A Delta Pilot's Japan Earthquake Story

Diverted aircraft parked at Yokota Air Base

Disclosure:  I didn't write this story but offer thanks to the Delta Pilot who shared his experience.

I'm currently still in one piece, writing from my room in the Narita crew hotel.

It's 8am. This is my inaugural trans-pacific trip as a brand new, recently checked out, international 767 Captain and it has been interesting, to say the least, so far. I've crossed the Atlantic three times so far so the ocean crossing procedures were familiar.

Everything was going fine until 100 miles out from Tokyo and in the descent for arrival. The first indication of any trouble was that Japan air traffic control started putting everyone into holding patterns. At first we thought it was usual congestion on arrival. Then we got a company data link message advising about the earthquake, followed by another stating Narita airport was temporarily closed for inspection and expected to open shortly (the company is always so positive).

From our perspective things were obviously looking a little different. The Japanese controller's anxiety level seemed quite high and he said expect "indefinite" holding time. No one would commit to a time frame on that so I got my copilot and relief pilot busy looking at divert stations and our fuel situation, which, after an ocean crossing is typically low.

It wasn't long, maybe ten minutes, before the first pilots started requesting diversions to other airports. Air Canada, American, United, etc. all reporting minimal fuel situations. I still had enough fuel for 1.5 to 2.0 hours of holding. Needless to say, the diverts started complicating the situation.

Japan air traffic control then announced Narita was closed indefinitely due to damage. Planes immediately started requesting arrivals into Haneada, near Tokyo, a half dozen JAL and western planes got clearance in that direction but then ATC announced Haenada had just closed. Uh oh! Now instead of just holding, we all had to start looking at more distant alternatives like Osaka, or Nagoya.

One bad thing about a large airliner is that you can't just be-pop into any little airport. We generally need lots of runway. With more planes piling in from both east and west, all needing a place to land and several now fuel critical ATC was getting over-whelmed. In the scramble, and without waiting for my fuel to get critical, I got my flight a clearance to head for Nagoya, fuel situation still okay. So far so good. A few minutes into heading that way, I was "ordered" by ATC to reverse course. Nagoya was saturated with traffic and unable to handle more planes (read- airport full). Ditto for Osaka.

With that statement, my situation went instantly from fuel okay, to fuel minimal considering we might have to divert a much farther distance. Multiply my situation by a dozen other aircraft all in the same boat, all making requests, demands and threats to ATC for clearances somewhere. Air Canada and then someone else went to "emergency" fuel situation. Planes started to heading for air force bases. The nearest to Tokyo was Yokoda AFB. I threw my hat in the ring for that initially. The answer - Yokoda closed! No more space.

Sendai Airport Tsunami Damage

By now it was a three ring circus in the cockpit, my copilot on the radios, me flying and making decisions and the relief copilot buried in the air charts trying to figure out where to go that was within range while data link messages were flying back and forth between us and company dispatch in Atlanta. I picked Misawa AFB at the north end of Honshu Island. We could get there with minimal fuel remaining. ATC was happy to get rid of us so we cleared out of the maelstrom of the Tokyo region. We heard ATC try to send planes toward Sendai, a small regional airport on the coast which was later the one I think that got flooded by a tsunami.

Atlanta dispatch then sent us a message asking if we could continue to Chitose airport on the Island of Hokkaido, north of Honshu. Other Delta planes were heading that way. More scrambling in the cockpit - check weather, check charts, check fuel, okay. We could still make it and not be going into a fuel critical situation ... if we had no other fuel delays. As we approached Misawa we got clearance to continue to Chitose. Critical decision thought process. Let's see - trying to help company - plane overflies perfectly good divert airport for one farther away...wonder how that will look in the safety report, if anything goes wrong.

Suddenly ATC comes up and gives us a vector to a fix well short of Chitose and tells us to standby for holding instructions. Nightmare realized. Situation rapidly deteriorating. After initially holding near Tokyo, starting a divert to Nagoya, reversing course back to Tokyo then to re-diverting north toward Misawa, all that happy fuel reserve that I had was vaporizing fast. My subsequent conversation, paraphrased of course...., went something like this:

"Sapparo Control - Delta XX requesting immediate clearance direct to Chitose, minimum fuel, unable hold."

"Negative Ghost-Rider, the Pattern is full" (every aviation story needs a top gun quote)

"Sapparo Control - make that - Delta XX declaring emergency, low fuel, proceeding direct Chitose"

"Roger Delta XX, understood, you are cleared direct to Chitose, contact Chitose approach....etc...."

Enough was enough, I had decided to preempt actually running critically low on fuel while in another indefinite holding pattern, especially after bypassing Misawa

As it was - we landed Chitose, safe, with at least 30 minutes of fuel remaining before reaching a "true" fuel emergency situation. That's always a good feeling, being safe. They taxied us off to some remote parking area where we shut down and watched a half dozen or more other airplanes come streaming in. In the end, Delta had two 747s, my 767 and another 767 and a 777 all on the ramp at Chitose.  We saw two American airlines planes, a United and two Air Canada as well. Not to mention several extra Al Nippon and Japan Air Lines planes.

Post-script - 9 hours later, Japan air lines finally got around to getting a boarding ladder to the plane where we were able to get off and clear customs. - that however, is another interesting story.

By the way - while writing this - I have felt four additional tremors that shook the hotel slightly - all in 45 minutes.

Cheers,

J.D.

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US Airways and Delta work out a trade

Some interesting news today - US Airways has announced that it is going to swap slots with Delta and get some international routes from them as well. Under the terms of the deal, which is still pending regulatory approval, US Airways gains 42 pairs of slots at Washington's Reagan Airport and will be able to start flying to Sao Paulo, Brazil from Charlotte and Tokyo from Phoenix. In return, Delta will get 125 pairs of slots at New York's LaGuardia airport.

US Airways was quick to point out that the slots that Delta is getting are currently being used by the US Airways Express operation, and that mainline US Airways service (including the Shuttle) won't be touched. Still, it's possible that mainline traffic could take a hit if there's less traffic being fed into LGA by the Express carriers, which will stop flying to 26 destinations from LaGuardia. And there will be around 300 layoffs at the airline's Piedmont regional subsidiary.

But the airline also gets some interesting assets in return. US Airways will start serving some major destinations from Washington DC (Cincinnati, Montreal, and Miami, among others) as well as smaller cities (Savannah, Pensacola, Ithaca, and more). The airline also noted that it would boost the number of seats that it flies to Washington by using "larger dual-class jets." And the deal also gives US Airways two key international routes. US Airways currently does not fly to Asia, and the airline has repeatedly delayed the start of Philadelphia-Beijing service. But Phoenix-Tokyo, which will be flown by Airbus A330s but not until 2012 at the earliest, would be a great way for the airline to offer another international connection at its western hub. US Airways will also launch Charlotte-Sao Paulo service next year.

Let's look at Delta, which already has significant domestic and international operations across town at JFK. The airline's press release notes that the airline will "build a hub operation at LaGuardia that will increase the number of customers served... without increasing congestion." It'll do the same thing that US Airways plans to do at Washington - operate larger planes. "In every slot where US Airways operates small turboprops today, Delta will operate larger jets," said Delta. "These new markets and larger aircraft would allow more than two million additional passengers to transit LaGuardia each year without increasing the total number of takeoffs and landings... Many small- and medium-sized communities throughout upstate New York and New England will benefit from service upgrades where Delta will operate larger regional and mainline jets."

The airline also plans to spend $40 million on a project to upgrade and rebrand the US Airways and Delta operations at LaGuardia, so it's clear that they're planning on making this a hub. At the same time, "Delta will continue to invest at its hub at New York's leading international airport, John F. Kennedy International," the airline said. So now the airline will be pursuing a rather interesting strategy of operation two hubs in the same city, one of which is primarily international and the other domestic. This could pose some interesting challenges; what happens to passengers seeking to connect between the two airports for an international or a domestic flight?

For more information, check out the US Airways press release here and the Delta release here.

photo by ChrisI1024 on Flickr

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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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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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jetBlue smokes competition in J.D. Power survey

The 2009 J.D. Power and Associates 2009 North American Airline Satisfaction Study was released earlier today, and jetBlue came out top, not just in the low-cost carrier group but overall, as well - for the fourth year in a row. For the 'traditional network carrier' category, Alaska topped the list for the second consecutive year. (Just to be clear, JD Power defines low-cost carriers as airlines that "operate single-cabin aircraft with typically lower fares," while 'traditional network carriers' "operate multicabin aircraft and use multiple airport hubs." It also considers AirTran to be an LCC, although it does operate multicabin aircraft.)

I spoke with Paula Sonkin, VP Travel and Real Estate at J.D. Power, who said that cost was the biggest influence for most passengers, and they've not been favorably impressed by the various sources of ancillary revenue (read: fees and charges) that the airlines have added recently. This, along with with declines in in-flight service, has led to overall customer satisfaction with airlines this year on the decline for the third straight year, reaching a four-year low (ouch). The only airline that improved its position versus last year was Southwest.

That's not to say that everything is gloom and doom, however. Sonkin pointed out that the airlines that did well - for example, Alaska, which was 4th place in 2007 and rose to 1st last year - did so because they focused on improving the things that were in their control. Fuel prices, a weak economy - those things can't be changed, and the things that occur as a result (such as increased fees and lowered employee morale, which can lead to poorer service) can be expected, if not necessarily liked. But Alaska really made strides because it improved its pre-flight process - that is, its website, the ticket booking process, and especially the check-in process, which the airline made faster and friendlier. Also on the plus side, passenger-reported flight delays and check-in times were reduced, and the general on-time arrival rate went up by more than 5% versus last year. “Despite the economic stresses that airlines are under, they are recognizing the value of passengers’ time and trying to make air travel more expedient and efficient,” said Dale Haines, senior director of the travel practice at J.D. Power. “Unfortunately, any improvements in customer satisfaction are being offset by passenger displeasure with cutbacks on in-flight services, increases in fees and issues with the helpfulness and courtesy of flight crews.”

jetBlue did very well, especially in the aircraft category (of course, flying a bunch of relatively new planes with in-flight TV might help), although Southwest really managed to place a strong second place (tied with WestJet), and the trend is that the airline is closing the gap with jetBlue. All of the airlines were scored on a 1000 point scale, and interestingly, even the lowest-ranked low-cost carrier (AirTran) still managed to beat the top-ranked traditional network carrier (see charts below). Delta and Continental performed adequately for the network carriers, with US Airways (haven't they branded themselves an LCC?) coming in dead last - maybe it was that whole experiment with charging $2 for drinks that really did them in. For the full results, head over to J.D. Power.

photo by MHJohnston from Flickr, licensed under the Creative Commons

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US Airways CEO: Consolidation needed

It seems like a few years can't go by without US Airways CEO Doug Parker talking about a merger. Parker came over from America West Airlines when it merged with US Airways in 2005, and by the end of 2006 had made a hostile bid for Delta. That fell through pretty quickly, but didn't put an end to speculation that Parker would be interested in shopping his airline around or looking to combine it with another. Back in April 2008 Parker mentioned in a letter to employees that the airline would merge if the time was right, and yesterday, addressing the company's annual meeting in New York, he said that further consolidation was much needed in the airline industry.

"The industry continues to be far too fragmented... The result is far too many hubs across the nation and far too many seats competing for those same passengers," Parker said. He also stated that the Delta-Northwest merger was a good thing, since it went pretty far in helping to simplify the industry, but that it wasn't enough: the industry needs to get smaller if it wants to become profitable.

Who could US Airways potentially merge with? The first option that people seem to mention is United. The airlines tried to merge back in 2000, but this was rejected on antitrust grounds; United and US Airways talked last year about a merger once again, but this time United walked away. Nothing has been ruled out between the two airlines in the future, though. American could be a good fit for the airline, too. And even if US Airways doesn't end up merging, the fact remains that capacity needs to be further cut for airlines to stay afloat during these tough economic times.

photo by matt.hintsa from Flickr, licensed under the Creative Commons

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Delta president: bankruptcy was a good thing

photo by Drewski2112

At a recent gathering of the Detroit Regional Chamber's Mackinac Policy Conference, Delta Air Lines president Ed Bastian said that Chapter 11 bankruptcy was a good thing for the newly merged Delta and Northwest, according to a Detroit Free Press article. "Bankruptcy worked for our companies... Now we stand as the strongest airline in the United States and the largest in the world," he said.

Yes, in terms of financial performance, bankruptcy did indeed 'work' for Delta. Just a few years ago Delta was struggling with high labor costs (some pilots at the airline were paid as much as $300,000), high fuel prices, and Song, a low-cost offshoot set up in 2003 to compete with jetBlue that ultimately failed three years later. It filed for bankruptcy in September 2005 and emerged in April 2007 a much stronger carrier, having cut labor costs and restructuring its route network, expanding its list of international destinations. And the merger with Northwest was well-timed and well-executed, with the airlines' route networks containing little overlap.

So even though Delta might be in a relatively strong position, I'm willing to bet that many of its employees have less-than-fond memories of the Chapter 11 process - recent grumblings over executive compensation being proof.

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Delta CEO: Goal of no layoffs

photo by sainz

Here's an interesting paragraph from an article in yesterday's Atlanta Business Chronicle:

Anderson credited employee for hard work despite an adverse economy, and said the carrier retains the goal of having no frontline layoffs. Delta and Northwest have offered buyout and early retirement packages to thousands over the past year, and officials have said 2,500 employees will leave the combined carrier after the busy summer travel season. “We just have to do our very best and work very hard,” Anderson said.

That's right! No 'frontline' layoffs at Delta, according to the CEO - except that that doesn't include Delta's wholly-owned regional subsidiary Comair, which has cut jobs through 'attrition' this past February. So, no layoffs? Well, maybe if you work for Delta mainline, but if you don't...

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Air France and Delta finalize joint venture

A Boeing 777 in Air France's new livery. Photo courtesy Air France

Air France/KLM and Delta yesterday put the finishing touches on a $12 billion-a-year joint venture deal that would allow them to operate as a single carrier on North Atlantic routes. The pact extends a previous joint venture that KLM and Northwest have had since 1997. Air France merged with KLM in 2004, and Delta recently took over Northwest, allowing for a four-way alliance (all are already members of the SkyTeam alliance).

The deal is a revenue- and profit-sharing venture, and will have antitrust immunity (something that American and British Airways are seeking right now). It affects more than 200 daily transatlantic flights to over 400 destinations in Europe and North America, or around 27% of total trans-Atlantic capacity. It also allows them to more effectively combine operations. For example, if both Delta and Air France have a flight from New York to Paris, but both flights are only 1/3 full, they can be combined and flown on one aircraft. Marketing, pricing, and ticketing will also be shared, and these result in very impressive cost savings (about $150 million per airline).

As previously mentioned, American, Iberia and British Airways in the oneworld alliance and United, Lufthansa (and soon Continental) in the Star Alliance are working on similar deals. This means that airlines without an alliance affiliation - like Virgin Atlantic - might suffer as a result. And while this means that Air France and Delta are cooperating even more closely, they can't actually merge - under US law, a foreign company can't own more than 25% of a US airline, although this rule might end in the future.

Some slides from the Air France/Delta news conference in Paris on Wednesday:

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Virgin America's top 10 requested cities

photo by Johnny Vulkan

Virgin America recently released a list of the ten cities that are most requested for new VA service. The survey is still up, so if you don't see your preferred route listed below, you can still vote.

1. SFO- Chicago
2. SFO- Honolulu
3. SFO- Miami
4. LAX- Miami
5. SFO- Portland
6. LAX- Chicago
7. SFO- Phoenix
8. JFK- Miami
9. SFO- Denver
10. LAX- Portland

Many of these routes are currently flown only by a few legacy carriers. The San Francisco - Chicago and Los Angeles - Chicago routes, for example, are currently flown only by United and American. JFK - Miami is flown only by American and Delta, and American has a monopoly on the San Francisco - Miami and Los Angeles - Miami routes. Even though Virgin America would certainly be taking a risk by flying into the fortress hubs of legacy carriers (United in Chicago, American in Miami, etc.), their relatively premium product would probably attract quite a few unsatisfied AA and UA customers. Those are the routes (LAX-MIA, SFO-ORD) that would be best for Virgin America to fly, especially as they would avoid head-to-head competition with other low cost carriers (i.e. Frontier on SFO-DEN).

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Continental gets approval to join Star Alliance

photo by bribriTO

Continental Airlines yesterday received a tentative OK to join Star Alliance, although the US Department of Transportation will require Continental, United, Air Canada and Lufthansa to release an 'annual report' on the alliance. Star Alliance is already by far the largest airline alliance, and the addition of Continental just makes it even bigger. As such, the US government has expressed concern about the impact on competition - and so has Delta, Continental's current partner in the SkyTeam alliance, which has complained that the impact on US domestic routes would be too large, given that United and US Airways are already members.

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Delta and Northwest announce merger

It's official: the long-anticipated merger of Delta Air Lines and Northwest Airlines has finally been announced. The combined carrier - already billed as "America's premier global airline", will be known as Delta and will be based in Atlanta. Delta CEO Richard Anderson would head up the new airline.

A press release by the airline touted the benefits of the merger; it "creates a company with a more resilient business model that is better able to withstand volatile fuel prices than either can on a standalone basis." The release went on to say that "the merged airline will maintain all hubs at Atlanta, Cincinnati, Detroit, Memphis, Minneapolis/St. Paul, New York-JFK, Salt Lake City, Amsterdam and Tokyo-Narita... Delta customers will benefit from Northwest’s extensive service to Asian markets and Northwest’s customers will have access to Delta’s strengths across the Caribbean, Latin America, Europe, the Middle East and Africa."

Of course, the merger still needs to clear regulatory hurdles, and there's always the issue of the pilots at both airlines, which haven't yet agreed on seniority. But if the merger goes off successfully, it will create the world's largest airline. Also, keep a look out for a United-Continental merger, which has been rumored to occur if a Delta-Northwest merger was announced - it could be announced very soon. (Although United has favored a merger for some time, Continental has said it would consider it only if a Delta-Northwest deal went through.) More details of the Delta-Northwest deal will be revealed tomorrow at a press conference featuring both CEOs in New York, but until then, check out the website that Delta set up about the merger.

I've also posted below the internal memo sent out to employees today at Delta, which sheds a bit more light on the merger process (click on the images to view them at full size):

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American, Delta inspect MD-80s

photo by Kevin Boydston

American Airlines yesterday announced that it was canceling 300 flights on Wednesday in order to inspect wiring covers in its 300-strong MD-80 fleet, with an American spokesperson calling the move an "abundance of caution" by the airline. Later in the day, Delta also said that it would voluntarily reinspect 117 of its MD-88s as well as 16 MD-90s. Delta said that as of last night, it had not found any problems, but the airline was nonetheless forced to cancel about 325 flights yesterday, with a few more following today.

Other airlines flying the MD-80 also reviewed their fleets as well: Allegiant Air said that it reviewed its 35 MD-80s without needed to cancel flights; a spokesperson for Alaska Airlines said that its 10-strong fleet of MD-80s operated "normally".

The checks come at a time when airlines are scrambling to comply with FAA audits and safety directives. Earlier in the month, the agency fined Southwest Airlines $10.2 million for flying 46 of its Boeing 737s without proper safety checks. American Eagle grounded 25 CRJs last week in order to double-check inspection papers on the hydraulic systems and rudders.

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Delta-Northwest, United-Continental mergers soon?

photo by Cubbie_n_Vegas

The Wall Street Journal is reporting that a merger deal between Delta Air Lines and Northwest Airlines could happen as soon as next week. Talks between the two were previously strained as the senior management of both carriers disagreed over whom would keep high-ranking management positions, but they have since come to an agreement.

As a result of Delta and Northwest's merger potential, merger discussions between United Airlines and Continental Airlines have also reportedly "grown more serious," said the article. United has proposed a merger with Continental before and has been turned down, but if Delta and Northwest announce a deal, Continental could change its mind very quickly and agree to merge with United, which has been actively looking for a merger partner for some time now.

An interesting point in all of these merger talks is Northwest's so-called "golden share" in Continental. This is basically some preferred stock that allows Northwest to abort a merger between Continental and another carrier. If Northwest and Delta do merger, however, Continental has the option to acquire the "golden share" for $100. Continental would be able to get the stock even if the Northwest-Delta deal later falls through.

The mergers raise a lot of inevitable questions - what types of aircraft will the combined operations operate (what will happen to Northwest's A330s)? Which hubs will stay open and which will close or be downscaled (Memphis, Cincinnati, etc.)? What international routes will be dropped or added? It's most likely that the answers to these questions will be worked out before the merger is announced (after all, it would be pretty stupid to merge first and then tackle those problems). As always, lots of things could happen. American Airlines, which is being left out of all of the "merger madness" at present, could intervene somehow. Labor unions or antitrust regulators could always prevent these mergers from going through (and with the size of these airlines, any mergers would get a high amount of scrutiny from the antitrust folks).

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Delta moves toward merger talks with United, Northwest

photo by Franco Folini
Publish Post

Delta Air Lines, which has reportedly been interested in a merger for some time now, has requested permission from its board to start "formal" merger discussions with United Airlines and Northwest Airlines soon, with a plan to choose one of the airlines with which to merge.

In the last few years, Delta has carried opposing views on mergers: it exited Chapter 11 bankruptcy last year after successfully fighting off a hostile takeover proposal from US Airways. But soon after leaving bankruptcy, it started exploring its merger options, and has been the target of merger rumors before (such as this past November, with United Airlines). And with a stagnant economy and oil prices at nearly $100 a barrel, mergers might help relieve some of the pressure that the US airline industry is feeling right now.

A Delta-Northwest or Delta-United deal would probably create the world's largest airline (currently American). So which airline could it be? Back in November, Northwest was (and still is) seen as the most likely candidate, because the route structures of the two airlines has less overlap. And Delta CEO Richard Anderson has ties with Northwest, having worked there for 14 years and ultimately rising to the rank of Northwest CEO. But the main problem with a Delta-Northwest tie-up is the fact that two hubs - Delta's Cincinnati and Northwest's Memphis - would probably be shut down, due to their close proximity to each other. This might create trouble from both unions and politicians.

The possibility of a combined Delta-United has been raised before, and United management has been advocating industry consolidation for quite some time. But it will be some time before any merger plans become concrete, and even then, they can still fall apart quite easily. But this time, it appears that the unions - at least at Delta - are more supportive of the merger idea than they have been in the past. Lee Moak, chairman of the Delta pilot's union, said in a letter that “consolidation may indeed be at our door... We do not oppose consolidation, and may even determine that consolidation is desirable.”

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British Airways launches OpenSkies

Although it’s no secret that British Airways has been looking to expand in the transatlantic market, the airline made an announcement yesterday that it is starting an “airline within an airline”. OpenSkies, as the new entity is called, will start flying in June with a single Boeing 757-200 from New York to either Paris or Brussels. Another 757 is planned to join the fleet later this year, with six aircraft in all by 2009. In a statement, Willie Walsh, BA CEO, said that "by naming the airline OpenSkies, we're celebrating the first major step in 60 years towards a liberalized US/EU aviation market which means we can fly between any US and EU destination”. Future cities will probably include Milan, Frankfurt, Amsterdam, and Madrid.

This is a smart move on BA’s part – the Open Skies agreement signed between the US and the EU would add a lot of pressure at BA’s London Heathrow hub. Currently, only United Airlines, American Airlines, BA, and Virgin Atlantic can fly from the US into Heathrow, but this is expected to change soon as more US carriers add the airport. It’s also a smart idea that British Airways decided to buck the “premium transatlantic” trend that pushed MaxJet into bankruptcy last month – OpenSkies will have business class, premium economy, and economy class (each with 24, 28 and 30 seats, respectively). But BA isn’t alone in this area – British carrier bmi, Delta Air Lines, and Air France/KLM are all expected to follow suit with Heathrow-US routes.

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Forbes: America's Worst Airlines

photo courtesy of tizzie

Forbes magazine recently released a list of the country's "Worst Airlines", based upon flight delays, lost bags and cancellations. ASA came in worst, although Forbes noted that air traffic control is more likely to delay flights with fewer passengers, and because ASA flies smaller jets, they're more prone to being delayed. And weather was also a factor - several storms at Dallas affected American Eagle's performance, and Comair, which has a large presence in the Northeast, is also affected by severe weather. (Note that Hawaiian Airlines and Aloha Air aren't listed on the 'worst 10' - in fact, they're near the top for on-time performance, mostly due to a lack of severe weather.)

1. Atlantic Southeast Airlines: On-time performance: 63.3% (worst), Baggage mishandling: 16.9 per 1,000 passengers (worst), Cancellations: 4.4% (second worst)
2. Comair: On-time performance: 66.6% (second worst), Baggage mishandling: 11.9 per 1,000 passengers (third), Cancellations: 5.4% (worst)
3. American Eagle: On-time performance: 69% (fourth worst), Baggage mishandling: 13.5 per 1,000 passengers (second), Cancellations: 4.4% (third)
4. Mesa Airlines: On-time performance: 72.5% (seventh worst), Baggage mishandling: 10.1 per 1,000 passengers (fourth), Cancellations: 2.7% (sixth)
5. ExpressJet Airlines: On-time performance: 73% (ninth worst), Baggage mishandling: 8.9 per 1,000 passengers (fifth), Cancellation rating: 3.4% (fourth)
6. US Airways: On-time performance: 68.3% (third worst), Baggage mishandling: 8.6 per 1,000 passengers (seventh), Cancellations: 1.9% (ninth)
7. American Airlines: On-time performance: 69.9% (fifth worst), Baggage mishandling: 5.8 per 1,000 passengers (11th), Cancellations: 2.0% (eighth)
8. United Airlines: On-time performance: 72.4% (sixth worst), Baggage mishandling: 5.4 per 1,000 passengers (12th), Cancellations: 2.1% (seventh)
9. Delta Airlines: On-time performance: 75% (fifth worst), Baggage mishandling: 6.6 per 1,000 passengers (eighth), Cancellations: 1.5% (13th)
10. Alaska Airlines: On-time performance: 72.8% (eighth worst), Baggage mishandling: 6.6 per 1,000 passengers (ninth), Cancellations: 1.2% (15th)

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US carriers look for more US-China routes

Several US airlines are pushing for more nonstop routes between the US and China, beginning in March 2009. And they're also going straight to the customer for help - most of them have designed separate websites highlighting their bids and are asking fliers to help out by signing petitions that will be presented to the Department of Transportation. Here are the airlines:

• American Airlines filed an application on Monday to start nonstop Chicago O'Hare - Beijing service, to start on March 25, 2009. (This isn't the first time American has tried to do this - a few months ago it filed a similar petition but failed because it couldn't agree with its pilots on work rules for the rather long flights.)
• Continental Airlines wants to fly between Newark and Shanghai starting on March 25, 2009.
• Delta Air Lines applied for Atlanta-Beijing and Atlanta-Shanghai service.
• MAXjet quietly filed for Seattle-Shanghai service, with a continuing flight from Seattle to Los Angeles.
  
• Northwest Airlines wants to fly Detroit-Beijing and Detroit-Shanghai.
  
• United Airlines is seeking San Francisco-Guangzhou service in 2008 and Los Angeles-Shanghai service in 2009.
• US Airways has proposed flying between Philadelphia and Beijing.

The Department of Transportation can only allow one new airline to enter the US-China nonstop market each year. Currently, all of the above airlines except Delta, MAXjet and US Airways serve China nonstop - a fact that might give them a bit of a competitive edge. My prediction: the Continental and Delta proposals will pass, mostly because there isn't any New York area-Shanghai service and Atlanta/the southeastern US are also underserved when it comes to nonstop US-China flights. United Airlines will also probably get at least one of their routes, too.

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A big change for Delta, indeed

Well, it's certainly been a long road for Delta, but only three months after exiting Chapter 11 bankruptcy, it has posted a $1.8 billion profit.

"Delta’s emergence from bankruptcy was a significant milestone in the history of the company and the airline industry,” said Gerald Grinstein, Delta’s chief executive officer, in a press release today. “In delivering the kind of outstanding financial, operational and customer service results we saw this quarter, it is clear Delta people at every level are producing a strong airline with a bright future.”

Delta's profit is even more amazing when compared to the airline's financial performance this time last year (it posted a $2.2 billion loss). Not counting bankruptcy-related costs, profits came out to 70 cents a share - much better than the 59 cents per share that analysts had predicted.

We'll see how United and Northwest, two carriers that have also gone through long, hard bankruptcy processes, have performed financially when they release their second quarter results (on the 24th and the 30th of the month, respectively).

And now for a bit of an editoral. Recently I've noticed that it doesn't seem like United or Northwest are announcing their bankruptcy exits the way that Delta has. Its 'Change the Experience' website allows travelers to suggest ways to improve Delta (or so the website says), and touts such things as its "Clean Campaign". The airline has also run television and print advertisements announcing its 'change'. It also put up a 'Today is a new day' banner on its website following its exit from bankruptcy.


I'm not sure if this effort is having any impact with the flying public, but it probably wouldn't hurt Northwest and United if they did the same thing. After all, Chapter 11 bankruptcy - even if it doesn't really affect the day-to-day operations of an airline - can have a negative effect on the average flyer. So when you exit bankruptcy, be sure to announce it as much as you can. Delta's done a pretty good job of it, and their agressive PR campaign, combined with the latest posted profit, will probably continue to improve the airline's image. (Oh, and the fact that the CEO is giving up a lot of his pay to a fund for employees - that might help employee morale a bit, and morale, good or bad, is something that affects the flying experience.)

To be fair, Northwest has announced its exit as well. In the July 2007 copy of WorldTraveler, its inflight magazine, President and CEO Doug Steenland penned a letter entitled 'A New Day at NWA, along with a link to the "NWA Moments" photo gallery on Flickr. And United did release a Hemispheres magazine article highlighting the changes it underwent during restructuring. But whether United and Northwest can genuinely 'change' (and whether Delta's 'change' extends beyond a slick PR campaign) remains to be seen.

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United: still looking to merge

United Airlines CFO Jake Brace recently said that his airline is still looking for a merger partner. He recently said that there are still airlines that United could merge with, but that it isn't looking to do a hostile take-over. He said that "consolidation is not something that one company can do in isolation. We don't believe that ... hostiles in the airline industry are very successful. Our belief is that you have to do something on a consensual basis." Evidently he was referring to the failed US Airways hostile takeover attempt of Delta.

Brace also said what United was looking for in a merger partner:

• an airline with a strong Atlantic network (like Continental or Delta). This is one of United's weaker areas.
• an airline with a southern hub (like Delta) so that it can increase its presence in the Caribbean and Latin America, which is its other main 'weaker area'.
• an airline with a strong northeast presence (like Continental, US Airways, and to a lesser extent, Delta)

United has long called for increased consolidation within the industry, but hasn't really been specific in saying which airline would be a best fit. Both Continental and Delta have been rumored to be serious possibilities, and United actually contacted Delta back in 2005 about a merger. (Delta declined.) Delta seems, at this point, the most likely candidate - it has one of the strongest Atlantic networks, it has a southern hub (at Atlanta), and it has a pretty good northeast presence. Of course, other airlines are fair game, too - and until United management announces which airline it's interested in, we probably won't know for sure.

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