As a Mets fan, I am disappointed that Delta is also the official airline of that “other team.” (Especially after that horrid subway series!)

Dan Webb on Aviation
As a Mets fan, I am disappointed that Delta is also the official airline of that “other team.” (Especially after that horrid subway series!)

I can’t say this was the smartest idea, but it is pretty funny…
The industry has been approaching the capital markets recently, with the latest to be US Airways and JetBlue. Now United is joining the mix to get some cash. The company will be offering bonds worth $175 million at maturity, but they will be “will be offered at a discount from their principal amount at maturity.” (Probably because United’s offering a low-ish interest rate, but I’m no bond expert.) The bonds will pay quarterly interest and mature in July 2012.
According to the SEC filing:
The Notes will be secured initially by a lien on all spare parts owned by United which are located in the United States (subject to certain exceptions) that are appropriate for installation on or use in Airbus model A319 and A320 aircraft and Boeing model 737, 747, 757, 767 and 777 aircraft or on any engine utilized on any such aircraft and may also later be secured by certain other collateral owned by United.
The ratings, B2 from Moody’s and B+ from S&P, put the bonds below and investment-grade and technically makes them “junk bonds.” But hey, it could be worse - they could be Cs!
Anyway, will be interesting to see how this all plays out. It definitely would be nice if United can get some extra cash, but of course they have to pay it all back eventually.
Back in April, I wrote a post entitled “Should Airlines Fear High Speed Rail?” and I discovered that a blog called “Trains for America” picked it up about a month ago and brought up some interesting points in response to my post. Unfortunately, due to my vacation and other things, I really haven’t had the opportunity to respond until now. So, let’s get to it!
First, the author writes:
It’s certainly well-written and interesting, but, naturally, holds views rather divergent from TFA. And geez, take a look at some of the other posts. How come no one talks about rabid “plane-fans”?
Well, thank you for the compliment, but what does that last question mean?
Anyway…
Let’s just ignore for now the many times that airlines have received large bailouts from the federal government.
This statement is probably a response to my point that airlines operate on a profit-and-loss basis, while government-supported rail might not have to.
But many bailouts? The last large bailout I can think of was the one in response to the September 11th attacks, and the only constant federal aid provided to airline routes that I can think of right now is the (non) Essential Air Service program. Nevertheless, the author seems to assume that I support government aid to the airline industry, and in most cases, I don’t. If an airline came up to the government today and asked for financial assistance due to the weak economy, I wouldn’t support it.
Next:
And yes, high-speed rail and trains in general should be supported by government; the service rail provides to communities large and small is more equitable, clean, and efficient than air and car travel.
I think a good discussion could be had about the “clean” and “efficient” aspects, but “equitable”? That’s just one of those vague words that can work in some political arguments (Mr. Webb, how dare you not support a transportation system that isn’t equitable?), but doesn’t really say much, because it can mean different things to different people.
The author goes on:
The mistake that air carriers in the past, including, as the blog mentions, Southwest, have made is that they view high-speed rail as competition rather than an opportunity. Let conventional/high-speed rail take over these short/medium haul routes and make sure that there are connections to the airports. This way, passengers can be funneled into the more profitable long-haul routes and the carriers don’t have to subsidize the connecting flights.
Just let them “take over”? How is this supposed to work out? Are the rail lines supposed to make the flying unprofitable by using the good ol’ government ATM as funding? (Clearly, the airlines should apply for bailout money at this point, in order to project American jobs.
)
The blog then goes on to use the example of Air France-KLM considering getting more involved in high speed rail, which is absolutely fine. They’re a free business, if they think it’s a smart investment, go ahead!
But on to the comments, which were very interesting (especially one from Allan), but I’d like to focus on the points made by the commenter Alex, who writes:
Like the “roads pay for themselves” argument, I am tired of the airlines pay for themselves argument. Weren’t the airports built by government?
Alex seems to have screwed up “airlines” and “airports,” as I am talking about the latter. While local governments do help pay for airports, they don’t start up airlines to use the airport, unlike government-subsidized rail service. And I’m all for attracting more private investment into airports, which is why I’m following what happens at Branson’s new airport. But anyway, if rail was to follow the system I was talking about, governments would help build stations and rails, but wouldn’t start up service, too.
Alex also writes:
Do airline landing fees really cover the full cost of maintenance, upgrades and renovations? I don’t think so, because flying from any Asian, European, or even a Canadian airport like Vancouver, and landing at most American airports is like time traveling back 20 or 30 years.
Clearly, Alex hasn’t been looking at terminal renovation projects here in the States (JetBlue’s new JFK terminal comes to mind). But Alex’s points make the argument moot, anyway, as he suggests that airports can’t cover their costs. But if high speed rail needs government help, then it can’t cover it’s costs either. Hmm.
And he continues:
What happens when oil goes back up to $100 or $120 a barrel. Sure, airlines will always be around for long distance travel, but for shorter hauls? Will they be around? Shouldn’t we be planning for the future? Why is this country incapable of looking ahead more than 2 or 3 years!?
I would simply say that this industry always has to look ahead more than two to three years, especially the aircraft manufacturers, since designing and building a new airliner is no quick task. And clearly the firms are planning to have airlines stick around in the short-haul market, just look at the Bombardier CSeries (yes, it actually has some decent range, but Swiss is going to use it to replace Avros). And obviously the aircraft manufacturers are also concerned about fuel efficiency to save costs. Why else would Bombardier be sticking a shiny new geared turbofan that is supposed to save on fuel on that aircraft?
Before I close, I’d like to note that I’m not an anti-high speed rail person (I do think it can work in some markets), and that I’m not writing against it just because I love airlines. If there’s a great high-speed rail line out there that provides good service to consumers, then that’s fantastic. I’m just weary of governmennt-funded high speed rail projects turning into things that unfairly affect other forms of transport.
Yesterday, I wrote about Gary Kelly’s speech at the AAAE convention, and today I would like to share the highlights of the question and answer session, and some parts of it were very interesting.
The first question was about business travel, and to be honest Gary’s response wasn’t too shocking – customer feedback has been positive, and the company is trying to move away from a “one size fits all” model to one that provides more customer choice.
Next up was about international service, and Gary said that Southwest’s systems still aren’t capable of generating international reservations, but that will be coming. Gary then said that since Southwest has flies only the 737, markets like Mexico, Canada, and the Caribbean make sense for consideration and that “we’ll be evaluating those [international markets] in future years, but it is not a priority.” Continue reading ‘AAAE: Gary Kelly’s Speech (Question and Answer Session)’
Sometimes, airline reporting is just hilarious. Take this line from a BBC report:
Dozens of holidaymakers returning to Newcastle refused to fly after they were asked to act as human ballast.
Scary! More details!
A jammed hold door meant luggage could only be loaded into the front of the Thomas Cook plane at Mallorca airport.
Passengers were asked to move seats to distribute the weight, but 71 left the plane, fearing for their safety.
Thomas Cook said it was standard procedure for airlines to ensure cargo and passengers were evenly distributed, and there was no safety risk.
I know I’m not the most frequent passenger, but isn’t moving passengers around for weight and balance a pretty common practice, especially on regional flights?
Oh well…
As I mentioned in an earlier post, Southwest CEO Gary Kelly was one of the keynote speakers at the AAAE conference, and here’s my summary of his speech.
Gary started off with a great joke by saying he gave up smoking when Herb retired, and that it was all secondhand. But, it wasn’t all fun, as Gary turned right to the recession and said that Southwest really isn’t seeing much improvement in the economic environment, and that it is a difficult time for the industry as a whole. He mentioned that the industry is facing a “one-two-three punch” of low last-minute ticket sales, low demand, and rising fuel prices.
On the bright side, he did say that he thought Southwest was in good shape, as it has a strong cash position and access to new capital if it needs it. But then he mentioned that May RASM was weak and June isn’t looking much better. He also announced that this is first time that Southwest is reducing ASM capacity.
Gary then focused on new revenue initiatives like pets on board, and said that “we’re hard at work on several other near-term as well as longer-term revenue initiatives.” But, he quickly mentioned that he believes Southwest has a “very strong competitive advantage” by not charging for the first two bags and “isn’t leaving any money on the table” because of it, as Southwest is still outperforming other carriers in terms of revenue. He also claimed that the low fare brand helps Southwest in a recession, but that Southwest has had to discount fares, bringing about lower yields. Continue reading ‘AAAE: Gary Kelly’s Speech’
Well, Republic’s been busy this week.
Yesterday, the carrier announced that it would be purchasing Frontier to bring the carrier out of bankruptcy protection. The Frontier brand will continue. PlaneBuzz brings up an interesting point - at this point in time, Republic does regional flying for United. Assuming the deal goes through, Republic-owned Frontier will now be competing with United, specifically in the Denver market, where both carriers have hubs.
Today, Republic announced its intent to purchase Midwest from TPG Group, which, in all honesty isn’t too shocking considering that Republic has loaned money to Midwest, it currently flies E170s for them, and recently it was announced that a Republic-owned company would be replacing the flying done by SkyWest. Another not-surprising part of the announcement was that Midwest’s remaining 717s will be going away and be replaced by E190s.
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