Is US Airways the 'ugly girl'?

flickr photo by Caleb's Photography

It's been posted elsewhere already, but in case you haven't heard, Continental CEO Jeff Smisek got in a little hot water after referring to US Airways, in decidedly un-diplomatic language, as an 'ugly girl.' “I recognized that United was the best partner for Continental, and I didn’t want to marry the ugly girl; I wanted to marry the pretty one,” he said.

A bad choice of words, no doubt. Smisek evidently apologized to US Airways CEO Doug Parker, who called the words "chauvinistic and offensive." "Jeff sent me an apology, stating that he “got carried away in the moment,” “really felt badly” and “had no good excuse.” I believe Jeff was sincere in his apology, have accepted it on behalf of all of us and am ready to move past it," Parker wrote in a letter to US Airways employees (you can read the whole thing at the end of the post).

Parker also defends US Airways' performance in the letter, pointing out that his airline's profit margins, on-time performance, and stock performance were all better than Continental's recently. But why did United, which had recently considered a merger with US Airways, ultimately choose Continental instead? Why did US Airways get dumped? Two things to keep in mind, according to Parker:

1. United chose Continental because it has "dominant positions in major business markets like Newark and Houston that allow them to collect even higher revenues than we can with our network," which is presumably more leisure-based.
   
2. Even if US Airways did get dumped, it doesn't mean that it isn't a "valuable standalone company" with "strong" prospects.
   

In closing, Parker notes that he's "looking forward to aggressively competing against the new United Airlines – and winning." He has effectively shrugged off the 'ugly girl' remark, and done so in a professional and detailed manner. But could US Airways be considered the 'ugly girl'? Here's the text:

May 4, 2010

Fellow Employees:

A number of you have contacted me asking about Continental CEO Jeff Smisek’s “ugly girl” comment yesterday. In case you haven’t seen it, when announcing their plans to merge with United Airlines yesterday, Mr. Smisek said, “I didn’t want him (United CEO Glenn Tilton) to marry the ugly girl. I wanted him to marry the pretty one.” The ugly girl was a clear reference to US Airways. Like me, many of you found his comment both chauvinistic and offensive to the hard-working people of US Airways.

First, you should know that Jeff sent me an apology, stating that he “got carried away in the moment,” “really felt badly” and “had no good excuse.” I believe Jeff was sincere in his apology, have accepted it on behalf of all of us and am ready to move past it.

Having said that, the emails I’ve received from many of you suggest this comment hit a nerve so I wanted to give you my views. As one of you simply put it, “Why are we the ugly girl?” The answer, of course, is we are not and there’s no better evidence of that than our recent performance.

In fact, we are performing better than Continental on almost all of the important metrics of our business. Financially, we each reported first quarter financial results in the past two weeks, and while we both lost money, we both lost much less than last year. However, US Airways’ rate of improvement was much better than Continental’s driven by both higher revenue growth and better cost control. On an absolute basis, our profit margins are now higher than Continental’s.

Operationally, we’re performing much better than Continental in the primary customer service metric of on-time performance. US Airways jets arrived on-time more often than Continental’s during the first quarter 2010, and we also outperformed them in on-time during all of 2009 and 2008. We are also now neck and neck with Continental in areas like baggage and complaints.
This is all being noticed by the outside world, as US Airways stock price is up 42 percent so far this year, while Continental’s is up 15 percent, even after announcing their merger.

Bottom line, I think both of our airlines are doing a great job in a challenging business – but if I were them I wouldn’t be pointing fingers.

So why did United choose to merge with Continental rather than US if we’re performing better financially and operationally than they are today? I think the answer is straightforward and one we’ve discussed many times – while we have a strong route network centered around PHL, CLT, PHX, DCA and the Shuttle, Continental has dominant positions in major business markets like Newark and Houston that allow them to collect even higher revenues than we can with our network. United preferred that network to ours and while we may disagree with that decision, it was United’s to make and we need to respect it and move on.

None of this means we don’t have a valuable standalone company. To the contrary, we’re producing better standalone results than our peers like Continental. We announced last week that we expect to report a profit in the current quarter of this year, which is further evidence of our standalone value. As consolidation makes our industry less fragmented and more efficient, our standalone prospects will only become stronger.

As we move forward, let’s not worry about the words of our competitors – no matter how inappropriate they may be – but rather let’s continue to show the world what we can accomplish by working together and performing our jobs in a professional and focused manner.

Thanks so much for your commitment to US Airways. I’m proud to be a part of your team and am looking forward to aggressively competing against the new United Airlines – and winning — for many years to come.


Doug

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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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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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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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Continental to join Star, link with United

photo by sea turtle

Even after merger talks between United and Continental fell through a few months ago, the two airlines are still interested in cooperating - yesterday, they announced plans to start codesharing and for Continental to join Star Alliance, of which United is a member. According to an email sent out to Mileage Plus members, United expects the deal to start sometime in 2009.

It remains to be seen what this means for US Airways, which has been a Star member for a few years now. It's possible that it could remain in Star, but having three US airlines in the same alliance could lead to some overlap.

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US Airways CEO mentions mergers

photo by caribb

In a letter sent to employees yesterday, US Airways CEO Doug Parker said that "airlines are going to have to make dramatic changes" if they want to survive. Although he said that he couldn't "comment on any specific discussions or transaction," he said that the media have suggested that US Airways is in merger talks with United and that American would make a good match as well. "Rest assured," said Parker, "if US Airways chooses to participate in any industry consolidation, we will do so because we believe it is the best interests of our employees and our airline."

Would US Airways be a good match for United, which has been seeking out merger partners? They already code-share (a benefit that the Delta/Northwest combination has), and US Airways has a strong presence in the Northeast and Southeast (two areas where United's route structure is weaker). But I don't see US Airways' route network as being as much of a plus for an airline like United, which needs more international routes. Of the six largest legacy carriers, US Airways has the smallest international route network. United might prefer a rumored merger with Continental to one with US Airways.

US Airways still has problems of its own, too, from its last merger (between US Airways and America West). And let's not forget that the last time United and US Airways tried to merge, it was rejected by the Justice Department on anti-trust grounds.

By the way, here's the original message sent out by Parker (posted on the US Aviation boards):

From: Corporate Communications
Sent: Wednesday, April 16, 2008 8:36 AM
To: Corporate Communications
Subject: USNews Now: An Important Message from CEO Doug Parker
Importance: High

An Important Message from CEO Doug Parker

April 16, 2008

Dear Fellow Employees,

With the recent news of a potential Delta/Northwest merger, analysts and media are speculating about the next potential combination. While we had hoped to remain on the sidelines of this speculation, today’s Wall Street Journal suggests we may be in merger talks with United and another article in the Dallas Morning News suggests we might make a good merger partner for American.

While I can’t comment on any specific discussions or transaction I certainly didn’t want you to hear this speculation without hearing directly from me about what this might mean for US Airways.

Most of you know my views on consolidation and those have not changed. Our industry is far too fragmented and consolidation, if done properly, could result in a much healthier industry which would be good for our employees, our customers and the communities we serve. Rest assured if US Airways chooses to participate in any industry consolidation, we will do so because we believe it is the best interests of our employees and our airline.

Despite all of the challenges of merging two airlines, we are a much stronger company today as a result of the merger of US Airways and America West. We posted the highest pre-tax margin of the big six airlines in 2006 and even with our operational challenges we posted the second highest pre-tax margin in 2007.

And we have an improving airline. We’ve made great strides with our operational improvement plan, including top three performances in on-time arrivals for three consecutive months. As we continue through 2008, we feel extremely good about our ability to continue to improve our operational performance relative to the industry.

But we can't ignore what's happening in the world around us. Oil has risen to over $113 per barrel and Wall Street is anticipating a recession that, if it happens, will lower all airline revenues. And the DL/NW combination potentially creates a formidable competitor. In that world, all airlines are going to have to make dramatic changes to their existing business models in order to be viable.

I know airline merger speculation can be distracting so for now, I encourage all of us to remain focused on running a great airline. Our work on the reliability, convenience and appearance initiatives continues and we are running an extremely reliable airline as a result. Whatever we do, we will always take great care to ensure the path we choose returns value to our shareholders and customers, and also provides long-term stability for our employees.

Thanks for all you do for our customers and keep up the great work.

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US Airways to start charging for bags

photo by Typophiles

Less than a month after United Airlines announced that it would be charging most passengers $25 to check a second bag, US Airways has announced that it would do the same, starting on May 1. US Airways claims that higher fuel costs are partly to blame and said that this new luggage fee will give the airline $100 million in additional revenue. It's a sign that the à-la-carte baggage trend is continuing throughout the major carriers - it's not unreasonable to say that by summer, virtually all of the majors will have adopted this fee.

And speaking of US Airways, the airline has been seeing some labor strife recently. Unions unveiled a 30-foot rat outside of the airline's headquarters, which supposedly symbolizes US Airways management. And CEO Doug Parker said that "our industry is in a mess, if you haven't noticed... we're about to head into what looks like another downturn."

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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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Lufthansa to buy stake in jetBlue

jetBlue announced earlier today that Lufthansa would "make a minority equity investment" in jetBlue. The agreement between the two airlines states that Lufthansa will buy about 42 million newly issued shares of jetBlue (19% of the airline) at $7.27 a share, about $300 million. Lufthansa would also get a seat on jetBlue's Board of Directors. (Per US law, Lufthansa would be limited to under 25% voting rights.)

Lufthansa CEO Wolfgang Mayrhuber said that Lufthansa was "very pleased to become an investor in JetBlue" and that "this investment presents Lufthansa with a compelling opportunity to invest in the U.S. point-to-point carrier market as the industry continues to evolve." Dave Barger, jetBlue CEO, was pleased with "this significant endorsement of JetBlue's franchise from one of the most respected leaders in global aviation" and said that the investment "will also improve our balance sheet and give us greater financial flexibility as we move into 2008."

In a conference call this afternoon, it was revealed that Lufthansa was the one that approached jetBlue (sometime during the late summer). The deal should close sometime during the first quarter in 2008. This seems to have been the right time for Lufthansa to move in for a deal; shares of jetBlue are relatively cheap at the moment, and the airline could use some extra cash. jetBlue has had some trouble over the past years with high oil prices and increased competition (especially now that Virgin America's competing in the transcontinental market). Shares of jetBlue have fallen by half since last February's mess at JFK involving passengers stranded on planes for several hours, an event which damaged the airline's reputation. In addition, with the low value of the dollar versus the euro, Lufthansa's getting a pretty good bargain.

As of now, the two airlines haven't said that they would cooperate in any areas other than "operation cooperation". No code-share deal was announced, either, and besides, jetBlue's reservation system doesn't allow for code-sharing (at least not yet). If the airlines were to integrate schedules, Lufthansa would certainly benefit from US domestic feed at JFK. Then again, Lufthansa's premium passengers might not want to go from Lufthansa's premium classes of service to jetBlue's all-economy service (even if they do have DirecTV).

But there are still a few unanswered questions. Lufthansa is close partners with United Airlines and US Airways, all three of which are Star Alliance members. It's unknown if Lufthansa's US partners had any say-so in the deal or not, or what the potential ramifications of the deal are for the two. And there's no word yet if this could eventually lead to jetBlue becoming a Star Alliance member. United has been rumored to be interested in jetBlue as a potential merger partner, and if Lufthansa were to increase their stake to 25% and if United were to buy 26%, then the two airlines would have a controlling interest in jetBlue. Right now Lufthansa is limited to 25% ownership, like all foreign carriers, but if this cap is lifted (and with the Open Skies deal announced earlier this year, it might be soon), then Lufthansa might eventually purchase a controlling stake in jetBlue.

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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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Paris Air Show: Day 1

The 47th Annual Paris Air Show opened earlier today in Le Bourget, France. The Air Show is a place where many airlines announce orders for airplanes from the major manufacturers like Boeing and Airbus, and this year, the main focus is on two airplanes in particular: the 787 and the A350. Here are the highlights of the first day's events. This post will also be updated throughout the day - check back later! (Pictures are courtesy of Boeing and Airbus.)

GECAS orders Boeing 777 freighters
GECAS (GE Commercial Finance) announced an order for six Boeing 777 Freighters, although GECAS could substitute some of them for passenger models in the future, if desired. The order is valued at $1.42 billion at list prices (keep in mind that for the majority of these large orders, there's usually a discount).

Lion Air orders Boeing 737-900ER
Indonesian carrier Lion Air announced an order for 40 more Boeing 737-900ER airplanes, an order valued at over $3 billion in list prices. Lion Air now has 100 total orders for the 737-900ER.

Akbar Al-Baker, CEO Qatar Airways, and Louis Gallois, CEO Airbus

Qatar Airways orders 80 A350s, 3 more A380s
Qatar has ordered 80 A350 'XWB' planes and an addition three A380s, meaning that they now have five A380s on order. The A350 order is broken up into 20 of the -800, 40 of the -900, and 20 of the -1000 varieties. Deliveries, according to Airbus, will begin in 2013. This order was a key one for Airbus, whose A350 has been slipping behind the Boeing 787 in terms of orders.

Chairman of Emirates Group Sheikh Ahmed Bin Saeed Al Maktoum and Gallois

Emirates orders 8 more A380s
Dubai-based Emirates has agreed to buy eight more A380s. A launch customer for the type, Emirates has the largest number of A380s on order, with 55. “It gives us a great sense of pride that Emirates Airline are showing such faith in our A380 product and in Airbus," said Airbus chief Louis Gallois. "We thank Emirates Airlines for this."

Jazeera Airways orders 30 A320s
Kuwait-based Jazeera has ordered 30 Airbus A320 aircraft, bringing the number of A320s it has on order up to 40.

US Airways increased A350 order, announces 'fleet renewal'
US Airways has announced that it will buy 92 Airbus aircraft for its fleet renewal in the future. The order is comprised of 22 A350-800s, 10 A330-200s, and 60 A320 family airplanes (a mixture of A319s, A320s and A321s). This is a sign that US Airways is committed to operating a predominantly Airbus fleet - it already operates 205 Airbus aircraft.

Nouvelair orders 2 A320s
Tunisian charter carrier Nouvelair has ordered 2 A320s, complementing the fleet of thirteen A320 airplanes (A320s and A321s) that it already has.

GECAS orders 60 A320 family airplanes
GECAS, which earlier announced an order for the 777F, has also signed a deal with Airbus for 60 more A320 family airplanes, which include the A318, A319, A320 and A321.

ALAFCO chair Ahmed Al Zabin with Airbus COO John Leahy

ALAFCO orders A350, A320
Kuwait-based ALAFCO (Aviation Lease And Finance Co.) has signed a firm contract for 12 A350s and has also ordered seven A320s.

S7 CEO Vladislav Filev with Airbus COO Leahy

S7 orders 25 A320 family planes
Russian carrier S7 has ordered 25 A320-family airplanes, adding to its leased fleet of A319s. Deliveries start in 2009, and the order is worth $1.8 billion at list prices (even though Airbus sales chief John Leahy said the actual price was "somewhat" less than list). Interestingly, S7 also recently ordered new Boeing 737s.

Air France signs MOU for A380, A320
Airbus announced that Air France would sign a 'memorandum of understanding' to buy two A380s and 18 A320s, although it should be noted that this is not yet an official order.

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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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US Air and Delta - merger tidbits

A little update on the US Airways/Delta merger situation. I read over the letters that the CEOs of the two airlines sent each other. I chuckled at the fact that US Air CEO Doug Parker called his Delta counterpart as "Jerry". (You can read the two letters here and here.)

Yet despite all the amicable talk, Jerry isn't giving in to Doug's request. Instead, both sides have launched massive PR campaigns in order to try to sway public opinion towards their sides. US Airways has hired the firm of Joele Frank, Wilkinson Brimmer Katcher in order to show its case for a merger (read: takeover), while Delta has hired Kekst and Co.

According to USA Today, US Airways has created a newsletter called For the Record, which will present news about the merger, although obviously in a pro-merger way. For its part, Delta has carried out a full page ad in Atlanta's Journal-Constitution going against the merger. It has also given out 50,000 lapel buttons that say 'Keep Delta My Delta'.

But lapel pins might not cut it. Delta faces an uphill struggle to stay independent from US Airways. Jerry can try as hard as he can to avoid a merger but in the end, it's up to the creditors. And if the US Airways team can convince them that the merger will be the most beneficial for them, then it will probably happen. Here's my advice for both - or rather, my opinion on what they might do, since I am probably unqualified to give any real advice:

• Delta should explain clearly why this merger is a bad thing - or rather, isn't beneficial. The lapel pins and a full-page ad may foster some sympathy, but it's probably not enough in the end. The consumer should be aware of the downsides of such a merger (frequent-flyer program hassles, integration hassles in general, decreased competition, higher fares, etc.).
• US Airways should explain in its campaign about why this merger might be beneficial. An increased route network means more destinations on the same frequent flyer program, which is something that travelers look for.

Feel free to leave comments!

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US Airways/Delta merger update

Here’s a mid-day update (done during lunch break) about the possible Delta-US Airways merger. CNN talked to US Airways’ CEO Doug Parker, who said that his airline’s hub in Charlotte, North Carolina would remain if the two airlines were to merge. Delta’s hub in Salt Lake City would also stay, although each hub is rather close to an existing one: Delta’s in Atlanta and US Airways’ in Phoenix, respectively.

Delta has stated that it wants to remain independent, at least during its stay in bankruptcy. Delta’s CEO said that his airline’s plan “has always been to emerge from bankruptcy in the first half of 2007 as a strong, stand-alone carrier. Our plan is working and we are proud of the progress."

It increasingly looks like any takeover (or merger) of Delta by US Airways will be a hostile bid. Yet Parker thinks that he will convince Delta’s bosses and creditors that the deal is a good one: "What you're hearing right now is reaction from people who haven't yet been able to digest the offer.”

Analysts have said that in addition to US Airways, United and American could potentially be bidders for Delta as well, or at least play a part in the consolidation of the industry.

So will the merger go through? Delta says no, and the fact that it’s in Chapter 11 bankruptcy certainly complicates things. Antitrust laws are another thing to consider; an example of this is the fact that Delta and US Airways are the only two airlines flying the New York-Washington shuttle route. But if the two are merged, it would create the nation’s (and perhaps the world’s) largest airline, beating American for the number one spot.

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US Airways seeking to purchase Delta

US Airways has just announced this morning that it would make an $8 billion bid (with cash and stock) for Delta Air Lines once the latter emerges from Chapter 11 bankruptcy protection. Delta creditors would get about $4 billion cash and and 78.5 million shares of US Airways stock which, based on yesterday's closing stock price, has a combined value of about $4 billion.

There isn’t much information available at this time, since the story was just released about an hour ago, but US Airways said that the deal would ‘generate $1.65 billion in annual synergies’. The combined airline would use the name of Delta, which according to US Airways' CEO, has a slightly higher brand awareness.

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