Monthly Archive for July, 2008Page 3 of 4

With the Geeks

Published
by
Dan Webb
on July 18, 2008
in Site Announcements
. 2 Comments

Courtney and Max, the hosts of the Airplane Geeks podcast were nice stupid enough () to have me as their guest on the latest edition of their Airplane Geeks podcast, which you can find here. There are a few topics discussed, including the airlines’ fight against speculation, Soutwest’s new partnership with WestJet, the launch of the CSeries, and a few other things.

I really enjoyed doing it, and thanks again to Court and Max for letting me on!

The Capacity Cuts in Detail

Published
by
Dan Webb
on July 18, 2008
in Industrywide
. 0 Comments

While reading Towers and Tarmacs yesterday I found a link to a very well-reserached article by Rick Seaney. He compared the December 2007 schedule to the December 2008 schedule and determined the change in seats. The decline for some cities is pretty drastic – and not all of the capacity cuts are loaded in yet.

My city is seeing an 11% reduction in seats. What about yours?

Advertising on Boarding Passes?

Published
by
Dan Webb
on July 17, 2008
in Industrywide
. 0 Comments

Apparently so, thanks to a new start-up called Sojern. The advertisements though, will only be on boarding passes printed out online, if I’m reading things correctly. The airlines, of course, don’t want to spend more on paper and ink. You can see a sample here. I will say that this is some clever targeted advertising.

I did find it interesting, though, that while passengers will see the advertisments when the check in, they will have the option of not printing them out if they wish. I wonder if to encourage it the airlines will offer a frequent flyer bonus for doing so. E-Miles already gives out miles for some programs for looking at ads, so I don’t think it’s too far of a stretch.

Delta started the new system yesterday in Vegas and will be rolling it out tomore cities. American, Continental, United, and US Airwasys will also be using the sytem in the future.

For more information, Adverstising Age has a good article.

In other news, Continental posted a loss for the second quarter. The conference call is slated for 10:30 this morning and can be found here.

Delta’s and American’s Earnings and Conference Calls

Published
by
Dan Webb
on July 16, 2008
in American and Delta
. 1 Comment

Delta and American released their second quarter earnings reports today (Wednesday). Excluding special items, Delta posted a $137 million ($0.35/share) profit, much higher than analysts expected. American had a loss of $284 million ($1.13/share), less than expected. When special items (such as accelerated fleet retirement) are included, American had a net loss of $1.45 billion and Delta had a net loss of $1.04 billion.

These better than expected results along with two straight days of lower oil prices were good for airline stocks. American’s stock was up $1.41 today to $5.82, almost a 32% gain, while Delta experienced a 26.55% gain by going up $1.24 to $5.91. Pretty much all of the airline stocks did well today, the AMEX Airline Index was up 18% today.

Both conference calls weren’t terribly exciting. In my opinion, anyone following the industry fairly closely the past few months wouldn’t have learned much. The only big announcement today was that American will retire the A300 fleet a bit faster – by the end of next year.

Some notes, though:

  1. Delta mentioned the industry’s fight against oil speculators, American didn’t.
  2. Both airlines seem like they are now following a wait-and-see approach to determine the effect of the capacity cuts and fare increases before they make further cuts.
  3. Delta mentioned that the regional jet flights are the most expensive, and that with the cuts we will see the equivalent of 100 RJs gone due to returning some planes and using others less.
  4. Delta also hinted at some adjustments in the regional market after the merger with Northwest goes through. Remember, the new airline will have three owned regional airlines – Mesaba, Compass, and Comair. So it will be interesting to see what happens with those airlines and the contract carriers like Pinnacle.
  5. Delta used the word synergy and its variations 37 times during the call by my count. Excessive, I think.

You can read a transcript of Delta’s call here and American’s here.

Farewell, and Thanks, Colleen

Published
by
Dan Webb
on July 16, 2008
in Southwest
. 0 Comments

I have always admired Colleen Barrett, and one of the first things I have done when I board a Southwest aircraft is crack open the inflight magazine and read her monthly letter. Yesterday she stepped down as president of Southwest Airlines, and boy did the company through a heck of a party (she will be staying on as an employee until July 2013, though). Click here to see the video. Colleen is a fantastic leader, and in my opinion is most known for stressing the importance of treating employees and customers very well, but especially the employees. Southwest has always seemed to operate on the philosophy that if a company treats its employees well, the employees will treat the customers well. So far that seems to have worked wonderfully.

Luckily, I have my own personal story of Colleen’s leadership. Continue reading ‘Farewell, and Thanks, Colleen’

Farnborough News; Egyptair Joins Star Alliance

Published
by
Dan Webb
on July 15, 2008
in Airbus, Boeing, EgyptAir, Farnborough and Star Alliance
. 0 Comments

This week will certainly be busy in terms of posts. First, the Farnborough International Airshow is going this week. The manufacturers could be making big announcements, and the airlines might be making some big orders. In addition, earnings season is in full swing and the airlines will be starting tomororw as both American and Delta will be releasing their results and having their quarterly conference calls.

But on to the news… Continue reading ‘Farnborough News; Egyptair Joins Star Alliance’

Hello, Mr. CSeries!

Published
by
Dan Webb
on July 14, 2008
in Bombardier
. 0 Comments

Well here’s almost-Farnborough news. The press release was issued from there a day before the the show officially started. Bombardier wants to generate interest over the course of the week, I’m sure.

Like many things in this industry, the story of Bombardier’s CSeries reads almost like a soap opera. The Canadian company’s attempts to enter the 100+ seat market started awhile ago. First, it considered purchasing Fokker after that company had financial trouble. Then it considered the BRJ-X (Bombardier Regional Jet eXpansion) but decided to stretch the CRJ series instead. Then the CSeries was announced in 2004. Then it was cancelled in 2006 and the CRJ-1000 was the new focus, but then the CSeries restarted in 2007. Finally, the series was launched after Lufthansa signed a letter of intent (LOI) expressing interest in 30 aircraft and 30 options.

Regional aircraft have changed a great deal the past few years. Continue reading ‘Hello, Mr. CSeries!’

Saturday Links #1

Published
by
Dan Webb
on July 12, 2008
in Saturday Links
. 0 Comments

Usually I don’t write a regular post on Saturdays, and that will continue. But I decided that from now on Saturdays I’ll be posting links to items I found interesting but didn’t write posts about.

  1. Jon Heckman reports that US Airways is eliminating domesitc IFE, and Brett Snyder at Cranky Flier speculates what the airline could do next to try to boost revenue.
  2. Aviation.com has a good article explaining that due to recent changes, frequent flier credit cards might not be best idea anymore and a regular cashback card could work better. I never thought of this before, but it’s a good point and something the airlines should worry about – credit cards provide good extra revenue.
  3. The DOT released a proposal that, if approved, will allow airports to charge higher landing fees at peak times.
  4. Embraer predicts that there isn’t much of a 50-seat market in the United States anymore, and a good number (at least 250) of this size of aircraft will be removed from service.
  5. Meanwhile, Boeing says there is a demand for 29,400 new aircraft through 2027, worth about $3.2 trillion in orders. The company also predicts high demand in the single-aisle market. (And they repeatedly push back development of the 737 replacement because?)

I hope you enjoy the weekend reading material. :)

Anyways we have an exciting week ahead of us as the Farnborough Air Show begins, and it will be interesting to see what news there will be from the manufacturers, and more importatntly, what aircraft will be ordered by what airlines. Personally, I’m watching to see what will happen with the 747-8 Intercontinental (the passenger version). There are only 26 orders of the type, six of which are for BBJs and the remaining 20 are from Lufthansa.

Delta’s Cuts at CVG

Published
by
Dan Webb
on July 11, 2008
in Delta
. 1 Comment

We’ve known for a few weeks now that Delta was planning to cut domestic capacity, but today it was reported that as a result of these cuts Cincinatti will be seeing a 23% decrease in capacity, which results in a loss of over 90 daily flights depending on the day of the week. Delta claims that this move is focused more on frequency reduction than the elimination of destinations.

This isn’t too surprising, as Cincinatti has plenty of regional jet flights that don’t make money like they used to. Surprisingly, though, Comair isn’t seeing too many cuts in this market – most of them are out of JFK. The other two regional carriers for Delta from CVG are Chautauqua and ASA. Does anyone know which of these two airlines is seeing the most cuts in service?

Also, Cincinatti has historically had very high airfares when compared to other airports in the country, and no low cost carrier (LCC) has had much success there simply because it was too hard to compete with Delta. Basically, whenever a carrier with low fares would enter the market, Delta would also lower fares and wait for the LCC to give up. Do these cuts increase the chances of a LCC coming to CVG? Not really, as smaller markets are primarily being cut. Those looking for a LCC will still have to drive to Loisville, Dayton, Colombus, or Indianapolis to catch a flight on AirTran, Southwest, or Frontier.

The Airlines and Oil Speculation

Published
by
Dan Webb
on July 10, 2008
in Industrywide
. 0 Comments

Note: I’ve added a few more opinions to this article over the course of the day.

Since I write five posts a week, I’m constantly looking for new material. Some days it’s really easy to find something write about if there’s a bit announcement from one of the airlines, for example. But other days I have to poke around a bit. It felt like the latter when I sat down last night to write today’s post, until I found this FlyerTalk thread.

Basically, the major airline CEOs all signed a letter asking those who received it to help support a movement to stop oil speculation, which they claim is the root of high oil (and therefore, jet fuel) prices. (A potential Iranian conflict, increased demand from other countries, uncertainty about the domestic oil supply, and inflation apparently have nothing to do with it.)

Speculators react to these factors because they affect the future supply and demand of oil. So they purchase oil ahead of time to try to lock in the price (hedging like Southwest) or they can try to trade contracts for oil deliveries and try to make a profit.

But anyways, the CEOs think that regulating speculation can help bring the price down. I can write for a long time on why I don’t like this idea, but why should I when there are some great articles on this topic that are better written than whatever I can produce?

  1. Has anything like this happened before? Well, as random as it sounds, this has happened in the onion industry before. The Wall Street Journal reports that it didn’t really work well.
  2. The Economist has an article revealing that while such a move can be well intentioned, it can make oil prices higher.
  3. The Ludwig von Mises institute has an article with a very similar message and one that helps explain the benefits of speculation.
  4. Finally, Walter Williams explains how a regulated market can fall flat on its face.

Personally, I think the airlines just like finding someone to blame.

So that’s how I feel on the issue. Feel free to share your thoughts in the comments.

Update 7/10 10:57PM: PlaneBuzz and Upgrade: Travel Better have very good posts on this topic as well. So does Russell Roberts, an economics professor at George Mason University who also blogs.