Monthly Archive for June, 2010

American to Upgrade Old 737-800s

Published
by
Dan Webb
on June 30, 2010
in American
. 1 Comment

Greetings again from Virgin America. The trip to Toronto has definitely been interesting, and I hope to have a trip report up tomorrow. But let’s talk about some airline news that came out yesterday that I didn’t have the chance to blog about – American is “enhancing” their older 737-800s. Generally, when one sees the word “enhance” in an airline press release, he or she should take a run for the hills. But this is actually decent news.

In all honesty, this isn’t huge news – American will be taking its old 737-800s and retrofitting them to look like the ones that have been coming fresh from Boeing. So what does that mean? New seats are on the way – including those that have the bottoms that move forward when you recline, making life easier for the people behind you. The old CRTs will be replaced with LCDs on the ceiling. I like this for a couple of reasons – the video quality will be better, but there will now be LCDs on the ceiling on both sides of the aircraft, so people in the window seats will have an easier time watching.

A great perk for those who want to stay productive is seat power outlets at every row. The older 737-800s only have outlets available in a couple of rows so you’re out of luck if you can’t reserve a seat there. Plus, American does plan to have Gogo installed on every 737-800 aircraft.

The only negative I see here is that the number of seats will increase as American adds a couple of extra rows in economy. That might make the plane more crowded but passengers really won’t see a big hit legroom wise because some galley space is being reduced, and slim seats are being used. So no big deal.

So, overall, this seems like a positive for passengers.

Greetings from Virgin America!

Published
by
Dan Webb
on June 28, 2010
in Virgin America
. 1 Comment

OK, I realize that Gogo has been around for awhile, but this is my first time using inflight Wi-Fi, and I have to say I’m a huge fan! And the fact that Virgin has power throughout the cabin only sweetens the deal!

So, why am I on Virgin America, you ask? Well, the airline has been doing Toronto flights for a few days now but tomorrow is the official launch event, and I was invited to cover it! And, to take care of all the disclosures – this trip is on Virgin’s dime. They’re covering my flights and hotels. B

Anyway, so I’m still in the first hour of this Dulles – San Francisco flight, and I am really enjoying it so far. The highlight so far is RED, the carrier’s inflight entertainment system. For me it has definitely lived up to the hype.

More to follow – expect a full trip report!

Another Mexican Filing from Frontier

Published
by
Dan Webb
on June 28, 2010
in Frontier
. 1 Comment

A short while ago I wrote about how Frontier is starting to build up its Mexican service again, after it was cut through the company’s bankruptcy. On Friday the airline applied to the DOT for authority to start up a brand new route – St. Louis to Puerta Vallarta once a week on Saturdays. Frontier already flies to Cancun from St. Louis. The new route would be operated with A319s.

In terms of published service, there isn’t much on this route – American used to fly it back in the day. It is on USA3000′s route map but I wasn’t able to book it (but it could be too far out).

But this is interesting. After a domestic ramp-up this year, Frontier is now showing faith in the Mexican leisure market once again.

Hopefully we can see some more entertaining Mexico ads as a result. :D

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A Quick Look at Virgin’s First Quarter

Published
by
Dan Webb
on June 25, 2010
in Virgin America
. 1 Comment

On Monday, the DOT will be releasing Form 41 results for the airlines. For most carriers that’s not too excited since we’ve all seen the numbers from earnings season. But it’s great since it’s a chance to peer inside at privately held airlines like Spirit and Virgin America. Like usual, the latter has sent out a press release with the highlights a few days before.

From where I sit, the theme for Virgin’s financial results remains the same from the past couple of quarters – the airline still has work today but its numbers are continually improving. For example, the airline’s operating margin was -14.7%. That doesn’t look fantastic compared to lots of other airlines who had margins in the low single digits (either positive or negative). But, Virgin improved their operating margin by 15.5 points, which is strong progress.

The carrier continues to impress from the revenue side, with passenger revenues up 46.2%. Part of that growth is thanks to more flying – the airline saw a 20% boost in capacity. But unit revenues grew strongly – yield was up 11.2%, PRASM increased 15.5%. The latter was aided by a 3.2 point increase in load factor.

The cost side doesn’t look too shabby as well. Ex-fuel CASM decreased by 11%, suggesting that Virgin’s doing a good job of managing the costs that it directly controls. What really seemed to hit Virgin this quarter was fuel – total expense there was up 117.1%. That was driven by a 26.2% increase in consumption to support that new flying. And the price of oil did not help – a year ago  prices were still very low. But Virgin’s cost of fuel per gallon was up over 72%.

And that’s what I think really hurt their results the most. Just for fun, I played around with the numbers. Holding everything else constant, had Virgin been paying the same amount for fuel in first quarter 2010 as they were in first quarter 2009, it looks like they would have slightly broken even, with an operating margin of 0.8%.

Of course one can’t rely on cheap oil to succeed – and Virgin is not unique in having to deal with high fuel prices. And the above scenario is probably very rosy. One reason Virgin’s average fare, and hence, yield, probably went up is because the airline has to set its prices in response to fuel costs. And if Virgin could increase their average fare proportionally to cover the increased fuel cost, they probably could. (Naturally the ability or lack thereof to increase fares to compensate for higher fuel costs is an issue for any airline.)

Virgin also seems to be using some of its resources more effectively. Fleet utilization was up 15.4% to 12.5 hours per day. While Virgin didn’t publish this ratio, revenue per employee was up 36.4%.

Finally – a quick look at cash. Virgin actually increased their cash balance from the prior quarter. That’s certainly good news. It’s happened before, as you can see that’s happened before, but if one looks at Virgin’s statement of cash flows from 2008, one can see that’s primarily driven by financing transactions. So while it’s certainly good to see an increased cash balance, it will be great if that boost came from a positive operational cash flow. And we’ll see that when the DOT publishes results next week.

So we’ll understand more when all of the numbers come out next week, but I think Virgin is making strong financial progress. I am very interested in seeing their second quarter numbers. Generally airlines have their best performance in the second and third quarters. Virgin says they anticipate a full-year operating profit, so we’ll have to see how the summer goes.

AirTran and Frontier Both Get MKE-CUN Rights

Published
by
Dan Webb
on June 24, 2010
in AirTran and Frontier
. 0 Comments

Fortunately, it appears that a regulatory catfight between Frontier and AirTran  has been avoided. Yay!

It all started when Frontier decided to announce last month that it wished to start up service between Milwaukee and Cancun. Like a couple of the routes that I was talking about last week, this one was cut a couple of years ago back when oil was going up to incredible heights and Frontier was dealing with some major financial issues at the time. So it does appear that Frontier thinks those routes can still work out fine since its rebuilding that network.

One important difference, though, is this time around this route could work a bit better as now Frontier has the Midwest network to connect to that flight.

Anyway, the airline was planning on seasonal service with with between one and tree weekly frequencies depending on the time of the year. All of the routes would be operated with A319s. So that’s all fine and good, but then on June 7 AirTran decides to step in and announce year-round service with 737-700s. Service would range from one weekly to daily service. I think this kind of illustrates how aggressive AirTran has been in Milwaukee.

Then we see some drama unfold between the two airlines. (You can check out each docket folder to see: click here for AirTran’s and here for Frontier’s.)  The source of said drama is a discussion of how many route authorities that are available actually exist. According to the United States’ current agreement with Mexico, only three US carriers can be flying the route. Most recently, Delta, Sun Country, and USA 3000 have the authority, and Frontier argued that those airlines should lose the right to fly the route since they haven’t flown it in awhile. (Or, to use the technical term, the service is “dormant.”)

DOT said that only Delta and USA 3000 still have authority, and the latter has given notice that the service is dormant, so both carriers will get to fly the route.

I’m very interested in seeing how the schedules turn out there. Frontier is planning to get started this December, while AirTran has said their service would start around April 1. Airtran’s schedule, with occasionally daily service, does seem like a lot of capacity, especially with another carrier onboard. Part of me thinks that AirTran wanted to show higher frequency than Frontier when it was thought that only one carrier would be allowed to fly the route, and perhaps the schedule might help their case.

So we’ll see how that all pans out. But I think this argument over one route shows how cutthroat things are in Milwaukee.

Looking at the Latest Yield Data

Published
by
Dan Webb
on June 23, 2010
in Uncategorized
. 0 Comments

The Air Transport Association came out with its latest yield data, and it continues to look good. If you look at the year-over-year comparisons in the chart, we’re continuing to see increasing double-digit gains. But I’m not sure if that paints the clearest picture possible since those comparisons are getting progressively better.

So here’s what I did – a chart of this month’s results compare to May 2009, 2008, and 2007, and a graph of the 12-month moving average of yields since May 2007. These results seem to suggest that yields are now meeting and improving from pre-recession levels.


Say Hello to the First Frontier ERJ

Published
by
Dan Webb
on June 22, 2010
in Frontier and Republic
. 5 Comments

A few days ago, photographer Paul Kanagie snapped a couple of photos of the first ERJ in Frontier colors at Philadelphia. It’s operated by Republic-owned Chautauqua. He kindly gave me permission to use them here. (Thanks, Paul!) Click on either photo to enlarge.

There have been ERJs running out of Milwaukee for Midwest for a short while now, operating as Midwest Connect. These replaced the SkyWest CRJs, which replaced the Skyways Dorniers.

I really enjoy this livery, and like how the slogan moved over from the fuselage to the tail-mounted engines. The animal featured on the tail is Luke, a lynx kitten. I point that out because that’s the same animal found on N501LX, a Lynx Q400. I know this is a dorky, nitpicky thing, but I’m not sure if putting that animal on an ERJ while the Lynx Aviation division is being shut down is the best idea.

On a side note, Philadelphia is one city where you can easily see the benefits on integrating the Midwest and Frontier networks. Let’s say I’m a really loyal Frontier flier, and I’m looking at options for getting back to Denver from Philly. Well, Frontier only has one flight a day at 5:45 PM, so I’m kind of out of luck if I want to leave earlier. But now with the integration of the Midwest network I can leave for Denver in the morning with a Milwaukee connection.

An Interesting Argument for Re-Regulation

Published
by
Dan Webb
on June 21, 2010
in Random
. 3 Comments

Airlines have been a hot topic here in DC of late as there have been hearings on the United-Continental merger going on. My ears perked up when Rep. Oberstar, chair of the House Transportation and Infrastructure Committee tossed out the idea of re-regulation. He used the fact that airlines got $2.7 billion worth of revenue from bag fees as an example that we, the consumers, aren’t seeing that many benefits of a deregulated industry anymore.

To use some quick back-of-the envelope math here, Oberstar’s arguments don’t seem to make a lot of sense to me. Sure, $2.7 billion in ancillary revenue sounds like a lot. But the DOT reported that about 703 million passengers flew in 2009. So that comes out to about $3.84 per passenger, not exactly a massive shift in the industry here.

And to take it a step further – the DOT also reported a $7.40 decrease in average fares in 2009. So despite all that extra ancillary revenue it seems that travelers still ended up coming out ahead last year.

Meanwhile, the Air Transport Association has a very handy chart that really shows the effects of deregulation on prices. Since 1978, the CPI has increased 229% while domestic air fares have only risen 42%.

I realize my analysis is very quick here – but from where I sit this does not seem like the strongest argument for re-regulation.

Alaska Decides to Hop Into St. Louis

Published
by
Dan Webb
on June 18, 2010
in Alaska
. 4 Comments

It was very interesting to see Alaska announce yesterday that they would be hopping on the Seattle – St. Louis route late this September. For awhile, it was one of the few routes off-hub routes that American was holding onto as TWA’s hub in St. Louis has been dismantled. But the airline is dumping that in August.

In May, Southwest, who has been building up its focus city operation in STL, decided to give the route a shot. But they’re dropping it as well, though the carrier has said it should probably be coming back next summer.

With no nonstop service left, it seemed to make sense for Alaska to give this one a shot. Besides, they’ve been selling traffic on this route for awhile through a codeshare with American. In fact, yields booking nonstop flights from Seattle to St. Louis through Alaska were 6.56% higher than those who booked through American, for what it’s worth. Perhaps with Alaksa’s brand loyalty in Seattle they think they can make this work.

Speaking of American, Alaska tells me they’d be interesting in having American place their code on the flight but nothing’s been officially set up yet.

On a side note – I wonder how many people on this route are Boeing employees?

Meanwhile, in an attempt to build up loyalty, Southwest just launched a double credit promotion out of St. Louis.

Quick Thoughts on American’s “Your Choice”

Published
by
Dan Webb
on June 17, 2010
in American
. 3 Comments

So I learned this week from Marshall Jackson on Travel that American has introduced a new “Your Choice” product this product, and more details about it can be found at aa.com/yourchoice.

First of all, only some of this stuff is new. The page consolidates options like an Admirals Club day pass and inflight Wi-Fi. All stuff that American has had for awhile. I still think that’s a good idea – I think that companies should make it as easy as possible for you to give them your money, so putting all the options in one place is a smart move.

The new offering is American’s “Boarding and Flexibility Package.” The price varies by route by starts at $9. It includes boarding with group 1 (the first after first class and elites), free standby, and halfing the change fee from $150 to $75. A couple of quick thoughts on this.

I think products like this one show that while unbundling is generally associated with LCCs, that certainly is not always the case. I just think that LCCs and legacies might do it differently – mainly, how far they will go.

But I like how American is branding this. At the LCC conference I wa sat a couple of weeks ago, the head marketing guy at Alaska said that the industry needs to move away from the word fee and move towards “service” instead. And I think this does this with American showing how one can make his or her travel experience more enjoyable.

The way I think of services like this is that airlines have always made all the perks available to elite members through first class fares. But clearly not everyone is very interested in paying that much. So there’s a revenue opportunity for airlines by allowing passengers to upgrade only certain things for a lower price. Of course, the airlines can’t give too much away for a low price to discourage people from buying first class and fully refundable fares.

Finally, I do think this is worth the price. But I would like to see American follow United here and offer an option to get priority boarding, and more importantly, priority security access in some airports.

Frontier Falls in Love with E-Jets (Again)

Published
by
Dan Webb
on June 15, 2010
in Uncategorized
. 1 Comment

The E-Jets have been an important part of the Republic operation for years. The carrier is the largest operator of the type in the world, and operates them for US Airways, Delta, and United as part of its fixed-fee business. But the aircraft type has served as an important part of the growth of the branded operation. The E-170s and E-190s have served as 717 replacements in Milwaukee, but are also being used out of Denver to add new routes and also begin replacing Lynx operations.

It appears that Frontier wants to continue utilizing the type even further, as Republic and Frontier have jointly filed to send E-190s down to Mexico from Denver and Kansas City. They are considering sending the E-190s on some existing routes – Denver to Cabo, Mazatlan, and Puerto Vallarta, and Kansas City to Puerto Vallarta.

I see some good potential there – a lot of these markets are non-daily with Airbus service. So having a smaller E-190 on the route could justify additional frequencies. Take Kansas City-Puerto Vallarta. That’s Saturday-only this winter. Maybe they can pick up an extra flight or two. Or, if a Airbus route is not performing well, Frontier now has the option to downgauge the route, whereas its only option beforehand was to cut and run.

Frontier’s also looking at the E-190 for Denver-Ixtapa and Kansas City-Cabo. These were both routes that went away when Frontier was in trouble back in 2008. One would guess they were among the weaker Airbus routes so maybe they can work with the smaller aircraft.

Anyway, Frontier’s not looking at starting this up until the Winter so there isn’t much detail at this point schedule-wise. I’d be interested to see if the E-190s outright replace some Airbus flying or if the two aircraft types can work side by side.

You can catch all of the juicy details in the original filing here.