AA and Southwest 'Love'-ing Each Other

Big news today is that Southwest is free to go out of Dallas' Love Field, Southwest's headquarters - but only to Kansas City (MO) and St. Louis. President Bush signed legislation that allowed this to happen. The new service is going to begin December 13 with four non-stop flights to each city. The one-way fare from Dallas to either St. Louis or Kansas City will be $79 with a 14-day advance purchase, while the unrestricted fare is $129 each way, Southwest said.

The whole controversy involves the Wright Amendment, a 1979 federal law, along with the Shelby Amendment, which state that no large jet air service is allowed from Love Field to any point beyond Texas, Louisiana, Arkansas, Oklahoma, New Mexico, Kansas, Mississippi, and Alabama. Here's a short overview from Southwest's campaign website to open up Love Field:

In 1979, Congress passed the federal law commonly referred to as the " Wright Amendment ", which restricts travel into and out of Dallas Love Field for commercial flights with more than 56 seats. This federal law makes it illegal to fly from Love Field to points beyond the four states surrounding Texas. The Wright Amendment also contains marketing restrictions, prohibiting Southwest Airlines from offering or advertising the availability of any connecting flights between Love Field and any city outside the Wright Amendment "service area." In 1997, Congress passed the Shelby Amendment, which added Alabama, Kansas, and Mississippi to the Wright Amendment service area. (from www.setlovefree.com)

But a provision in the bill makes Missouri exempt from Wright. And Southwest fought long and hard for this moment. It cited a study that predicted that the estimated fare savings would be $77 million - and 500,000 additional Missouri passengers would fly. That's along with the additional $218 million per year into the Missouri economy. "The push from Missouri allows us to create a competition laboratory, if you will, to prove our case," said Herb Kelleher, Southwest's executive chairman and co-founder, in a statement. "Our experience in 60 other markets tells us that carriers serving these markets will decrease their fares and increase their Missouri traffic."

As of now, the only airlines flying out of Love are Southwest and Continental Express. But that too will change, as American Airlines - based in next-door Forth Worth, and with a flagship hub at DFW and a hub at St. Louis - prepares to start service out of Love as well. American didn't want to start service at Love, where it leased three gates. "We didn't want to be forced to go to Love Field but we will go and we will compete aggressively," American Airlines spokesman Tim Wagner said. Regardless, American has to upgrade its facilities at Love first, so they won't be flying out any time soon.

So this means war. Southwest and American have been rivals for many years, but this is taking it into the Southwest's backyard. Will AA flyers use the Love Field facilities, or will they opt for its mega-hub at DFW? Or will other passengers stick to Southwest?

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The End Of An Era

Boeing has recently announced that production on the final 717 has commenced. There are two reasons that I feel this is the end of an era.
The first is that this jet, which is to be delivered to Airtran, will be the final aircraft to ever be produced at Boeing's Long Beach, CA facility. This facility has produced many aircraft which have changed the aviation world forever, such as one of the most important aircraft of all time, the DC-3. Other aircraft that were produced at the Long Beach facility include the DC-9, DC-10, MD-11, and the MD-80.
The second reason that I feel this is the end of an era is that this aircraft will be the last aircraft related to the DC-9 ever sold. The DC-9, MD-80, and the 717 are aircraft that are very important aircraft in the fleets of many airlines, even though they are aging. Northwest Airlines operates a very large fleet of DC-9's. American Airlines has over 233 MD-80's in its fleet. Delta Airlines operates 136 MD-80's and MD-90's. Airtran operates 84 717's currently, with 4 more on order. Hopefully these great aircraft will continue to serve airlines for many years to come.
So, to McDonnell Douglas, all the wonderful employees at Long Beach, the DC-9, and the Boeing 717, I say:

So long, and thanks for all the planes!

~MD-11

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Surprise, Surprise: US Airways Orders A350

The newly merged US Airways will buy 20 A350-800s, becoming the first airline to do so, and deliveries will start in 2011 and go until 2014. The plane is capable of seating 253 in a standard three-class seat layout.

According to Airbus, the airline's A330 pilots won't need to undergo additional training to fly the new airplane. The deal is worth €3.42 billion, or $4.03 billion, at list prices. Keep in mind that Airbus will most likely cut a deal with the airline so that it pays significantly less for the aircraft.

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Air Canada Says Goodbye and Adieu to Jazz

ACE, the parent of Air Canada, said today it will spin off Jazz into an income trust. AC will get the proceeds of the deal, as well as majority control of Jazz. From the Globe and Mail of Toronto:

ACE plans to market Jazz as a source of stable income because it effectively serves as a charter airline booked by Air Canada for regional flights. Jazz incurs costs for pilots and planes, but it receives a steady stream of revenue from Air Canada, even if a flight is half empty.

Jazz began charging Air Canada an hourly flying rate on Sept. 30, 2004, when Air Canada emerged from bankruptcy protection.

“Jazz doesn't have to worry about fluctuations in passenger loads. If Jazz runs on a Monday and it's half empty, it's the same fee as if it's full. It has a guarantee of revenue because of a capacity purchase agreement,” an industry source told the Globe and Mail. As part of that pact, Jazz pumps jet fuel into its planes but Air Canada pays those fuel bills.

Jazz had capacity last month of 358 million available seat miles (ASMs), or 40 per cent of WestJet Airlines Ltd.'s capacity of 905 million ASMs. But as a trust, Jazz's $1-billion value on the stock market would be two-thirds the size of WestJet's $1.5-billion valuation of common shares.

Halifax-based Jazz has its roots spread across Canada. In 2002, Jazz emerged as the new name for the merger two years earlier of four regional carriers: Air BC, Canadian Regional Airlines, Air Ontario and Air Nova.

Jazz has 3,700 employees and 119 aircraft, which seat 37 to 75 people. The carrier has been growing rapidly, with its passenger traffic in October up 77.8 per cent from the same month last year.

Jazz CEO Joseph Randell, in a corporate presentation, wrote that Air Canada effectively “buys or rents the capacity flown by the regional carrier.”

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Northwest Goes Down The Toilet - Literally

For those that don't believe me, check out http://cgi.ebay.com/NORTHWEST-AIRLINES-model-going-down-the-toilet_W0QQitemZ6581964642QQcategoryZ10771QQrdZ1QQcmdZViewItem
Since this link might not be around for much longer, I'll post the contents of the page here.

Please note that I did not write the remainder of this post, so don't get mad at me for these rather radical views.

With wage cuts, layoffs, and replacement workers…

parking airplanes and cutting service…

The Airline is shrinking!

If the Northwest airline model gets much smaller it will slide right down the toilet.

Just look at the picture.

This Minnesota based Northwest Airlines plastic A320 model is falling to pieces and close to going down the drain.

Time is running out! This may be your last chance to salvage the Northwest airline model.

Bid Now, before it’s too late!

Or, just Watch and see what happens.

Getting the Northwest airline model out of the toilet would make a wonderful holiday gift for anyone who may be further impacted if it goes all the way down the tube.

Gift wrapping is available upon request.

One-way economy shipping from MSP would have cost only $158.51 if you had bid over a month ago. It might have cost you $255.51 a couple of weeks ago. By the end of this auction, the shipping will cost $1112.51 plus all applicable taxes and fees… however, to remain competitive in this dynamic market, we supposedly have no choice but to give away the farm. Shipping is now FREE.

"The Airline" refers to the airline industry as a whole, and all other airline references are descriptive only of the plastic airplane model pictured in the toilet.

EXECUTIVE BONUSES...

I can’t explain how we continue to operate without any profits. Our executive compensation plan is another important component of our strategy of giving away the farm. In order to retain the talented executives with the knowledge and skills necessary to get the airline model out of the toilet, we supposedly have no choice but to give huge executive bonuses in addition to some of the highest executive pay in the industry.

The first bidder is receiving the keys to a 1999 BMW 5-series with remote keyless entry. Yes, that’s right, I am giving this bidder the keys to a BMW just for bidding!

There will be more bonuses given as we continue to strive toward our goal of getting the Northwest airline model out of the toilet.

Do your part to get the Northwest airline model out of the toilet, Bid Now!

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Champagne Flows in Chicago Thanks to the Chinese

Just when the folks over in Chicago and Seattle couldn't have thought it possible t get muchhappier after the big Emirates order (see last post), they can now. Eight Chinese airlines placed an order yesterday - when President Bush was in town - for 70 737-700s and -800s worth about $4 billion. They will be delievered between next year and 2008.

No specifics were given, but the planes will go to Air China, China Eastern, and China Southern. And it seems now that for the first time in five years, Boeing might outsell Airbus - it has 659 orders now compared to Airbus' 494.

Boeing has traditionally been pretty strong in the Asia-Pacific market, even as Airbus has eroded its market share in other regions.

And President Bush has to be happy - he's been doing a lot of complaining lately about the United States' huge trade deficit with China. This order should help cut some of that.

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Singapore: No Merger with Qantas

Excerpts from an article by the AP:

SINGAPORE (AP) -- Singapore Airlines on Friday dismissed talk of a potential merger with Qantas, saying the issue could only be considered if the Australian government allows greater competition on the prized trans-Pacific route to the United States.

On Thursday, Australian Prime Minister John Howard threw his weight behind the idea of a merger between two of Asia's biggest -- and most profitable -- airlines after a meeting with counterpart Lee Hsien Loong on the sidelines of the Asia-Pacific Economic Cooperation summit in South Korea.

"This issue has already been discussed and debated extensively in recent months," Singapore Airlines spokesman Stephen Forshaw said. "We've said all along that for mergers to happen, there needs to be considerable regulatory liberalization. It is an idea ahead of its time."

Interesting. First of all, Singapore and Qantas both are bastions of their respective alliances - SQ is a big Star player, and Qantas was a founding member of oneworld. So if they did merge, which alliance would win out? The problem with this is that Qantas is partly owned by British Airways - another oneworld member. And Singapore owns 49% of Virgin Atlantic - BA's archrival.

But the issue that's the focus point isn't alliances; it's a route: Los Angeles - Sydney, which is only flown by United and Qantas as of now. According to the AP article, Qantas has about 75% of the market share on that route, which also constitutes 15% of its total profit. Singapore wants in on the route, so it can pick up passengers on the Singapore-Australia-Los Angeles circuit.

I believe that Singapore, which will only allow a merger if the Australian government is more allowing of competition on the trans-Pacific routes, is playing hard-to-get. If the Australian prime minister is backing the merger, then they will probably do some things to appease Singapore.

Both airlines are world-class nonetheless. Singapore is known for its fantastic service (think Raffles class) and Qantas is known for its profitability and safety record.

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