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.

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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.

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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.

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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.

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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.

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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.

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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.)

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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.

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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?

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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?

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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.

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Fare Raise!

Attention K-mart - er, Orbitz/Travelocity - shoppers! Be prepared to shell out more dough to buy a plane ticket!

Southwest Airlines announced that it will raise fares $10 for a one way ticket as it tries to offset $600 million in additional fuel costs. And don't think it's just Southwest. It's Delta, too. And Northwest. And Continental. And US Airways. And American. And United. Even Alaska jacked up the fares by ten bucks on continental flights.

This is the second round of fare-raising from Southwest, a low fare carrier. Well, those low fares won't be as low.

"There comes a point where you have to be realistic," said Southwest spokesman Ed Stewart. "Even the most savvy of analysts would agree that fuel is something we just have to keep an eye on."

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Alaska Airlines Gets Rid of Older Jets

Seattle-based Alaska Airlines is going to get rid of its MD-80 aircraft (pictured) to make way for Boeing 737s, a type of aircraft that the airline already has in service. 26 MD-80s are leaving, and 39 Boeing 737-800s are joining the fleet. Delivery is between now and 2008.

Savings will apparently be about $115 million per year as fuel, operating, and maintenance costs plummet. Although the number of aircraft operated by Alaska will only increase by 4, compared to the beginning of the year, its capacity will increase by 18%.

This is a smart move for Alaska. Sure, the company is going to have to go through two pre-tax charges of $130 million to $150 million, but the savings clearly win in the long run. Interesting to note that Alaska, which is a seudo-low cost carrier, is going to simply its fleet to just Boeing 737s - something that competitor Southwest Airlines has always done.

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USAir CEO Declines 770K Bonus

The CEO of the US Airways Group, Doug Parker, said that he declined a $770,000 bonus last year and won't accept any bonuses until his airline becomes profitable.

Parker, the CEO of America West Airlines, oversaw the merger/takeover with US Airways in September 2005. The combined airline kept the US Airways name.

Why would Parker walk away from about three-quarters of a million dollars? He said it would be wrong for him to accept bonuses until US Airways employees get payments under a profit-sharing plan. "I was personally somewhat conflicted because I know full well our team earned and deserved it," he said. "But it seemed the right thing for me to say I'll decline the bonus." The bonus was tied to his performance when he was at the helm of America West.

Executive bonuses have been problems at other airlines, especially United and American, where then-CEO Don Carty was forced out in February 2003 after it became known that he accepted big bonuses when the airline was forced to slash the pay of others drastically.

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Northwest Buys Indy Air's Certificate

Northwest Airlines is going to pay $2 million for the operating certificate of former low-cost carrier Independence Air. Indy Air, which was auctioning it off, had other bidders for it but said that Northwest's offer was the highest.

The FAA requires each airline to have an operating certificate. It's easier to buy someone else's than going through the process of creating one from scratch. Northwest is most likely going to use it in a new subsidiary for regional routes, one that flies planes with 51 to 76 seats. NWA also recently reached a tentative deal with its pilots that allows the airline to start work on the subsidiary.

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DEN Traffic Up After Southwest's Entrance

Denver International Airport reported an 8.3% increase in passengers in January after Southwest Airlines began service to the airport. That's a 300,000 person increase compared to the time a year before.

"Southwest certainly was a part of the increase in January," airport spokesman Steve Snyder said.

United has roughly 58% of the traffic at DEN and reported a 4% rise in traffic. Hometown carrier Frontier has about 20% of the traffic and reported a 16% increase at the same time. Denver carried 3.5 million passengers last month in all.

Like everyone else is saying, I think Denver is seeing an increase from Southwest, but it's too early to see whether this trend will stick or if it's just a temporary increase. This isn't good news, however, for United or Frontier. Almost everyone in an existing airline's a bit scared when Southwest comes to town.

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Aeroflot Might Snap Up Rivals

Interesting news out of Russia. The Moscow Times is reporting that Aeroflot is considering buying government stakes in rival government-owned carriers with newly issued shares. That's according to Lev Koshlyakov, deupty CEO of Aeroflot. The board meets in June to decide whether to issue more shares or not.

Altough Koshlyakov said that the plan would "expand the company's activities", he denied a report that stated that Aeroflot's real plan would be to bring the government's shares into the Aeroflot family - and thus create a near-monopoly. Koshlyakov wouldn't say which shares Aeroflot might purchase.

The report said that Aeroflot wanted state-owned Pulkovo, Rossia and Dalavia to be merged directly into Aeroflot, and for the government's 51% stakes in KrasAir and Vladivostokavia and 25% stake in Siberia Airlines (also known as S7). The apparent source for this info comes from an unidentified member of Aeroflot's board. This would mean that, according to some analyists, Aeroflot's current 20% share of the Russian market would increase to over 50%.

Some also say that the government is putting pressure on Aeroflot to consolidate the industry. This would make sense, since Russian President Vladimir Putin last month announced an order that would merge the country's aircraft manufacturers into one entity.

In my opinion, I think that this Aeroflot-led consolidation might occur, especially if it's with the government's blessing. After all, Aeroflot announced last week that profits fell 50% to 3.052 billion rubles ($109 million), even though income increased 10% but costs grew almost 15% as well.

According to the Times, there are 185 airlines in Russia. Profits are souring for almost all as fuel prices increase and since many operate Russian-built aircraft with poor fuel efficiency, this makes the problem worse.

Consolidation is nothing new to the airline industry, but it is in Russia - especially on such a grand scale. It will intersting to see how this plays out in the future.

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American Eagle Won't Charge for Drinks

American Eagle, a division of American Airlines, announced yesterday that it will stop charging $1.00 per soft drink, which it did do on some California flights since January. Spokesperson Dave Jackson: "We didn't sell a lot and we also got feedback from our customers saying they'd prefer that juices and sodas be complimentary." No, really? Gee, imaging having to shell out a dollar for a can of Coke on American - especially when they don't offer anything else for free.

I've already written about my experience on Northwest Airlines last summer. They charged for everything - peanuts, etc. - but not drinks. American Eagle will continue something similar: charging $1.00 for cashew nuts and $5.00 for pillow-and-blanket sets which the passengers can keep. Not only that, but the airline said it was looking to "roll them out further".

Now it's common practice for low cost carriers elsewhere - especially Europe (hint: Ryanair) - to charge for everything. On Ryanair, the only thing that's free is the air. Water is extra.

And American's excuse for trying to charge for soft drinks: movie theaters profit from the sale of drinks and snacks.

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