Monthly Archive for January, 2012

A Quick Note on On-Time Statistics

Yesterday I was participating in the usual weekly recording on the Airplane Geeks Podcast, and I noticed that my fellow co-host Rob Mark wanted to discuss an article entitled “Delays Worse After JFK Runway Work Done.” Some interesting points about the DOT’s on-time database popped into my head as I was researching and preparing for last evening’s discussion, and I think some of them are worth sharing here as it shows the importance of properly using government data to draw conclusions.  Let’s take a look at two of the first paragraphs in the story:

When construction began in March 2010, officials said the revamped Runway 13R-31L would reduce flight delays by cutting the time planes spent traveling to and from the gate by up to a minute, or an estimated 10,500 hours a year.

But since the runway reopened in July 2010, the percentage of late arrivals and departures has increased.

When playing with operational data, it’s very important to be using the right statistics. According to the article, the runway was supposed to reduce taxi times, but instead uses late departures and arrivals to judge its effecgtiveness, which in my opinion is an error. First, departure delays are based on gate departure time, so a shorter taxi to the runway wouldn’t have any affect on departure delay. One could argue that a shorter taxi-in time for the inbound flight could lead to better departure performance, but I think that’s a pretty minor factor. Second, there are many factors that can affect flight delays, so using broad on-time statistics and implying that the runway is involved isn’t accurate. (Granted, the author does mention that delays have many causes, but that’s buried a few paragraphs into the article.)

If we actually look at taxi times (which is included in the DOT data), the story at JFK looks quite different. The author compared October 2009 – March 2010 to the same period a year later. In the later period, taxi in times at JFK were shorter in five of the six months being compared. Taxi out times were shorter in four of the six months.

But while taxi time numbers are (in my opinion) more reflective of the runway’s impact on operational performance, there’s still some very important caveats to consider. First, the DOT data doesn’t have any information on weather conditions at the airport, so if one month is stormier than the other a fair comparison might not always be generated.

The other issue with the DOT database is that a bunch of flights aren’t included, as the data only covers domestic flying. Second, only carriers that “have at least one percent of total domestic scheduled-service passenger revenues” are required to share their data, so that excludes smaller airlines like Virgin America, Spirit, and a bunch of regionals. The only exception is ExpressJet, which reports voluntarily. Obviously this can be an issue at a major airport like JFK. Just for fun, I took the T100 segment data, filtered out flights operated by all-cargo aircraft*, selected airports with at least 10,000 departures, and determined how many of those flights were performed by carriers that didn’t report data that month:

The DOT on-time database is very powerful and has a wealth of useful information for those interested in operational performance. But one has to be careful with the data and understand its strengths and weaknesses when analyzing it.

*I was having a tough time with this decision. Obviously, freight and boxes don’t have feelings and won’t get ticked off about a delay, but those flights are still buzzing around and can have an effect on congestion. But in the end I felt that eliminated all-cargo flying was the best for this post.

A Couple of Thoughts on the Southwest/AirTran Network Changes

Last week, Southwest announced what AirTran cities will end up being converted to Southwest stations, and that included revealing a few more cities that would be eliminated. This announcement follows previous announcements in August and November announcing AirTran station closures. Here’s a chart of AirTran cities along with the number of originating passengers from August 2010 through July 2011, courtesy of the DOT T100 database:

The vast majority of the cities that are being cut are some of the smallest in the AirTran network. The two largest stations being eliminated are Dallas/Ft. Worth and Newport News/Williamsburg. Southwest cant serve the former due to the Wright Amendment, and the latter city was probably cut due to its proximity Southwest’s Norfolk operation.

By the way — It’s worth noting that the numbers for the two “smallest” cities – Bermuda and Des Moines – are a bit misleading. AirTran only started flying to Bermuda a few months ago, and the same goes for its own-metal flying to Des Moines, which had been previously served through AirTran’s small partnership with SkyWest. Also, while Washington-Dulles is one of the airports losing AirTran service, but that airport continues on as a Southwest station.

Cranky Flier already had a good rundown and analysis of the latest cities to be cut, so I recommend taking a look there. But this latest round of network changes has got me thinking about the Southwest network going forward. Here’s what CEO Gary Kelly had to say about the AirTran deal when it was announced:

It offers Customers more low-fare destinations as we extend our network and diversify into new markets, including significant opportunities to and from Atlanta, the busiest airport in the U.S. and the largest domestic market we do not serve, as well as Washington, D.C. via Ronald Reagan National Airport. The acquisition also allows us to expand our presence in key markets, like New York LaGuardia, Boston Logan, and Baltimore/Washington. It presents us the opportunity to extend our service to many smaller domestic cities that we don’t serve today, and provides access to key near-international leisure markets in the Caribbean and Mexico.

A lot of what Kelly mentioned in that quote is already done, at least to some extent. Southwest will be launching its own service to Atlanta next month, and it now has access to AirTran’s slot portfolio at LGA and DCA. The carrier is already adjusting its schedule at the former, and will be launching service from LaGuardia to Denver and to St. Louis. But further expansion at the slot-controlled airports is iffy – Southwest lost out to JetBlue in the slot swap and additional slots are hard to come by. (Though one possibility that comes to mind is a potential divestiture in any potential M&A activity with American crops up.)

And while Kelly did mention the opportunity presented by smaller markets, the cuts in AirTran’s smaller-city service would indicate that opportunities might be limited in this area.

So what’s next for Southwest? Near-international seems to be an important opportunity for them, especially as the airline plans to increase its Mexican flying to destinations like Cabo, Mexico City, and Cancun. And the fact that Southwest’s soon-to-be-delivered 737-800s will be equipped for ETOPS would indicate that Hawaii is a possible location for a future expansion in Southwest’s network. The expiration of the Wright Amendment in 2014 could open up some interesting opportunities from Dallas as well, though the number of gates at the airport is restricted.

Obviously, those three opportunities are significant, but I’m just wondering where Southwest sees itself growing over the next 5-10 years or so. It seems that Southwest might not grow significantly over that time period, especially as the carrier mentioned that its latest Boeing order “intended to predominately serve as replacement aircraft as the airline continues the modernization of its fleet.” Obviously, the airline’s orderbook of 737-800s will allow it to increase capacity on existing routes, but I’m just wondering how many cities left in the US that would support a Southwest level of service.

Pinnacle CEO: “We Need to Act Immediately”

Regional carrier Pinnacle has made no secret of the existence of its financial issues, and in December announced the creation of a new restructuring program. But Pinnacle CEO Sean Menke, who joined the company this past May after leaving Frontier in 2010, provided an update on the situation in a letter to employees that was filed with the SEC on Friday.

Menke’s message is incredibly clear, writing that: “on the current path, our financial position will continue to worsen at an alarming rate; we need to act immediately,” and latter adding that “we may ultimately conclude the best way for us to achieve our goal is to use the court-supervised Chapter 11 process.”

Menke attributes Pinnacle’s current challenges to the airline: a longer than expected integration, issues with a new integrated seniority list that came as a result of a new pilot deal, and most interestingly, the nature of its agreements with mainline carriers. Pinnacle currently has four major capacity purchase agreements (CPAs) with mainline carriers.

Pinnacle’s two largest contracts represent 75% of the company’s revenue, and both cover CRJ-200 flying for Delta (one is a legacy Pinnacle contract, the other is a legacy Mesaba agreement). Menke says that these agreements “have historically performed well, and contractual rate adjustments scheduled for 2012 and 2013 will improve the economics in 2012 and beyond.” The agreements have “reasonable contract terms and will continue to be the backbone of our organization.”

But the company’s other agreements do not seem as promising. Menke says Pinnacle’s contract with Delta to operate the CRJ-900 in the Delta Connection network “will benefit from the pilot-related rate adjustment in 2012, there are no additional adjustments throughout the balance of the contract, which begins to wind down in 2017.” Menk adds that the agreement “only produces marginal economics today” and “it will only worsen over time as maintenance and fleet aging expenses surpass contractual rate increases.”

Perhaps the most interesting agreement for Pinnacle is its contract with United/Continental to operate the Bombardier Q400. While the aircraft certainly provides favorable economics, it appears that current agreement between Pinnacle and United/Continental is not sustainable, as Menke writes that the company has “found that the payments being received from United/Continental are not covering the expenses to operate the Q400s.” Menke adds that “the performance of the Q400 CPA will only worsen as this fleet ages and expenses increase.”

Menke’s commentary on the profitability of its contracts is fascinating. On one hand, Republic has touted in the past how it has a great fleet mix compared to its competitors thanks to its larger E-Jets. Yet Pinnacle says that its 50-seat flying is the most profitable. Obviously, it all depends on how the regionals negotiate their deals with the mainline carriers, but it just stood out to me.

Meanwhile, Pinnacle might be the regional carrier in the most precarious situation at the moment, the issue of declining profit margins is certainly not unique or new. This slide from a December Republic investor presentation tells the story better than I can:

I know I’ve said this before, but it will be simply fascinating to see how the regional industry evolves in the coming years. On one hand, common sense would dictate that regional carriers have more bargaining power than in the past thanks to recent consolidation. But at the same time the number of major network carriers has shrunk to four (and that number could shrink further, if the latest media speculation about American is correct).

Meanwhile, the whole issue of pilot scope remains up in the air, as contracts at United, Continental, US Airways, and American are all amendable, while Delta’s contract becomes amendable at the very end of this year.

AirTran/Southwest Applies for More Mexican Routes

Southwest is continuing its push to add more Mexcian flying to its route network as its AirTran subsidiary has applied to the US Department of Transportation (DOT) for the authority to to Cancun from Austin and Denver using AirTran 737-700 aircraft. The filing comes after Southwest last year announced plans to launch service from San Antonio to Cancun and Mexico City, and from Orange County to Cabo and Mexico City. The carrier is also competing with Frontier Airlines for the authority to fly between Chicago and Cancun.

The airline said in its application that its frequency of service in the Austin- Cancun market will vary from four times per week to daily with a proposed start date of May 25. The proposed Denver-Cancun service would be slated to launch around April 16, with daily service during the December-to-June high season, and would fly “several times a week during the off- peak period.” The company noted for both markets, however, that the exact schedule depends on “demand and market conditions.”

The bilateral agreement between the US and Mexico limits the number of carriers that can operate on Mexican routes (in many cases the number of US carriers is capped at three), but the airline notes in its filing that designations are available. One designation is available for Denver-Cancun service, as only United and Frontier currently have the authority to fly between the two cities.

Sun Country and Continental have the authority to fly between Austin and Cancun. Delta has flown on the route in the past, but notified the DOT last month that it had ceased service and had “no objection to the withdrawal of its own-metal designation on these routes.”

Virgin Adds PHL

After teasing everyone with six possible destinations, Virgin America has officially announced that its seventeenth destination will be Philadelphia. This spring the San Francisco-based airline will bring three daily flights to Los Angeles and two to San Francisco (the Airline Route blog breaks down the schedule).

As I wrote earlier this week, I really like this move. I think Virgin’s superior onboard product is most “valuable” (for lack of a better word) to travelers on long-haul flights, and Philadelphia fits the bill. Plus, I think adding another major East Coast destination will help the airline increase its relevance to West Coast (business) travelers.

It will be interesting to see how the competition reacts on this one. Naturally, one would expect US Airways to be a strong competitor on both routes, and the same goes for United on the San Francisco route (the airline recently cut its service between LAX and PHL). I’m most interested in Delta, which added a few weekly flights between Los Angeles and Philadelphia in October. It will be interesting to see how Virgin’s entry will affect Delta’s presence in the market (if at all).

Virgin also included a couple of interesting data points in its press release:

Virgin America will bring much needed nonstop competition from California’s largest airports to PHL….When entering markets that offer little low–fare competition, Virgin America has historically seen fares drop by up to one–third. In addition, 50 percent of travelers flying from PHL to the Los Angeles market now use connecting flights and 45 percent of those traveling from PHL to the San Francisco Bay Area are connecting passengers.

With those statistics in mind, it will be fun to watch to see how much Virgin can stimulate demand in these markets with lower fares, but also affect the mix of connecting vs. nonstop passengers. It also makes me wonder how Virgin’s entry has affected that mix with some of its other market entries — which is hopefully something I can examine at some point in the future.

Southwest Announces Interior Upgrade, Plans to Increase in 737-700 Seat Count

Earlier this morning Southwest Airlines revealed Evolve: The New Southwest Interior, a cabin upgrade that includes bringing new seats to the airline. Like many other carriers, Southwest has opted for lighter low-profile seats that should generate cost savings. The airline says the “improved durability of the redesigned seat coupled with fuel savings from 635 pounds less weight per aircraft is expected to result in more than $10 million in ongoing annual cost savings.”

The new seats bring some new features that should be nice for customers, including more space for bags underneath seats a fixed-wing headset that looks much more comfortable than Southwest’s current seat. The new seats also feature less recline. That change might not be popular with everyone, but as someone who is sick of having people recline and restrict my laptop usage I welcome this move! Here’s a handy diagram of the seat: Continue reading ‘Southwest Announces Interior Upgrade, Plans to Increase in 737-700 Seat Count’

Guessing Where Virgin America Flies Next

Virgin America is nearly set to announce its seventeenth destination, and the airline has revealed six possibilities:

I’ve been thinking about these and taking a guess is pretty tough, mainly because I think Virgin will serve nearly all of these cities at some point.  I went back to my interview with CEO David Cush from a few months ago and that helped me narrow it down:

“Our strong sense is we’ll add one major East Coast business market next year, and then we’ll see what else happens,” David continued. “I would guess you may see one or two destinations in addition to a major East Coast business destination.”

While things certainly may have changed since then, that comment would narrow it down to Newark, Atlanta, and Philadelphia. While I think Newark is the destination that Virgin wants to serve the most, I don’t think it’s going to happen this time around. Slots at the airport have so far proven to be elusive for the airline, which recently tried to convince the government that it should receive Newark slots as part of the divestitures in the slot swap. Unless a deal has been struck recently, the new destination probably isn’t Newark.

Atlanta also seems like a good fit for Virgin, but I don’t think it’s likely to be announced tomorrow. While this situation might be a little different, I keep thinking back to how JetBlue wasn’t able to make Atlanta work a few years ago. Plus, there’s already a low-cost presence courtesy of Southwest/AirTran, and I’m sure Delta would be a strong competitor as well.

That leaves Philadelphia, which makes the most sense to me. It fits the major East Coast market label and has no competition from low-cost carriers. Plus, the Virgin product looks great compared to US Airways, which decided to remove IFE from its domestic fleet a few years ago. (It’s worth noting, though, that US Airways’ A321s have Gogo.)

But while I think Philadelphia is the most likely choice, I definitely think Newark, Houston, Atlanta, and Phoenix all have a good chance of seeing Virgin service sometime in the next few years. Bozeman has me scratching my head a bit. I suppose it’s a possibility, but it doesn’t seem like a top priority to me. (I could be proven wrong, though!)

Southwest Interested in DCA Slots (Again)

Southwest Airlines plans to apply for two Washington-National slots being divested by Delta Air Lines, according to a recent DOT filing by the Dallas-based carrier.

The move comes after Delta notified the Department of Transportation (DOT) that it would be suspending regional jet service between DCA and Jackson, Mississippi (the slots for the service were awarded in 2004). After Delta’s notification to the DOT, US Airways proposed in a filing to operate Washington – Jackson service “until such time as the Department reallocates the two slot exemptions.”

Southwest then chimed in, saying that it “has no objection to US Airways’ application for interim service in that market,” but it also plans to “submit an application in the reallocation proceeding that will generate far greater public benefits than US Airways’ small aircraft service in the DCA-JAN market.”

“[T]o allow US Airways to obtain slot exemptions on a permanent basis – and thereby increase its already dominant share of DCA slot holdings – would fly in the face of the Department’s recent decision on the Delta/US Airways ‘slot-swap’ requiring those carriers to give up DCA slots in order to preserve competition,” Southwest added.

This move isn’t enitrely shocking considering Southwest’s participation in (and subsequent loss of) the slot swap auction. While only a single slot pair is up for grabs, it will still be interesting to see if Southwest can grab it to bolster AirTran’s existing service at National.

Southwest Adds Atlanta – Los Angeles

Southwest announced yesterday that it would start flying its own metal between Atlanta and Los Angeles, an existing AirTran route. While it’s certainly notable that Southwest is adding a new transcon flight, it is also worth noting that  it appears that the move will have no effect on capacity.

For example, here’s a (heavily cropped to save save) screenshot of the AirTran website taken last night showing an ATL-LAX and LAX-ATL flight that are still listed but not bookable:

If one looks at the Southwest website, the timing of the new flight is nearly identical to the old AirTran flight:

Essentially, it looks like one of the four AirTran flights in the market is being replaced with Soutwhest.

Anyway, Southwest starts its own service to Atlanta next month with flights to Austin, Baltimore, Chicago, Denver, and Houston.

Chart of the Day: Regional Jet Block Hours

The dramatic growth in regional flying, especially of the 50-seat jet variety during the late 1990s through early 2000s, was nothing short of impressive. Nevertheless, totally regional jet flying in the US appears to have topped out over the past few years. Here’s a chart of total block hours of major regional jets at US carriers over the past few years (2011 isn’t included because all of the data hasn’t come out yet):

A quick look at this graph leads to a few interesting points/questions/things to consider:

  • If so many 50-seat regional jets weren’t tied up in long-term, multi-year contracts, how many would still be flying today to support mainline flying?
  • While larger regional jets certainly have an increased presence in the US industry than they did a few years ago, 50-seaters still dominate the landscape. Will scope clauses at mainline carriers continue to relax to allow for more of these aircraft to enter the market, or might management and labor find a way to bring this flying in-house? (The latter isn’t the most likely scenario but it’s worth considering.)
  • If oil prices were to keep on rising, let’s say to $120 for hypothetical, how much further would regional jet flying be reduced?
  • What happens to all the 50-seaters as more and more come off contract over the coming years? Obviously exactly what happens depends on the economy, oil prices, etc., but still interesting to consider.
  • What replaces 50-seaters as they age? The only regional jets in production right now are of the larger variety, and the only aircraft in the 50-seat area that’s currently in production (that I can think of) is the ATR 42. In what scenarios aircraft like the CRJ-700/900, E-170/175, Q400, ATR-42/72 work as replacements?

Porter Plans Sixth US Destination

Canadian carrier Porter airlines plans to grow its transborder presence next year, noting in its most recent traffic results release that “a sixth U.S. market is…anticipated by spring.” While the airline didn’t provide any further details, it is worth pointing out that Cincinnati, Cleveland, Detroit, Philadelphia, Pittsburgh, and Washington, DC are listed as potential destinations on the carriers route map in its inflight magazine. In the United States, Porter serves Boston, Chicago (Midway), and Newark with multiple daily flights, and also has seasonal flights to Burlington and Myrtle Beach.

Meanwhile, 2011 marked dramatic growth for Porter, with a 35.9% year-over-year traffic increase on a 19.2% increase in capacity, resulting in a 7.5 point load factor boost, to 61.7%. And that load factor increase was certainly seen on the carrier’s big three transborder routes. Here’s the load factors on those routes for the first six months of the year (the most recent data available at the moment), as per the DOT:

While load factor growth is certainly nice to see, it doesn’t always equate with profitability. It is worth noting, however, that The Globe and Mail reported last month that privately-held Porter would turn it first annual profit in 2011.