Star Alliance looks to India, Russia, and cargo

Jaan Albrecht, the chief executive of Star Alliance, said that he is hoping that he can announce the inclusion of an Indian and a Russian airline in the alliance sometime this year. India and Russia are the two major holes in the alliance's network that remain to be patched. "I am sure that by the end of 2007 we will be able to make an announcement about a new partner, first in India, and probably next year in Russia," he said. "The development of the aviation industry in Russia and India is quite amazing. We wanted to take time to study, to analyze which carrier would be successful... If you just take Russia, there are today about 250 carriers. We see gradual consolidation."

Potential Russian candidates for inclusion in Star include S7 and the KrasAir-led AiRUnion alliance. Flag carrier Aeroflot is already a member of competing SkyTeam. In India, Albrecht revealed that Star is in talks with Air India and Jet Airways. The other major market that Star recently entered was China, when it included Air China and Shanghai Airlines.

Star is reportedly also interested in starting a cargo-only division of the alliance. "Our focus is on passengers, but cargo has been coming on our agenda since last year and we are exploring the possibilities," said Albrecht. "Cargo is a totally different environment, totally different market. We are very careful. But it would be the same logic, the same drivers, the same pillars for a successful cargo alliance."

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S7 Orders Boeing 787

The second largest airline in Russia, S7 (also known as Sibir), yesterday announced that it was ordering 15 Boeing 787s, with options for 10 more. This is big news, since it is (to the best of my knowledge) the first purchase by a Russian airline of brand-new Boeings. It's also the first purchase by a Russian carrier of the 787 - an airplane that state-run Aeroflot has been looking at for quite some time. The 787s, which are due for delivery starting in 2014, supplement an order S7 placed last month for 10 Boeing 737-800s, with options for 10 more.

Of course, this places more pressure on state-run Aeroflot to make a decision regarding the type; it has been trying to decided between the 787 and the A350 for quite some time.

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Flights between US and China could double

A recent agreement between the US and Chinese governments lets the amount of flights flown by US carriers between the two countries to more than double. Right now, US carriers fly 10 daily flights to China, and the agreement allows for 13 more flights, with 1 new flight this year, another next year, four more in 2009, and seven more between 2010 and 2012.

This deal is significant because it will probably result in a tough race between US carriers like United, Northwest, American, Delta, and Continental. United and Northwest already have a pretty big presence in the Asia-Pacific region, and United was recently awarded the latest China route (Washington-Beijing). This provides other airlines like Delta and Continental, which want to enter the Chinese market, an opportunity to do so. 'Established' airlines, like United and Northwest, also have an opportunity to expand in the Asia-Pacific region, which is very profitable for both airlines. In a statement today, Northwest said it "applauds the U.S. Government’s success in achieving a major liberalization of the U.S.-China market. The new agreement opens the door for important new routes including Detroit-Shanghai, Detroit-Beijing and Minneapolis/St. Paul-Shanghai which Northwest urgently wants to offer its customers." The government will decide which airlines will get the routes.

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Interesting AA video

Here's a neat video that shows an American Airlines pilot's journey from Boston to Paris and back again:

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Skybus takes off

Yesterday Columbus, OH-based Skybus Airlines operated its first flight from Columbus to Burbank, CA, and also operated flights to Kansas City and Portsmouth, NH. Although I haven't flown Skybus myself, an ABC News reporter did, and reported on his experience (he calls the airline 'The Greyhound Bus of the Skies'). He reports extensively about the 'add-ons' (e.g. snacks, drinks, pillows) that you can purchase onboard, and quotes the CEO of Skybus as saying, "Keep in mind that most of America shops at Wal-Mart. Most of America can do basic addition."

The article also points out that one way Skybus keeps fares low is by outsourcing everything - including the airline's spokesperson, who works for a PR firm in Columbus. Yet even though costs are low, Skybus' business model - while imitating the very successful Ryanair - might have some problems in the future. For example, it requires passengers to book their own connecting flights. If you lived in Burbank and wanted to travel to, say, Portsmouth, you would have to book a Skybus flight from Burbank to Columbus, retrieve your luggage, and go through the entire process again from Columbus to Portsmouth. Whether customers are willing to go along with this in order to get a cheap fare (even though most tickets aren't as low as $10) or not remains to be seen.

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Northwest to exit bankruptcy on May 31

Northwest Airlines, which has been in bankruptcy for the last 20 months, finally received approval from a bankruptcy judge on Friday to exit Chapter 11 bankruptcy on May 31. Northwest is the last US major carrier in bankruptcy, and like many of its competitors, it used the process to significantly cut costs - about $2.5 billion. In Northwest's case, the airline has become a lot more competitive by retiring older planes (the entire DC-10 fleet and some DC-9s), moving domestic capacity to international routes, and getting concessions from labor unions.

"I want to thank our employees for their hard work and sacrifices that helped Northwest attain its goal of repositioning the airline for long-term success," said the airline's CEO, Doug Steenland, in a statement. Many believe that even though Northwest's stock will probably not fare well on Wall Street (it will being trading under the symbol NWA), the airline has a better outlook. Airline consultant Mike Boyd said, "They're going to be in a very strong position. They have a strong vision of what they want to do. If you're going to bet on an airline, I'd bet on them." Northwest will, next year, be the first North American airline to fly the new Boeing 787.

But the bankruptcy was no doubt hard on employees. Some interesting figures from the Detroit Free Press: Northwest had 33,755 workers when it filed for bankruptcy in September 2005; it now has 30,787. During the same time, the annual salary for a 15-year flight attendant fell from $44,184 to $35,433, and CEO pay fell from $571,354 to $516,384 (although the CEO also gets $26.6 million in stock and options over four years, so don't feel too sorry for him).

Northwest has evidently used the process of Chapter 11 to its advantage; it has unloaded a lot of costs and trimmed the airline down to a more competitive size. Yet it also has to contend with renewed competition from other airlines that have gone through the same process.

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Virgin America gets final go-ahead

Richard Branson's newest airline project, Virgin America, has finally received approval last Friday from the FAA to start operations this summer. The airline, however, had to make quite a few concessions in order to recieve the OK - the chief executive, Fred Reid (an ex-Delta president), was replaced. Regulators in the US were concerned about foreign ownership (after all, Branson's Virgin Group is based in the UK), and the laws in the US state that the most that a foreign corporation can control of a US-based airline in 25%. Virgin America also has to report any loans that it recieves from the Virgin Group and that US trustees on Virgin America's board have to appoint a trustee to represent the Group's 25%. The Virgin Group also financed $88.4 million in equity financing and debt, which is just under half of the airline's overall financing amount of $177.3 million. Virgin America is planning to limit future investors to US citizens only.

The airline is planning to start services this summer from a hub at San Francisco and fly to New York-JFK with a fleet of new Airbus A319s and A320s. Later, it's planning to add Washington-Dulles, San Diego, Los Angeles, and Las Vegas. Not surprisingly, a lot of the major US carriers have tried to argue that Virgin America shouldn't be allowed to fly (for an assortment of reasons).

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BA joins premium transatlantic competition

Last year I wrote about so-called 'boutique airlines' - airlines which catered exclusively to the first- and business-class markets - and also looked at the expansion of these types of airlines across the Atlantic, where they have been most prolific. A handful of these 'boutique airlines' include Maxjet, Eos, and Silverjet, which fly between the New York area and London. There's also L'avion, which flies between Paris-Orly and Newark. All four fly specially configured Boeing 757s or 767s in a business or first-class configuration.

Now British Airways is foraying into this group of carriers, which target the upscale leisure traveler but mostly the business traveler. It announced that beginning in the summer of 2008 it would start flying all-premium class transatlantic services. However, the interesting part is that it wouldn't just be to and from the UK - BA is looking at service from a US city (probably New York) to various European cities like Paris, Madrid, Frankfurt, Milan, and Zurich. The chief executive of BA, Willie Walsh, said that the airline would probably - like the 'premium competition' - use Boeing 757s and/or 767s, which are smaller than the 747s and 777s that the airline currently uses on transatlantic routes.

This seems like a natural choice for BA, which has accomplished a lot with its first and business class products. But these have come under increasing pressure from the start-up 'boutiques', so BA is trying to hit back with a 'boutique' of its own. However, the fact that it wants to fly between the US and other European cities, not just the UK, is a bit more surprising, and also a gamble. Analysts have pointed out that BA has lost money before in such moves, so we'll have to see if they will be successful this time round. In any event, the move certainly will increase competition on the transatlantic routes and bring the battle for premium customers beyond the 'boutiques' - airlines like Air France and Lufthansa, BA's main competitors, will have to look out as well.

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United to cut domestic capacity, add international

United Airlines said that it would cut domestic capacity (in other words, cut domestic flights) by up to 3% this year - mostly due to a difficult domestic market, where competition is heavy. Instead, it's shifting some of this capacity over to international routes - for example, this fall, it is starting Washington-Rio de Janeiro and Los Angeles-Hong Kong service. For 2007, United said that international capacity would grow 3 to 4%, while domestic capacity would be cut 2 to 3%, compared to last year's levels. In a statement, Chief Revenue Officer John Tague said, "Given the domestic market's slow revenue growth and excess capacity, we believe that removing marginal domestic capacity is the appropriate response."

The Rocky Mountain News also published an interview with Kevin Knight, United's senior vice president of planning. An excerpt:

What is United seeing in the domestic market?

Our bookings continue to look pretty good, but we're also seeing capacity increasing versus what we saw last year. That's putting pressure on yields, which is putting pressure on the revenue side. So we're responding to that with a little less capacity. It's pretty much across the board. I wouldn't necessarily say it's low-cost carriers or legacy carriers; it's pretty much industrywide.

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Yorkshire Airlines

A bit offensive to some, perhaps, but still humorous: Yorkshire Airlines.

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Midwest still resists AirTran

AirTran Airways, which has been pushing a hostile takeover of Midwest Airlines, has extended its offer until June 8. AirTran announced the takeover bid back in December, and is seeking to buy Midwest for $389 million in cash and stock. Midwest has staunchly refused to give in; a company spokeswoman said that "It doesn't change anything. The board continues to remain steadfast in its view that the offer is inadequate." The board last month unanimously rejected a $15 per share offer.

But that might not be enough. AirTran announced that Midwest shareholders have tendered almost 14 million shares of Midwest to an AirTran company. That's more than the 56.6% of Midwest's outstanding shares. And even though the company spokeswoman said that the board is still rejecting the idea of a takeover, AirTran now has enough shares to nominate three members to Midwest's board, which has nine members.

Midwest has been seeking to 'go it alone' and has its own plan for independent growth, which involves new routes and more airplanes. It has even launched a website, Savethecookie.com, which plays off of the airline's reputation for serving freshly-baked cookies in flight. Of course, the companies are vastly different in terms of company culture (and, some would argue, in terms of service levels). If the airlines were to merge, I don't think it would be the smoothest of mergers. We'll see if Midwest is successful at convincing the public to stay independent, and if AirTran is successful at convincing the shareholders to go ahead with the takeover.

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IRS More Popular than US Airlines

On the University of Michigan's Customer Satisfaction Index, the IRS scored a 65. That isn't exactly news, except for the fact that America's airlines scored even lower - a 63, which is two points less than last year and the lowest it's been in six years. "The process [of cost cutting] took so much out of them - they may have cut beyond the bone," said Claes Fornell, director of the University of Michigan's National Quality Research Center. The lowest-scoring airline was United, at 56 (from 63 points last year); Southwest had the most at 76 points (two more than last year).

Apparently the industry has to be in trouble when the American public likes tax collectors more than the airlines...

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'Salmon-Thirty-Salmon' delivers exactly that

Edit (or Correction, not Perfection): TAB reader Cromely has pointed out that the freighter wasn't the one in the Salmon paint scheme but instead a converted freighter in regular livery. You can read the rest of his post here. The corrected post:

Alaska Airlines' famed 'Salmon-Thirty-Salmon', with a 120-foot long salmon painted on its fuselage, was met at Seattle-Tacoma Airport this morning by a Boeing 737-400 freighter carrying over 32,000 pounds of Copper River salmon onboard. Throughout the day, according to the company, Alaska will deliver over 160,000 pounds of Copper River salmon throughout the country on eight flights from Cordova, AK to Seattle, where the fish will then be flown out throughout the country.

Up until recently Alaska has relied on Boeing 737-200s to haul freight, but they were getting expensive (both in terms of fuel costs and maintenance), so with those gone, and newer Boeing 737s on order, Alaska was able to convert the -400s into freighters.

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Star Alliance at ten years

The world's oldest and largest airline alliance turns ten years old today. Star Alliance was founded on May 14, 1997 by Air Canada, Lufthansa, SAS, Thai and United. Today there are 17 member airlines, with 3 affiliates and 3 future members. A brief look at the past ten years, adapted from Wikipedia:

• 1997 — The alliance is founded by Air Canada, Lufthansa, Scandinavian Airlines System, Thai Airways International, and United Airlines. Varig joins the alliance.
• 1999 — Ansett Australia, All Nippon Airways, and Air New Zealand become members.
• 2000 — Singapore Airlines, bmi (British Midland), Mexicana, and the Austrian Airlines group, made up of Austrian Airlines, Tyrolean Airways, and Lauda Air join the alliance.
• 2001 — Ansett Australia folds under bankruptcy.
• 2003 — Asiana Airlines, LOT Polish Airlines, and Spanair join.
• 2004 — US Airways joins the alliance. Mexicana's membership ends. Adria Airways, Croatia Airlines, Blue1 inaugurate the alliance's regional network (affiliate members)
  
• 2005 — TAP Portugal joins the alliance. After acquiring US Airways and merging under the US Airways name, America West Airlines joins working through US Airways original membership.
• 2006 — Swiss International Air Lines and South African Airways join the alliance. Shanghai Airlines, Air China are invited to join the alliance. Turkish Airlines submits a request for membership in early December and the request is accepted.
• 2007 — Varig involuntarily leaves the alliance on January 31.

Of the airlines that have joined, only three have left - Ansett collapsed, Mexicana decided to partner with American Airlines (member of the oneworld alliance), and Varig was forced to leave earlier this year due to major restructuring changes (however, they have the option to rejoin within 18 months).

Star is also promoting its 10th anniversary with the 'Experience of a Lifetime Competition', which sounds interesting - only problem is, if you live in the US, you have to actually fly a Star airline internationally in order to enter.

Ten years on, though, Star has really changed air travel. Since 1997, most of the world's major airlines are part of one of the big three global alliances (oneworld and SkyTeam were created in response to Star), and on each alliance, a person can really fly seamlessly around the world without having to worry about a million different tickets. Alliances have really made things easier for the flyer - especially being able to gain frequent flyer miles on a bunch of different airlines!

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Skybus gets FAA certification

Columbus, OH based startup Skybus Airlines recieved certification last week from the FAA so that it can start flying on May 22, as planned, with a few brand-new Airbus A319s. The first flight is scheduled to be a morning departure from Columbus to Bob Hope Airport in Burbank, CA. On the same day, Skybus will start service to Boston (really Portsmouth, NH) and Kansas City. Other destinations will include Richmond, VA, Fort Lauderdale, Seattle/Vancouver (through Bellingham, WA), Greensboro, NC, and San Francisco (through Oakland). Evidently Skybus is trying the Ryanair approach to airports: choosing ones that are relatively inexpensive to operate from. In some markets (e.g. Kansas City, Richmond) this can be done at the city's main airport, but in more expensive areas (e.g. Boston Logan, Sea-Tac) this is harder to do when the landing fees are pretty high. Or as the company's "Rules of Flying" says, "Big airports can be a big pain. We choose less crowded and more convenient secondary airports for better punctuality and, of course, lower prices."

Skybus also seems to be copying Ryanair in another key area: amenities (or lack thereof). Ryanair is famous for having virtually zero extras, whether it be removing window shades and reclining seats or snacks and drinks or charging for baggage. Skybus does the same here, except they say that you don't have to "pay for everyone else's baggage", and if you're "hungry? Thirsty? Bring cash." And a book, since there's no inflight entertainment.

Of course, a certain portion of the fares are low - really low - at only $10, you probably couldn't expect too much. However, only a small percentage of fares - at least 10 seats per flight - are offered at that low price. More commonly, fares are going in the range of over $100. But if you can get the $10 fare, it's certainly a good deal. Now we'll just have to see if Columbus is a sustainable market - the reason why the company chose it was because America West pulled out of it a few years ago.

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Delta's New Look

Some of you are probably familiar with Delta's 'new look' and paint scheme. The reactions to it have been decidedly mixed, with the majority (at least on the online community) against it. I've heard people call Delta the Official Airline of Hugo Chavez due to the logo's resemblance to that of Citgo, the Venezuelan state-run oil company. There have been calls for the airline to switch back to the old 'widget' livery as well.

The new livery, officially launched on May 1, was part of Delta's new rebranding effort and 'Change' campaign. The airline has even launched a website focusing on its efforts to change, and aired the following TV ad:


So what are your opinions on Delta's new rebranding campaign? Do you like the 'new widget' or do you prefer the old one? Personally, I like the old, but I must admit that the new one is growing on me.

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