Monthly Archive for February, 2011

Allegiant Considers Passing Fuel Risk to Consumers

Published
by
Dan Webb
on February 28, 2011
in Allegiant
. 6 Comments

When it comes to airline costs, fuel is perhaps the most volatile and uncontrollable. Forecasting the price of fuel even a couple of months in the future can be tricky. Carriers can attempt to get a handle on fuel costs through hedging, but doing so is by no means a 100% guarantee on an airline’s fuel price.

What only complicates the situation is that airlines sell inventory many months in advance. If an airline sells a bunch of seats at a low price, an increase in fuel prices will put pressure on margins. Meanwhile, if an airline ends up raising prices for higher fuel prices, does that end up chasing away demand?

Allegiant Air is mulling a way of passing along this fuel risk along to its consumers, according to a filing with the Department of Transportation. Under the proposal, Allegiant will offer passengers a normal fare, but will also offer a lower fare that will be adjusted to fuel prices. After booking, the fare can go even lower or “could increase (up to a set maximum that would be clearly disclosed) depending on changes in fuel price between the booking and travel dates,” Allegiant says.

The company notes that it is “especially difficult” for the airline “to predict what the fuel price might be at time of travel” because it primarily carriers leisure travelers who often book their travel arrangements far in advance. In addition, it says such a policy “strikes an appropriate balance between the interests of consumers and the interests of carriers.”

Allegiant provided details on this possible new product in comments on proposed DOT rules covering passenger protections, such as post-purchase price increases, which are currently allowed. The DOT wrote in a document outlining the proposed rules that it had found that carriers do not participate in such increases, but that the DOT has “have often found this to be the case in the sale of tour packages that include air transportation.” The DOT also said that in many cases ”consumers are not made aware of the potential for a price increase at the time of purchase, and therefore are deceived when the increase is imposed and the seller uses the terms of the contract of carriage to justify an additional collection.”

The DOT has proposed a ban on all post-purchase increases, but also presented two possible alternatives. One of these is to allow increases “as long as the seller of air transportation conspicuously discloses to the consumer the potential for such an increase and the maximum amount of the increase, and the consumer affirmatively agrees to the potential for such an increase prior to purchasing the ticket.” Another option is to allow such disclosed) increases, but prevent them from taking place after a certain time period (60 or 30 days before departure).

Allegiant opposed this alternative in its comments, writing that “such a time frame would negate essentially all benefits of the concept for consumers and carriers alike.”

When I first saw this idea, I thought it was a little bit out there, but it started to make some more sense after some thought. Every year, my family decides if it’s worth pre-buying heating oil for the winter, or just rolling the dice with market prices. How is this any different? As long as Allegiant (or any airline considering something similar) fully explains this new fare option to its passengers to the time of booking, I don’t see any issues.

I’m not sure if I would choose this potential option if it were ever offered, though. It would depend on the amount saved.

Some Route Changes at Alaska

Published
by
Dan Webb
on February 25, 2011
in Uncategorized
. 1 Comment

Alaska has had a couple of announcements over the past couple of weeks, and I figured I’d go through them quickly before we head into the weekend.

First, last week (yes, I’m late) Alaska announced that it will boost existing service from Oakland and San Jose to Maui. Currently the cities have four and three weekly flights, respectively, and those will become daily on June 5.

I know it’s nothing new, but Alaska’s increased presence in the Hawaiian market is impressive to say the least. I was playing around with some DOT data recently, and Hawaiian capacity in terms of ASMs for November 2010 was up over 160% compared to November 2008.

Alaska, however, is also ending service on the “nerd bird” route between San Jose and Austin on May 6, after launching service between the two cities in September 2009. Southwest started flying the route back in November, so one could guess that competitive pressure played a factor in the decision.

Meanwhile, Alaska this morning announced the routes for its new regional partner SkyWest. The move comes as Horizon prepares to fully eliminate the CRJ-700 from its fleet this year to become a sole Q400 operator. But Alaska says the speedier CRJ-700 is the best fit for some of the longer Horizon routes, like Seattle – Long Beach.

SkyWest and Horizon will co-exist on a couple of routes, however. SkyWest will operate one flight between Seattle and Fresno “to rotate the regional jets through its maintenance base” and will also operate one frequency on the busy Seattle – Portland route “to position aircraft for maintenance.” You can see a full schedule here.

On a side note, I can’t wait to see the first CRJ-700 in Alaska colors!

AirTran’s Interesting Branson Additions

Published
by
Dan Webb
on February 24, 2011
in AirTran
. 0 Comments

Branson has been an interesting little airport to watch, and some interesting new of new AirTran service from the airport emerged yesterday. AirTran currently serves Atlanta and Orlando from the airport. Milwaukee was also served for awhile but has been dropped since. The airline, however, will add some new flights at the end of May.

The new flights include once-weekly flights to Baltimore, plus four-times-weekly service to Houston and Chicago. All of these additions are interesting for a couple reasons. For one, Houston and Chicago have both previously been served by the still-recently-created Branson Air Express operation. Second, these are all Southwest hubs. Granted, BWI is a big AirTran operation as well, but Midway and especially Houston are different cases.

Either way, after the Southwest merger closes Branson will have a bunch of new connecting opportunities…something that I’m sure excites the airport and the city.

Republic Reports Fourth Quarter Results

Published
by
Dan Webb
on February 23, 2011
in Republic
. 4 Comments

Last night Republic Airways Holdings, parent company of Frontier, Republic, Chautauqua, Shuttle America, and Lynx Aviation, reported its fourth quarter results last evening, and they’re quite interesting to examine due to a bunch of special items.

For example, Republic as a whole had a net loss of $1.3 million in the fourth quarter of 2010, compared to a $20.1 million net profit in the fourth quarter of 2009. But, when excluding special items (such as certain fleet transition costs), Republic’s net profit was $7.4 million, a $5.3 million improvement compared to the fourth quarter of 2009.

The results get more interesting when broken down by segment. Republic’s fixed-fee business (flights operated for mainline carriers) reported a $22.1 million pre-tax net profit. The branded business (Frontier), however, experienced a pre-tax net loss of $26.3 million. But, when items are excluded, the loss is only $11.2 million, a $5.4 million improvement compared to a $16.6 pre-tax net loss excluding items in the same quarter in 2009.

There are a couple of other interesting statistics for Frontier. Excluding items and fuel, unit costs actually decreased 2.7% year-over-year in the fourth quarter, to 6.84 cents. As expected, however, fuel added additional cost pressures – Frontier’s average cost for a gallon of fuel (excluding mark-to-market hedging results) increased  19.5% compared to the fourth quarter of 2009.

Republic will be holding its earnings call later this morning. Sadly I’m stuck in class for most of the day but I hope to catch a replay of it soon.

Chatting with Frontier About Their Latest Fleet Moves

Published
by
Dan Webb
on February 22, 2011
in Frontier
. 1 Comment

Earlier this month, Republic Airways Holdings announced that it had inked a deal to operate eight Embraer 170 aircraft for Delta Connection later this year, a move that builds on an existing partnership between the two companies. Republic subsidiaries Shuttle America and Chautauqua Airlines operate Embraer 175s and 145s, respectively, under the Delta Connection banner.

These eight E170s are currently in service with Republic’s branded business, Frontier Airlines. I was intrigued that the news release announcing the deal mentioned that the E170 flying would be replaced with Embraer 145 regional jets and Bombardier Q400s. I was interested in how permanent the move was, and fortunately I was able to speak with Daniel Shurz, Republic’s Vice President of Strategy and Planning a couple of weeks ago to discuss the changes.

The A319 makes up the largest part of Frontier’s fleet. Photo credit: Jay Bowie.

Daniel told me that in the past Frontier had “laid out a fleet vision that already had the 170s leaving the Frontier business over the course of the two years from summer 2011 through spring 2013.”

“In an ideal world you’d have everything match up” in terms of aircraft leaving and entering the fleet, but Frontier was not “likely to end up with that scenario,” said Daniel. “What we’re doing essentially is sending 170s to Delta earlier than 190s arrive as new delivery aircraft. Our first new delivery of a 190 is scheduled for August of this year under the agreement we have with Embraer.”

Republic announced this past summer that it would acquire 24 new E-Jets from the middle of this year for its branded service. So far all of the aircraft being delivered will be E190s, though Republic has the option to convert these orders to E195s if it desires.

So, how is Frontier adjusting in the interim? As Republic announced, there will be additional E145 and Q400 flying, but Daniel also told me that Frontier has “temporarily extend the operation of two of our 318s through the summer as well.”

When it comes down to the details, Frontier “will have three scheduled lines of Q400 flying, three additional scheduled lines of 145 flying, and two additional lines of 318 flying replacing eight lines of 170s going to Delta,” Daniel said, adding that “it’s pretty close to a one-for-one replacement.”

Daniel did mention, however that one of the Q400 aircraft “is essentially dedicated to Aspen and that wouldn’t have been operated if the Q400s weren’t in the schedule,” so essentially Frontier has “replaced eight airplanes with seven airplanes.”

All of the additional E145 flying will be out of Frontier’s Milwaukee hub, and will be reduced as E190s are delivered. According to Daniel, Frontier has yet to decide if the additional E190s or remaining E170s will then be moved to Milwaukee.

Meanwhile, Frontier still plans to remove all E170s from branded service by the summer of 2013, and expects to remove the last Airbus A318 from its fleet by the end of this year.

I was also interested to ask Daniel about some of the more longer-term changes in Frontier’s fleet, especially the Bombardier CSeries 300. Republic became the North American launch customer of the type when it announced an order for the type nearly one year ago. Republic is currently slated to receive its first CS300 in the second quarter of 2015.

I was interested in how the CS300 will fit into Frontier’s fleet, as it’s just about the size of Frontier’s A319 aircraft, though the airline has also been growing its fleet of larger A320s. Daniel said that “the CS300 is fundamentally a 319 replacement.” He added that the aircraft is “too small to be a 320 replacement in one sense,” but “we obviously expect significantly reduced operating costs on the CS300 compared to today’s Airbus narrowbodies. You could make an argument that you could get by with just the CSeries.” Even though the aircraft is smaller than the A320, an airline could “take advantage of lower operating costs to run higher frequencies in some cases,” said Daniel.

I was also interested in some of Frontier’s recent Airbus moves. The majority of its upcoming new aircraft are A320s, but it is also taking on three ex-Mexicana A319s as well. Daniel said “it’s likely our new lease acquisitions will be 320s.”

Daniel provided additional background on the A319 aircraft, saying that “when Mexicana collapsed, we were lucky on timing… The lessor in question had a strong incentive to get the airplanes back into service so we found ourselves with reasonably attractive pricing.”

“What we’re finding in general in the new aircraft market is that the 319 and 320 lease prices are not that different. The unit cost of the 320 is clearly superior, so we’re taking advantage of the fact that we wanted to grow the 320 fleet,” said Daniel.

Many thanks to Daniel for being willing to spend some time with me, and to Frontier’s PR department for arranging the interview.

Republic is set to hold its fourth quarter earnings call on Wednesday, so it will be interesting to see if any interesting announcements come out of that.

Horizon Q400 in Alaska Colors

Published
by
Dan Webb
on February 21, 2011
in Alaska and Horizon
. 0 Comments

After an announcement in January about Horizon adopting Alaska’s brand, a Q400 registered N441QX has been painted with the new Horizon livery. Fortunately, aviation photographer Russell Hill was able snap a couple of great photos of the aircraft at Portland (PDX) this weekend.

I have to say – I really like how the new paint scheme looks. And while it is a little bit sad to see the Horizon retire its brand, the fact that the Horizon name gets such prominent placement on the fuselage is very rare among US-based regional airlines.

Thanks to Russell for letting me post his photos – you can find more of his aviation photography on his Flickr page.

Virgin America Announces Chicago Service

Published
by
Dan Webb
on February 17, 2011
in Virgin America
. 4 Comments

After years of trying, Virgin America will be able to launch service to Chicago O’Hare this spring.

The airline just announced that it will launch five daily flights to the new destination – three to San Francisco and two to Los Angeles - beginning May 25. (Earlier I speculated that it would be the other way around, but I was wrong, apparently.)

According to  Virgin’s website, it appears that all service will be operated with A320s. Here’s the schedule:

I have a couple of thoughts on this. First of all, it’s nice to see a new competitor in these markets. But, while Virgin has an absolutely delightful product, both United and American have much more convenient schedules along with large bases of frequent fliers to boot. That being said, Virgin isn’t exactly new to competing with these airlines.

After the launch of Dallas service in December, Chicago becomes Virgin’s second mid-continent, fortress-hub market. It will certainly be interesting to watch the performance of both.

American’s 737 Fleet Growth

Published
by
Dan Webb
on February 17, 2011
in American
. 1 Comment

American-parent AMR Corporation filed its annual report yesterday. With most annual reports, I like going straight to the section on the fleet, and this was no exception. I knew that American would be receiving a bunch of 737-800s in 2010, but I forgot how many. During the past year, the number of operating 737-800s increased by 44 – from 108 to 152 aircraft, or nearly a 41% increase. In the past two years, the fleet has very nearly doubled – 77 of the type were operating at the end of 2008.

Interestingly enough, this fleet growth was significant enough to bring the average age of the 737-800 down! The average American 737-800 at the end of 2008 was nine years, but thanks to all of those deliveries, the average age decreased to six years in 2010. (It was seven in 2009.)

Despite all of the 737-800 deliveries, however, American’s mainline fleet grew slightly, from 610 to 620 aircraft. The growth in the 737-800 fleet was offset by MD-80 retirements. American notes in its annual report that its fleet of operating MD-80s decreased from 258 to 224 aircraft.

American’s 737-800 deliveries continue – the airline says that it has purchase committments for 15 737-800s this year and 28 in the next. Meanwhile, American also says that as of the end of 2010 it also has “firm commitments for eleven Boeing 737-800 aircraft and seven Boeing 777-200 aircraft scheduled to be delivered in 2013-2016.” Meanwhile, the airline ordered two 777-300ERs last month that are slated for delivery next year.

Anyway, it’s been interesting to watch this fleet growth from American, especially after it was bolstered by an order this summer. But it makes sense – American says the 737-800, on a seat-mile basis, is 35% more fuel-efficient than the MD-80.

American said this summer that the new 737-800s coming this year will feature the Sky Interior, so it will be fun to see that as well.

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A Couple Thoughts on United/Continental Crossfleeting

Published
by
Dan Webb
on February 15, 2011
in Uncategorized
. 3 Comments

One of the biggest pieces of news over the past couple of days is that United and Continental are now beginning to shift around their combined fleet on long-haul aircraft. What’s interesting is how the configurations of United’s fleet are much less dense than Continental’s thanks to First Class and Economy Plus – a United 767-300ER seats only eight more passengers than a Continental 757-200, for example. Of course, these differences will change once United announces a formal company decision on the future of First Class and Economy Plus. But for now, here’s a list of the fleet. United and Continental aren’t done converting their 777s and 757s, respectively, but the new configurations are below. Continental has yet to list a new 767-400ER configuration:

Anyway, I’m most interested in some of the 757 moves out of Dulles. I would guess the 757 is a little bit more restricted out of Dulles than it is Newark – IAD-CDG is 212 miles longer than EWR-CDG, for example.

In June, United will add a second Dulles – Paris flight, operated with a 757 (the other with a 777-200ER). In the fall, the 777 will be replaced with a 757, but the second flight stays on.T his in an interesting market to watch, since Air France just cut its third summer frequency (but on flight is upgraded to an A380), and plus OpenSkies is still a new entrant. Meanwhile, Dulles – Amsterdam will be operated with a 757 instead of a 777 in the fall. Anyway, it just seems like a new opportunity to adjust capacity to demand, not to mention utilize the combined fleet to optimize costs.

The two route changes out of Newark are also interesting. Service to Zurich will be upgraded from a Continental 767-200ER to a United 767-300ER, and Brussels flights will go from a Continental 767-400ER to a United 777-200ER. That’s a capacity upgrade for sure, but I wonder if United’s product had anything to do with that.

I’m sure this is just the beginning of some changes from United, and it’ll be fun to watch the rest.

A Slightly Different Way of Looking at On-Time Numbers

Published
by
Dan Webb
on February 14, 2011
in Uncategorized
. 1 Comment

December’s on-time numbers are interesting due to the large number on cancellations related to the post-Christmas storm. The DOT on-time metric takes cancellations into account as well, so a major storm can really hammer down an airline’s monthly performance.

When I saw that less than 60% of JetBlue’s flights arrived on time for the month, I wondered how much the storm affected the airline’s operation, and it was pretty significant. For example, I calculated what percentage of scheduled flights around the storm – note that for legacy carriers only mainline flights are included:

That result didn’t surprise me considering that JetBlue’s two largest operations are in New York and Boston. To put things in context, Continental canceled about the same number of mainline flights out of Newark than JetBlue did in JFK, but those cancellations made up a samller part of Continental’s total network (Houston is a larger hub than Newark).

So, I decided to calculate the on-time percentage as found in the DOT’s monthly report, and then calculate it again for flights that actually operated as planned – so I excluded cancellations and diversions. All of the airlines improved, but JetBlue’s performance did so the most. Is that a completely fair comparison? Well, it is certainly worth evaluating how individual carriers perform in weather, but I would say overall a lot of the cancellations during the storm were beyond the control of JetBlue.

What’s worthy of note, however, is that even when excluding cancellations and diversions, JetBlue’s on-time arrival percentage was still the worst of the eighteen carriers that report results.

Hawaiian Continues Asian Expansion

Published
by
Dan Webb
on February 14, 2011
in Hawaiian
. 1 Comment

Earlier this morning Hawaiian Airlines announced it would continue it Asian expansion, with daily service to Osaka, Japan beginning on July 12. The service will be initially operated with 767-300ERs, though Hawaiian notes in a press release that the route will eventually be served with A330-200s.

Currently, the route is already flown by JAL daily with a 767-300ER. Hawaiian’s codeshare partner Delta also operates the route with daily A330-300 service, and current schedules show the airline is slated to increase capacity by flying a 747-400 on the route instead.

It’s been interesting to see Hawaiian’s Asian route map expand quickly over the past few months – Tokyo-Haneda was added in November and Seoul launched last month.

The new route requires government approval.