Southwest wants to buy Frontier

In a pretty surprising announcement today, Southwest Airlines has said that they've submitted a proposal to purchase Denver-based Frontier Airlines, which is still under Chapter 11 bankruptcy protection. Southwest will bid for the airline in a bankruptcy auction next month, along with Republic, which said last month that it would bid for Frontier. There aren't too many details out right now, but some interesting information is available over at the Southwest blog. Some excerpts:

What’s in proposal?
What we can say is that we are interested in a substantial investment in Frontier and to operate Frontier as a wholly-owned subsidiary, independently and separately from Southwest Airlines, for a period of time until the carrier could be combined into Southwest.

Is this a response to Republic’s bid?
Frontier has been in bankruptcy since April 2008, and we’ve been considering a bid for some time, independent of any action Republic took with its bid proposal. In the past month, we began an intensive study of the airline and expressed that interest to Frontier.

More details will emerge soon, but this has some big implications for service at Denver, where Southwest has been going up against well-established United and hometown carrier Frontier. One question that I have - what happens to the Airbuses that Frontier operates? Would Southwest keep them for a while, or swap 'em out eventually for Boeings?

As for what this means for the Republic deal, here's an excerpt from a press release issued today:

The Republic investment agreement provides for an auction period, during which Frontier may seek higher or otherwise better competing bids. If Frontier identifies such a bid, it can terminate the Republic investment agreement and accept the other offer. Under the auction procedures approved by the Court, interested bidders must submit an initial proposal by Aug. 3, 2009, and a final proposal by Aug. 10, 2009. Frontier and its advisors, in consultation with the Unsecured Creditors’ Committee appointed in Frontier’s Chapter 11 cases, will conduct an auction, if necessary, on Aug. 11, 2009, to consider all qualified proposals and determine the highest or otherwise best proposal.

photo by Taurus Photographix from Flickr

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Big changes in store at Aeroflot

Big changes are happening over at Aeroflot - a new CEO, no more Russian jets, better in-flight service, and a plan for a slimmer company (as well as slimmer flight attendants). And if you have a complaint, simply email the CEO himself.

By the end of this year, all of the airline's Tupolev Tu-154s - previously the backbone of the medium-haul fleet - will be retired, replaced by Airbus A320 family aircraft. The airline also has retired its Ilyushin Il-86 fleet (to be replaced by three leased MD-11s), leaving the Ilyushin Il-96 as the sole Russian type left. Aeroflot has been itching to get rid of those for a long time, as they're rather expensive to operate. The Il-96s will leave the fleet by October, along with the Tu-154.

Meanwhile, the airline, like most others, is struggling to cut costs. CEO Savelyev revealed in an interview with the Russian business paper Vedomosti that 40% of the airline's routes are unprofitable, with the worst being Moscow-Los Angeles, losing $14 to $21 million a year. "But we aren't looking at abolishing the route," he said, stating that the airline is closely reviewing all costs and is planning on making money on the route by June 2010. "If there's demand and good capacity, then why dump it?" The airline is also seeking to slim down, and plans to trim 6,000 of its 15,000 employees. "This number doesn't come from the ceiling," said Savelyev. "We invited the international consulting firm Bain to develop a new corporate structure... The optimal ratio is 1 million passengers for every 1000 employees. In 2008, Aeroflot carried 9.2 million passengers, so the company should have just over 9000 people."

The size of the company itself isn't the only thing that Savelyev wants to make narrower; he's set his sights on the airline's flight attendant corps. “These will be very eye-catching, very striking girls,” he says in the Moscow Times, which reports that they will not exceed a Russian size 48 (US, 12 to 14). New uniforms are also in the works, with orange on the way out: “A sociologist told us that, unfortunately, the color of our old uniforms was a repulsive color, that it made passengers nervous." His son, studying in England, sent him a video of Virgin Atlantic flight attendants (seen here on YouTube); "in bright red they look like professional models," he said. In-flight service is also looking to get a much-needed overhaul; apparently a Singapore Airlines hospitality trainer flew on a couple of Aeroflot flights to judge the service. “We scored a C plus or a B minus," said Savelyev, "but the good news is that our mistakes are easily correctable."

The familiar hammer-and-sickle logo will still be around, though - Savelyev has said that he "likes" the "bird with the hammer and sickle." Back in 2003, when the airline introduced its current color scheme, branding experts suggested that the airline drop the logo since it carried rather negative connotations. The first planes to get the new livery actually flew around for awhile with the logo applied as a sticker, so that airline management could get rid of it if desired. But the hammer and sickle wings are so synonymous with Aeroflot that the airline decided that they might as well be retained, the last vestige of the airline's Soviet past. Things have changed - for example, customer service. "As for all of the complaints," said Savelyev, "passengers can write to my email address, which is listed in the Aeroflot in-flight magazine.

photo by Aleksander Markin from Flickr, licensed under the Creative Commons

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Sydney-Los Angeles game of chicken continues

If you're a passenger thinking about flying between Sydney and Los Angeles, things can't get much better. If you're one of the four airlines that fly that route, things can't get much worse. Earlier this month Delta became the fourth airline to fly between the two cities, joining Virgin-backed startup V Australia, which had entered the market this past February. They joined Qantas and United, which have shared a cozy duopoly for the past 15 years on the route (since Continental stopped flying it), and the result is a four-way game of chicken and a fare war that won't end until one airline drops out - all amidst a dismal business travel climate.

The airlines are resorting to tactics that have an air of desperation to them. Qantas is allowing kids to fly for free on the route, and when you buy a business class ticket, you get two for the price of one - deals that the airline has labeled "unprecedented." Said a Qantas spokesperson: "This is the first sale of its kind for many, many years." Qantas, which used to control nearly 75% of traffic on the route, now flies around half. Before things got bad, the airline made around a quarter of its cash on the route, and even though it's losing money there like everyone else, Qantas has interest enough to stick it out and wait for the situation to improve.

Then there's United, which has come out with the uncharacteristically ballsy proclamation that it would match any competitor's fare between Sydney and Los Angeles. "United is determined and committed to matching the initiatives of other carriers and we'll compete aggressively on price if that's what's required for us to protect our business here," said their Pacific vice president, James Mueller, quoted in The Australian. "I look at our services to Australia as sort of our southern cornerstone of our overall Pacific product offering... [we] fully intend to keep operating here indefinitely." According to the article, United's revamped premium cabins have paid off, with the airline's market share on the route holding steady (for now). United has been flying the route for nearly 25 years, ever since it purchased Pan Am's Pacific route network in April 1985.

And then there are the new entrants: V Australia and Delta. Things have become more complicated now that Delta has announced a joint venture with V Australia parent Virgin Blue, to say nothing of the latter's codeshare agreement with United on domestic flights from Sydney. Some analysts are predicting that one of the airlines could leave the market as early as October, but which one? Both Qantas and United are so well-entrenched in the route that I don't see either giving it up; this leaves Delta and V Australia. Some have said that Delta, being the larger of the two, won't be the one to pull out, but I'm not so sure. If Delta does drop LAX-Sydney, they might lose their claim to flying to all six inhabited continents, but right now it can't be much more than another international route for them. V Australia, on the other hand, doesn't have anywhere else to turn to if they drop the route, apart from service to Los Angeles from Brisbane and Melbourne.

So, if you're planning a trip to Australia, book now while prices are low - before the game of chicken comes to an end.

photo by code20photog from Flickr

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BA loses $2.3 million a day as OpenSkies cuts back

Dow Jones is reporting that British Airways is burning through £1.4 million, or $2.3 million, a day, according to the airline's CFO, Keith Williams. Williams said in February that the airline was losing £2.7 million of cash a day, which is almost $4.5 million, so I guess that's an improvement. But William is also warning that the "cash burn isn't sustainable," and that rate is likely to increase during the winter. So BA is by no means out of the woods yet.

And in related news, BA subsidiary OpenSkies has announced that it will drop its New York - Amsterdam route next month, leaving the premium BA offshoot flying just one route (New York - Paris). OpenSkies CEO Dale Moss has said that "while OpenSkies developed more than 16% market share during only nine months, it was not enough to sustain a profitable service at this time." "We tried very hard to make it, but the current market forces were just a bit too difficult," he said on the company's blog. "My most sincere wish is that someday OpenSkies will return to Amsterdam and make it another signature route." But despite Moss' optimistic outlook, parent British Airways has hired an investment bank to find a buyer for the airline.

photo by bribriTO from Flickr, licensed under the Creative Commons

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How to make money from Ryanair

The Times recently shared a clever way to take back the money that you might have lost with Ryanair's £5 online check-in fee. A cup of coffee on board sets you back either £3 or €3, so you can pay for your coffee with either currency and ask for your change back in either currency. If you pay with a €50 bill, you could get €47 back in change, but that's only worth around £41. Instead, pay 50 euros but ask for your change back in pounds sterling - and instead of getting £41 back, you get £47 and make a profit of £6. Not only do you get back your online check-in fee, but you get an extra quid on the side (depending on the exchange rate, of course). I'm surprised that Ryanair boss Michael O'Leary, famous for his fanatical low-cost approach, hasn't removed this loophole yet, but I'm assuming that it's only a matter of time.

photo by jon gos from Flickr, licensed under the Creative Commons

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Wi-fi and the future of inflight entertainment

US Airways announced yesterday that it will become the latest airline to offer in-flight wi-fi, starting next year. It'll be provided by Aircell's Gogo Inflight system and only available on the airline's A321 fleet for now, but Gogo is already present on the entire fleets of Virgin America and AirTran. United, American and Delta are also looking at installing Aircell's service, while Southwest and Alaska are currently testing the competing Row44 service. (As an aside, US Airways removed power outlets on its A321s, so if you're planning on using the internet for awhile, be sure to bring a spare battery.)

Some airlines, like American and AirTran, have been offering free wi-fi for a limited time on certain routes (after all, that is the most effective way to get people hooked). But there's no doubt that in-flight wi-fi is here to stay, and it could be that pretty soon laptops could replace the TV as the key means of entertainment.

And wouldn't airlines like this? An excellent article in Reuters points out that there would be significant cost savings for airlines. After all, they've got to pay for the installation of the systems and any upgrades, as well as the extra fuel costs related to hauling around all of that extra equipment. And next time you're watching a movie on a transcontinental flight, keep in mind that the airline had to pay a licensing fee to the movie studio. Which means that NBC pockets a bit of cash every time I watch an episode of The Office on United.

There's even another bonus. From the article:

Passengers engrossed with their laptop PCs and mobile entertainment devices that can be used continuously as a result of the power sockets on every seat could also free up cabin crew. "I've heard stories about the number of crew on board each flight being cut by airlines after they introduced personal TVs on every seat," said Anthony Prakasam, an aviation consultant.

So basically, the internet would help further distract passengers from the ever-declining level of in-flight service? Perfect! Makes you wonder why airlines haven't rolled out wi-fi already. Maybe because it costs at least $100,000 to outfit an aircraft? I'm not sure, but perhaps airlines should trim down their current inflight entertainment systems to just long-haul routes and hand out free wi-fi access instead. They might be able to recoup their costs pretty quickly with all of the savings of getting rid of the conventional IFE systems on some flights. Of course, I'm not a bean counter at an airline so I'm not sure if that would make economic sense. What do you think?

photo by DrewVigal from Flickr, licensed under the Creative Commons

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What's next for JetAmerica?

It's been a week since much discussed startup JetAmerica announced that it was shutting down operations, blaming difficulties with securing slots at Newark. Still, there's the possibility that the airline could always start up again. From a Florida Today article:

The airline’s chairman vowed to return to service this fall, however, with Melbourne [Florida]’s airport serving as the base for the operation’s lone Boeing 737-800 jet. “Melbourne will be our focus city,” Steve Schoen said in a telephone interview late Friday from Clearwater, where the airline is based. He later added that the airport in Lansing, Mich., will also be a “target city.”

That's right - we might not have seen the last of the JetAmerica yet. But airports would probably be pretty wary of giving JetAmerica (or its latest incarnation) another chance. The Melbourne airport allocated $25,000 to help promote JetAmerica, and most of that's been spent. And the Toledo-Lucas County Port Authority, which was JetAmerica's focus city, has already spent $119,000, and that amount could end up being as high as $150,000.

I recently asked Toledo Airport's President and CEO, Michael J. Stolarczyk, a few questions about his airport and JetAmerica. If JetAmerica were to start up again, "we would certainly hope that Toledo Express is considered," said Stolarczyk. "If Steve Schoen starts another air carrier, we would welcome the discussion and would fully vet the proposal as we did the first time. The operations team that Steve Schoen compiled was comprised of professionals from the industry and there were several points in their model that will prove to be viable. Fortunately, I’m sure they have learned some valuable lessons from this experience – as have we - and I fully hope Mr. Schoen reemerges with a strong product and that he considers Toledo Express as a service corridor."

Stolarczyk also notes that JetAmerica should have gone with a less aggressive schedule. "Daily service to the New York area is provided from Detroit and we truly wanted to capitalize on that and capture some of those travelers. We can capture those travelers; however, we may not be able to fully load daily service to New York right from the start. In the future, we will begin with three to four times per week service to this market…and then grow that service to its maximum potential."

And as for Toledo and those other airports which were seeking new air service, Stolarczyk remains optimistic. "The team at Toledo Express is going to continue to be diligent in our efforts to secure air passenger service. We will continue to bring the best offer to the table that we possibly can for our partners in these efforts –just like we did with JetAmerica... We bring the same spirit of enthusiasm and support that we showed to JetAmerica to all potential passenger air service partners. It is not a matter of if we will obtain additional air service; it is truly a matter of when."

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A Manhattan airport in Central Park? Not really

Today's epic airline prank is brought to you by The Manhattan Airport Foundation, which wants to bulldoze Central Park and put up an airport in its place. Yes, you must be thinking that this is a joke, and yes, you're right.

Beyond the sheer implausibility of razing Central Park to make way for an airport, let's look at the details. Their address is "233 Broadway, 58th Floor," which is in the Woolworth Building. But the building, which was completed in 1913, only has 57 floors. Perhaps the 'Foundation' has open-air offices on the building's rather angular roof. They've also secured financial backing from the "Waalwijk Charitable Trust" and the 'Tokyo-based holding company' Yamanote Ltd. Problem is, neither entity actually exists. However, that's not preventing the Foundation from accepting a thousand dollars in return for naming rights to a bench. You could throw in some cash, but you'd end up feeling more burned than a JetAmerica investor.

The Foundation claims that it exists to promote "the immediate development of a viable and centrally-located international air transportation hub in New York City for the benefit of all New Yorkers," claiming that "Central Park squanders 843 acres of the most valuable real estate in the world." It touts Central Park's location as a more convenient alternative to JFK, LaGuardia, and Newark, and even claims that "Environmentalists Rally In Support Of Manhattan Airport." Perhaps most hilarious, however, are excerpts from the laughable Frequently Asked Questions:

Q: I own an apartment alongside Central Park. What will Manhattan Airport do to my property value?
A: History has proven that bringing a transportation amenity to an underserved region elevates the perception and economic well-being of the area... [Right, like having 747s flying into Manhattan is going to raise property values on the Upper East Side.]

Q: What about the environmental impact of building Manhattan Airport?
A: Research shows that single-passenger car-service and taxi trips between Manhattan and JFK/EWR/LGA account for up to 9% of automobile-created carbon-based emissions in the region... [Research also shows that 86% of non-cited statistics are made up on the spot.]

Q: Will taxpayers shoulder the financial burden of building and operating Manhattan Airport?
A: No. Manhattan Airport is a privately-financed corporation. To date, nearly 100 investors have signed on to provide approximately $130M in equity with another $80M from the bond market making Manhattan Airport the most ambitious privately-funded airport development project in US history. [Because 100 investors are really going to invest in a fake airport.]

It's impossible to figure out who's actually behind the prank; the website is deliberately vague. Still, I wonder why someone would come up with such an elaborate ruse. Are they trying to send home a point, or do they just have too much time on their hands? Perhaps we'll find out; in the meantime, check out some pictures of the proposed 'airport':

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El Al's new "low cost economy" experiment

Capitalizing on the willingness of travelers to pay more for a (theoretically) better passenger experience, a lot of airlines have added "premium economy" products over the last several years, with Air France, British Airways, Virgin Atlantic and United Airlines among them. And on other end of things, a lot of airlines have also launched (and also abandoned) their own no-frills, low-cost carriers, in an attempt to emulate the success of the standalone LCCs. Remember Delta's Song? Or United's Ted? Or Continental's Continental Lite? (Well, not many may remember that last one.)

The Israeli newspaper Haaretz is reporting that Israeli carrier El Al is introducing something that I've never seen before: a stripped-down version of its economy class product, but within its existing economy class. This comes as low-cost carrier easyJet announces service from London to Tel Aviv; British airline bmi has already entered the market. German LCC Air Berlin also serves Israel, and El Al, being a 'traditional' carrier, is apparently feeling the heat. But instead of launching its own LCC (a concept which Haaretz says the airline's previous management explored but ultimately rejected), the airline will be turning a block of seats in regular economy class into a low-cost economy class.

The new sub-economy class will take up about 10-20% of all seats on the plane, and those seats will be grouped together, not located around the cabin. Although the seats are the same (no Ryanair tricks here), amenities like checked baggage, meals and headphones will cost those passengers sitting in sub-economy extra cash. "Our plan is to open on the planes another class, the low-cost economy," said El Al CEO Haim Romano. "While leg room will be the same as in the rest of the economy class, low-cost passengers will receive no free services. They will have to pay for every suitcase they check in, for food and beverages on board, for headphones or any other entertainment service, for blankets and pillows and for reserving seats." Which could work well for the airline, although how they're going to prevent a sub-economy passenger swiping a headset from a "regular" economy seat or going to the galley to get a free coffee might need to be worked out.

As of right now, El Al is only planning on rolling out the new low-cost economy class on its European flights, which makes a lot of sense; the airline doesn't face low-cost competition on its longer routes, where profit margins are usually higher. But the airline has said that if the experiment is successful, El Al might introduce it on its long-haul flights too.

photo by caribb from Flickr, licensed under the Creative Commons

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JetAmerica shuts down

I'll be writing more about this soon, but for now, here's the news release:

JetAmerica Suspends Sales
$900,000.00 in Refunds to Passengers
Clearwater, Florida - July 17 – JetAmerica, the public charter air carrier operator, announced today that it is suspending sales to all markets and that it would immediately begin to notify affected customers and process refunds to all customers who have booked seats on its flights.

“We are reluctantly suspending our public charter operations effective today,” said John Weikle, CEO, who has been with the company since April. “Finalizing the slots required to support our charter program at Newark has taken longer than expected and we have decided to suspend our flights in order to refocus on different markets. We still strongly believe that there is an unmet need for affordable air service to secondary markets and we look forward to offering this option again in the near future," concluded Weikle.

"We will be refunding more $900,000 in ticket reservations for flights from August 14 through the end of September," said Bryan Glazer of World Satellite Television News and Media Relations, which represents JetAmerica.

Glazer's firm, which previously represented JetBlue and Virgin Atlantic Airways, was retained by JetAmerica in May. The firm's national media blitz generated headlines across America that helped sell more than 20,000 tickets during the first JetAmerica's online e-commerce operations.

"It is unfortunate that so many consumers' will be affected. This was unavoidable. I worked closely with the executives of JetAmerica for several months and know they did their very best to overcome the challenges that the slot situation posed. But in the end, the business plan never called for paying for more than a half million dollars for slots," said Glazer.

He added, "Don't be surprised if JetAmerica comes back with new routes and new destinations."

All customers will receive automatic refunds within 7-14 business days. Any customer not receiving a full refund in 14 days should call 727-451-3970.

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Air France dismisses report of a "black year" in 2010

Air France executives have dismissed a report in the French financial newspaper Les Echos which claims that the airline could face a "liquidity problem" in 2010. The report, published under the headline "Air France: les risques d'une année noire" (the risks of a black year) says that accountants from the accounting firm Secafi, hired by Air France's works council, have painted a couple of pictures regarding the airline's financial strength, none of them very pretty.

Under the first scenario, an upswing in traffic occurs at the end of the 2009-10 financial year and oil stays around $61 a barrel, and Air France, taking advantage of reduced costs, could keep its losses to a minimum, or even break even.

More realistic, says the report, is the second scenario, in which traffic numbers stay sluggish, revenue declines 9%, but oil stays low (around $58 a barrel), which is "more or less" what the airline faced in late May. But the airline would still post a loss that's much higher than the 184 million euro loss posted in the 2008-2009 financial year, and revenue declines in the past month have approached 20%, not 9%.

Then there's the worst scenario, which a decline in revenue of over 9% but oil reaching $70 a barrel. "In this scenario, the operating loss would cause us to consume more than 1.5 billion euros in cash in 2009... this means that it wouldn't be a year before the company runs out of cash," says the report. A "black year" indeed.

Pretty serious stuff, especially as oil is currently trading in the low sixties. Even if oil sticks around $61-63 a barrel, scenario #1 isn't likely, as air traffic probably won't rebound for the airline before the end of the 2009-10 financial year. And it's unlikely that oil prices will be around $58 a barrel for a long period, as they are in scenario #2. Still, it might be taking things too far to say that the airline could run out of cash within a year; the airline issued over 600 million euros worth of bonds last month to finance new aircraft purchases, and perhaps they could do the same in the future if needed.

Unsurprisingly, Air France management isn't buying the gloom-and-doom forecasts. In a statement, the airline said that "the Executive Management of Air France-KLM wishes to make clear that in no respect does it validate any of these imaginary scenarios [and] that its financial position is, and will remain, extremely healthy in the coming years." The statement went on to say that Air France had 4.5 billion euros on hand at the end of June, along with 1.2 billion euros in available credit lines.

photo by caribb from Flickr, licensed under the Creative Commons

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Lufthansa struggles with Austrian purchase

Lufthansa has been really putting together quite the airline empire over the last few years, acquiring Swiss Air Lines, Italian carrier Air Dolomiti, and German carriers Germanwings and Eurowings outright, as well as purchasing large stakes in British airline bmi and Brussels Airlines (and will own the latter outright by 2011).

It's also trying to wrap up a deal to take over Austrian Airlines in its entirety, although the plan has dragged on for a long time, thanks to roadblocks from the anti-trust unit of the European Commission, which is concerned about a lack of competition on some European routes. Lufthansa has already apparently agreed to more concessions, including dropping flights between Vienna and Frankfurt and Vienna and Geneva, but it's unclear whether or not this will be enough for the EC.

Austrian has been bleeding red ink recently; the airline lost 429 million euros last year, has more than one billion euros in debt, and has already burned through two thirds of a 200 million euro injection from the Austrian government that it received this spring. Its chairman has said that if the Lufthansa deal falls through, the airline would need over one billion euros in new capital. Austrian's future is being increasingly called into question as the prospects for the deal's success look dimmer.

And meanwhile, Lufthansa is also struggling (although not to the same extent as Austrian). The Austrian deal, with a deadline of July 31, is still dragging on and on and becoming ever more expensive, and Lufthansa is looking at ways to lower acquisition costs. It also reluctantly purchased fifty percent of bmi from its founder, Sir Michael Bishop, who for many years held an option that would force Lufthansa to buy his stake. Bishop actually ended up suing Lufthansa back in May in order to make Lufthansa proceed faster with the deal.

But the deals with Austrian, bmi and Brussels have contributed to Lufthansa's increasing financial pressures. The airline today announced that it would roll out a costs-saving initiative called "Climb 2011," which calls for savings of one billion euros ($1.4 billion) per year starting in 2011. The plan focuses on lowering passenger costs as well as shedding 20% of its 2,000 office jobs in its passenger airline core business. Lufthansa has also said that it will defer delivery of some aircraft from 2010.

Depending upon how many further obstacles it receives from the EC, Lufthansa might just decide to axe the takeover of Austrian, especially as the costs of a takeover mount and Austrian's financial situation becomes more and more perilous. Austrian could be looking less and less attractive, especially while Lufthansa digests the the financial burden of taking over bmi and Brussels. With the global airline industry stuck in a deep downturn, Lufthansa needs make sure that it doesn't bite off more than it can chew, and should concentrate on solidifying its core operations - after all, that airline empire is no good if the carrier at the center of things isn't strong.

photo by caribb from Flickr, licensed under the Creative Commons

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AirTran's 'Internetiquette' for in-flight wifi

AirTran recently became the second airline to outfit its entire fleet with Wi-Fi (after Virgin America). "But with your newfound freedom to surf the internet, comes a little responsibility," says the airline in the introduction to "Internetiquette," a brochure that will be found in every AirTran seatback pocket. The 'manual' says that it will "[allow] you to enjoy the internet to the fullest, while at the same time, not offending the people around you."

"Internetiquette" features such helpful tips as #48 ("Flight attendants are not tech support"), tip #10 (helping you figure out which online photos are suitable for flights [SFF] or not suitable for flights [NSFF]), or #134, which advises against taking your laptop into the lavatory to take care of some business.

But perhaps even better are the series of short videos hosted by none other than "Airplane!" star Peter Graves, who speaks about some of the dos and don'ts of in-flight internet use. He even manages to throw in a few jokes from "Airplane!" every now and then in the videos, which can be seen here.

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United deals with song fallout

Last week, a music video was posted to YouTube that was every airline PR executive's nightmare: a catchy country-music song, professionally edited with a humorous music video, that was quickly spreading across the internet. Normally this wouldn't be a problem, but the song was called "United Breaks Guitars," by Canadian singer Dave Carroll and his band, Sons of Maxwell, and describes his fight with the airline to receive compensation after United baggage handlers in Chicago damaged his $3,500 Taylor guitar.

In the last week or so, the song/video (which only cost $150 to make) has reached almost three million views on YouTube, gained prime-time exposure on CNN's Situation Room, and was the most popular song at the band's concert last Friday. “Everybody was calling for that song the minute we hit the stage,” Carroll said to Rolling Stone. “It was unbelievable, 1,500 people raising their hands in the air to the ‘United breaks guitars’ tag line in the chorus."

That's got to be causing some serious pain over at United headquarters in Chicago. It's bad enough when a YouTube video critical of your airline (no matter how light-heartedly) garners millions of views; it's even worse when you see that the song has had such success that over a thousand people put their hands in the air to the words of "United breaks guitars." How many of them are going to have that chorus line stuck in their heads at the first mention of United? And how many discussions of the song ("Did you see that video on YouTube?") are going to evolve into discussions about a lack of customer service on United ("You know, I flew with them last April...") ? And it's not over, yet - there are still two more songs on the way.

Obviously, it's hard to blame United for not seeing this particular incident arising. I don't think a case where someone, slighted by an airline, has turned around and released a wildly popular country song about their experiences. But it does highlight some serious customer service policy deficiencies, ones that United is seeking to rectify. As the pictured "tweets" show, United Airlines' PR department has been working hard to respond to comments on Twitter regarding the song, and has said that the video will be used for training, and that they've "apologized for, have fixed, and most importantly, learned from" the mistake, too. Airlines are starting to understand the power of social media - a $150 music video can be more effective than a multi-million dollar Madison Avenue ad campaign.

Perhaps airline reps everywhere now will be thinking in the back of their minds, "Could this turn into a smash YouTube hit?" After all, it worked for Carroll - national attention and a priceless amount of free publicity. Rolling Stone has said that Bob Taylor, of Taylor Guitars, personally phoned and offered Carroll two free guitars of his choice for the second video, while other airlines have reportedly offered him free tickets.

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Pilots agree to cuts, but trouble still ahead for BA

It seems as though British Airline Pilots Association (BALPA) members are actually buying British Airways CEO Willie Walsh's statements that the airline is facing its largest-ever crisis, since 94% of them voted today in favor of a 2.6% cut in salary, a move that should save the airline £26 million. "We have pressure tested the company's trading position and cost base, and are satisfied that this step is necessary to help BA recover its position as one of the world's most successful airlines," said Jim McAuslan, general secretary of BALPA.

BALPA's agreement to pay cuts is a relief for Walsh, who is going to have a much harder time convincing cabin crew and ground handling staff to take a salary cut. Four weeks of negotiation have failed, and the threat of a strike looms large for the airline. “There is every sign that a conflict is looming if this last throw of the dice does not succeed," said Mick Rix, who heads up the GMB union. The Unite union evidently doesn't buy Walsh's message as BALPA did, saying that "BA’s management are opportunistically using the recession to force through changes which are more far-reaching and damaging to BA’s future.

The pilots have seemed to recognize that the airline's future is at stake during these critical next months. While painting gloom-and-doom pictures has always been a management strategy used to extract concessions from unions, I think that British Airways is genuinely in a "fight for survival," as Walsh put it. Naturally, it was under Walsh's nose that the airline went from making record profits one year to posting record losses the next, and once the dust settles after the current crisis, Walsh might find that he needs to move on. But to be fair, BA is saddled with outdated, expensive labor contracts - ones that need to change, and change in a hurry.

"The problem is that there’s no flexibility with the cabin staff," said Howard Weeldon, a senior strategist at London's BGC Partners LP. "It’s been entrenched for 20 or 30 years... There has to be some form of compromise, because you can’t have an airline without cabin crew and the cabin crew need the jobs. A strike would be very, very foolish and it would only make things much worse.” But unless the cabin and ground staff agree to a reduction in wages, a strike might be just the thing that Walsh finds himself facing later this summer. He's also going to have a difficult day tomorrow, when he addresses BA's shareholders at their annual meeting - and they can't be happy about the fact that the airline has stopped issuing a dividend. The airline has even talked with key shareholders about an emergency rights issue for £500 million, although that would probably be a last-resort option.

photo by michal818 from Flickr, licensed under the Creative Commons

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Continental allowed to join Star Alliance immunity pact

The Department of Transportation ignored a recommendation from the Department of Justice that Continental Airlines not be allowed to join nine other Star Alliance carriers in recieving antitrust immunity on international routes, and instead granted it permission earlier today. (Thanks for the heads up from Airline Route.)

The airlines (Air Canada, Austrian, bmi, LOT, Lufthansa, Scandinavian, Swiss, TAP, United and now Continental) can benefit from "limited and carefully considered" antitrust immunity on international routes, saying that "the transaction will not substantially reduce or eliminate competition."

In its ruling, the DOT also stated that the Continental's joining "does not materially alter the competitive landscape or increase overall market share to any significant degree," noting that Continental's move to Star allows for "a more competitive alliance in markets where oneworld or SkyTeam have a strong presence."

The DOT also noted that Continental currently overlaps with other Star carriers in fourteen city-pair markets, but stated that creating "carve outs" (routes that are not covered by the antitrust immunity) would "detract from the efficiencies that the alliance would otherwise create." Existing "carve outs," such as Chicago-Frankfurt, Washington-Frankfurt, San Francisco-Toronto and Chicago-Toronto, are still in effect. As for domestic competition (especially with United), the DOT concluded that "the benefits of the alliance outweigh the comparatively small risk of harm that could occur in domestic markets."

Of course, the whole argument of alliances being good for the consumer only stands if "metal neutrality" is practiced. "Metal neutrality" is when airlines that jointly market services aren't picky about who actually operates the flight (and thus keep more of the revenue). For example, if I wanted to fly from Boston to Frankfurt as seamlessly as possible, I could take a direct Lufthansa flight, or instead fly United through Washington Dulles. If I book my ticket with United Airlines, under "metal neutrality" they'd put me on the Lufthansa flight, even though they'd make much less money than if they put me on their flight through Washington. If things are kept metal-neutral, the DOT argues, then carriers won't spend time worrying about making sure that a passenger flies on their airline; instead, they can work on syncing their flight schedules and sharing financial benefits and losses, which give them incentive to make things as convenient as possible to the passenger.

photo by James Willamor on Flickr, licensed under the Creative Commons

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WestJet announces largest-ever expansion

If there's a Canadian airline on the rise, it's definitely WestJet. Originally started in Calgary in 1996, it was originally only going to fly to destinations in western Canada (hence the name). But the airline quickly grew in subsequent years, and is now the second largest airline in Canada (behind Air Canada) and the largest Canadian low-cost carrier. WestJet has, more recently, announced plans to introduce a frequent flier program and has announced a codeshare agreement with Southwest Airlines (another one is in the works with Air France/KLM).

And earlier today, the airline announced what it billed as its "largest-ever seasonal non-stop flight schedule" in the company's history, adding 11 destinations for the winter schedule. Pretty much all of them are warm-weather getaways (Miami, Mexico, Cuba, St. Maarten, etc.) although I was rather surprised to see Atlantic City on the list. Year-round service to Yellowknife from Edmonton and San Diego from Calgary was also added. The airline's transborder and international capacity will increase 45% year over year, compared with just 5% domestically.

"This schedule represents significant expansion on both the transborder (U.S.) and international fronts," said Chris Avery, WestJet's VP, Revenue and Planning. "Both are strategic decisions as we continue to aggressively pursue and earn profitable market share in these critical areas. WestJet is well on its way to becoming the market leader in many of the most popular sun destinations in the U.S., Mexico and the Caribbean."

WestJet also has to be taking advantage of the rather precarious situation that its chief rival, Air Canada, finds itself in. Air Canada has been dealing with less-than-stellar relations with some of its unions, and is trying to avert a possible strike during the 2010 Vancouver Olympics. Any significant labor disruption at Air Canada could be enough to push the airline into bankruptcy for the second time in the past ten years - something that WestJet, which is not a unionized carrier, would be sure to exploit.

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"United Breaks Guitars" and inspires country song

I recently came across a country singer's airline-related story of woe on United Airlines (thanks to Alex for the heads up). Dave Carroll was flying from Halifax to Omaha on United Airlines, with a stopover in Chicago, when his guitar was damaged (full story here):

In the spring of 2008, Sons of Maxwell were traveling to Nebraska for a one-week tour and my Taylor guitar was witnessed being thrown by United Airlines baggage handlers in Chicago. I discovered later that the $3500 guitar was severely damaged. They didn’t deny the experience occurred but for nine months the various people I communicated with put the responsibility for dealing with the damage on everyone other than themselves and finally said they would do nothing to compensate me for my loss. So I promised the last person to finally say “no” to compensation (Ms. Irlweg) that I would write and produce three songs about my experience with United Airlines and make videos for each to be viewed online by anyone in the world.

Frustrated with United customer service, Carroll found a creative way to try to get even with the airline: write a song. Called "United Breaks Guitars," the catchy, country-sounding song details his experience. Of course, I'd like to point out that his troubles could have been prevented had he carried his precious guitar with him on board the aircraft - I'm pretty sure that this is possible, having seen passengers carrying guitars on board planes in the past. Nevertheless, it makes for enjoyable watching (and listening).

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Ryanair plans 'standing seats'

Ryanair boss Michael O'Leary

When the story broke last week about China's Spring Airlines looking into 'standing-only' flights, I figured that it was only a matter of time before European budget carrier Ryanair would announce plans for a similar concept. And sure enough, Ryanair, not to be outdone, finally announced today that it was in discussions with Boeing and the Irish Aviation Authority to look at "vertical seating" in its 737s - the last four rows of regular seats would be removed in order to make room for the new seats. Passengers wouldn't actually be standing, but "they would have something like a stool to lean on or to sit on," said Ryanair spokesman Stephen McNamara; CEO Michael O'Leary has described them as "barstools," according to The Sun, which also reports that O'Leary got the idea from the Chinese carrier.

The passengers who use the "vertical seating" would fly for less than those with a regular seat, and would apparently be used only on flights under 90 minutes. "We might take out the last five or six rows and say to passengers, 'Do you want to stand up? If you do, you can travel for free'," said O'Leary, to Sky News. "Why is this any different to what happens on trains, where you see thousands of people who cannot get a seat standing in the aisles, and it happens regularly on the Underground?"

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Spirit Airlines reportedly buys Air Jamaica

Some interesting rumors are circulating around the tropics - acccording to the Jamaica Gleaner, US ultra-low-cost-carrier and Ryanair-wannabe Spirit Airlines will purchase perennially unprofitable state-owned flag carrier Air Jamaica, which could be renamed "Spirit of Jamaica." The news comes only days after Radio Jamaica reported that the Jamaican government's Privitisation Committee, set up to find the best buyer for the airline, recommended that either Trinidad-based Caribbean Airlines or British charter airline Thomas Cook should be the one to make the purchase. Spirit Airlines spokesperson Misty Pinson refused to confirm or deny the story, only saying to The Airline Blog, "We don't comment on market rumors."

In preparation for the sale, the government installed Bruce Nobles, the same person who oversaw restructuring at Hawaiian Airlines, as president and CEO. Nobles realized, pretty quickly, that Air Jamaica's fleet utilization was poor and vowed "to fly the airplanes as much as you can to generate revenue." He also dropped routes to Atlanta and Miami, and instead used the aircraft on routes where they made money. Nobles also noted that one of Air Jamaica's main problems was that it lacked capital; "Air Jamaica spends too much money because it does not have any," he said, and has since secured more cash for the carrier.

Evidently, he's done a pretty good job of fixing up the airline; those who thought that there would be a mid-summer snowstorm in Montego Bay before a profitable Air Jamaica might be surprised. Nobles says that the airline, which has never made a profit, could break even as soon as December and may actually become profitable in 2010. Especially given the current economic environment, that's quite an accomplishment. The fact that Spirit's owners, Indigo Partners and Oaktree Capital, are interested in buying Air Jamaica has to be a testimonial to the airline's improved financial condition.

Of course, if the sale turns out to be true, it does raise a few unanswered questions. Would Air Jamaica turn into an ultra-low-cost-carrier, along the lines of Spirit? Many in Jamaica would probably cringe at the thought of their national airline becoming another Spirit, which is known for its Ryanair-like disregard for passenger service (according to the Department of Transportation, Spirit had the most complaints in 2008, with 14.3 per 100,000 passengers; US Airways, with 2.0, came in second). Perhaps Spirit might run the carrier separately, keeping its existing (and newly-profitable) business philosophy and using it to feed Caribbean traffic into Spirit's US operations (and vice versa). But here, the 'feed' strategy might not be successful - for a start, the two airlines serve different airports in New York (Air Jamaica at JFK, Spirit at LaGuardia). And the discrepancy in the current levels of service offered by the airlines might be off-putting to some travelers, too.

photo by Matt Coleman - BNA-Photo on Flickr

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Delta starts flights on crowded Sydney-LAX route

photo: Delta flight 16, a Boeing 777-200LR, gets ready to leave Sydney. Photo by AFP

Delta Air Lines started Los Angeles - Sydney service on July 1, becoming (as Fish pointed out) the first US airline to fly to all six 'inhabited' continents since Pan Am. If anything, it further sends home the message that Delta is now a major international player, and that it's putting some of the route authorities it acquired with Northwest to good use. Even though the US, unlike so many other countries, has never had an official 'flag carrier,' Pan Am was the closest to it until it went bust in 1991. So perhaps now Delta has assumed that mantle - not bad for an airline that, 80 years ago last month, started out as a crop-dusting operation in Louisiana.

But Delta had better not be expecting an easy ride on the US-Australia route, which is known for being a major cash cow for the airlines that fly it. Up until recently, those airlines were Qantas and United, and they both made a lot of money (Qantas apparently makes 20 to 30% of its money on the route, and I recall that United also also attributes a pretty hefty amount of its earnings to the route as well). United and Qantas had a lock on the market, and if you didn't like one of those airlines, your options were, well, rather limited (unless you wanted to fly via Asia, which adds several hours). Qantas flew about 70% of the traffic, leaving United with the remaining 30%.

But Virgin offshoot V Australia started flying between Sydney and Los Angeles this past February, and suddenly things got complicated - the formerly lucrative route has turned into a money-losing one. Fares went down, as they usually do when a carrier enters a new market; over the past year, prices have gone down by more than half. Qantas' market share on the route is expected to fall to just over 50%, and just as badly, their international yields were down 25% in May versus the same month last year. Capacity will be going up by as much as a third, now that there are new airlines flying the route and Qantas is using the A380, and that can also lead to lower yields.

Still, nobody's giving up, at least not yet. "[The route] is such a jewel that we intend to keep it," said Alison Espley, United's general manager for Australia and New Zealand. "Someone may not last the distance, but we will." She said that United has been flying the route for 24 years and isn't going anywhere, and that other airlines are going to "have to look very seriously" at exiting the route. Virgin chief Richard Branson similarly predicts an airline exiting, but of course, not his own: "I would put money on either Delta or United not flying across the Pacific in two to three years." By year's end, predicts Flightglobal, the market share on the route will be Qantas 60%, United 17%, V Australia 15%, and Delta 8%.

What used to be a comfortable money maker is no longer, and chances are that at least one of the four airlines might have to consider stopping flying Sydney-Los Angeles pretty soon.

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JetAmerica delays launch, blames Newark

The story started last night, when Jaunted reported that startup airline JetAmerica would not let you book tickets in July on their website, even though their reported launch date is July 13. "There is a problem with our server," said a JetAmerica employee when Jaunted phoned the reservations number. "[The website] is only booking flights for August and September... IT says all should be fixed by end of day tomorrow." Cranky Flier, meanwhile, has warned potential passengers to stay away from JetAmerica, at least until they're in the air.

But just a little while ago, the airline released a press release that stated that it was "self-imposing a thirty one day delay of the launch of its first flights," which are now scheduled for August 14. JetAmerica said that "unforseen complications with landing and take-off time slots at Newark Liberty International Airport" were to blame for the delay.

"In February 2009, the Federal Aviation Administration advised us, through an intermediatiary, that our operations at Newark could be accommodated," said Brian Burling, JetAmerica's VP of Operations, in a press release. "However, at about the same time JetAmerica started making national news with its $9 non-stop fares; when JetAmerica announced 60,000 website visitors and sales in excess of 20,000, the FAA re-clarified its policy, telling JetAmerica we would need to obtain slots." He added, "The delay is not as unusal as it sounds... Historically, many of the world's most successful airlines and charter services have had to delay their launches."

“We feel terrible for the folks who booked with us for travel during the July 13 - August 13 timeframe, but the FAA's change in the slot policy for indirect air carriers is beyond our control," said CEO John Weikle. "We are working hard to obtain all the slots we need as soon as possible.”

According to the press release, the airline will also be e-mailing 6,486 passengers to alert them that their credit card accounts will be fully refunded, and that the refunds should appear "on e-statements within 7 to 14 days." The airline will also offer those inconvenienced passengers "special incentives to rebook on future flights," including waiving the $10 reservations 'convenience fee' and the seat assignment and first-checked piece of baggage fee. (Those who are affected can call 727-451-3970 for more information.)

Burling says that the airline has "no immediate plans to change our flight schedules," saying that "initially, JetAmerica planned to fly 34 weekly flight segments starting on July 13, 2009. On August 14, 2009 the number of flights is still slated to expand to 40 per week." And, as if to try to head off any ensuing negative press coverage, he said: "People should not be quick to jump to negative conclusions about JetAmerica. I am particularly referring to internet bloggers and naysayers who are predicting the worst."

Well, I'm not predicting the worst, but this means that JetAmerica's start is shaky at best. I'm no expert in airport slots, so I'm not sure if their excuse is plausible (I assume it is), or if JetAmerica is experiencing other problems, but blaming everything on 'server problems' and then switching to another explanation looks anything but professional. Weikle and Co. are going to have to put their damage control response into overtime to have to deal with this - and even if they do get in the air next month, it remains to be seen if passengers will continue to have confidence in the carrier.

Edit: In a statement to The Airline Blog, Toledo-Lucas County Port Authority CEO Michael J. Stolarczyk, had this to say about the delay: "We are disappointed to hear about this situation, and our first priority is with our customers here in Toledo. We need to embrace and support JetAmerica and we sincerely appreciate the support of our community. The Toledo-Lucas County Port Authority is also trying to mitigate their inconvenience as much as possible. We will see JetAmerica fly in August and beyond."

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Auf wiedersehen to Lufthansa's A300s

The last Lufthansa Airbus A300 flight flew earlier today, as the culmination of the airline's plans to phase out the 26-strong fleet. Lufthansa flight 3853, operated by aircraft D-AIAM, left Rome and arrived in Frankfurt shortly past 9:00am local time. The A300s have been a key part of Lufthansa's 'continental' fleet since 1987, and the airline used them extensively on inter-European routes. But the A300s got the axe as part of a cost-cutting plan that Lufthansa has implemented, which is expected to save €300 million ($420 million).

American Airlines, another big A300 operator, is also expected to retire the last of its A300s this year on August 24th. Those of you who have yet to fly on an A300 (myself included) might want to look at booking tickets before it's too late...

photo by eigjb on Flickr

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