Posted by Seth on September 27, 2010 under frequent flyer, Internet, News | 
Apparently the airline industry is bored when there isn’t enough merger activity going on. Southwest and AirTran have ramped that pace back up again, with the Dallas-based carrier announcing a planned $1.4 billion buyout of AirTran this morning. The carriers expect the deal to close in the first half of 2011 with operations merging in 2012.
So those are the facts, at least as much as are available now in the early stages of the news discovery. What are the big open questions out there regarding the merger?
WHY?
OK, so this is both a very easy and very complicated question. Southwest has struggled of late to enter new markets, in part because it is harder to find underserved destinations and in part because there are significant barriers to entry in major markets like Atlanta, New York City and Washington, DC. With this purchase the carrier picks up – at a relatively bargain price – significant slot portfolios in all three of those cities. The slots at Washington’s National and New York’s LaGuardia airports are particularly valuable to Southwest.
Somewhat strangely, the Associated Press is reporting the move as an effort by Southwest as seeking “entry into a number of smaller markets.” That makes very little sense. Not only does Southwest already serve many small markets, including most that AirTran serves, but the value is in the larger markets. Southwest fought strongly to defeat the proposed US Airways – Delta slot swap at LGA/DCA in an effort to gain access to slots at those airports. When that failed they simply bought the slots they wanted.
The Atlanta market is nothing to sneeze at, either. While Delta has successfully fought off small entries on a few occasions (e.g. JetBlue’s efforts a few years back), AirTran has established themselves quite solidly in the market there. This move opens up that entire market to Southwest in one quick move.
International?
Southwest has historically only flown domestic routes. They’ve talked about code-sharing to gain international service but those deals have been delayed or canceled recently. This move gives them established service in Mexico and the Caribbean. CEO Gary Kelly stated in the analyst call that the carrier is committed to going international as part of this move. The destinations that AirTran serves should meld nicely with the Southwest operations so that decision isn’t such a surprise.
Fleet commonality?
Southwest is been a Boeing 737 customer and solely operated that type for a long, long time. AirTran operates a fleet of 737s and 717s. There was previously some discussion on retiring the 717s as they start to age – some are 10ish now – and it would seem that the new carrier could simply retire the type completely and keep most of their operations intact based on sharing in the Southwest 737 fleet base. The official statement today says that they will be keeping the 717s in the fleet but it would not be too surprising to see that stance change in the coming years.
In-flight products?
AirTran offers a first class product. They also offer in-flight entertainment. They offer food for purchase. Southwest offers none of those things. Both carriers offer in-flight internet connectivity, with AirTran having deployed the gogo product from Aircell fleet-wide. Southwest is in the early stages of rolling out Row44’s satellite-based system fleet-wide.
There are a lot of things that will need to be reconciled on that front. I expect that the gogo-equipped planes will convert to Row44 eventually. Once the 717s are retired there are not all that many 737s to add on to the Row44 deployment and Southwest holds quite a bit of pricing power on that front since they are the sole commercial customer for the product today.
On the seating front I expect that the first class sections will be removed from AirTran’s planes. Perhaps they will pursue a hybrid option comparable to JetBlue’s Even More Legroom product but that seems unlikely, particularly as Southwest seems quite satisfied with their open seating policy and their “fewer fees” marketing mantra, even if that isn’t completely true in terms of actual operations. Still, there doesn’t seem to be a sufficient demand in the business model to keep the first class seats around so those will disappear.
Loyalty Programs?
The loyalty programs of the two carriers are rather different and Southwest is long rumored to be working on a revised Rapid Rewards program expected to launch eventually. It seems highly unlikely that AirTran’s A+ Rewards will trump the Rapid Rewards program as part of this merger. Even with the uncertainty surrounding the timeframe for the revised Rapid Rewards, the program is bigger and more established than A+ Rewards.
Fares?
The quotes from Southwest are touting the “Southwest effect” and their intentions to bring lower fares to more customers. Unfortunately, that plan does not seem to mesh with the reality of the merger. AirTran already generally offers downward pricing pressure in markets which suggests that there is not necessarily a lot of room for fares to move with Southwest taking over. Connecting the two networks will offer a bit of expansion in potential for low fares but it does not seem conclusive that fares will be cut for consumers.
Moreover, it ignores the effect on airports where Southwest becomes the dominant carrier and sees little competition. In such cities, including Oakland and Albany, fares actually have increased faster than the average across the country.
Finally, any loss of competition almost certainly will lead to increased fares for passengers. Supply & demand doesn’t work perfectly in the airline industry but it is pretty close at the macro scale in situations like this.
Conclusions?
Unlike the United Airlines – Continental merger which was billed as a combination of equals, this move is most definitely a buy-out of the smaller AirTran by Southwest. The main attractions – NYC, Washington and Atlanta markets as well as the international routes – are likely worth more to Southwest than the purchase price paid. The fact that they also pick up a few extra airplanes, too, probably doesn’t hurt the situation, but not really critical to the deal. Southwest is dictating terms and nearly everything associated with the combined carrier will be based on the Southwest side of the operation.
There are plenty of other little things that will play out in the coming months. But the near-term view suggests that Southwest is going to be growing and spreading their wings just a bit further.
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Tags: AirTran, Atlanta, Boeing, Continental, Delta, fees, frequent flyer, IFE, internet, JetBlue, merger, Mexico, New York, New York City, points, Southwest Airline, United, US Air, Washington DC
Posted by Seth on September 22, 2010 under Internet, News |
JetBlue has made a big splash today with their announcement of an impending in-flight internet offering. The service, leveraging the Ka spectrum of satellite connectivity form provider ViaSat, will offer significant bandwidth and a broader coverage footprint than that of ATG provider Aircell, the company behind the gogo product. Company CEO Dave Barger sums it up nicely in the press release issued today with the announcement:
This system will be designed for the 21st century, not just for today’s personal connectivity needs, but with the bandwidth to expand to meet tomorrow’s needs as well. In just the three years since we launched BetaBlue, the first commercial aircraft with simple messaging capability, technology has advanced by generations. Rather than invest in current technology, designed to transmit broadcast video and audio, we elected to partner with ViaSat to create broadband functionality worthy of today’s interactive personal technology needs.
Great news, right? Sortof. There’s a catch (actually a few).
![674451208_dBNgv-M[1]](http://boardingarea.com/blogs/thewanderingaramean/files/2010/09/674451208_dBNgvM1.jpg)
The announcement is based on a Memorandum of Understanding (MoU) not a formal contract. Maybe that’s splitting hairs, but in the end it could make a difference. The MoU is non-binding and a full contract is expected by the end of the year.
Additionally, the technology is new – VERY new. So new that it doesn’t really exist in a form that can actually be installed and won’t for two years. The first trial installations are not expected to occur until mid-2012.
Not only are there many potential pitfalls along the way with getting the technology functional for commercial air service – and let’s not forget that getting a functional antenna was part of the death knell for the Kiteline service that JetBlue & LiveTV tried to bring to market previously – but VIaSat is also new in this market. The JetBlue MoU represents ViaSat’s entree into the commercial aircraft connectivity market.
And then there is the fact that between now and mid-to-late 2012 JetBlue will have no connectivity. While Delta (70+ seat aircraft only), Virgin America and AirTran will have fleet-wide coverage in span and other carriers will have something, JetBlue will have nothing. Having the best product is great but if it takes so long to deploy there is something lost in terms of customer value in the interim.
There is also the consideration of potential partner connectivity offerings. LiveTV was supposed to be providing connectivity options for Continental, too. Those plans went out the window when Kiteline died and Continental also delayed the gogo trial that was supposed to parallel the Kiteline effort. Can LiveTV convince the new world’s largest carrier to hold off on expanding the gogo deployment that they’ll have through the United Airlines p.s. offering for nearly three more years, offering nothing in the interim? Yes, the ViaSat/LiveTV Ka-band offering will be the best out there, but do customers today really need that or just something to get the job done?
There are no official details published by Aircell nor Row44 about the uptake on their products. No one knows just how compelling the in-flight connectivity availability is in terms of driving bookings to one airline versus another. So maybe it isn’t a big deal at all. But a two or three year wait to find out is something of an eternity in the airline industry.
More in-flight connectivity options is always a good thing. There is no denying that. Hopefully this one happens on schedule and isn’t too late to the market.
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Posted by Seth on May 14, 2010 under frequent flyer, News, points |
AirTran is no stranger to poking fun at other airlines and doing what they can to poach frequent flyers from those carriers. They basically have no shame in that regard. And why should they? Marketing is all about going after the customers, right? Being able to do so with a sense of humor is an added bonus. In the case of their latest promotion, they’re going after the Midwest/Frontier combination in Milwaukee, and once again they’re being creative about it.
For starters, they are offering a status match to anyone who holds Midwest Miles Aspire or Executive status. Those customers can become AirTran A+ Elite simply by submitting a request. Considering the reciprocity between the AirTran and Frontier programs that is now coming to an end this makes sense as an effort to hold on to those customers.
And then there is the creative part. AirTran is also offering Midwest Miles members the opportunity to earn AirTran A+ credits simply by redeeming their Midwest miles. Yes, there are some restrictions. Midwest Miles members must redeem their miles for a charity donation through the Midwest program. Credit in the A+ program will only be earned at the 50,000 and 100,000 levels of donations/redemptions. But if someone chooses to redeem their miles that way they essentially can convert the reward miles from one program to the other – causing a donation to be made in the process – and the devaluation of the points isn’t all that horrible.
Like I said, quite a creative way to gain customers. And now that the new Midwest/Frontier is no longer Milwaukee’s hometown airline there is decent motivation for those customers to go looking.
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Posted by Seth on April 28, 2010 under News |
Just announced on the quarterly earnings conference call:
- 7x daily DCA-BOS
- 1x daily DCA-FLL
- 1x daily DCA-MCO
That makes a lot more sense than trying to get Charlotte or JFK on the schedule. There is competition on all these routes, most notably from US Airways on all three routes, but also from Delta, American Airlines, Spirit Air and AirTran.
The new flights put JetBlue in the drivers seat on traffic between Boston and the DC area, with 18 daily departures amongst the three airports. The fight for Boston is going to be fun to watch…
The new flights are bookable now at jetblue.com, with some good sales out there for travel prior to December 15, 2010.
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Posted by Seth on April 10, 2010 under frequent flyer, News |
I like when the airlines offer frequent flyer promos for a number of reasons. First off, there’s the opportunity to earn a ton of extra points. But most promos don’t apply to most customers so there is another aspect to it that I find interesting. The promos are often used by the airlines to improve bookings on routes where there is heavy competition or where the loads are otherwise not performing all that well. When the promos are system-wide it is an even stronger signal that the airline is looking to drum up business in an hurry.
A few weeks back there were a rash of bonuses announced on the Baltimore – Boston route as Southwest, JetBlue and AirTran began fighting in earnest for market share on the route. In the past couple weeks another set of routes has seen a targeted bonus pop up: premium cabin trans-continental routes. Delta fired the opening shot in that battle offering up huge numbers of miles for service in their relatively new BusinessElite product on flights between New York City’s JFK and both Los Angeles and San Francisco. Passengers buying paid business class tickets can earn 50,000 points for each round trip flown on the routes. For passengers with slightly less deep pockets there are 25,000 mile bonuses available for folks flying on the most expensive coach fares, most of whom will be riding in the BusinessElite seats anyways. The promo is valid for travel from April 1 to May 30.
American Airlines responded earlier this week, essentially copying the Delta offer. At least they didn’t have the gall to call their regular economy seating “premium economy” fares.No word yet on whether Virgin America or United Airlines – the two other carriers with a premium product on the transcon routes – will be responding to this fight. Some additional coverage of the NYC transcon promos can be found here.
It seems that business travel is recovering a bit but perhaps not as many companies are offering paid premium cabin travel for the domestic transcons anymore, pitting the carriers against each other in an effort to grab the lion’s share of that shrinking market.
American has also launched a rather creative tiered promotion for service to their newest destinations. The carrier is adding service to 17 destinations in the coming months and passengers who fly to more than one of those destinations will receive progressively more bonus points, up to 100,000 if they can get to 10 of the airports. This promo also requires registration and runs through the end of July.
And then there’s Southwest Airlines. Forget targeted promotions. Rapid Rewards has a wide-open promo running right now. All fares and all routes are eligible with the lower fares receiving double credit (one bonus point for each itinerary) and Business Select fares receiving 2.25-3 credits per itinerary depending on distance traveled. The promotion is valid for travel through May 26, 2010. Wholesale promos like this hearken back to the crazy promotions that most the legacy carriers were running double elite miles promos in an effort to build new bookings. The Southwest promo is only good on new bookings so they’re doing what they can to generate more revenue in the short term. Is this a bad sign for Southwest? Are future bookings and revenue numbers that weak? We won’t really know for a couple months yet when the financial reports come out, but seeing promos like this are always a red flag to me regarding a carrier.
Lots of opportunities to earn a ton of points right now, assuming you’re flying on these carriers and on these routes. Have fun!
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Tags: AirTran, American Airlines, Boston, Delta, frequent flyer, JetBlue, Los Angeles, New York City, points, San Francisco, Southwest Airline, United, Virgin America
Posted by Seth on March 26, 2010 under News |
One of Southwest’s recent commercials has a bunch of their baggage handlers flashing their painted chests at an AirTran plane with the slogan “Bags Fly Free” spelled out. Cute, right? Well, the folks at AirTran have a bit of a sense of humor about the situation and they’ve responded online with this “ad” that they would run if they really cared. Or so they claim.
I love when the airlines have a sense of humor about themselves and their competitors. Behaving too seriously just isn’t believable.
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Posted by Seth on March 25, 2010 under frequent flyer, points |
Who knew that the Boston – Baltimore route was so coveted? Apparently Southwest, AirTran and jetBlue are convinced it is. The three carriers have launched a bit of a price and points war on the route this week. For starters, there is the fare – starting from $49 each way plus tax. That’s not too shabby, especially considering the pretty wide open availability of seats at that price unlike some sale fares that are quite limited.
On top of the good price, however, all three airlines are also offering bonus miles on the route. AirTran is offering double A+ Reward points while jetBlue is offering triple TrueBlue points. Southwest is also offering a bonus. Registration is required for both promotions.
Neither offer is enough to get me to go out of my way to fly the route, but always good to know that there are still some pockets of competition where the airlines are vying for your business.
UPDATE: Updated noon Friday EDT to reflect Southwest’s participation in the fun.
Posted by Seth on March 23, 2010 under News |
When last we met, Delta and US Airways were in the middle of negotiations on one of the largest airline operations reallocations in recent memory. The two carriers were going to be trading over 150 slot pairs at New York City’s La Guardia and Washington, DC’s National airports. But that was seven months ago and since then both the US Air pilots’ union and the FAA have had some comments about the proposed move. The FAA was insistent that some of the slots be given over to limited incumbent carriers or to new entrants at the two airports. As of yesterday it appears that some agreements have been reached to make the swaps happen.
Delta will be giving up 15 of its 125 new slot pairs at LaGuardia, selling five each to AirTran, Spirit Air and WestJet. WestJet would be a new entrant at LaGuardia while AirTran and Spirit are considered limited incumbents based on their relatively minimal operations there. Spirit currently operates 11 daily departures, mostly to their hub in Ft. Lauderdale; AirTrain operates 18 daily flights to five destinations, 9 of them are to their Atlanta Hub. WestJet currently serves the New York City area with service to Newark airport and it is not clear whether they intend to move that service to LaGuardia or operate to both facilities going forward.
In Washington, US Airways will receive 42 new slot pairs, of which five will be ceded to jetBlue as a new entrant to the market. jetBlue currently has significant operations at Dulles airport but no service into National and has previously expressed interest in starting service there should slots become available. That opportunity appears to be on the horizon for them.
This deal is still subject to approval from the FAA and such approval should not be assumed. Previously the FAA suggested that 20 of the LaGuardia slots and 14 of the National slots would need to be shed. The proposal from the airlines doesn’t quite meet those targets. Still, with the number of other carriers involved it does seem likely that the deal will be approved. Of course, the pilots might still find a way to interfere.
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Posted by Seth on February 14, 2010 under News |
This one isn’t quite as awesome as the Kulula Air livery that was making the rounds on the internet last week, but the latest special livery from AirTran is pretty sweet. The carrier has partnered with McKee Foods to celebrate the 50th anniversary of the bakery’s best known brand, Little Debbie Snacks. I have a special place in my heart for those little bundles of excessively sweet and gooey goodness as I pretty much grew up on them so I’m sure that skews my view of the livery a bit. I’m OK with that.
Oh, the airline is running some contests and whatnot associated with the plane, too. Whatever. If they aren’t serving Fudge Rounds or Oatmeal Cream Pies or Star Crunch on board it shouldn’t really count.
Some more info on the promos and the livery here and here.
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Posted by Seth on August 22, 2009 under Internet |
Earlier in the month there was some big news from in-flight internet provider Row44 – they received approval from the FCC to operate their gear on airplanes in the USA. The other shoe dropped yesterday, with Southwest announcing that they are going to be equipping their entire fleet with the system.
Southwest Airlines and Row 44 are continuing plans to roll out wi-fi beginning in the first quarter of 2010. Beginning this fall, Southwest will be moving to the next step of certifying Southwest’s full fleet with plans to begin fleetwide rollout of the Row 44 satellite service in the first quarter of 2010. The airline has been testing the service on four aircraft since Feb. 2009 and has received fantastic Customer feedback on the product.
Their plans for deployment fleet-wide are not the first (AIrTran Virgin America have previously committed to fleet-wide deployment) but they are the broadest. By far. Southwest operates over 3200 flights/day on about 550 planes. That is a lot of systems for Row44 to sell and a lot of coverage to provide.
The pricing has still not been determined (or at least not announced) so that remains a big question mark. Southwest is different than the other carriers offering WiFi in that their average stage length is much shorter – only ~650 miles per flight. For a per-flight subscription they’d likely have to charge much less than the others to have a fairly valued offering. Or they could just offer a 24-hour plan to cover all the hops on Southwest that day. That makes more sense given the flight patterns and route scheme that Southwest uses.
More coverage from Runway Girl, who apparently got a head’s up prior to the official announcement.
