Monthly Archive for October, 2010

Looking at Yesterday’s Southwest Announcements

Published
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Dan Webb
on October 29, 2010
in Southwest
. 0 Comments

Southwest had their annual media event yesterday (yours truly was invited but chose not to attend due to school commitments), and they had three big announcements. I just wanted to provide a few thoughts on each.

Newark

It was very interesting to see Continental/United give up 18 slot pairs at Newark in order for the DOJ to allow their merger to close. When that was announced, Southwest said it would start up in March and operate a full schedule in June. The first eight flights were announced yesterday – six to Midway and two to St. Louis, both starting on March 27.

Midway isn’t shocking. It’s always a solid guess when Southwest announces a new city but doesn’t announce any routes – it’s a large market as it is and – even though Southwest doesn’t use this word – it’s a hub.

St. Louis certainly might seem a bit more interesting, but I think it makes sense. Southwest has really built up that station as American has trimmed back, and it can work for some connections, and a big one is Dallas. Southwest still has about four more years of being stuck with the Wright Amendment – and from what I can tell, St. Louis is the city with a nonstop Dallas flight that provides the shortest (distance-wise) route to/from Newark.

But this works from the St. Louis end as well, I think. My theory is this – Southwest has been working to build up business travel – possibly from American frequent fliers. New York, obviously,  is a big business market. So this move could make Southwest look even more attractive.

With ten unused slot pairs, Southwest has more Newark service to announce. Right now the schedule is set to be extended again on November 16 – so it would not surprise me to see those additional flights announced then.

Wi-Fi Pricing (Sort Of)

I don’t have much to say about Southwest’s Wi-Fi service, as I have yet to try it in person. That being said, Southwest has decided on a flat $5 price for service after playing around with a bunch of price points. It should be noted, however, that this is only an introductory rate.

Volaris

Southwest had some details to announce about its Volaris partnership – passengers will be able to start booking combined itineraries on November 12, and travel will start on December 1. Bags will be transferred between the two airlines, but you’ll have to check-in for both flights, which isn’t uber-convenient. That being said, with no codesharing going on to/from Mexico right now due to the FAA’s safety downgrade of Mexico, this partnership doesn’t look horrible compared to others. That being said, it’d be nice to see this develop further, and also for Southwest to add more partners.

The Bachelor: DCA Slot Edition

Published
by
Dan Webb
on October 28, 2010
in AirTran, JetBlue, Republic, Southwest, Sun Country and US Airways
. 2 Comments

There are two slots (one pair) up for grabs at Washington National – and a few airlines are fighting over them. Picking up slots at a restricted like National is a rare opportunity, and it’s always interesting to see carriers argue about it. Eventually, the DOT will have to choose who should get them. It’s basically like the TV show The Bachelor, I guess. I’ve never watched it, honestly.

Granted, the applications came in a couple of weeks ago, but I’ve really wanted to blog about this.

First – let’s talk about how these slots became available in the first place. There are slots currently being used by Republic for Kansas City service that was inherited from the Midwest acquisition – and that’s the problem. These slots can’t be transferred. Republic argued last year that they should hold on to the slots, noting how they were keeping the Midwest brand and such, but the DOT disagreed:

After careful review, we have concluded that a “transfer” of exemptions has in fact occurred. Midwest, the party to which the awards were granted, has now ceased to exist as a carrier. Unlike Frontier, which was acquired by Republic but still operates as a subsidiary under its own operating certificate, Midwest clearly no longer holds or operates the exemptions, and Republic’s claim to these exemptions arises only as a result of its transaction with Midwest.

Another interesting mention in the DOT’s letter from November:

Moreover, the fact that Midwest operated relatively few slots was deemed a key factor in its qualifying for award of the slot slide exemptions. When Midwest’s various applications for the five slot slides were considered, the Department noted in approving them that Midwest met a statutory “exceptional circumstances” requirement in part because it had operational limitations due to holding only a limited number of slots at DCA. Based on FAA August 2009 data, we understand that Republic holds over one hundred exemptions at DCA – a fact that clearly distinguishes its current status from that of Midwest when Midwest was awarded the exemptions.

This is an interesting situation for Republic. Of course, those slots are tied up with their US Airways Express operation at DCA. In its application for the slots a few weeks ago (which I’ll be getting into more shortly), Republic argued:

RJET obtained the slots in a sale/leaseback transaction with US Airways in 2005, as a financing mechanism to enable US Airways to raise additional money…US Airways has retained complete control over and has the exclusive right to use the slots. Importantly, although RJET is listed as the holder of record of those slots, Republic has no control over the use of, nor can it sell, the DCA slots. Moreover, US Airways has the right to repurchase the commuter slots at any time.

Anyway – after analyzing the situation, the DOT decided to launch a proceeding to determine what airline should receive the slots. A quick summary of the applications.

Republic, not surprisingly, wants to hold on to the slots for its current Kansas City service. These slots are used for one of the airline’s three Kansas City flights under its branded service. “Failure to grant the slot exemptions to Republic would result in substantial harm to leisure, business, and government travelers, the affected local and beyond communities, and inter-carrier competition,” says the airline in its application. The carrier is “proposing to operate Stage 3-compliant, 99-seat ERJ-190 aircraft between DCA and MCI with these two slot exemptions, effective December 1, 2010″ and adds that “effective December 1, 2010, all three of Republic’s nonstop DCA-MCI services will
be operated with 99-seat ERJ-190 aircraft.” Right now, this is an E-170 route. Just for reference, US Airways also has DCA-MCI service, some of which is provided by Republic.

Next up is AirTran, looking to obtain the slots the slots for service to Ft. Myers (a market it already serves from DCA) or Sarasota. The airline doesn’t commit to an aircraft type, saying it will use either 717s or 737-700s. I just found this application a bit interesting, since in the past AirTran has tried to get the ability to reduce its Ft. Myers service. Meanwhile, US Airways serves both of these markets, but it appears that Ft. Myers flights are seasonal.

Speaking of US Airways, the carrier has tossed its hat in the ring as well, proposing service to Pensacola. This is the “third within perimeter slot allocation proceeding in four years in which US Airways has applied,” the airline notes. Service would be operated with E-175s during the summer and 170s during the winter. “With 99-seat Embraer EMB-190s a part of US Airways’ fleet, US Airways could further increase seats should demand warrant,” US Airways adds.

Southwest has also applied for the slots for its own flights to Kansas City. Had this been a year or two ago, I would’ve been shocked by this application, but the airline publicly showed its interest in DCA with the proposed slot swap between US Airways and Delta, which is now tied up in court. I have to think – does this application really make sense for Southwest when we exclude AirTran? Historically speaking, Southwest has avoided small stations, with only a handful of cities having less than ten daily departures. Having an airport with only one departure is very un-Southwest-y, at least to me.

And, to save the best/most interesting for last – Sun Country is giving this a whirl as well, for flights to Lansing. Why Lansing? Well, the DOT has said that these slots must be used for small or medium hub airports, and Sun Country is considering building up there. But what’s more interesting is that Sun Country is planning for the Lansing flights to originate and end in Minneapolis. So here Sun Country can say they’re providing service to a smaller city while providing new competition with Delta. In terms of the actual application – I’m not entirely sure what was going on here. Sun Country submitted its original application, and then corrected it. Based on the differences in the schedule listed in the appendices of both, it appears that Sun Country originally thought they could run two roundtrips.

What I found very interesting, however, is who didn’t apply. JetBlue said in a March 3 letter to the DOT that it was “prepared to use the two AIR-2l slots immediately,” yet they didn’t apply. I asked them why not, and here’s what they had to say:

JetBlue regrets that DCA remains artificially restricted, and while we are grateful that Congress has begun to shine light on this [with the recent MWAA oversight hearing before the Senate Aviation Subcommittee], acquiring one slot pair, limited to specific cities defined by the government and not by the free market or by JetBlue itself, made such an application economically unfeasible. We look forward to greater access opportunities in the future.

Anyway – that’s just the applications. The airlines have recently submitted their responses to the applications of the competing airlines, and that’s where this really gets fun. Expect a post about those in the next few days.

Meanwhile – also up for grabs are Republic/Midwest’s five slot slides. What is a slot slide, you ask? Basically, each slot is assigned for a time period, but under certain conditions (generally, to boost competition) the DOT will allow an airline to “slide” that slot do another time of the day. The DOT said in its announcement for this proceeding that it “will conduct a separate proceeding with regard to Republic’s five slot slide exemptions at DCA.”

Today’s Route News

Published
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Dan Webb
on October 27, 2010
in Uncategorized
. 0 Comments

A couple of interesting routes were announced today, so I figured I’d toss them out there.

First, JetBlue said that in May they will be launching seasonal daily service to Anchorage from Long Beach. Anchorage is a brand-new destination for the carrier. There’s no competition from Long Beach, but JetBlue will be going head-to-head with Alaska’s seasonal service to LAX. You can read the full release here.

Next up is Continental’s announcement of new service from Newark to the Providenciales in the Turks and Caicos. Flights will launch on February 18 with four-times-weekly service, which will become daily on March 6th. I found that interesting, since JetBlue will be launching daily service from JFK on February 17.

Allegiant’s MCO Experiment Will End In February

Published
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Dan Webb
on October 27, 2010
in Allegiant
. 0 Comments

This February, Allegiant launched an interesting experiment when it decided to shift some of its Orlando service from Sanford to International. But Allegiant announced yesterday that the experiment will come to an end after a year.

So why go back? Well, Allegiant says in their press release some passengers preferred Sanford. But I think the biggest reason that Alleigant mentions is the low costs of Sanford.

The reason I think Allegiant moved to MCO in the first place is because there was some competition from other airlines in most of the moved markets – most notably from AirTran.  My guess is Allegiant thought they could gain some market share or increase their (ticket) revenue by moving to MCO. But my guess is that the higher costs may have wiped out any of the benefits of shifting airports. But that’s just a wild guess on my end.

I really wanted to analyze this move a bit more by digging into some DOT data and trying to see if Allegiant was able to exact any kind of revenue premium or gain market share, but I really don’t feel all that comfortable doing that. When I started looking into the second quarter DB1B numbers, I noticed that there were still itineraries booked to Sanford for cities that had experienced the switch. I’m guessing these are trips that were booked prior to Allegiant’s announcement. Since the data reflects some itineraries of people who were expecting a different airport at first – and since the MCO bookings were made closer-in, I didn’t want to make any premature conclusions.

Anyway – Allegiant’s earnings call is later today – so maybe we’ll get some more insight there.

Catching Up With Virgin America, Part 2

Published
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Dan Webb
on October 26, 2010
in Virgin America
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Here’s the rest of my interview with Virgin America’s CEO, David Cush. After an interesting chat about restricted airports, we discussed future destinations, airline partnerships, and more.

—

Virgin had recently announced a deal with Sahaab Aircraft Leasing (part of Jazeera Airways Group) for four A320s. I wanted to get the details on those. Here’s what David had to say:

“One of them is already in service. It started flying Friday of last week. The second one will come in about one more week. They’re coming in imminently. We actually took possession of those aircraft back in July and put them through all of the modifications that we do, you know, for our cabin interiors and a few other changes we wanted to make on them.”

He continued:

“The other two are coming this year also. And as a matter of fact we have possession of those other two. They’re currently in modification. And we have two other aircraft coming direct from Airbus later this year, one of which will go into service this year, one of which will go into service next year. So we’ll have 33 airplanes flying but have possession of 34 airplanes by the end of the year.”

In addition to those aircraft, the airline is scheduled to take on twelve more next year. I was wondering what Virgin was planning to do with that additional capacity – are they focusing on new markets or are there opportunities to build up capacity on some of the airline’s existing routes?

David said that “we’ll do a little of both. As an example, we’re starting our JFK-LAX number six, our sixth [daily] flight in about two weeks. And we’ll add some additional schedule probably into some of the current routes we’re flying, but we also plan on starting a couple of new cities next year. Obviously, we have Dallas coming up, we have Cabo, we have Cancun, but I would guess at least two cities on top of that next year, but also some additional frequency in existing markets.”

I was also very interested in the performance of Toronto. David said the destination is “doing fine,” and noted that “it’s a tough market with strong competition.” “Obviously, it’s a highly seasonal market,” he added, and later said that “anytime you go into a market with strong competition that’s heavily seasonal the first winter’s going to be tough, but I think the performance thus far has been everything we expected it to be.”

Toronto also interested me because of the recently-announced joint venture between United and Air Canada. “I guess my view on that, again, comes down to the fact that there are not access problems in any of these airports that are covered by it, and they will certainly have tremendous market power, but I think that’s fine,” said David.

He continued: “As long as you can get into airports, the fact that someone is a strong competitor should not be a reason to keep them from cooperating. I think in general our view is that it will certainly make Air Canada and United tougher to compete against, but it’s something that from a competition standpoint should be allowed and we’re ready to compete with them.”

The airline also recently changed its bag policy, allowing one free checked bag to international destinations. Here are David’s thoughts on the change:

“We absolutely think it differentiates us. It is a little bit unusual that everyone has Canada under the US bag policy but not Mexico. Mexico is one free bag. Our reason for doing that, very simply, is our primary competition to Toronto is Air Canada and Air Canada has a free baggage allowance, and therefore we know that if we’re going to be successful in that market, we need to compete with them on price, which we do, on service quality, which we think we compete very well with them, but also with bags. It seemed to be a hot button, we listened to our customers and made the change.”

Virgin has added a bunch of interline partners, but I wanted to know if any codeshare relationships were on the horizon. David said Virgin will probably “not be doing codesahre this year. We’ve still got some system changes we need to make, but I would say filing for codeshare with V Australia is fairly imminent. That filing will certainly happen this year. And that’ll be the first one we do, once we get through that one we’ll figure out where we want to go.”

On a related note, I was wondering how the frequently flyer partnerships with the other Virgin carries has been performance. David said the partnership with the folks Down Under has “done very well for us, and the exchange between Virgin Blue, V Australia, and Virgin America is pretty strong. As a matter of fact, it’s very strong.”

David also said that the partnership with Virgin Atlantic “started out extremely strong” and said that “in the first week [of the partnership] we saw a significant amount of accrual in each other’s programs on the other airline…it’s doing everything we would’ve expected it to and more.”

Since we were talking about V Australia, I wanted to see if David had any thoughts on the joint venture between Virgin Blue and Delta being tentatively denied by the DOT:

“I don’t really have anything significant or specific to say about the DOT process. I know that it’s ongoing and we’ll just kind of see where it ends up. But I think all of the Virgin carriers recognize that we have to run our own businesses, and even though we compete with Delta, V Australia has to do what’s best for V Australia and Virgin Blue has to do what’s best for Virgin Blue. So, we cooperate with them. They cooperate with Delta, and hopefully in the end we all make a few bucks.”

And then – finally – the big question. Virgin America has been saying it would post a full-year operating profit in 2010. Is that still the case?

“The wildcard of course is oil prices, and we’re keeping a close eye on what’s going on there. It’s bubbling up into the eighties and jet fuel’s about 50% more expensive than it was at this time last year, so that’s pretty significant,” said David.

“All of that being said, though, I’m still sticking to my guns here that we’re expecting a full-year operating profit this year,” he concluded.

Delta Reaffirms 787 Orders

Published
by
Dan Webb
on October 25, 2010
in Delta
. 2 Comments

After Delta and Northwest merged, the status of the latter’s 18 787 orders were a bit up in the air. For example, take this mention from the airline’s second quarter 10-Q:

The Boeing Company (“Boeing”) has informed us that Boeing will be unable to meet the contractual delivery schedule for these aircraft. We are in discussions with Boeing regarding this situation.

But it appears that situation has changed. “During the September 2010 quarter, we entered into an agreement with The Boeing Company to reaffirm our previous orders for 18 B-787-8 aircraft and to defer delivery of those aircraft from 2008-2010 to 2020-2022,” says Delta in its third quarter 10-Q, released earlier this afternoon.

Pushing back delivery 10-12 years (compared to the originally planned date of 2008) is certainly interesting – what role will the aircraft play in Delta’s network? Delta has also talked in the past of converting its 787 orders to another aircraft – is that option still available to them?

Basically, will Delta actually be getting 787s in 2020, or is there more than meets the eye here?

Another thought – the average age of Delta’s 767-300ERs is currently 14.4 years. The average ages for the A330-200s and -300s are 5.1 and 5.5 years, respectively. I’m wondering how the future of those fleets mesh with with 787 order.

American CEO Gerard Arpey Talks About the CSeries

Published
by
Dan Webb
on October 25, 2010
in American
. 5 Comments

I’m starting to clear through the backlog of earnings calls, and I was able to review American’s this weekend. Stifel Nicolaus analyst Hunter Keay asked about the airline’s future fleet plans, and what American CEO Gerard Arpey had to say about the CSeries was pretty interesting:

Hunter Keay: ….how flexible might you be or how open might you be on maybe introducing a different fleet type to the mainline? You know, I’m specificlally referring to, say like, the larger CSeries, for example. Is that something you would consider adding to the mainline fleet if were to get really favorable pricing, or are you pretty much dedicated to all-Boeing fleet [on] the mainline side indefinitely?

Gerard Arpey: I think it is something definitely worth considering…that is an interesting airplane. I do think that we think about airplanes in the context, obviously, of capacity, and the way that we think about capacity is correlated to GDP. So, I think the long-term vision, if you will, or strategy under our FlightPlan 2020 would be to grow the American Airlines network consistent with GDP growth in the regions of the world that we operate, which are most of them. So, yeah, I think, you know, subject to that way of thinking about the need for lift, the CSeries is an interesting airplane.

Hunter Keay: Yeah, I appreciate that perspective because I think it is interesting if you look at sort of seat count, CSeries to an MD-80 versus a [737-800] it’s interesting. So, ok, well thanks a lot for that.

Gerard Arpey: You’ve got all the complexity of adding a different airframe, potentially different engine, and you know quite frankly the labor agreements are not friendly, today anyway, to added fleet types because of all the training that is required the way we do it today. Now it doesn’t have to be that way. You don’t have to train everybody through every type of airplane you have, and there again, there are ways to do that smarter that would be good for the company, and I think good for our pilots, and those are the kind of things we’re talking to them about.

Hunter Keay: That’s really great. Thank you for that.

Gerard Arpey: Thank you, Hunter.

—

Very interesting stuff. In terms of seat count, the smallest mainline aircraft operating for American is the MD-80, at 140 seats, which is larger than the smallest mainline aircraft at US Airways, Delta, United, and Continental. And on the regional side, all of American’s larger regional aircraft are under 70 seats, which is a bit smaller than some other carriers.

So, considering that seat gap, the CSeries looks like an interesting fit for American. Though it would appear that labor could be in issue. (To read more about “scope gaps,” I’d recommend shooting over to this guest post from my friend Courtney earlier this year.)

Naturally, a customer like American would be a big deal for Bombardier. They’ve already broken into the North American market with Republic, but an order from a major carrier would certainly go a very long way – especially since I think merger activity in the US has hurt Bombardier’s order prospects a bit.

Had Northwest stayed independent, the CSeries looks like a compelling DC-9 replacement. United was also discussing a narrowbody order for this year, but it appears that decision has been delayed thanks to the Continental merger. I’m not saying orders from Delta or United are out of the question – but I would argue that mergers have delayed any potential orders.

But back to American. I transcribed that part of the call myself, so apologies for any errors. You can find the audio on American’s investor relations page, and find a transcript on Seeking Alpha (there are some typos mixed in, but they don’t negatively affect  comprehension all that much.)

Virgin America’s CEO on Newark Slot Deal, Southwest-AirTran, and More

Published
by
Dan Webb
on October 25, 2010
in Virgin America
. 0 Comments

Two weeks ago (October 6th), I had the opportunity to catch up with Virgin America’s CEO, David Cush. That day, the airline was celebrating the launch of its new service to Orlando, with one flight each to Los Angeles and San Francisco. I was able to chat with him for about fifteen minutes, and covered a bunch of interesting topics.

I figured it would make sense to start off asking about Orlando, and here’s what David had to say:

“It’s very looking very strong. As a matter of fact, I went through some numbers this morning that were showing the bookings of Orlando in the early days versus the same period for Ft Lauderdale when we started Fort Lauderdale in November, and San Francisco – Orlando is putting up much stronger than Fort Lauderdale did and much earlier. And LA is slightly stronger. So we’re quite happy straight out of the gate with the results.”

The biggest thing to happen in the industry since I had last spoken to David a few weeks prior was the announcement of the Southwest-AirTran deal, and I was interested in hearing what David thought. “We are supportive of consolidation in the industry,” he said.

He continued, saying that “we think it does result in a healthier, more stable industry, which is good for investors, good for employees of these companies, and ultimately good for passengers. And we think the AirTran-Southwest merger is one that doesn’t really raise any big competition issues because all of these airports are open airports. That being said, where consolidation goes in and reduces competition, we do have a problem with it, and we had a big problem with [the] United-Continental merger for that reason. Those guys are dominant at Newark and Chicago which are two airports we’ve been trying to get into for three years. So, the reason I bring that up is because the Southwest-AirTran merger doesn’t cause these kind of problems, so we can get into any of those airports and compete with Southwest, but that’s not the case with other mergers.”

A friend asked me to ask if the deal had any effect on Virgin America’s thoughts on servicing to Atlanta one day. “We’re going into these fortress hubs. Dallas is really the first one we’re going into, but sooner or later we’ll go into all of them and that doesn’t really impact our timing,” David replied.

Since David also mentioned Newark, I decided to ask about the slot deal with Southwest and United/Continental. “Southwest will operate short-haul flights out of Newark. Those will be the least-damaging to Continental and those are the ones with the most competition already,” David told me.

“We would’ve put in flights to LAX and to San Francisco where it would cause the most competitive harm to United now. The fact is they’ve got a monopoly market on Newark – San Francisco now that those two airlines have combined, and they operate all but one frequency on Newark to LA, one operated by American, and it’s just outrageous that the government allowed that to happen number one, and number two allowed Continental to chose who they were going to compete against. That’s not the way competition policy is supposed to work. And now it’s the passengers that want to fly between Newark and the West Coast are going to pay and pay dearly.”

David also mentioned Chicago earlier during the call, and I wanted to see if there were any updates about a potential entrance into O’Hare. “We are still actively looking at it,” he said. “We are having some continued discussions with the airport, but we haven’t found a solution. I’m hopeful that sometime in the next 60 days we’ll find a solution. If we don’t, then we’ll take our airplanes and go somewhere else, as we have the last two years.”

Anyway, this is just the first part of the interview – expect part two tomorrow!

Southwest Announces GSP/CHS Service

Published
by
Dan Webb
on October 21, 2010
in Southwest
. 1 Comment

On Wednesday, Southwest revealed its initial schedule for its new service Greenville/Spartanburg and Charleston, South Carolina, after announcing their intent to serve the two cities back in May. Service will launch on March 13.

Overall, the announced cities aren’t all that shocking – both cities will each get two flights to Midway, and one each to Nashville and Houston. Boths will have Baltimore service as well – with three dailies for Charleston and two for Greenville.

Greenville will also get one flight to Orlando – which I find very interesting because that will put Southwest head-to-head with Allegiant.

When Southwest originally announced this service, I found it very interesting because it looked like what Southwest originally did in the Boston area, avoiding Logan and deciding to fly to Providence and Manchester. These two cities could be used as an alternative to Atlanta and Charlotte for some travelers.

But, that’s not as much of an issue right now, considering that AirTran has flights out of Atlanta (duh) and Charlotte. Which makes me wonder – what were Southwest’s plans for these two cities before and after the merger announcement? Naturally, none of us on the outside know that answers, but it’s certainly an interesting question to ponder.

Looking ahead – Southwest has yet to announce the cities it will serve out of Newark, but those flights should be announced by the end of the year.

WestJet Partners with…American?!

Published
by
Dan Webb
on October 21, 2010
in American and WestJet
. 5 Comments

I think it’s safe to say that most people were at least a bit surprised when it was announced earlier this week that American and WestJet would be partnering up. Earlier this year WestJet and Southwest parted ways, and media reports suggested that WestJet’s partner here in the States would be Delta.

But, anyway, interline itineraries can be booked through American beginning on November 9th, and connections between the two airlines will take place at the six Canadian cities with American service – Calgary, Montreal, Toronto, Ottawa, and Halifax.

What’s interesting is that this initial phase of the partnership seems very focused on American’s passengers. A press release sent out by both airlines says the agreement “provides American’s customers seamless connecting service to 25 new Canadian cities not currently served by American or American Eagle,” but doesn’t mention the benefits for WestJet.

The airlines note that they “expect to implement a second phase of their interline relationship in December that will add additional connecting opportunities through WestJet’s nonstop U.S. flights to Canadian cities” and that they are “exploring other ways to enhance customer benefits through other commercial cooperation agreements.”

So we’ll see how this develops – will it eventually turn into a codeshare partnership? And will we see WestJet adjust its route network to adjust connectivity at all? Right now the airline only has service to two of American’s focus cities – Miami (from Toronto) and Los Angeles (from Vancouver, Calgary, and Edmonton).

And where do Delta and Southwest fit into this? Are they still seeking a Canadian partner? If so, the only option left on the table would be a partnership with Porter. (That assumes, of course, that WestJet would like to stick with one US partner.)

(Edited at 10:12 pm to clear up some confusion about the United States cities WestJet served.)

Notes from Hawaiian’s Earnings Call

Published
by
Dan Webb
on October 20, 2010
in Hawaiian
. 0 Comments

I always enjoy listening to airline earnings calls, as you get a lot more detail about the airline’s quarter compared to the actual financial press release, and the analyst question and answer session is usually very interesting as well. So I’ve decided that this earnings season I’ll be sharing some of my notes from the calls. I hope to do this for all of the airlines, but it will probably take awhile based on the sheer number of them today and tomorrow.

Anyway, Hawaiian’s call was yesterday evening here on the East Coast, and I did find a few things interesting.

CEO Mark Dunkerley brought up the topic of the airline’s new A330s, saying that “operationally, the aircraft has performed every bit to our expectations,” and also noted that customer response to the new product has been “excellent.”

He was further asked about the aircraft during the Q&A, when one analyst was wondering if there was any difference in fare on the A330 routes, such as LA – Honolulu, where Hawaiian operates both 767 and A330 aircraft.

Dunkerley responded by saying that “where we see the value of it, is that people tend to look out for the A330 operation, book to it, and then that helps up move up the revenue management curve that way. So the fares are actually the same, you know the fare levels are the same, but we have had the 330 book up really very very nicely indeed.”

The Hawaiian chief was also asked about the possibility of the airline joining an alliance. “We do look at whether or not it is in our long-term interest to join an alliance periodically. We look at it periodically. So far we’ve determined that the costs would outweigh the benefits but it is a changing equation as we see the development of our industry move in a sort of pro-alliance way.”

Allegiant’s entrance into the Hawaiian market came up, and what Hawaiian could say about it was a bit limited because thye have yet to announce any routes. But Dunkerley did mention that, if one looks at Allegiant’s current domestic route structure, they could be flying on routes that Hawaiian doesn’t, which could reduce the competitive effect of their entrance.

When asked about ancillary revenues as part of the Allegiant question, Dunkerley said that “we are looking at ancillary revenues…we are absolutely committed in this direction.”

Dunkerley also provided some interesting notes on performance on different parts of the route network. On the interisland side, it reported that load factors were up over 4%, with PRASM up over 30%. It would appear that this market has rationalized a bit now that go! and Mokulele have teamed up.

PRASM for transpacific flights was down about 3%, and Dukerley had some very interesting commentary on that result:

“While this number is clearly very different from the year-on-year numbers being reported by our competitors for their domestic networks, it is important that the raw numbers are viewed through the lens of the vastly different circumstances this time last year on the West Coast to Hawaii routes, and the other domestic routes. Unlike most of our competitors who reported substantial losses last year, Hawaiian had a good 2009, on the back of a surprisingly mild slowdown in demand for Hawaii vacations. In fact, the decline in US West Coast to Hawaii revenue per seat mile for all of last year was a remarkably modest 5%, considering the state of the economy. During this period, demand in other markets, with a much higher exposure to business traffic, was down substantially more. It’s not surprising, therefore, that both the recovery in demand for our…[transpacific]…markets is less dramatic than in other markets, and that airlines have belatedly reacted to the good conditions of last year by adding capacity this year.”

Anyway, that’s the stuff that really interested me. I haven’t been able to find a free transcript of the call, but if you’re interested in listening for yourself you can find a recording of the call here.

Hawaiian is also having an investor day next week, so there could be some interesting information coming out of that as well.