could significantly affect the passenger experience.
What about the planes?
American just placed an order for 460 new jets, a wholesale refresh of their narrow-body fleet and then some. And much of that purchase was predicated on leasing the aircraft. Leasing companies aren’t generally keen to do business with companies in bankruptcy, though at least the new aircraft will have a high enough residual value that the leaseholders will be somewhat covered. Still, this isn’t likely to make their interest rates any better.
As for the existing fleet, the company has made it clear that they reserve the right – as is granted to them under the law – to slow payments on the existing contracts as they look at renegotiating them. Reading the bankruptcy filing, however, it is not clear exactly how many of the aircraft are tied up in leases or what that liability is. These numbers are significant, but not horrible based on a reasonable revenue model:
As of September 30, 2011, maturities of long-term debt (including sinking fund requirements) for the next five years are: remainder of 2011 – $1.1 billion, 2012 – $1.7 billion, 2013 – $1.0 billion, 2014 – $1.5 billion, and 2015 – $778 million. Future minimum lease payments required under operating leases that have initial or remaining non-cancelable lease terms in excess of a year as of September 30, 2011, were: remainder of 2011 – $309 million, 2012 – $1.1 billion, 2013 – $1.0 billion, 2014 – $861 million, 2015 – $703 million, and 2016 and beyond – $6.3 billion.
There will definitely be savings that come from working some of those contracts and likely from grounding some planes, but it is hard to see that making a sufficient difference to bring the company back from the edge. There is also nearly $1Bn locked up in landing slots and routes that is mortgaged to lien-holders, something that seems unlikely to be sold off anytime soon.
Prelude to merger?
The Delta/Northwest merger was prefaced by both carriers’ bankruptcy re-orgs. The US Airways/America West was also borne out of the US bankruptcy shortly prior to that deal being announced. Is that something we could see out of this filing? There are a number of folks already suggesting that the only way for US Airways and American to survive long-term is to combine their resources.
That would be a disaster.
Yes, it worked for DL/NW. It worked in large part because they were more or less in lock-step on the way out of their bankruptcies and were moving in the same direction anyways. Plus their route networks were incredibly complimentary. The US Airways and America West route networks were complimentary, but that’s where the benefits stopped for them. The results of that merger are a labor relations nightmare. It is something of a miracle that the carrier is still managing to operate and even eke out profits from time to time given that burden.
A merged AA/US would have the existing US labor issues as well as the AA labor issues that have been slowly smoldering and which appear likely to boil over into a full-blown fiasco depending on just how bad the cuts are on the contract front. Nothing like slashing $7 billion in pensions liabilities to make your work force feel respected and happy about their future participation in the company. There is the chance that a merger between the two could be seen as American acquiring US Airways and thus the AA union – with its much larger workforce – could absorb the US union and force down the rules upon them. But even that wouldn’t necessarily solve the labor relations issues.
Some other have suggested that Alaska Airlines might be a ripe partner. Or possibly JetBlue. Sure, it is possible, but seems unlikely as neither of those – both of which are profitable for the most part – gets much value of picking up the mess rather than cherry-picking bits as desired in the future.
What’s really going to happen?
If you’ve read this far and think I actually know what I’m talking about then I guess I’ve got you fooled. I actually believe the stuff I’ve written here but I have no idea if it’ll actually play out that way or not. I do know that I’m not worried about the operations or the miles, at least not yet. The company is likely to pull through well enough and has the cash to run long enough that I’ve got no immediate concerns. And any long-term actions will almost certainly protect the AAdvantage program anyways, so even that isn’t much concern.
It certainly does seem like those pilots who retired recently en masse and cashed in on their retirement plan might’ve made a smart move. Oh, and the fact that the CEO retires and joins up with former Continental Airlines CEO Larry Kellner in a private equity company is certainly an entertaining development.
Related Posts
Tags: Alaska Airlines, American Airlines, bankruptcy, Continental, Delta, frequent flyer, JetBlue, merger, NorthWest, points, United
Posted by Seth on November 23, 2011 under News |
JetBlue and WestJet were the winners of the auctions for landing slots at New York City‘s LaGuardia airport and Washington, DC‘s National airport according to reports. JetBlue had made it clear that they intended to bid on the slots and their win there is not particularly surprising. WestJet is a slightly bigger surprise (and only won at LaGuardia); the carrier appears ready to attack the "golden triangle" commuter traffic from Ottawa, Toronto and Montreal to New York.
On the JetBlue side there isn’t any particular indication yet of what the routes will be used for (or even an official confirmation that they won). With an equal number in both DC and LaGuardia it would be possible to take on the US Airways and Delta Shuttle operations, though that also seems unlikely; the market doesn’t need a third player in that space. There are enough other routes that could be operated from the two airports which makes Shuttle service seem unlikely. And with $72MM invested in acquiring the slots it seems to make sense that they’re going to want to maximize revenue, not just attack other established markets.
Most surprisingly to some observers is that Southwest apparently declined to bit at both airports. Southwest was the main instigator of troubles with the previous efforts to distribute the slots so their absence from the auction is somewhat surprising. That said, with their purchase of AirTran the need to acquire slots through the auction process was rather diminished.
Related Posts:
