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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.
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