Monthly Archive for August, 2009Page 2 of 5

Annoying Airline Reporting #6

Published
by
Dan Webb
on August 26, 2009
in Annoying Airline Reporting
. 2 Comments

Greetings, again, from San Diego. It’s about 4 AM here and I’ll be heading to the airport shortly. There was a bunch of cool stuff at NBTA, and I’ll have plenty of things to talk about.

But, today, I have yet some more annoying reporting that I heard behind me in the press room yesterday, where someone was interviewing a representative of Virgin Atlantic. The interviewer inquired about future growth, and the representative mentioned that Virgin has both A330s and 787s on order, which will enable them to expand.

Where does this one get annoying?

Next, the interviewer asked, “You have orders for the Dreamliner too, right?”

Ugh. :D

United Breaks Guitars Song 2 Comes Out – Who Cares?

Published
by
Dan Webb
on August 25, 2009
in United
. 2 Comments

Everyone’s probably heard the original “United Breaks Guitars” song at this point, and it has nearly 5.2 million views on YouTube. As promised, Dave Carroll has released the second of three songs about his experience. The song has been out for a week, and has roughly 225,000 views. Still a good amount, but it doesn’t seem to be getting the same amount of buzz as the first.

But does anyone really care about this?

We already know about Dave Carroll’s issue. The first video was hilarious, and I watched it a few times. The second video, while very-well produced, was underwhelming. Everyone knows about Dave’s problem, and more importantly, United already fixed the problem with a charitable donation, so Mr. Carroll’s latest effort doesn’t tell us anything new. In fact, it makes me see Mr. Carroll as a bit of a whiner. United’s taken care of him, he’s gotten a bunch of press, and probably even made some money with iTunes sales. Isn’t that enough? Plus, I’m not a fan of him focusing on a single employee, who was just following United policy. If it was anyone else, the same thing would’ve happened.

Anyway, just my two cents.

Continental to Serve IAD from CLE and IAH (Big Suprise…Not Really)

Published
by
Dan Webb
on August 25, 2009
in Continental and United
. 0 Comments

Greetings from the lovely NBTA Conference in San Diego…more about that later this week. On the show floor, each of the three major alliances has its own (large) booth, though it’s kind of awkward that Continental has to be at the Skyteam booth despite only being there for a couple of more months as it will jump over to Star Alliance on October 27.

Speaking of the move to star, yesterday Continental announced that it will start service to Dulles from Houston (ExpressJet ERJs) and Cleveland (CommutAir Q200s).  Naturally, the flights will enable connections between Continental and United.

Alaska’s Monthly Investor Update

Published
by
Dan Webb
on August 24, 2009
in Alaska
. 0 Comments

Alaska releases a monthly update with some traffic and financial data, and it’s always interesting to take a look. First, let’s look at revenue. PRASM was down 1.3% year-over-year and RASM was actually up 0.7%. That’s great, right? Well, not so fast. Alaska reports:

RASM and Passenger RASM were favorably impacted by first bag fee revenue, which began on July 7, 2009, of approximately $4.9 million for Alaska mainline. Given the seasonally high passenger count for July, this amount is in line with our previously disclosed estimate of $70 million in incremental annual revenue for Air Group. RASM was also favorably impacted by the revised Mileage Plan affinity card agreement described in our second quarter 10Q which we estimate will provide approximately $15 million in incremental revenue for the last six months of 2009, or approximately $2.5 million per month.

So, those pesky bag fees make comparing harder, especially when comparing the carriers. From United’s Q2 release:

There is no consistent industry practice among airlines regarding the recording and classification of ancillary and other revenues. Some ancillary revenue products, such as premium seat upsell revenues, are consistently recorded by most airlines as passenger revenue. Certain other ancillary revenue products, such as first and second bag fees and ticketing and change fees, are classified by
some other carriers in other revenue. For United, first and second bag fees and ticketing and change fees are recorded in passenger revenue.

So those RASM numbers are making the situation look a bit better than it actually is.

But, on the bright side, advanced booked load factors look good – up 1.5 points for both August and September. And that could be a good sign – Alaska had an  a 3.5 point increase for July in its last update, but  the increase was actually 4.6 points. Two things on that – first, still doesn’t say much on revenue. But it also goes with what Virgin America CEO David Cush told me – that advance loads aren’t the greatest at predicting actual traffic. It seems to me that more people are booking close-in.

Like many other airlines, Alaska is seeing an increase in CASM ex fuel and items, and the airline is predicting an 8% increase for the third quarter. Alaska also estimates its fuel cost per gallon will be down 36% year-over-year in the third quarter.

Anyway, off to NBTA festivities! :D

Sunday Video #36

Published
by
Dan Webb
on August 23, 2009
in Sunday Video
. 0 Comments

Not exactly aviation-related, but I found this via Christi Day, who tweets for Southwest, and I thought it was quite cool:

YouTube Preview Image

Saturday Links #56

Published
by
Dan Webb
on August 22, 2009
in Saturday Links
. 0 Comments
  1. Aw, look! It’s the cute little A318 for British Airways! The airline will use two A318s to fly between London City Airport and JFK.
  2. Premium traffic was down over 20% in June, and that’s good. Brett Snyder tells us why.
  3. Air France had to scrap plans to acquire Czech Airlines.
  4. As usual, Jon Ostrower has a very informative 787 update.
  5. Alaska still thinks Virgin America is in violation of rules regulating foreign ownership of airlines (big shocker).

Southwest to Roll Out Fleetwide Wi-Fi

Published
by
Dan Webb
on August 21, 2009
in Southwest
. 0 Comments

Southwest has just announced this:

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.

Since February, Southwest has been testing Wi-Fi with four 737-700s. At first, the service was available for free but now the airline is playing around with prices. A rollout of Row 44′s service is now possible because the service has received approval from the FCC.

The press release is pretty light on details, however. There’s been no word on prices thus far, though I think it’s safe to assume that Southwest would charge different prices depending on the duration of the flight. No word on how quickly Southwest plans to roll this out, either.

ATA Yield Data Shows Potential Bottom

Published
by
Dan Webb
on August 21, 2009
in Finance
. 0 Comments

Over the past month, I have been on the hunt for more and more data to look at, as it seems that I have been developing a somewhat unnatural obsession with Microsoft Excel. :D The Air Transport Association (ATA) releases the monthly yields of seven carriers and their regional affiliates, and the July numbers were just released. It looks like, just maybe, we’re starting to see a bottoming out. The year-over-year decline in passenger yield was less in July than June for Domestic, Latin, and Atlantic markets, though the decline worsened in the pacific.

There was also an improvement in some yield numbers in April, but this can probably be traced to the “Easter mismatch.” Easter was in April this year and March last year, improving April’s results but worsening March’s results.

aug21

ATA President James C. May said in a news release, however:

While the modest improvement in demand from June to July would normally be cause for cautious optimism, the fact is that the number of air travelers continues to fall despite double-digit declines in fares. Clearly, with the difficult economic environment, demand for air travel remains weak.

May makes a good point, but things are slowly looking a bit better on the traffic side. According to July 2009 traffic numbers, Alaska, Allegiant, JetBlue, and Southwest all posted gains in RPMs.

Is it safe to call a bottom here? Maybe, but I’m interested in seeing what the autumn has to bring.

Analyzing the Southwest Effect in Denver

Published
by
Dan Webb
on August 20, 2009
in Southwest
. 5 Comments

One phrase that’s usually tossed around when Southwest starts service in a new city is the “Southwest effect.” The logic is pretty basic: Southwest comes in with low fares, and those low fares stimulate demand and and really increase passenger counts. For a good example, I dug into an old high school research paper (further confirming my dorkiness) about the subject, specifically Southwest effect in Providence. One good example is the PVD-PHL route. Previously, only US Airways served it.

aug20_1That’s a pretty dramatic increase in passengers – to over 1,000 in some quarters – along with a very large reduction in fare. (On a random note, look how much more the traffic varied by season after Southwest entered. My guess is more leisture travelers, but that’s another topic for another day.)

So, why am I bringing this up now? Well, a little while back Loren Steffy of the Houston Chronicle wrote:

The Southwest Effect, the notion that the carrier’s low fares encourage additional traffic in markets it enters, hasn’t worked in Denver.

And I decided to try and evaluate this claim. My first move was to look at average airfares for Denver. The closest Southwest launch similar to Denver in recent history that I could think of was Philadelphia, so I threw that in too. I examined the fare premium in those cities compared to the national average:

aug20_2

The fare premium in Philadelphia was higher when Southwest entered than in Denver. One possible reason could be that Frontier was already driving fares down in the Denver market. Nevertheless, the fact that fares were lower in Denver could make any Southwest effect a bit smaller, as there wast less of a premium to drive down, at least the way I see it.

I then decided to move along to the DOT report on domestic fares, and look at some individual markets. I chose Southwest’s original destinations from Denver – PHX, LAS, and MDW. Service started in January 2006, in the first quarter. Continue reading ‘Analyzing the Southwest Effect in Denver’

Annoying Airline Reporting #5

Published
by
Dan Webb
on August 19, 2009
in AirTran, JetBlue and Southwest
. 0 Comments

Since this is my third post in this series in three days, I figure I should re-iterate that I’m not trying to be pretentious or claim I know everything about the airline industry (I don’t). I do notice, however, some things in articles about airlines in the mainstream media that have some obvious errors. One example is this recent AP article about JetBlue and Southwest in Boston. Unfortunately, I’m scared to quote more than five words from the AP (a bit paranoid, sure, but I don’t want to risk anything).

The first (and most) annoying part of this piece? Factual inaccuracy that can be very easily avoided with a quick check of press releases. In the fifth paragraph, it is stated that Southwest will start BOS-BWI in September. This is false. Southwest started service to both Chicago Midway and Baltimore this weekend. JetBlue, however, is starting up on September 9.

In the sixth paragraph, the author claims that the two airlines “mostly crossed paths” in markets such as BUR or MCO. Burbank? Why? I looked back at some old DOT data, and the two airlines have only occasionally competed here on the BUR-LAS route, which JetBlue started, dropped, and picked up again. (If I’m missing any other routes, let me know.)

There’s a fair amount of discussion in this article about the BOS-BWI route. I was disappointed to find that AirTran wasn’t mentioned once, especially considering that they have nearly as many seats on the route as JetBlue and Southwest combined. According to the schedule for September 10th (JetBlue starts on the 9th, but only has three departures that day), here’s the number of outbound seats:

aug19

Interestingly, I saw some AirTran ads in Boston this weekend advertising the fact that they have the most service on this route. I haven’t been to the city too much this year, but I wouldn’t be surprised if those are relatively new since Southwest and JetBlue said they would be coming onboard.

Finally, the reporter quotes a finance professor from Northeastern who thinks that Southwest’s no-fee approach will make Southwest beat JetBlue in Boston. While this isn’t really annoying airline reporting, it’s just not true, in my opinion. Don’t get me wrong, the no-fees campaign might very well help Southwest bring more passengers, but not necessarily make them victorious in BOS. First of all, while Southwest has touted its connecting service, JetBlue has more nonstops, plain and simple. Second, Southwest would need to start service to new cities, like CLT, RIC, and the Caribbean destinations JetBlue has been adding. Third, schedule is always important. Southwest doesn’t do redeyes. JetBlue does. This, I think, is very important for transcon passengers, as I really do doubt that a traveler would pay for another night in a hotel to avoid a second bag fee.

Anyway, that’s it for now. :D