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.

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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.

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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.

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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.

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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.

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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

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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.

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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...

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