Star Alliance looks to India, Russia, and cargo

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

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

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

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S7 Orders Boeing 787

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

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

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Flights between US and China could double

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

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

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Interesting AA video

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

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Skybus takes off

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

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

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Northwest to exit bankruptcy on May 31

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

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

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

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

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Virgin America gets final go-ahead

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

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

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