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Wednesday, December 6, 2006

Lufthansa launches 747-8, orders more A340s

Lufthansa confirmed an order today for twenty Boeing 747-8 aircraft with options for twenty more, being the first airline to announce an order for the type. The list price of the planes is $5.5 billion, but with discounts that Lufthansa most likely got the price comes down to about $3.2 billion or less.

The new 747-8 features the same engines as the 787 and is cleaner and quieter. It also has a 787-style cabin and has a newer, more efficient wing. But the environmental aspect of the 747-8 is especially important, since the EU has gone after airlines hard in the past few months over CO2 emissions.

Lufthansa also ordered seven more A340-600s, at a time when hardly any airlines have any A340 orders outstanding. Most major airlines have opted for the two-engine model - like the 777, 787, A330 or A350, but Lufthansa seems to have faith in four engines. It is the only major airline that doesn't operate 777s, but with these 747s becoming more efficient, perhaps the gap between four-engine planes and two-engine planes is narrowing.

Monday, December 4, 2006

US Air and Delta - merger tidbits

A little update on the US Airways/Delta merger situation. I read over the letters that the CEOs of the two airlines sent each other. I chuckled at the fact that US Air CEO Doug Parker called his Delta counterpart as "Jerry". (You can read the two letters here and here.)

Yet despite all the amicable talk, Jerry isn't giving in to Doug's request.
Instead, both sides have launched massive PR campaigns in order to try to sway public opinion towards their sides. US Airways has hired the firm of Joele Frank, Wilkinson Brimmer Katcher in order to show its case for a merger (read: takeover), while Delta has hired Kekst and Co.

According to USA Today, US Airways has created a newsletter called For the Record, which will present news about the merger, although obviously in a pro-merger way. For its part, Delta has carried out a full page ad in Atlanta's Journal-Constitution going against the merger. It has also given out 50,000 lapel buttons that say 'Keep Delta My Delta'.

But lapel pins might not cut it. Delta faces an uphill struggle to stay independent from US Airways. Jerry can try as hard as he can to avoid a merger but in the end, it's up to the creditors. And if the US Airways team can convince them that the merger will be the most beneficial for them, then it will probably happen.
Here's my advice for both - or rather, my opinion on what they might do, since I am probably unqualified to give any real advice:
  • Delta should explain clearly why this merger is a bad thing - or rather, isn't beneficial. The lapel pins and a full-page ad may foster some sympathy, but it's probably not enough in the end. The consumer should be aware of the downsides of such a merger (frequent-flyer program hassles, integration hassles in general, decreased competition, higher fares, etc.).
  • US Airways should explain in its campaign about why this merger might be beneficial. An increased route network means more destinations on the same frequent flyer program, which is something that travelers look for.
Feel free to leave comments!

Thursday, November 30, 2006

Iberia could split with BA, oneworld

Spanish airline Iberia is thinking about ending its seven-year-old partnership with British Airways and the oneworld alliance. The airline's finance and strategy director said recently that Iberia didn't feel 'tied' to BA, stating that "In a marriage you need two parties and Iberia and British Airways' priorities have not always been the same...They [BA] have their priorities...and Iberia is not in first place." He also added that Iberia could potentially hook up with SkyTeam's Air France/KLM or Star's Lufthansa.

Some analysts have wondered whether or not this is just a ploy by Iberia to get increased attention from BA, which recently raised its stake in Iberia from 9% to 10% in order to get two seats on its board. But whatever the outcome, Iberia plans to be aligned closely with either BA, Air France/KLM or Lufthansa as the airline industry in Europe heads for more consolidation. We've seen this with Ryanair's ongoing attempt to merge with Air Lingus and serious talks between Air France/KLM and Alitalia (see the last few posts).

Use the bathroom before flying China Southern

China Southern has recently figured out that since it takes a liter of fuel to flush a toilet in-flight, passengers are recommended to use the bathroom prior to boarding the plane. That, according to a China Southern captain, is enough for "an economical car to run at least 10 kilometers".

The captain, Liu Zhiyuan, also said that flying around one kilogram of items like pillows, blankets and magazine for one hour consumes 0.2 kg of fuel, meaning that "the blankets and pillows on board the aircraft eat up 60 tons of fuel every day. If each seat is loaded with three 450-gram magazines, another 60 tonnes will be consumed," he explained. Apparently the airline is also filling their on-board water tanks at 60 percent full.

I'm surprised good old Ryanair, which doesn't have any window shades, pillows, etc., hasn't told its passengers use the bathroom before boarding.

Wednesday, November 29, 2006

Radioactive 767s

This isn't really relevant when it comes to the airline industry, but it's still something you don't see everyday. Apparently British Airways is grounding three 767s - two at Heathrow Airport and one at Moscow's Domodedovo - indefinitely due to very low traces of radioactive substances.

The groundings are happening as part of the investigation into the poisoning of ex-KGB man Alexander Litvinenko, and the two events might be related. Of course, the risk to anyone on board the planes was probably next to nothing, but people who flew on affected flights (a list can be found here)
From BA's website:
British Airways has been advised that three of its Boeing 767 short haul aircraft have been identified by the UK government as part of the investigation into the death of Alexander Litvinenko.

The airline was contacted last night (Tuesday, November 28) by the government. It has taken the three B767s out of service to enable forensic examination to be carried out.

The initial results of the forensic tests, which was confirmed late this afternoon, has shown very low traces of a radioactive substance onboard two of the three aircraft.

British Airways has been advised that this investigation is confined solely to these three B767 aircraft, which will remain out of service until further notice.

British Airways understands that from advice it has been given that the risk to public health is low.

The airline is in the process of making contact with customers who have travelled on flights operated by these aircraft, which operate within Europe.

Thursday, November 23, 2006

Possible takeover of Alitalia by Air France?

Air France/KLM, the airline group that's the largest in Europe, said yesterday that it was in talks with Alitalia about a possible takeover of the Italian flag-carrier. Alitalia is half-owned by the Italian government, and hasn't made a profit since 1998, but has instead remained flying over the past few years due to government bailouts.

A potential problem that stands in the way of the airline's profitability is the fact that it has two main hubs: one in Milan and one in Rome. Most European airlines, by comparison, really have one main hub: British Airways in London, Lufthansa in Frankfurt, Air France in Paris, Iberia in Madrid, etc. Alitalia also has to deal with a bunch of new start-up airlines as well.

The chances of such a takeover aren't very good. The Italian unions have voiced their displeasure, as has the Italian prime minister, Romano Prodi. "I would like to know Air France’s real intentions. Does it want to create a big European transport group in which Italy would also have a place, or simply grab the Italian air transport market, which is large and very lucrative?” he said in the French newspaper Le Figaro.

Air France and Alitalia are already members of the SkyTeam Alliance.

Thursday, November 16, 2006

Could a United-Delta merger happen? It might

United will probably enter this merger madness that's gripping the industry at the time, some analysts predict. At a Citigroup investor conference yesterday, United's CFO, Jake Brace, said that "the industrial logic of mergers in the airline industry is so compelling... We believe mergers in the airline industry have significant synergies, and we believe the industry needs to consolidate."

He also wouldn't say much about the subject of Delta, but wouldn't rule out anything in way of a merger. "We're going to do what makes sense for our company, and we'll be interested to see what happens with US Air and Delta," Brace said.

A United-Delta merger would make much more sense from a variety of standpoints. The two airlines have more compatible fleets - both predominately Boeings - as opposed to US Airways, which has an almost all-Airbus fleet. There is also less overlap between the two airlines' hubs, compared with US Airways. United has hubs at Los Angeles, San Francisco, Denver, Chicago, and Washington, while US Airways has hubs at Phoenix, Las Vegas, Charlotte, and Philadelphia. In contrast, Delta has hubs at New York JFK, Atlanta, Cincinatti, and Salt Lake City.

Could a merger happen? It might. Analyists predict that United will place a bet for Delta, and will do so sometime soon.

Wednesday, November 15, 2006

US Airways/Delta merger update

Here’s a mid-day update (done during lunch break) about the possible Delta-US Airways merger. CNN talked to US Airways’ CEO Doug Parker, who said that his airline’s hub in Charlotte, North Carolina would remain if the two airlines were to merge. Delta’s hub in Salt Lake City would also stay, although each hub is rather close to an existing one: Delta’s in Atlanta and US Airways’ in Phoenix, respectively.

Delta has stated that it wants to remain independent, at least during its stay in bankruptcy. Delta’s CEO said that his airline’s plan “has always been to emerge from bankruptcy in the first half of 2007 as a strong, stand-alone carrier. Our plan is working and we are proud of the progress."

It increasingly looks like any takeover (or merger) of Delta by US Airways will be a hostile bid. Yet Parker thinks that he will convince Delta’s bosses and creditors that the deal is a good one: "What you're hearing right now is reaction from people who haven't yet been able to digest the offer.”

Analysts have said that in addition to US Airways, United and American could potentially be bidders for Delta as well, or at least play a part in the consolidation of the industry.

So will the merger go through? Delta says no, and the fact that it’s in Chapter 11 bankruptcy certainly complicates things. Antitrust laws are another thing to consider; an example of this is the fact that Delta and US Airways are the only two airlines flying the New York-Washington shuttle route. But if the two are merged, it would create the nation’s (and perhaps the world’s) largest airline, beating American for the number one spot.

US Airways seeking to purchase Delta

US Airways has just announced this morning that it would make an $8 billion bid (with cash and stock) for Delta Air Lines once the latter emerges from Chapter 11 bankruptcy protection. Delta creditors would get about $4 billion cash and and 78.5 million shares of US Airways stock which, based on yesterday's closing stock price, has a combined value of about $4 billion.

There isn’t much information available at this time, since the story was just released about an hour ago, but US Airways said that the deal would ‘generate $1.65 billion in annual synergies’. The combined airline would use the name of Delta, which according to US Airways' CEO, has a slightly higher brand awareness.

Thursday, November 9, 2006

Austrian Airlines to start Iraq service


Austrian flag carrier Austrian Airlines said today that it would start flying scheduled flights to the northern Iraqi city of Erbil twice a week, starting December 11. According to the airline, the city is the 4th largest in Iraq and it is a logical new destination for its extensive Middle Eastern network - the airline claims that it is 'already the number three carrier in Europe when measured by services into the Middle East'.

The flights are on Mondays and Fridays with an Airbus A319 from Vienna to Erbil and back (flights 829 and 830).

Wednesday, November 8, 2006

Aeroflot lets 787 slots expire, retires Il-86

Russian flag carrier Aeroflot lost twenty-two production slots last week for the Boeing 787 aircraft because the government wouldn't approve its order. "The original conditions on the contract have expired... We will now be looking for other alternatives. We remain in contact with Boeing," said Aeroflot Deputy CEO Lev Koshlyakov.

Originally Aeroflot remained undecided between the A350 and the 787 and seemed like it would split its order both ways. Alexander Lebedev, owner of 30% of Aeroflot, cut a deal with Boeing to give it the production slots basically as a time extension so that Aeroflot's board could confirm the order, which it has yet to do.

Aeroflot also announced last month that it plans to retire the Ilyushin Il-86 from service later this month. Aeroflot's Deputy Director General Igor Desyatnichenko said that the planes will be retired November 15, and that they were "too costly to keep them through the winter and fly just two or three months in the summer". He also said that the planes, which aren't very fuel efficient, didn't meet European environmental and noise regulations.

The Il-86 was introduced in 1980 and was the first Russian wide-bodied airliner. Aeroflot and other airlines have used (and continue to use) the aircraft on tourist flights to southern resort towns in the Caucasus during the summer months.

Reactions to FedEx's A380 cancelation

After FedEx's decision yesterday (see previous blog post) to cancel its A380 orders because of prolonged delays on Airbus' part, there have not been any other cancellations by other airlines ordering the A380 - as of yet.

Singapore Airlines, which will be the first airline to put the A380 into service, says that it has no plans whatsoever to scrap its order, although it will get its first A380 in October of 2007 instead of December of this year, as originally planned. The airline said that it won't be affected greatly by the delay because it's taking delivery of six Boeing 777-300ERs this month.

FedEx rival UPS, which has ten A380s on order (as well as options on another ten) said that the company isn't rushing to make a decision about whether to cancel its orders or not. "We are not pressed to make a decision," said Chief Executive Officer Mike Eskew. "Our backs are not against the wall on this issue." UPS says that it has enough planes scheduled for delivery in the next few years to avoid any problem.

Airbus company EADS also reported its first quarterly loss in three years earlier today.

Tuesday, November 7, 2006

FedEx Dumps Airbus, Goes to Boeing

Cargo delivery giant FedEx announced today that it has canceled its order for 10 A380-800F planes and instead has ordered 15 Boeing 777 (777F) freighters. Notably, this is the first A380 customer that Airbus has lost.

CEO Frederick Smith said, "The availability and delivery timing of this aircraft, coupled with its attractive payload range and economics, make this choice the best decision for Fedex." He went on to say, "Global demand for air cargo and express services continues to grow rapidly and FedEx has made significant investments in our network to meet customers' needs and fulfill our business objectives. Therefore, it was necessary and prudent for us to acquire the Boeing 777 Freighter." Simply put, FedEx needs new planes soon, not later, and if Airbus can't deliver, then they figure that Boeing will.

Right now I'm sure everyone at Boeing headquarters in Chicago is partying, but not the same in Toulouse, France - Airbus headquarters. Airbus has been facing some tough times recently, with Emirates threatening to cancel its order for 43 passenger A380s (the largest customer of the plane to date). Right now, the scheduled first delivery of the A380 to an airline will be in October 2007 - two years behind schedule.

Deliveries of the aircraft to FedEx are expected to start in 2009 and last through 2011. At the time of writing, shares of Airbus parent company EADS fell 3.05% while Boeing shares climbed 5.26%

Thursday, October 5, 2006

Aer Lingus Says 'No' To A Ryanair Takeover

Irish 'flag carrier' (this term his been disputed) Aer Lingus has recieved, and promptly rejected, a $1.9 billion (£1 billion) takeover offer from low-cost archrival Ryanair. The reason? The bid "significantly undervalues the group's businesses and attractive long term growth potential", according to the Aer Lingus board. Of course, the real reason could be that Aer Lingus, which has a rich history as a full-service, international airline, doesn't want to be bought out by Ryanair, which has gone from being a dowdy puddlejumper of an airline to one of Europe's largest in a little over ten years.

Michael O'Leary, Ryanair's outspoken boss, called the potential takeover a 'strong opportunity' to create a new airline that would carry over 50 million passengers a year. The airlines would, however, be operated seperately, and in some cases even compete on some routes.

The Irish government could also be an obstacle to any future plans that Ryanair may have regarding an Aer Lingus takeover. It owns 28.3% of Aer Lingus, and although Ryanair has said it would be 'happy' if the government kept its shares, I'm not sure whether the government would be happy to see itself holding 28.3% of an airline that has frequently clashed with governments in other countries.

The deal might also have had some problems with the anti-trust groups: a combined Aer Lingus-Ryanair coalition would carry a huge 78% of passengers between London and Dublin.

The two airlines, though, aren't as different as some think. Aer Lingus used to be a mostly full-service airline, yet in the past five years it has significantly changed its business model, cutting back on some services and opening new routes to mainland Europe (before, it flew primarily to England and the US). Now, Aer Lingus tries to market itself as a low-fare airline, much like Ryanair.

Could a takeover still happen? If it did, Ryanair would have to significantly boost its purchasing price. (It already owns 16% of Aer Lingus.) And the combined group would have to drop some routes and/or frequencies to avoid trouble with anti-trust agencies.

Tuesday, October 3, 2006

A380 Faces More Delays as Customers Rethink Purchases

Just when the news over at Airbus couldn't get any worse - lagging behind Boeing in the orders count, A380 delays, etc. - it did. Airbus confirmed recently that the A380s scheduled to be delivered to customers will be further delayed due to 'wiring problems'. The planes will be delayed another year.

Emirates, the largest customer of the type, will have to wait an addition ten months for its planes, something that it's president is not too happy about: "It's a very serious issue." Emirates, along with Virgin Atlantic, have announced that they are 'reviewing' their options - meaning that they might order fewer or potentially none of the airplanes.

Airbus earlier had said it would deliver nine A380s next year - a number that's now down to 9. Delays are, in total, two years late - meaning parent company EADS is losing billions. And this comes at a critical time, too, as Airbus tries to regain the lead from archrival Boeing.

Will Emirates really cancel its A380 order like some have predicted? Not likely. The airline has, after all, gained much publicity over its huge A380 order (43 aircraft), which is the largest so far. The second largest order, from Lufthansa, is only 15 aircraft. That said, whether Emirates cancels or not, Airbus is still in quite a bit of trouble for the time being.

Friday, September 29, 2006

UAL Head to Stay Until 2011 While Merger Rumors Swirl

United Airlines today extended the contract of its CEO, Glenn Tilton, until 2011, ending speculation about his departure (his previous contract expired next year).

Tilton joined United in September of 2002 and headed the airline during its long Chapter 11 bankruptcy process. But now that United's out of bankruptcy, Tilton is calling for 'more consolidation' in the industry - meaning mergers of some sort. "Deregulation has done its work," he told the Financial Times earlier this year. "It's time to recognise that we should compete on a grander scale. Should the opportunity present itself, we'll make sure we're in a position to take advantage."

Which airline would Tilton like to see United merge with? Most people think Continental, because the two airlines operate similar aircraft and don't generally fly the same types of routes. Continental has a strong Latin America and European presence and United's Asian route network is the best in the industry. Yet Continental's CEO, Larry Kellner, has repeatedly said that Continental wishes to remain independent.

Whether or not that happens we'll have to see, but I bet that two of the legacies will merge next year... probably a United/Continental combination

Friday, September 22, 2006

United: Help Us Get Into China

Not to be outdone by American, United yesterday emailed its Mileage Plus members a similar plea to sign a petition to help the airline fly from Washington to Beijing (see last post). United, with the support of the governors of Virginia and Maryland and the mayor of Washington DC (as well as other economic organisations) set up a website to explain their petition.

United is petitioning the Department of Transportation to be allowed to be the first domestic carrier to have a direct route between Washington, D.C. Dulles (IAD) and Beijing, China (PEK). Right now, 28 other world capitals have this route to Beijing; Washington, D.C. deserves to be next!

We are asking our members to please add their name and support to this initiative. It will only take a few moments of your time.

Simply click here to read our petition. Then add your name and address below to the form.

Thank you in advance for your participation.


Here's the text of the petition:

The Honorable Maria Cino
Acting Secretary
U.S. Department of Transportation
400 Seventh Street, S.W.
Washington, D.C. 20590

RE: Docket 2006-25275

Dear Madam Secretary:
I am writing to express my solid support for the application by United to initiate the first nonstop capital-to-capital service between Washington, D.C. Dulles (IAD) and Beijing, China (PEK), effective March 25, 2007.

If approved, United's application would create the first capital-to-capital service between the United States and China. This would not only be the most efficient route for the residents of the Washington, D.C. area, but provide an easy connection from cities throughout the eastern half of the United States.

The capital-to-capital route serves to enhance and strengthen the economic and political relationships between our two countries, and opens a welcome, and necessary, door to China. I respectfully ask that the Department grant United's application for the Washington Dulles to Beijing route. Thank you for your attention to their application.

Wednesday, September 20, 2006

American: Help Us Get Into China

It seems like American Airlines is needing a bit of help to fly into China, or so it seems from an email that they sent out to the AAdvantage members:

Two Days Left To Support Our New Gateway To China

American Airlines recently applied to the U.S. Department of Transportation for the authority to fly from Dallas/Fort Worth International Airport to Beijing, China, beginning March 2007. Three other airlines have also submitted an application for an additional China flight, but only one U.S. airline will be awarded the right to add a daily flight to and from China.

As one of our valued AAdvantage® members, you can help us open a new gateway to China. The Department of Transportation bases its decision on many factors, and one of the most important is the amount of community support. By signing your name to an online petition you can show your support.

How will you benefit if American flies to China? DFW is American's largest hub where it operates almost 800 total daily flights with service to 129 domestic destinations. Establishing a flight to China from DFW will provide you with an expanded network of exciting destinations and more ways to both earn and redeem AAdvantage miles. In addition, once in China, you can connect to 24 destinations in the country's interior through our codeshare partner China Eastern Airlines.

Please sign this petition by Friday, September 22 and help us bring this valuable service to DFW. Visit www.FlytoChinaonAA.com. You'll also find more information about American Airlines and our proposed flight to Beijing.

Sincerely,

Dan Garton
Executive Vice President, Marketing

Tuesday, August 1, 2006

Russian Airline Alliance?

Russian news agency RIA Novosti is reporting that a 25% stake in number-two Russian airline S7 might be transferred to flag-carrier Aeroflot if the two airlines establish an alliance. If no alliance occurs, then the stake will be put up for auction.

The government, which owns the 25% stake, has been trying to sell it as part of its privitization plan. Of course Aeroflot is pleased with the idea of holding a large stake in its biggest rival, which focuses on services out of Moscow, Novosibirsk and Irkutsk. Aeroflot has one hub - Moscow. Their slogan might as well be 'All routes lead to Moscow' - a system that's pretty inefficient. For example, if you want to fly from Petropavlosk-Kamchatsky to Vladivostok, you have to fly to Moscow - a ten hour flight and then an eight and a half hour flight. However, S7 has a direct route between the two cities that cuts travel time considerably.

Of course, there are government critics of the transfer, who say that the transfer could make Aeroflot more capable of blocking S7's route expansion, especially on international routes, where Aeroflot dominates. But even if that's the case, Aeroflot is a long way from the Soviet days, when it was the only Russian airline.

The Smoker's Airline

Are you tired of the continual cutbacks and restrictions that almost every airline has implemented over the last few years? No meals in economy, or if you're on Northwest, no food at all... Less seatroom, no magazines, no pillows, no blankets... And for some people, the worst restriction is on that little habit that many take up that's called smoking. Smoking is understandably banned on all US flights and in most countries by now (Aeroflot bans smoking too, but do you actually believe them?). And smokers that do want to light up whilst in flight have to find an airline that will accomodate them - not an easy thing nowadays.

Well, traveling smokers will no longer be forced to go through Nicotine Withdrawl for several hours while in flight, because a brand new airline is being launched - especially for smokers. That's right, the Dusseldorf, Germany-based Smokers' International Airline (Smintair) will allow smoking in all 138 seats on board two leased Boeing 747-400s. Flights will start on March 26 between Dusseldorf and Tokyo's Narita airport.

Smintair's chief, Alexander Schoppmann (himself a smoker, of course), said that he had been planning the airline for over a year. "I have been a traveler for the best part of 50 years," he told CNN. "I have seen the level of service go down and the price go up."

Each passenger will also be able to watch TV on 15-inch screens and be able to access the internet inflight.

"SMINTAIR will bring back the joy of flying by offering only 30 first class and 108 business class seats on a "Jumbo Jet", one of the most reliable planes in the World," boasts its website. Being cooped up in a smoke-filled "Jumbo Jet" for thirteen hours doesn't exactly sound like my idea of the Joy of Flying, but perhaps it does to some people. Then again, I belong in the non-smokers category, a category that Smintair seems keen on attracting.

"Non-smokers will find the cabin air more refreshing than on any other flight with any other airline, as SMINTAIR adds fresh outside air to the conditioning system!" its website proudly proclaims. But it's no secret that the air on board an aircraft is just circulated around, no matter how much 'outside air' is added.

But, if this sounds like a good airline to you, you're not only welcome to fly it, but invest in it as well. All you need to secure a 1% stake in Smintair is one million euros. And the airline's website certainly tries to assure you that your investment will be a smart one: "It is of extreme logic, that an investment in SMINTAIR will be extremely profitable, as it is connected to a lower than average risk. A very conservative business plan, even calculating Kerosene prices on the basis of US$100/barrel crude oil, foresees a profit margin of more than €50Mio/p.a. (per airplane), taking fully booked aircraft into consideration. With only 138 available seats in each of our BOEING 747-400ER and tens of millions of smokers in Europe and Asia, this is certainly not an impossible task."

Or is it? I know one thing's for sure - I, like most non-smokers, would probably prefer to book on Lufthansa instead. After all, there's no smoking there, and I'm sure that their CEO (the guy with the beard in the picture) is less amatueurish than Smintair's - I'll leave you today with the first two paragraphs of his letter to potential fliers (see the rest here):


Ladies and Gentlemen, dear Guests,

before I would like to share my next to 50 years of experience as an airline passenger with you, I'd like to take the opportunity to clear one of the biggest lies floating around everywhere in the World:
"Second Hand Smoke (SHS, a.k.a. ETS, Environmental Tobacco Smoke) damages your health".
The WHO (World Health Orgaisation) confirms in all of it's studies concerning the subject, that ETS has not even a statistcally relevant effect on the non-smoker's health! If you want to go deeper into the subject, without prejudice, please refer to following link: http://www.thetruthisalie.com. You will be more than surprised of the amount of facts and neutral proof. By the way, did you know that the NAZIs also sported a huge Anti-Smoking campaign? Yes, they did and the one we experience now, frightningly, carries exactly the same insignia.

Now on to a more pleasant subject than the NAZIs and a fat lie:
In the 50s, 60s and 70s, I was always looking foreward to every flight, enjoying a luxurious experience above the clouds. The stewardesses (yes, that was the job title and they were proud of it!) were all friendly, very pretty and, in their fresh uniforms, elegant. In general, the service was first class, even back in the "economy" section. The spacing between the comfortable seats was sufficient, in the then smaller aircraft, even for tall people like me. For a long time, you were greeted with a vast selection of "Monte Christ" cigars, in LUFTHANSA's First Class, even before the plane took off! However, times do change. "Thanks CHRIST", one should exclaim, as everything becomes even more comfortable, .... except for the life of an airline passenger!

Sunday, July 30, 2006

Airports: They Wreck the Air Travel Experience

Yesterday I flew United Airlines from Boston to Spokane, Washington via Denver. The flight itself was quite enjoyable. The check-in process was not.

Of course, United's check-in facilities in Boston were crowded, even at 6:45 in the morning. I spent close to half an hour waiting in line, and saw one check-in person even go on break and return fifteen minutes later, when there were still lots of people waiting to be processed. By the time my bags were checked and my boarding pass was handed to me, it was 7:15 - running quite a bit late for a 7:55 flight!

Then came that awful reality of air travel nowadays - the dreaded security line. I would have missed my flight had the security woman allowed us to cut in front of everyone else upon seeing my boarding pass.

Then, after being whisked through security, I showed up at the gate only to realize that the plane that that I was supposed to take to Denver had not yet arrived. Instead, a Ted (United's low-fare subsidiary) aircraft would be flying our route. And that meant that they had to deplane and clean the plane too (even though you can't notice the difference if they clean the plane or not). All that time spent worrying and looking at the clock had gone to waste!

Of course, the flights themselves were nice. United has a fabulous terminal at Denver, and the process of switching flights was not stressful at all. But I find that the check in process is always the most stressful of the air travel experience, along with security.

Friday, July 28, 2006

Best Airline TV Ad?

Here's a post that I hope some of the readers of this blog will get involved in: what, in your opinion, is the best airline TV ad ever? Even notable or just interesting ones would be nice to list. If possible, I'll try to find it online and post it here. (Please add your response in the form of a comment.)

Here are some interesting ones. Note that the first two don't feature aircraft too prominately:

Aeroflot:


Air France (1999):


Braniff Airways (1975:)


United Airlines (1994):

Delta Buys NYC-London Route From United

Delta Air Lines announced that it would purchase United's JFK-London route authority for up to $21 million, pending approval from the Department of Transportation and bankruptcy court (Delta is still in Chapter 11).

Delta has been trying unsucessfully to fly this route for over a decade. It has an international hub at JFK and flies to many European destinations from the airport but has yet to serve London. If all goes well, it plans to start its first service to London's Gatwick (not Heathrow) airport later this year and add flights next year.

Of course, if the route wasn't profitable for United then I would see reason to sell it off. But hopefully this won't turn out to be a repeat of the 1991 disaster where TWA sold it's JFK-London Heathrow authorities to American Airlines for some quick cash. In the short term, the deal paid off, but TWA really made lots more money on the route than they sold it for, and American pulled off a great deal at TWA's expense.

Also of note: United flew the route from JFK to London's Heathrow Airport, which is the city's primary international gateway and on the shortlist of the world's busiest airports. But under some law, only United and American are allowed to fly into Heathrow, since they purchased their route authorities from Pan Am and TWA, respectively. The other US carriers - like Delta, for example - have to go into Gatwick.

Clickair To Be Iberia's New LCC Product

Spanish flag-carrier Iberia has announced that its new low-cost carrier's name will be Clickair. The low-cost airline was originally called Catair, it being based in Barcelona, but in a statement Clickair said that the reason behind the change was that it had to do with computers, since its main sales medium will be the internet. (Strategic Name Development has more on the name change.)

However, Clickair's future may be shaky. Pilots at Iberia, concerned about salaries and job security, threatened a week-long strike last week, even though it was called off after promises of job security. However, the flight crews have not yet recieved their much sought-after wage increases.

And in bigger news, earlier today Iberia ground staff blocked one of three runways at the Barcelona airport to stage a protest after the Iberia lost a license to operate ground handling operations. They used buses and other vehicles to block the runway. This loss of the contract could be a major problem for Clickair's future, as the low cost airline had expected to share ground handling operations with Iberia (and thus save a lot of money).

Monday, July 24, 2006

United Posts Profit, Stays in Chicago

Chicago's Mayor Daley must be thrillled.

United Airlines, Chicago's self-proclaimed Hometown Airline, announced this morning that, after an amazing six years (!) of losses, the company was finally posting a (preliminary) modest quarterly profit. The reason? Mostly higher ticket prices and strong demand, two factors that have helped push up black ink (or at least stem the flow of the red ink) industry-wide. After this morning's announcement, the company's shares jumped up to thirteen percent.

United also announced on Saturday that it plans to move its headquarters from Elk Grove Township, Illinois to downtown Chicago, defeating rumors and speculation that it would move to Denver or San Francisco. Of course, like any Big Company Moving to Chicago (think: Boeing in 2001), United certainly got its fair share of goodies: $5.25 million in tax financing and $1.35 million in job grants from the Illinois Department of Commerce and Economic Opportunity.

These two announcements have to be good news for the company. The announcement of a profit, no matter how small, is the first in six years, and should help to ease the fears of shareholders, some of whom have seen their share prices fall from $43.00/share back in January to as little as $25.88/share last month.

And the announcement that United will stay in Chicago is good news for the company and the city; the company will get a bunch of benefits and the city will get the taxes.

And how could United be United if it wasn't based in Chicago?

Friday, June 23, 2006

Troubled Air Scotland Changes Name

Scotland's self-proclaimed 'flag-carrier' is getting an overhaul. Air Scotland, operated by other airlines based in Greece and the Netherlands, suffered from a bad image as a delay-prone airline with bad service. There's never been anything 'Scottish' about the airline, maybe except for the huge Scottish flag branded on the tails of their airplanes. Even the the logo banner at the top of the airline's website reads, 'Air Scotland - Operated by Greece Airways'. The company even went so far as to have its Iraqi-born founder dress up in a kilt to celebrate the beginning of service. But Air Scotland has been faced with bad public opinion. So, what does an airline with a bad public image do? Simple - change its name. Air Scotland will now be known as topjetair. (Read an additional viewpoint about this over at Strategic Name Development's blog.)

Like any name change at an airline, there are two sides to the story. One passenger explains why Air Scotland might have switched its name: "We were left high and dry at the airport in Spain with no information from Air Scotland. I am sure they have changed their name because of their reputation." However, the company denies this. Says its manager: "We now fly from other airports in the UK – not just Scottish ones – and we wanted to give the airline a more international flair."

The manager should get the Golden Shovel award - that's not really the reason why they're changing their name. They shouldn't need to have a more 'international flair' - after all, if you're a 'Scottish' airline with a Greek operator, isn't that international enough? I guess not.

But the new owners are understandably eager to shed its poor image. Airlines do this whenever they're faced with bad public opinion. Olympic announced its desire to rebrand itself (read here) a short while ago. And the most noteworthy example occured when ValuJet Airlines suffered a horrific crash in the Florida Everglades ten years ago. After shutting itself down and reopening up several months later, it found that many people were - quite understandably - afraid to fly them. So what did they do? They bought up AirTran, a bumbling little Florida carrier flying a couple of elderly Boeing 737s. ValuJet adopted this new name and became the airline that we all know of today. I wonder how many people really know that AirTran is really just ValuJet 'in disguise' - but if anything, it shows the immense power behind a simple name.

Thursday, June 22, 2006

Aloha Airlines Goes Retro

Like many other airlines, Aloha Airlines has decided to paint one of its planes (a Boeing 737) in a livery from the past. Aloha used the 'Funbird' scheme starting in 1969 and throughout the 1970s. The paint job was shown off for the first time yesterday at Honolulu International Airport, complete with a party featuring 70s cars and music.

"It's a feel good time. We've gone through a lot the last year and a half," Aloha Airlines President and Chief Executive Officer David Banmiller said. "It's a tough industry and sometimes we lost the fun part of life and we're trying to bring that back and invigorate our customers and our employees,"

Perhaps the airline hopes that the new paintjob will act as a marketing gimmick to give the airline a boost in the fiercely competitive inter-Hawaii market.

BA Center of Price-Fixing Investigation

Today's news reads that British Airways is being investigated by the UK Office of Fair Trading (OFT) and the US Deparment of Justice (DOJ) for allegedly fixing fuel surcharges on some of its longer flights in and out of the UK.

According to the BBC, passengers on long-haul BA flights currently pay a £35 fuel surcharge for a one-way ticket, compared with a £37 surcharge on AA flights in and out of the UK. While American is not under investigation at this time, it, United Airlines and Virgin Atlantic have stated that they are helping with the investigation. At this time, no other airlines have been investigated. If BA is found guilty, they could be fined up to 10% of worldwide sales, according to the BBC - which was £8.5 billion last year.

Of course, while the financial penalties for price-fixing may be severe, the fallout doesn't necessarily extend over to the flying public. After all, who's going to quit flying Airline X just because they were involved in price-fixing? While it's no doubt the wrong thing to do, and airlines can pay a huge financial price for it, I don't think being convicted of price fixing ranks high up on my list when I choose what airline to fly on. Safety, service, and price are factors that count more.

Wednesday, June 21, 2006

U.S. Airlines Expand Internationally

Delta Air Lines recently announced that this winter it will start flying to Accra, Ghana from New York-JFK with a Boeing 767-300ER, becoming the only scheduled airline to do so. And they're not planning on stopping there. "With more additions planned by winter," a statement by the airline reads, "Delta is proud to operate nonstop flights to 12 unique trans-Atlantic destinations not served by any other U.S. carrier." As of now, the destinations out of the 12 that have been announced or currently flown are: Budapest, Hungary; Moscow, Russia; Kiev, Ukraine; Istanbul, Turkey; Athens, Greece; Düsseldorf, Germany; Stuttgart, Germany; Nice, France; Mumbai, India; and Dakar, Senegal. All of these cities will be serviced from JFK by either Boeing 767-300ERs or Boeing 777-200ERs.

Why all of the non-stop routes to far-off cities? The answer: mostly because they're much more profitable than domestic flying. Delta can lose money on, say, Atlanta-Baltimore, because low-cost competitor AirTran flies that route too. Also, flying around the big planes domestically (like the 767) can mean lots of empty seats, which translates into money lost.

So Delta has instead opened up a bunch of international routes, most of which they have no competition on. There are exceptions; for example, Aeroflot flies JFK-Moscow as well, and Delta will compete with American and Continental on the JFK-Mumbai route. But for the most part, Delta will maintain a near-monopoly on many of these routes, many of which have huge demand but no airline (yet) flying it.

Other airlines have followed suit. United Airlines announced last month that it plans to start thrice-weekly service from Washington Dulles to Kuwait City with a Boeing 777 aircraft. The route, as of now, is not flown by anyone. United and other U.S. legacy carriers are looking closely at Delta's expansion abroad and will no doubt expand their international service if it pays off for Delta.

This is occuring, of course, at a crucial time for both airlines. Delta is still struggling through Chapter 11 bankruptcy, and keeps deferring the filing of its reorganization plan. United, on the other hand, has just exited bankruptcy, and the cost advantage it had for the past several years of being the only U.S. major in bankruptcy in fading away. It needs to take a page out of Delta's book and expand abroad as well - but only in the right areas, and in close cooperation and planning with its Star Alliance partners. Right now, the most important area for United to concentrate on is the Asia-Pacific region, where it is by far the dominant carrier.

Tuesday, June 20, 2006

Varig To Close Down Today?

So I've said that Varig might shut down earlier (see last post), even saying that a shutdown was imminent. However, Varig was saved (for the time being) - a group comprised of employees made a bid for it, and even though it was the only bid, the judge approved it.

Now, however, there are strong rumors floating around that Varig will cease operations sometime today - mostly because of a lack of cash. According to this source, this rumor is substantiated because:
  • Top managers at Varig were warned about the situation last night and were told that all planes had to return to Rio de Janiero.
  • Two U.S. court rulings allowed lessors to repossess 19 of Varig's aircraft.
  • The Brazilian Ministry of Defense, which oversees civil aviation activity, called a meeting of the CEOs of all the Brazilian airlines - except Varig.
So now you're probably asking if this is true. After all, I've cried wolf over here before (like last post). But even if Varig doesn't cease to exist today - which could still happen - they are in a very, very, very fragile financial condition. Unless Varig undergoes serious restruction (maybe even shutting the airline down temporarily and reopening), their prospects do not, unfortunately, look good.

Friday, June 9, 2006

Final Hours for Varig?

Assets of the bankrupt Varig, Brazil's flag carrier, did not sell at auction yesterday - meaning that Varig could liquidate any day now.

There was only one bid - from a group of Varig employees. And even that bid only totaled half of the asking price for the airline's aircraft and routes. The bankruptcy judge said that he would return a verdict in 24 hours whether to accept the bid or not - which means that a verdict should arrive, literally, any hour now.

Varig's assets would be sold - without debt - and the three billion dollars in debt would be transferred to another company.

According to the AP,
Varig currently has a tiny 16.7 percent share of the domestic market - behind rivals TAM and GOL. But it still has 66.4 percent of the international market - a market that it had a government-supported monopoly on back in the 1970's.

If Varig does go, it'll be a very sad thing. It has been in business since 1927 and has since seen good times and bad times - like now. It will also leave a gap in Star Alliance, the alliance that Varig helped found. But make no mistake - there will be no tears shed at the offices of TAM and GOL, which have long desired the

Tuesday, June 6, 2006

Mergers Possible?

Many analyists agree that the US airline industry is badly in need of consolidation. If this is the case, which it very well might be, which airlines would merge? Here are the combinations that I see might work. Keep in mind that many of these airlines are in no financial shape to merge, and even if they were, airline mergers have usually not gone off well in the past (with a few notable exceptions). Readers out there are welcome to post comments/criticisms about my ideas. So here goes:

1) Northwest and Delta
There are several advantages with this merger. First, they're partners already, both in the SkyTeam alliance. Secondly, their international networks complement each other very nicely. NW is strong in the Asia/Pacific region, while Delta is strong and adding routes in Europe and Latin America.

Domestically they have a bit more overlap. Northwest has hubs at Minneapolis, Detroit and Memphis while Delta has hubs at Atlanta, Salt Lake City, Cincinatti, and New York-JFK. The Memphis hub would most likely be merged into Atlanta while Cincinatti would be merged into Detroit. The route network has quite a bit of overlap. Both NW and DL are strong in the West (with DL probably a bit stronger) and DL is stronger in the East and South. Northwest is very strong, however, in the Midwest and into southern Canada.

The major downside to this merger would be the aircraft. NW operates an aging fleet of DC-9s, DC-10s along with newer 757s, A320s and A330s (not to mention the Boeing 747-400). DL, on the other hand, has a varied fleet, with three kinds of Boeing 737s, MD-80s and -90s, 757s, 767s, and 777s. This is where it gets complicated! I believe that the merged DL/NW would dump the DC-9s, 737s, MD-80s and 90s, and also the 777s (only because DL has less of them than NW has of the A330s).

2) United and Continental
United has large hubs at Chicago, Washington-Dulles, San Francisco, Denver, and Los Angeles. Continental has large hubs at Newark, Houston, and Cleveland. There's overlap at two hubs: Newark/Washington and Cleveland/Chicago. Cleveland would most likely be moved to UA's massive Chicago operation, but I really can't tell if a combined airline would keep either both Newark and Washington or choose one or the other (and if the latter, which one?)

The international route structure would complement much like DL/NW: United is strong in Asia/Pacific/Australia while CO is strong in Europe and Latin America. Domestically it works too; UA is strong in the West and Midwest while CO is strong in the East and South.

In terms of aircraft, there's a bit more overlap but not much. UA flies variants of the 737, 747, 757, 767, 777 and A320; CO flies the 737, 757, 767, 777.


Now would those mergers happen? Maybe. Again, airline mergers are rarely successful. But they can work, as demonstrated by the US Airways/America West merger.

Friday, June 2, 2006

Alliance Update

Hm. This could be the shortest post yet. Portugalia is going to join SkyTeam whilst Air China will join Star Alliance. Star has fought long and hard for an airline in China to join, and it finally got one of the big ones. Now I just wonder if Shanghai Airlines will join Star as well...

Tuesday, May 30, 2006

Aer Lingus To Leave oneworld

Irish carrier Aer Lingus, one of the first members of the alliance oneworld, has announced its desire to pull out of the group, which is headed by British Airways and American Airlines. "Alliance membership has inevitably become less relevant for the airline over time, with an increasing number of customers availing of our new direct services at low fares," Aer Lingus Chief Executive Dermot Mannion said.

Why is Aer Lingus leaving? There are a few reasons. The first is that it's getting more expensive to be in an alliance. Malev Hungarian, Royal Jordanian and JAL are all joining oneworld, and it's not cheap to integrate each others' computer systems.


But the more important reason is the fundamental shift in the carrier's strategy. It was still a full-service airline aimed primarily at business travelers when it joined oneworld back in 2000. But times have changed, especially after the events of 9/11, and Aer Lingus became a low-fare airline. Cabin services are now different from most of the other oneworld carriers.

On the operational side, the amount of passengers on Aer Lingus that came from other oneworld airlines has fallen to about 6 per cent.
Aer Lingus has said, however, that the airline would continue to seek ties with some existing partners, but outside of the alliance.

I think this is a good move for Aer Lingus, which has reported profits since 2001, when it came close to filing for bankruptcy. It has certainly learned (and benefited) from the idea that it is good to change when the market dictates change. Aer Lingus changed its business model after 9/11 and has seen positive results. Leaving oneworld, then, seems like a logical further step.

Tuesday, May 16, 2006

United To Move World HQ?

United Airlines, according to economic development corporation World Business Chicago, might move its headquarters from Chicago to Denver. UAL is currently based in Elk Grove Village a suburb of Chicago. World Headquarters for United has been in the same location since 1961.

All United would say is that it is seeking to 'consolidate its facilities', as a spokeswoman put it. UAL wouldn't speculate if it would move to Denver or San Francisco, as several news articles have stated it might. If United does leave Chicago, it would most likely leave for Denver - where the airline's CEO said his company's 'second home' is.

Yet another option for the airline is to stay in Chicago. United - which is one of the largest employers in Illinois - might move its facilities to the downtown area. And you can bet that the airline, which in the Chicagoland area calls itself 'Chicago's Hometown Airline', is being persuaded by city and state officials to keep WHQ in Chicago.


Mayor Daley refused to comment until after United made its decision, which is expected by Labor Day. The director of World Business Chicago had this to say:
"I think the mayor, the governor of Illinois and the entire business community of Chicago will weigh in, just to tell (United) how important they are and how much we love them."

But if United does move its headquarters out of the Windy City, they had better be prepared to wait, according to TV personality Conan O'Brien: "United Airlines is considering moving its headquarters from the Chicago area to another city. The good news for Chicago is that United is leaving from O'Hare Airport, so their departure will be delayed six years."

Monday, May 15, 2006

ANA To Start Domestic LCC

Japan's All Nippon Airways' chief executive has told the Financial Times that the airline plans to launch two, separate low-cost international and domestic airlines by 2009. "In 2009 competition will increase and low-cost carriers, particularly from elsewhere in Asia, will start flying into Tokyo," said the CEO. "We have to be well prepared for it." The international routes would be inside Asia.

The possible main reason behind the launch: Tokyo's Haneda Airport will open a new runway in 2009, which is seen as a way to lower high landing fees.

This seems like a good move for ANA, which has picked up business from rival JAL after the latter suffered through a string of safety problems in the past few years. ANA is also facing increased pressure from other Japanese low-cost carriers. No word yet on what the new airline might be named.

Saturday, May 6, 2006

Revenge in Russia

Russian flag-carrier Aeroflot has announced that it will purchase Airbus A350 airliners, when only a few months ago it had said it would purchase Boeing's 787. The reason? The U.S. has opposed Russia's potential membership in the World Trade Organization, and this move by Aeroflot is seen as politically motivated.

In December 2005, according to the newspaper Vedomosti, Aeroflot was considering a purchase of 22 Boeing 787s. But as relations between the U.S. and Russia deteriorate, Aeroflot's switching sides is no surprise. Especially when the fact that the Russian government owns 51% of Aeroflot is revealed.

Airbus wouldn't comment, and Aeroflot wouldn't say much beyond that the contracts haven't been signed yet. "We haven't chosen the planes yet," a spokeswoman for Aeroflot said, but I think that Aeroflot will go ahead with the A350 purchase.


Boeing, which has been trouncing Airbus in the orders area, seemse to be suffering from American diplomacy at the moment. Beside the Aeroflot situation, there's trouble for Boeing in Asia: China Airlines (which is based in Taiwan) might cancel its order for Boeing's new 747-8 after a spat between the Taiwanese and American governments over transit stopovers for the Taiwanese president.


Airbus, on the other hand, is seemingly immune to diplomatic events like these, mostly because it is a multi-national consortium of European manufactures as opposed to Boeing, which is based in the U.S.

Tuesday, May 2, 2006

The Frequent-Flyer Program Turns 25

Yesterday was the 25th anniversary of the start of AAdvantage, the frequent flyer program of American Airlines. Even though it seems like every airline nowadays has a FFP, the idea was a foreign concept twenty-five years or so ago.

On the eve of the deregulation of the industry in 1977, executives at American Airlines knew that there had to be a better way to gain the loyalty of their top customers. United Airlines gave customers a wall plaque on which they could add a star for every hundred thousand miles they flew. Michael Derchin, head of the airline's marketing department, devised a plan. Seemlingly simple enough today, it was a radical idea at the time: the more a passenger flew, the more miles he or she got. It took a few years to get the kinks worked out (and to get adequate computer systems introduced), but on May 1, 1981, the world's first frequent flyer program debuted.


United Airlines rolled out Mileage Plus eleven days later. And the rest is history.

Olympic Airlines To Change Its Name?

Olympic Airlines has been in quite a bit of trouble recently. After the Hellenic government's failed privatization bid back in 2004, when it aimed to privatize the state-owned Greek flag carrier, Olympic finds itself in more troble with the government.

This time, it's over illegal loans. The European Union alleges that hundreds of millions of euros were illegally given to the airline through loans by the Hellenic government.
Kathimerini, a Greek English-language newspaper, reports that the government has submitted a business plan to the EU in which Olympic Airlines would cease to exist but have its network taken over by a new airline, Pantheon Airways. (For an in-depth look at the name, head over to Strategic Name Development's blog.)

But to make things more confusing, Finance Minister Giorgos Alogoskoufis said in an interview that the Olympic brand name might not be disposed of after all. “It is our objective to keep the name, despite the fact the [would-be new] company is known by the code name Pantheon,” he said.

Monday, May 1, 2006

Swan(Song) For An Airline

First off, I apologize for my absence. I've got lots of catching up to do with this blog. Hopefully the few readers I've got haven't abandoned me yet.

That said, today's big story: the final flight of Song Airlines. Song was the low-cost arm of Delta Air Lines. First flying on April 15, 2003 (mostly to stave off stiff competition from jetBlue at JFK), it tried to emulate jetBlue's model (except with Boeing 757-200s instead of Airbus A320s). For a while, the lime green 757s flew from the hubs at JFK and Orlando. Yet there was a strategy change at Delta (it was no secret that Song didn't live up to the airline's expectations), and in October 2005 Delta announced that it would fold Song back into mainline Delta. That process was completed yesterday, as flight 2056 flew from Las Vegas to Orlando.

Friday, April 7, 2006

(More) Bad News for Airbus

Singapore Airlines said the other day that Airbus has to redesign its Airbus A350 if it wants to really compete with Boeing's 787.

Bloomberg reports that it took Airbus four attempts to come up with today's A350. And the most interesting fact is, the A350 is pretty much a revised A330. Just use more composites, new parts, and a new tail, and you have a totally different aircraft, right?

Wrong, says pretty much all of the industry executives. Singapore Airlines CEO Chew Choon Seng said, "Having gone to the trouble of designing a new tail, and introducing a lot of new composites, and everything else, they might as well go the whole way and design a whole new fuselage as well instead of using something old. It would make it more directly competitive with the 787.'' And according to Steven Udvar-Hazy, CEO of ILFC, an airplane lessor company, Airbus needs to spend $8-10 billion dollars to revamp the A350 and should completely redesign the plane to make it bigger and faster. "This removes any possible doubt that Airbus needs a new plane. When the most prestigious airline in the world and the biggest leasing company in the world both send you the same message, you need to listen," said Richard Aboulafia, vice president of the Teal Group, a Fairfax, Virginia-based consulting company.

After Boeing announced the 787 project (back when it was called the 7E7) back in December 2003, Airbus dismissed it. Of course, Airbus was busy on its A380 project (which they need to delay again, by the way) and publicly annouced garbage to the tune of, "Nobody wants an airplane like the 7E7. More airlines wants the A380." And while airlines did want the A380, a bunch want the 787. So when orders for the 787 took off (bad airplane pun intended), Airbus scrambled to come up with a competing product. The result was the A350, which as I said before is really a modified A330. As of March 30 Boeing has 298 orders while Airbus only had 100 orders and 92 committments.

So, how much does an A350 and a 787 cost? The A350 is $170 to $190 million each, while the 787 is $142 to $150 million. And speaking of money, Airbus' parent company EADS is under lots of financial pressure, noted analyists. Redesigning the A350 would cost billions of dollars, and BAE Systems, which owns 20% of Airbus, announced recently that it was selling its stake. So EADS now needs to buy that 20%, which is valued currently at $4.3 billion.

Wednesday, April 5, 2006

United vs. Southwest (Part 2): Showdown in DC

Southwest Airlines, that bastion of low fares for the past thirty-five years, has announced it will serve Washington's Dulles airport this year. And to make matters even more interesting, it's the second hub of United Airlines that Southwest has invaded this year. (It started servicing Denver International in January.)

CEO Gary Kelly said that Southwests moves into markets that "are overpriced and underserved", and with the liquidation of Dulles-based Independence Air in January, there's been a low-cost carrier gap at the airport that hasn't been filled until now.

As of now, Southwest only wants two gates at Dulles' Terminal B concourse, and the airline did not specify where it would fly to from IAD. But its CEO said that service would most likely start in the early fall with ten to twelve daily flights to four or five destinations.

This move by Southwest is somewhat confusing to me. On the one hand, the collapse of Indy Air leaves reasonable space for a low-cost carrier to move in. On the other hand, Southwest has a hub just to the north in Baltimore, where it is one of the dominant carriers at BWI.

United, Ted, and United Express handles about 60% of the traffic at Dulles, and a United spokeswoman said, "We compete vigorously everywhere we fly." But an industry analyist pointed out that following this move, United once again has low-cost competition at each of its hubs - Southwest at Chicago's Midway Airport, across town from United's megahub at O'Hare; Frontier at San Francisco; Frontier and Southwest at Los Angeles; Frontier and Southwest at Denver; and now Southwest at Dulles.

Behind The Name: Compass Airlines

I recently was contacted by a reader that referred to this blog in his article about the reasons why Compass is a good name for Northwest's new subsidiary. Read this excellent and interesting article at http://www.namedevelopment.com/blog/archives/2006/04/northwests_comp.html.

Thursday, March 30, 2006

Northwest's New Subsidiary: Compass Airlines

In June, Northwest Airlines (which, by the way, lost almost $500 million in February) wants to start its new way to screw pilots over- whoops, start a new subsidiary airline called Compass Airlines. Compass will fly from Northwest's three hubs in Minneapolis, Detroit and Memphis. The first flight, in June, will be the Minneapolis-Washington Dulles route.

Compass is part of what I see as Northwest's big plan to a) cut costs, b) retire those Flying Fossils that are the DC-9s, and c) rely less on the 'express airlines' like Mesaba and Pinnacle. The pay scale for Pinnacle will be lower than Northwest's, so the airline saves money there because the pilots get paid less. Northwest is eager to get rid of those DC-9s, which average 30 years or older. And the airline has had a rocky relationship with some of its express airlines that fly under the Northwest Airlink name recently.


Although Compass will share corporate headquarters space with its parent in Eagan, Minnesota, the AP reports that flight operations will be headed out of Dulles. Not coincidently, that's where defunct Independence Air has its hub. On March 10 I wrote that Northwest bough Indy Air's certificate, which they put to good use here. At the beginning Compass will fly a single fifty-seater Bombardier CRJ-200, the type Indy Air used to fly. And Compass will hire a bunch of ex-Indy Air employees, like the director of safety, operations, and maintenance. (The CEO of Compass will be Northwest's current CFO.) Of course, all this is still up to the Department of Transportation to allow, and that takes time. But with Compass basically taking bits and pieces out of the carcass of Independence Air, they'll be able to shave off some time and get those planes in the air.

Speaking of planes, Northwest hasn't decided what type Compass will operate in the future. Northwest had to wrangle with the unions over the number of seats on planes that Compass could fly. Originally NWA wanted Compass to fly 100-seaters, but the union didn't buy that, so they dropped it down to 76-seaters and the union gave the green light. Understandably, some junior pilots over at Northwest were concerned that Compass would replace their jobs. Laid-off Northwest pilots and flight attendants get first priority for jobs at Compass. How benevolent.


But the airline has said it will fly either Bombardier's CRJ-900 model or the Embraer 175. Compass plans to have 36 planes by the end of 2010. The brass over at NWA are hoping that their new airline-within-an-airline will pay off. With Northwest losing what it called a 'staggering' $2.6
billion dollars in 2005, they're hoping that Compass will point the airline in the right direction.

LAN To Get More 767s

LAN Airlines SA said it will purchase three Boeing 767-300s, to be delivered in 2007 and 2008. The cost: $270 million. LAN already bought a dozen of the type from Boeing last August.

Wednesday, March 29, 2006

AA & Others Eager To Fly To China

Reuters is reporting that American Airlines is going to fly to Shanghai from Chicago on Sunday. Not only that, but they've been waiting fourteen years to get in. That's right - over a decade ago they set up an office in Beijing, and it's only now that they're getting to fly to China.

The airline expects to fly up to 245 passengers to China a day, and the load factor's pretty nice, too: AA predicts that 86% of its seats will be full. They'll definately be making money on that flight. And American also predicts that the amount of people flying between the two nations will grow by 500,000, or 17%, per year. Right now 3,000,000 fly betewen China and the U.S. each year.


Right now only three U.S. airlines fly to China: United to Beijing from Chicago, Los Angeles, New York, San Francisco and to Shanghai from Chicago and San Francisco and Continental to Beijing from Newark. (Northwest flies via Tokyo to Beijing, Shanghai and Guangzhou, but not directly from the U.S.)

And when more - if limited - rights are given starting in 2007, you can be sure that they'll be arguing over who gets 'em. Continental wants to fly to Shanghai from Newark, but United - which has been flying to China for a long time - wants even more routes to Beijing, Shanghai and Guangzhou. In March 2007, the Department of Transportation will dole out 14 round trips to 'existing U.S.-China carriers' - meaning, at this time, either United or Continental. Half of those round trips must be to smaller cities, and an agreement with the Chinese government allows the DOT to allow a new carrier to start flying to China in 2008. My guess is that Delta will be this next carrier. After all, it's tried to get permission to fly to China from Atlanta and was turned down.

International routes are mostly profitable for U.S. airlines. Flying a bunch of people to Tokyo or London more often than not creates more cash than flying a bunch of tourists down to Disney World. The US and Chinese governments will be holding talks in Beijing on April 19 and 20 over the opening of Chinese skies. The top three airlines in China have sent letters to the country's top aviation board, the CAAC, opposing the freer skies that United and the like want so badly.

Monday, March 27, 2006

Siberia Airlines To Get A319s

Siberia Airlines, or Sibir as it's officially called, announced that it will try to lease ten ex-Northwest Airlines Airbus A319s as it tries to phase out the aging Russian-built Tupolevs. As of now the airline operates six Airbus A310s, ten Boeing 737-500s, nine Ilyushin Il-86s, twenty-eight Tupolev Tu-154Ms and two Tu-204s. It plans to lease at least two more 737s and two more A310s this year, according to Flight International. Sibir will also obtain a leased 737-400 in June for charter work.

S7, as the airline markets itself, is trying to modernise its fleet - especially on domestic routes, which make up about 78% of its business. However, says the airline, the Russian airline industry has to worry about aging fleets and airports, rising fuel prices and overcapacity - there are 185 airlines in Russia. That's a lot for a nation that only has 35 million passengers, according to the airline.

BA: No Merger w/ Iberia - For Now

The head of British Airways' Spanish and Portuguese operations has ruled out a merger with fellow oneworld alliance carrier Iberia, but when asked if such a thing might occur down the road said, "There's a clear trend for consolidation. When will we arrive at this point? That's the million dollar question." BA and American Airlines collectively own 10% of the Spanish carrier.

I don't see a 'complete' merger in the works at all. Both are flag carriers for their respective countries, so that has to be taken into effect. They might be able to do a merger à-la-Air France and KLM, who are now one entity on paper but still two distinct airlines.

Wednesday, March 22, 2006

United Airlines, Shanghai Airlines Sign Code-Share Deal

Here's a small post:

United Airlines and Shanghai Airlines are scheduled to begin code-sharing on May 15 (pending government approval). The two airlines will code-share on 11 flights in the US and China. However, there have been reports that Shanghai will join Star Alliance in the first half of this year. If this is the case, then the two will codeshare on probably almost every route.

Tuesday, March 21, 2006

Airbus Rolls Out A300 In Old Colors

Airbus has long since allowed the original A300 to go to the scrap yard. Which was surprising, considering that the A300 was the plane that put Airbus on the map. But now, it picked up an idle A300 and painted the original paint scheme on it.

The Airbus first flew in February 1983. It was slated to go to Laker Airways but the airline went defunct before the aircraft was finished. The aircraft, an A300B4, was delievered to Pan Am in 1985, was bought by Sempati Air of Indonesia in 1993 and then it went on to DHL in 1999.

(View picture at http://img482.imageshack.us/img482/7763/yourfile6xs.jpg - Blogger doesn't seem to want to upload pictures now.)

Friday, March 17, 2006

US Airways To Stick with Star - For Now

US Airways has decided to keep its code-sharing deal with United Airlines - for the time being, anyway. A code-sharing deal is where each airline is allowed to sell seats on the other airline. This arrangement brings in over $200 million annually to United.

The two airlines began code-sharing in 2002, after the government anti-trust unit said no to a merger between the two. In 2003 US Airways joined Star Alliance, which was co-founded by United in 1997. The relationship until now has been a pretty happy one. US Airways had a predominantly East Coast network from hubs in Pittsburgh, Philadelphia, and Charlotte, and United had a strong West Coast network from its hubs in Denver, San Francisco and Los Angeles.

But all good things (might) come to an end. Last year US Airways merged with America West - and subsequently gained a large route network in the West with hubs at Phoenix and Las Vegas. Because of the increased competition, there was need for dialogue. US Airways said in an SEC filing that it was talking things over with United about a few points. If the talks fail, said the airline, its "codeshare relationship with United and membership in Star Alliance could be terminated".

Which makes for good guessing. In the history of Star, there have only been two airlines to leave: Ansett Australia, which liquidated in 2001, and Mexicana, which quit code-sharing with United and subsequently pulled out of Star a few years back. If US Airways were to jump ship too, would it stay out of alliances? Or would it join another? oneworld already has American, and SkyTeam already has Delta. Then again, Star already had United.

Wednesday, March 15, 2006

Delta: We're 'Tapped Out'

Edward Bastian, the CFO at Delta Air Lines, warned yesterday that the airline is 'tapped out' financially, and that Delta can't get any more loans. "We are clearly in the worst shape and are the most fragile of anyone in the industry," the AP quoted him as saying. He went on to say that because of its precarious finances, Delta must extract huge pay and benefit cuts from its pilots if it wants to survive.

Delta's section of the ALPA (Air Line Pilots Association), of course, said that it would strike if that plan of action was carried out. And, to make matters worse for the Delta brass, the SkyTeam Pilots Association (SPA) said it would support pilots at Delta and partner Northwest, which is also in bankruptcy. The SPA is made up of pilots from Delta, Northwest, Continental Airlines, AeroMexico, Alitalia, CSA Czech Airlines, KLM, Air France, and Korean Air.

Hmm. How many times have we heard this talk from Delta management?

Aeroflot to Join SkyTeam

Although the news that Aeroflot is going to join the airline alliance SkyTeam is nothing new, there's now an official date to its entry: April 14.

Air France-KLM CEO Jean-Cyril Spinetta will fly to Moscow to welcome Aeroflot to SkyTeam, Aeroflot deputy CEO Lev Koshlyakov said Tuesday in a telephone interview from Moscow, reported Bloomberg.

Aeroflot will gain access to SkyTeam's 684 destinations in 133 countries. It flies to 88 destinations, 27 of them in Russia. It is also the first Russian airline to join a global airline alliance.

There have been murmurs about how Aeroflot's standards aren't up to par with the likes of Air France, KLM, Delta, etc., or how all of those old Tupolevs that they fly are too old. Now I've never flown Aeroflot or Air France or KLM, so I can't attest to that statement. I'm sure it can't be much worse than Delta or Northwest. And about the Tupolevs: they're built like tanks. If you're afraid of flying on an Aeroflot Tupolev, shouldn't you be equally afraid of flying on a Northwest DC-9?

Tuesday, March 14, 2006

A Look at Boutique Airlines

A Brandweek article called them 'boutique airlines', so I will too. Perhaps you've heard about some of these boutique airlines. You know, the ones that offer cushy seats, decent food, attentive flight attendants, etc. Here are the big three boutique airlines (at time of writing). One is transcontinental (across the US) and the other two are transatlantic.

1. United's Premium Service (p.s.)
United's p.s. service is flown on Boeing 757-200 aircraft between New York's JFK airport and Los Angeles and San Francisco. These p.s. flights have three classes of seating: first, business, and 'Economy Plus', which is basically coach class seating with more legroom.

In first class, you get seats that lie down flat, like you would in first on a trip overseas. If you're in business then your seat only reclines quite a bit. (Only.) Passengers in these two classes get portable DVD players with movies. Everyone gets free food and power for their laptop computers. Fares on p.s. start at $1000 for Economy Plus, $3660 for business class and $4550 for first class.

So is this airline-within-an-airline a success? United says it is. "We're extremely proud of the success of p.s.," said Dennis Cary, United's senior vice president-Marketing, in a press release. Cary went on to talk about the accolades that p.s. has racked up.

2. Maxjet Airlines
Maxjet Airlines is a Dulles, Virginia-based startup that concentrates solely on business class. It currently flies three Boeing 767-200s five times a week between New York-JFK and London's Stanstead Airport. In April it will start service from Washington-Dulles to London as well. They're supposedly a 'low-fare airline' - the first transatlantic one since People Express back in the 80s. Tickets start at $1500 round trip, last minute, between New York and London. That may not seem like 'low fares' - but it is when you compare it to the likes of American, United, British Airways, and Virgin Atlantic, who charge about $9000 for the same flight.

The 767s are equipped with 102 business class seats. Not bad, considering the plane can usually fit over 200 seats. The seating arrangement is 2-2, meaning that everyone has either an aisle or a window seat. The seats, which don't recline all the way but close to it, have 60 inches of space in front and in back of it. That's about double what you'd find in economy in most airlines. "Eighty percent of our customers are coming from the premium cabins of our competitors," the airline's CEO says. "We give you everything they do and reduce the price 75%."

Really? I've never flown Maxjet, so I can't comment. But I ask a simple question: how can they afford to do that?

3. Eos Airlines
Maybe you've got a lot of extra dough that you can use on a flight to London. If so, you could skip Maxjet and book on Eos, which has a higher level of service than Maxjet but - not surprisingly - charges more. (Duh.)

Instead of the wide-body 767s flown by its competitor listed above, Eos flies single-aisle Boeing 757-200s. And those only hold 48 passengers, who are waited upon by six flight attendants. That comes out to one flight attendant for every eight people. Not bad.

And the amenities don't stop there. Each passenger has a personal 'living space' that covers 21 square feet. Each has a seat that converts in to a 6 foot, 6 inch long flat bed with feather pillow and cashmere blanket. Reading light, side table, guest seat, computer power, and fold-out table are included. If you're hungry, you can dig into entrées such as rack of lamb and filet mignon.

All this luxury must be really expensive, you might think. And it is - at $6500 for a last minute round trip from JFK to London, it is. But that's only about half the price of a first-class fare on British Airways.

In conclusion: these three airlines are great ways for passengers with deep pockets (or expense accounts) to upgrade their flying experience. But if I had to pay my way from New York to California, I might just go with jetBlue.