Tuesday, May 13, 2014


TWA Flight 800 Remembered...10 Years Later 

For The Crews and People Who Never Had the Chance

To Say Good Bye

DATE: July 17, 1996 TIME: 2031 Eastern Daylight Time

Monday, May 12, 2014

A new airline hopes to fly nonstop from London City Airport to New York
Officials are trying to raise some money through crowdfunding
Ticket prices have yet to be announced
(CNN) -- You've finished your business in London and want to head directly home to New York.

Instead of traveling to far-off Heathrow or Stansted airports, imagine boarding a light-rail train directly to the closer London City Airport. There, you can quickly clear security and customs and walk a short distance to your gate, where you can board an all-business-class airline for your nonstop flight to New York.

That's the pitch from Odyssey Airlines, which hopes to start service in 2016.

"We are going after the traditional business traveler," Odyssey CEO Adam Scott said. "We are operating the most fuel-efficient and modern aircraft available." And flying out of London City Airport, with its proximity to the city center and short walking times to gates, "we are able to offer our travelers substantial time savings."

"The entire journey (to New York) will be significantly less than the journey that you might currently fly with one of the traditional carriers."

Odyssey plans to start service with 10 specially outfitted 40-seat Bombardier CSeries aircraft to fly nonstop from London City Airport to New York and elsewhere.

To do so, the new airline hopes to raise about about 5 million pounds ($8.48 million) by crowdfunding, including a current effort to raise 1 million pounds on Crowdcube. It's already raised about 5 million pounds from investors and peer-to-peer lending.

Overall, it needs to raise more than 60 million pounds ($101.8 million), mostly through institutional investors, to launch the airline.

Artists, solo entrepreneurs and even the makers of the "Veronica Mars" movie have turned to crowdfunding to launch products. But an airline?

Through fundraising on Crowdcube, Odyssey officials hope to recruit customers and build brand loyalty before the first aircraft takes flight.

"We're trying to get our name out and raise our profile," Scott said. "It's a way to engage early on with our would-be customers," who also could be early investors.

Airlines such as Eos, Maxjet and Silverjet tried and failed around the 2007-08 economic crisis to lure travelers to an all-business-class model. Some Silverjet executives have joined Odyssey for another attempt.

Those airlines operated under different business models: flying older, more inefficient aircraft and flying into airports farther from the London city center, argued Scott.

Besides its central airport location, Odyssey will fly new airplanes. The Bombardier CSeries aircraft will burn 20% less fuel and have 15% lower operating costs than its peers, company officials said in documents.

Odyssey's closest competition at City Airport is a British Airways flight. But the British Airways A318 can't take off from City Airport's short runway (about 4,000 feet) fully fueled and clear the skyline. It makes a stop in Ireland to completely fuel up before heading onto New York.
The Bombardier would be able to take off fully fueled from City Airport and fly nonstop to New York.

The company hasn't announced its target ticket prices, but Scott posted some hints.
"We're not going to be a discount carrier, but we're not going to be exorbitantly above our competition. We're going to be priced competitively in the market," Scott said.

Friday, April 04, 2014

American Airlines Has $10 Billion Burning a Hole in Its Pocket
By Justin Bachman     January 28, 2014  
The new American Airlines’ (AAL) fourth-quarter results were broadly in line with the profitable holiday travel season reported by its domestic peers. One thing that’s definitely not seen at other U.S. airlines, however, is the $10.3 billion in cash American has in its coffers—about one quarter of the airline’s annual revenue.

That kind of cash reserve is partly a response to what it takes to create the world’s largest airline, forged through a merger that will be rife with enormous costs, such as replacing older MD-80 jets by 2018 and raising salaries for workers. The cash cushion also helps to gird for emergencies—especially at a company with almost $17 billion in total debt—and to weather the eventual downturn of another recession or other events that depress travel demand. Still, executives acknowledged today on a conference call that $10 billion in the bank is too much.

“Holding more cash than the company needs to hold is not a good use of our shareholders’ capital, and we understand that,” Chief Executive Officer Doug Parker said in response to an analyst’s question about American’s conspicuous money pile. “It’s early on, but we understand the point and share the view. There’s no reason to hold more cash than we need.”

Delta Air Lines (DAL), which is considered the best financial performer among the network U.S. carriers, had $2.84 billion in cash and cash equivalents as of Jan. 1, while Southwest Airlines (LUV) has about $3.1 billion. Delta has resumed paying a quarterly 6¢-per-share dividend and using cash flow to repurchase its shares, spending $201 million on those activities in the last quarter.

“How much cash is normal?” CRT Capital analyst Michael Derchin asked Parker during American’s call, pressing the effort to figure out when American may begin paying a dividend or buying back its stock. “How much do you need?”

Parker replied: “We just don’t know. Twenty to 25 percent of revenues …  is too much in a world that really has been transformed. But we prefer to make sure that it really has been transformed before we say what that [cash] should be.”

On an operating basis, American had a $436 million profit, exceeding Wall Street’s forecasts; sales of $9.98 billion for the quarter also slightly topped the average of nine analysts queried by Bloomberg. Texas-based American left bankruptcy protection last month and merged with US Airways on Dec. 9, taking about $3.2 billion in charges for 2013, most of them tied to its Chapter 11 reorganization.

Later this year, the airline will begin adding more seats to its MD-80, 737-800, and 777-200 airplanes to help boost financial returns. That strategy, which requires employing a thinner aircraft seat, has been a trend across the industry as a low-cost method of increasing the revenue performance of each flight.

Thursday, April 03, 2014

Southwest Airlines, once a brassy upstart, is showing its age
Carrier copes with labor strife, high costs; some pine for days of co-founder Herb Kelleher

The Wall Street Journal
By Jack Nicas and Susan Carey
April 2, 2014 10:17 AM
CHICAGO—At Midway Airport here on Jan. 2, Southwest Airlines Co. canceled a third of its flights, lost 7,500 bags and, at one point, had 66 aircraft on the ground—about twice as many as the carrier has gates. Passengers were stuck on the tarmac late into the night.

A severe snowstorm was the main culprit, but Southwest managers also blamed ramp workers, suggesting that nearly a third of them called in sick to protest slow contract talks. The spat boiled into a legal battle, with the workers suing Southwest for requiring they provide doctor's notes. They say they are chronically understaffed and are being blamed for executives' mismanagement of the storm.

Labor strife has long roiled the airline industry, but not Southwest. The carrier never has laid off workers or cut their pay, and has had only one strike in its history, a six-day mechanics' walkout in 1980.

But now Southwest is asking for some of the biggest contract changes ever from employees in a bid to contain costs—and some union leaders are furious. "We built this airline," says Randy Barnes, a union representative for Midway's ramp workers. Now, he says, management is "tearing it down."

The recent acrimony is one way that Southwest is showing its age. Once the industry's brassy upstart, the airline, which took wing 43 years ago, has begun to resemble the mainstream rivals it rebelled against in its youth: carriers that were slow-growing, complex and costly to run.

First sketched out on the back of a cocktail napkin in 1967, Southwest was built on simplicity, thrift, labor harmony and rapid expansion. For decades, it was the fastest-growing and lowest-cost airline in the U.S., undercutting competitors' fares in new markets and sending traffic skyward—a phenomenon known in government and industry circles as the "Southwest Effect." To help keep things simple and cost-effective, the airline flew one model of plane—Boeing Co.'s 737—and stayed close to customers with wisecracking flight attendants and funny ads. For decades, that original formula helped the company soar.

Over the past year, Southwest's stock has risen 77.6% to $23.94, and the carrier remains the only U.S. airline with an investment-grade credit rating.

Still, the airline has failed to hit its long-standing goal of a 15% return on invested capital since 2000; it recently said it doesn't intend to grow overall until it does. Even with record profit last year, its return was 13%, up from 7% in 2012.

There are other big challenges. Southwest is flying fuller planes, connecting more passengers and serving bigger airports that are prone to delays. Partly as a result, some of its operational ratings have plummeted. Last year, it lost more bags per passenger than any other carrier. And after years as one of the most punctual airlines, just 72% of Southwest's flights were on time in the fourth quarter—dead last in the industry.

Southwest was "blessed for so many years with a product nobody else had and financial results that nobody else was able to touch that they kept doing things their old way," says Bob McAdoo, an airline analyst for Imperial Capital LLC. But now, industry changes and Southwest's maturation mean "there are so many areas they're under pressure to change, things the company never had to deal with," he says.

Gary Kelly, the chief executive who has run the Dallas-based company since 2004, says the Southwest model still works. He points to record profits of $754 million for 2013—up from $421 million in 2012—and a surging stock price. He argues that the launch of international flights this year will open new avenues for growth.

"Southwest is in a better position today than it has ever been in its history," Mr. Kelly says.

But the CEO also emphasized the need for Southwest to adapt. High fuel prices, for example, have forced it to "pivot" from its longtime blueprint of offering short-haul flights between midsize cities toward longer flights between bigger cities, which use fuel more efficiently. Fuel last year accounted for 35% of Southwest's costs, more than double the share a decade ago. That shift has required it to add larger planes, drop service to many small cities and enter bigger markets while meddling with key traits like its first-come-first-served boarding process.

Other U.S. carriers, meanwhile, have bulked up and trimmed spending through mergers and bankruptcy restructurings. The three U.S. airlines larger than Southwest—American Airlines Group Inc., United Continental Holdings Inc., and Delta Air Lines Inc.—offer first- and business-class service, elite loyalty programs and global networks that capture lucrative business travelers. Ultra-discounters, including Spirit Airlines Inc., are undercutting Southwest fares while JetBlue Airways Corp. and Virgin America Inc. are competing more aggressively for the middle-class customers whom Southwest long owned.

"Not only has the world changed, but our relative position within the industry on costs has changed," says Mr. Kelly, a 59-year-old Texan and former accountant who joined the company 28 years ago. "Now we just need to make sure our labor contracts are updated to reflect the current reality."

With its growth stalled, Southwest can't hire as many new employees at the bottom of the pay scale. From 2007 through 2012, Southwest's cost to fly a seat one mile rose 42%—more than any other major U.S. airline, according to Massachusetts Institute of Technology data that adjust for flight distance.

Its low fares, long the core pitch to customers, aren't so low anymore. Its average one-way fare was $144 in the year ended in September, a 21% increase over the same period five years earlier, when adjusted for inflation. That compared with single-digit increases at larger rivals and big price cuts at new ultra-discounters like Spirit, according to the MIT data.

Many longtime customers remain loyal fans. "If there's a Southwest flight going to where I'm going, I'll fly Southwest" even if it's more expensive, says Dr. Joseph Coyle, a psychiatry professor at Harvard Medical School. "They treat everybody equally."

Mr. Kelly says Southwest's research shows that at any given time, it is the least expensive option in as few as 40% of its markets, compared with more than 50% of its markets in 2000. He notes that Southwest is almost always the best deal for fliers with checked bags, since each passenger can stash two pieces of luggage free.

While nearly all competitors impose a bag fee, Southwest has stuck by its "bags fly free" mantra—although Mr. Kelly has said he is open to charging for bags in the future.

This year holds some pivotal tests. Southwest hopes to complete its integration of AirTran Airways, which it bought for $1.5 billion in 2011, by finishing up the work of training workers, overhauling airplanes and linking the carriers' networks. It plans to begin international flights under its own brand after inheriting several Caribbean and Mexico destinations from AirTran. That will require it to master marketing in foreign countries, hire overseas workers and even make sure its flight attendants have passports.

Southwest also faces costly upgrades to its outdated computer systems—a holdover from its simpler days—to bring them in line with industry standards.

After snowstorms forced airlines to cancel thousands of flights this winter, other carriers' computers automatically rebooked many customers. But at Southwest, employees had to manually reschedule each disrupted passenger, says Teresa Laraba, Southwest's senior vice president of customers.

Another problem: Southwest's antiquated phone system limits the number of incoming calls, so some passengers were met with busy signals. Southwest says it plans to soon replace those systems. "I've been waiting a long time" for the upgrades, Ms. Laraba says.

Perhaps Southwest's biggest challenge involves its 45,000 workers, who long have enjoyed unparalleled job stability and compensation. About 83% of its workers are unionized, and Southwest is currently in negotiations with nearly all of them over new contracts—some of which seek to freeze pay scales.

The average Southwest worker earned nearly $100,000 in 2012, including pension and benefits, compared with about $89,000 at a traditional hub-and-spoke airline, according to MIT. Southwest also shares profits with employees, paying them $228 million last year, or more than 6% of their pay.

"It is harder today for us to claim that we are the low-fare leader than it was before because our cost advantage has been narrowed," Mr. Kelly says. "And that is exactly what we want to make our employees understand."

He says Southwest is seeking savings from increased productivity and more flexibility in workers' contracts—not from pay cuts.

For its nearly 17,000 ground workers and customer-service agents, Southwest wants to tighten rules on sick time and largely hold compensation flat. In prior contracts, workers generally received raises. It also ultimately wants 40% to be part-time, meaning their families would have to pay more for health benefits.

The company says it aims to do this by filling new openings with part-timers, rather than forcing current employees into part-time status. Still, unions blanch at the idea, saying they want to protect careers, not just jobs.

The ground-workers' union recently won a victory when the carrier backed off a proposal to outsource a sizable number of jobs to outside vendors.

Randy Babbitt, Southwest's senior vice president of labor relations, says Southwest's existing contracts were designed for a smaller, short-haul airline that didn't fly late at night or adjust service levels according to demand. For example, Southwest now flies to Fort Myers, Fla., 20 times a day in the winter and 10 times a day in the summer.

"You've got to have something flexible or part-time," Mr. Babbitt says. "It's what everybody else has. We just never needed to address it until now."

Union officials argue that Southwest employees have a more demanding workload compared with others in the industry. The airline carries about 3,000 passengers per full-time employee, compared with 1,350 passengers per employee at its bigger rivals, according to MIT's data.

The flight attendants' union says it has made clear to the company that it won't agree to a rule that would require its members to fly a minimum number of hours—standard practice in the industry.

Capt. Mark Richardson, president of the pilots union, said the slow pace of negotiations is "frustrating" but acknowledged that Southwest is distracted by talks with other work groups.

Some Southwest employees still pine for Herb Kelleher, the raucous co-founder who stepped down as executive chairman in 2008 after 30 years in the post. He was beloved by employees and known to spend hours in employee break rooms, smoking cigarettes and chatting with workers. Mr. Kelleher, 83, is famous for his love of Wild Turkey bourbon, Harley-Davidson motorcycles and outlandish costumes. He declined to be interviewed.

"Ever since Herb…left, this has been more of a corporation and less of a family," says Mr. Barnes.

The winter's brutal weather aggravated the labor rancor. Over the first week of 2014, Southwest canceled 40% of its flights at Midway and delayed another 40%, largely due to weather. The carrier said that ramp workers at Midway called in sick more than 450 times over that week, for about 22% of their scheduled shifts.

After Southwest began requiring ramp workers to provide doctor's notes, the union sued the carrier for breach of contract in U.S. district court in Dallas.

In court documents, Southwest alleged the sick calls were "widely perceived to be a coordinated job action to protest the slow progress" of contract negotiations.

The union said there was no work action, but rather a spike in illnesses fueled by mandatory overtime that exhausted workers. The union also produced work logs that it said contradicted the company's sick-call figures.

A judge dismissed the case in February and instructed the union to file a grievance, which it has.

Mr. Kelly acknowledges that "mistakes were made" during the operational meltdown but he disputes the union's claims that the company understaffed Midway or mismanaged the operation.

While he says he has no desire to replicate Mr. Kelleher's flamboyant tenure, he was recently content to call upon the former CEO to deliver one of his signature no-holds-barred insights.

On March 12, the birthday of both Messrs. Kelleher and Kelly, the two addressed employees in a video posted online. Mr. Kelly asked his predecessor, "How do you respond to employees concerned about change?"

Mr. Kelleher responded: "What I tell them is…'What we're talking about here is your future. If we don't change, you won't have one.' "

Tuesday, April 01, 2014

A Charter Airline Shuts Down After 63 Years Flying U.S. Troops

A World Airlines MD-11 jetliner
Photograph by Ric Feld/AP Photo
A World Airlines MD-11 jetliner
A storied name in U.S. military transport is fading into history. World Airways shut down on Thursday amid a failure to find financing, four months after its parent company blamed Pentagon budget cuts for a sharp squeeze in business and put the airline into bankruptcy.

World Airways was founded in 1948 and transported U.S. troops starting in 1951, when the U.S. entered the Korean conflict. The charter airline flew its last flight on Wednesday, a day after its primary creditor declared the company in default and ended financing; World laid off 325 employees on Thursday. ”A lot of people have worked hard to try to save our airline,” Eric Bergesen, World Airways’ chief operating officer, said in a news release. “Despite this regrettable outcome, I sincerely thank each of our employees for their dedication and continued support as we attempted to build a future for the company.”

World’s parent, Global Aviation Holdings, blamed the airline’s latest financial difficulties on the U.S. Air Mobility Command, the Air Force unit that transports military personnel and supplies, which canceled its 2014 contract with the company as the military adjusted to a tighter budget. That decision stripped World of $54 million in revenue, the company said in its November 2013 filing in Delaware—World’s second Chapter 11 filing within a year.

Friday, February 21, 2014

Regional Flying

Why American Eagle Might End Its Flying Days

By Justin Bachman February 14, 2014

The airline that once handled nearly all the regional flying for American Airlines (AAL) is likely to shrink into a company that merely transfers luggage and refuels other airlines’ jets.

American Eagle—one of the world’s largest regional airlines—had sought wage-freeze concessions from pilots in exchange for adding 60 new, larger Embraer jets and speeding the career path for Eagle pilots to move to American Airlines. But this week the local chapter of the Air Line Pilots Association declined to forward that contract to American Eagle’s 2,600 pilots for a vote.

American Eagle President Pedro Fabregas told workers on Thursday that American Airlines would begin seeking other airlines to fly the new Embraers and would move some of American Eagle’s Bombardier CRJ-700 jets to “more cost-effective carriers.” That means new business for rival airlines such as Republic Airways (RJET), SkyWest (SKYW), and Air Wisconsin Airlines. This isn’t the first time the giant airline has sought to disentangle itself from its regional partner: American’s former parent, AMR, had also tried to sell the Eagle unit before AMR’s 2011 bankruptcy filing.

Story: Yes, There’s a Pilot Shortage: Salaries Start at $21,000

American Eagle will retain its 50-seat jets, but those models have rapidly lost favor in the industry and are being retired. Once American is able to move its regional operations away from the 50-seaters, American Eagle is likely to be a subsidiary that does little or no flying. What does a regional carrier do once its flying days are over? “Our ground-handling operation continues to thrive, and we have added new business and employees there at a rapid pace and will aggressively seek to continue this trend,” Fabregas wrote in a memo.

That plan appears to be fine with union leaders, given the widespread pilot shortage in the regional industry and the near-certainty that wages for regional airline crews will increase. “Our pilots decided they were not willing to work for less than the company is already paying our peers,” William Sprague, chairman of the local ALPA unit, told members. “We will now begin the process of assisting our pilots in identifying alternative career options within the industry.” Sprague told the Dallas Morning News on Wednesday that 30 American Eagle pilots are already leaving each month to fly for other carriers.

When large airlines sign new contracts with regionals to operate their “feeder” flights, those deals will reflect the higher costs of new federal rules mandating 1,500 flight hours for first officers. Those rules, supported by both ALPA and the major carriers’ trade group as a step toward further safety in the industry, virtually guarantee higher pilot salaries. Which is why the union was ready to risk seeing American Eagle grounded if it meant accepting stagnant salaries.

Bachman is an associate editor for Businessweek.com.

Monday, January 20, 2014

3 Extravagant Flights You'll Never Be Able to Afford

Some United first-class tickets cost more than $10,000 round-trip!
However, this is nothing compared with the luxury a few international carriers provide on their long-haul flights. From onboard showers to fully private suites to gourmet delicacies, these airlines have designed their service so that passengers are in no rush to land.

Not surprisingly, the prices for this kind of service can be astronomical. Here are three particularly extravagant examples.

The new gold standard
In the past decade or so, Emirates has quickly risen through the ranks to become the largest airline in the world in terms of international traffic. It has also developed a well-deserved reputation for luxury. The price matches the service; a round-trip first-class ticket from New York to Dubai for early March costs just over $22,000.

For that price, pampering begins long before you get on board. Emirates offers a complimentary "chauffeur drive" service to first- and business-class customers in most of the cities it serves. You don't have to worry about arranging a car service to get to the airport: Emirates will pick you up in a Mercedes.
Emirates is the largest operator of the massive Airbus A380 (Photo: Emirates.)
First class passengers get "fast-track" vouchers to speed up the check-in and security process at the airport. After clearing security, first class passengers have access to the Emirates Lounge, which has a gourmet buffet, open bar, TVs, Wi-Fi, and even showers.

Emirates flies the massive Airbus A380 for flights from New York to Dubai, and it uses the extra space well. First class passengers have fully private individual suites on Emirates' A380s, with seats that convert into a mattress for sleeping. At mealtimes, Emirates offers a seven-course gourmet lunch/dinner. However, first-class passengers can also order a multi-course meal at any time during the flight.
The onboard shower is a unique touch on Emirates A380s (Photo: Emirates.)
If you get "cabin fever," Emirates has lounges on board where you can get a drink and socialize with other passengers. Lastly, Emirates even has two showers that you can use before landing so you can hit the ground running upon arrival.

An Emirates first-class ticket is perhaps the most expensive thing in the air short of a private jet -- but you do get a lot for the money.

The business traveler's dream
While Emirates is rising fast in the aviation world, Singapore Airlines has also developed a great reputation for its premium services. It's comparatively affordable, too! Singapore Airlines no longer offers nonstop flights to the U.S., but its one-stop service from New York to Singapore costs just about $13,000 round-trip. (The plane makes a stop in Frankfurt along the way.)

Check-in for passengers departing from Singapore is especially luxurious. First-class passengers are directed to a dedicated check-in lounge where a Passenger Relations Officer handles the check-in process.
Most international travelers would love a lie-flat seat. Singapore Airlines' first-class passengers get a real bed! (Photo: Singapore Airlines.)
Singapore Airlines also uses the A380 for flights to New York. Like Emirates, it has used the extra space to offer private "suites" -- with leather and wood trim -- for first-class customers. A unique feature is that the suites feature standalone beds that fold down from the wall; first-class passengers don't have to sleep on a converted seat .

Singapore Airlines has impressive dining options, too. The airline offers gourmet cuisine from a variety of the countries it serves. It also has a unique "Book the Cook" feature that allows you to pre-order your main course from a wider selection of entrees 24 hours before the flight. The service may not match Emirates in every respect, but it's pretty close.

The classic
Cathay Pacific has been flying from Hong Kong since shortly after the end of World War II, and over a long period of time it has built a reputation for high-quality service. It flies to a variety of U.S. cities. A round-trip first-class ticket from Los Angeles to Hong Kong for early March would you set back almost $16,000.

As a member of the Oneworld airline alliance, first-class Cathay Pacific customers have access to airport lounges in most major cities across the world. In Los Angeles, the Oneworld lounge has hot and cold buffets, a bar, and shower facilities. In Hong Kong, Cathay Pacific operates several lounges with different premium amenities.
Cathay Pacific doesn't have private suites -- but its first-class seats are still very nice. (Photo: Cathay Pacific.)
Onboard Cathay's Boeing (NYSE: BA  ) 777-300ER aircraft, each first-class passenger has a semi-private suite. Not surprisingly, the seats convert to flat beds, and passengers are supplied with 500-thread-count linens for sleeping. Many Cathay Pacific customers swear by the carrier's flat-bed seats as the most comfortable in the industry.

Cathay Pacific offers meal service for first-class customers whenever they want to eat, and it has toasters, skillets, and rice cookers in its galleys so that food can be made to order. Other first-class amenities include organic cotton pajamas and his-and-hers toiletry kits. Cathay Pacific may not be as flashy as Emirates or Singapore Airlines, but it's comfy. The service is attentive, too, with two flight attendants assigned to the six-seat first-class cabin.

Unless you're a multi-millionaire, flying first class on Emirates, Singapore Airlines, or Cathay Pacific is out of reach. Even multi-millionaires might think twice about dropping $22,000 on a round trip from New York to Dubai!

Still, for these prices, first-class fliers do get plenty of perks. Whether it's an onboard shower with Emirates, a real bed on Singapore Airlines, or Cathay Pacific's gourmet cuisine, first class means real luxury on these international airlines. U.S. carriers like United and American do their best to offer an attractive first-class product, but at this point, they're not in the same league with some of their global rivals.

Friday, January 17, 2014

Let It Snow: The Makers of De-Icing Fluid Are Having a Superb Winter

Few people are as important in winter air travel as the crews that spray de-icing fluid onto departing airplanes. Without the fluid, there’s a good chance there won’t be a flight. More weekend snow across the Midwest—the forecast for the region predicts up to 5 inches and has airlines gearing up for more de-icing—promises to be a boon for the chemicals’ manufacturers.

“For the North America market, it’s going to be a a blistering good year,” says Gary Lydiate, chief executive of London’s Kilfrost, one of three big players in the de-icing fluid industry, along with Dow Chemical (DOW) and Swiss company Clariant (CLN:VX). Lydiate says Kilfrost has already shipped about 70 percent of the de-icing fluid it expected to sell this winter, with two-thirds of the season remaining. Come May, once most airport de-icing ends, Kilfrost says volume will total about 20 percent more than during the 2012-13 season.

In recent weeks the company has shipped more than 544,000 gallons of de-icing fluid to Illinois, most of it to Chicago’s O’Hare International, where Kilfrost customers American (AAL) and United (UAL) both have hubs. Airlines at O’Hare have used 1.06 million gallons through Jan. 15, compared with 1.1 million gallons for all of the 2012-13 season, a spokeswoman for the city’s Department of Aviation said in an e-mail. Most airports deal with multiple suppliers, given that carriers generally procure and apply their own de-icing fluid or outsource the job.
U.S. airlines spray more than 25 million gallons of de-icing fluid each year, according to a 2009 study of the industry by the Environmental Protection Agency. In Denver, where a May snowstorm isn’t terribly unusual, airlines used 1.9 million gallons of de-icing fluid last winter and are on pace to go through the same volume this winter, says Scott Morrissey, director of environmental programs.

Most de-icing is performed with propylene glycol, called Type 1, a pinkish-orange fluid you may see washing across your plane window. When weather is more severe—or when a plane must wait in a queue for takeoff—a thicker green liquid, akin to a gel, is applied to coat the airplane for longer periods. Both types of fluid are formulated much like other competitive products, be it motor oil, laundry detergent, or the top-secret syrup Coca-Cola (KO) blends with water and sugar, Lydiate says. “It looks like a simple thing on the surface, but underneath there’s a hell of a lot of technology to make it work,” he says of de-icing fluids. “This is not a commodity industry.”

The 3 to 5 inches of snow predicted for the Midwest and Great Lakes this weekend is likely to be followed by a second, frigid taste of the polar vortex, which earlier this month sent temperatures plunging as low as 25 below zero in parts of the Midwest and to single-digit temperatures as far south as Texas. Overnight temperatures could drop as much as 25 degrees below normal later next week, according to forecasts, as the jet stream takes a deeper dip south.

“There is the chance the cold may rival that of early January in some areas,” AccuWeather said in a Jan. 16 client note. The next time you’re on a delayed flight, as the plane is hosed ahead of takeoff, consider the positive: Nasty weather means nice profits for some companies.
Bachman is an associate editor for Businessweek.com.

Monday, December 23, 2013

On Jammed Jets, Sardines Turn on One Another

The New York Times
By JAD MOUAWAD and MARTHA C. WHITE | The New York Times –  5 hours ago

Flying coach can be a bruising experience these days.

Rory Rowland said he was rudely rebuffed after he asked the person in front of him not to recline his seat on a red-eye flight. When he later got up to use the bathroom, and the other passenger had fallen asleep, “I hip-checked his seat like you wouldn’t believe,” Mr. Rowland, a speaker and consultant, said, then feigned innocence when the enraged passenger complained to a flight attendant.

With air travelers increasingly feeling like packed sardines, flying has become a contact sport, nowhere more than over the reclined seat.

Now, it is only getting worse, as airlines re-examine every millimeter of the cabin.

Over the last two decades, the space between seats —  hardly roomy before —  has fallen about 10 percent, from 34 inches to somewhere between 30 and 32 inches. Today, some airlines are pushing it even further, leaving only a knee-crunching 28 inches.

To gain a little more space, airlines are turning to a new generation of seats that use lighter materials and less padding, moving the magazine pocket above the tray table and even reducing or eliminating the recline in seats. Some are even reducing the number of galleys and bathrooms.

Southwest, the nation’s largest domestic carrier, is installing seats with less cushion and thinner materials —  a svelte model known in the business as “slim-line.” It also is reducing the maximum recline to two inches from three. These new seats allow Southwest to add another row, or six seats, to every flight —  and add $200 million a year in newfound revenue.

“In today’s environment, the goal is to fit as many seats in the cabin as possible,” said Tom Plant, the general manager for seating products at B/E Aerospace, one of the top airplane seat makers. “We would all like more space on an aircraft, but we all like a competitive ticket price.”

Some carriers are taking the smush to new heights.

Spirit Airlines, for instance, uses seats on some flights with the backrest permanently set back three inches. Call it, as Spirit does, “prereclined.”

The low-cost airline started installing the seats in 2010, squeezing passengers into an industry low of 28 inches. While the Airbus A320 typically accommodates 150 passengers in coach, Spirit can pack 178.

And that is a good thing, Spirit says.

“Customers appreciate the fact that there is no longer interference from the seat in front of you moving up and down throughout the flight,” said Misty Pinson, a spokeswoman for Spirit.

Rick Seaney, the chief executive of FareCompare.com, said the airline business had changed in recent years, after airlines parked older planes and started flying with fewer empty seats. In the past five years, he said, carriers had cut capacity —  the number of seats they fly —  about 12 percent.

“The flip side is they can’t afford not to fill up their seats,” Mr. Seaney said. “This is a massive sea change.”

With so little space to haggle over, passengers have developed their own techniques for handling the crowded conditions.

“They jam their knee into the back of your seat as hard as they can, and they’ll do it repeatedly to see if they can get a reaction,” said Mick Brekke, a businessman who flies for work a few times a month. “That’s happened to me more than once, and that usually settles down after they realize I’m not going to put it back up.”

The passengers Mr. Brekke has encountered are not even the most extreme: Some have taken to using seat-jamming devices, known as knee guards, that prevent a seat in front from reclining. Airlines ban them, but they work, users say.

Smaller seats are not the only reason passengers feel more constricted these days. Travelers are also getting bigger. In the last four decades, the average American gained a little more than 20 pounds and his or her waist expanded about 2.5 inches, according to the Centers for Disease Control and Prevention. The dimensions of airplanes, however, have not changed and neither has the average width of a coach seat, which is 17 to 18 inches.

As the cabins grow more crowded, airlines say they are thinking only of their customers, trying to keep costs down. Jude Bricker, the senior vice president for planning at Allegiant, said the airline’s nonreclining seats have fewer moving parts and so require less maintenance, which means lower costs. This allows the airline to keep its fares low, he said.

“We are continually reminded from customers and their behavior that what they want most is convenient service with a low fare,” Mr. Bricker said.

Several budget carriers in Europe have also adopted stiff seats, including Ryanair and EasyJet. Air France, for its domestic flights, which never take more than an hour, has installed nonreclining seats where the magazine pocket has been moved above the tray table to provide more space in the critical area around the knees.

For passengers willing to pay more, of course, airlines offer more room. Business class remains an ultracompetitive market with constant innovation and comfortable amenities, like seats that recline fully. Airlines are also increasingly offering several rows of coach seats with more legroom —  also at an extra price.

Still, the squeeze is on for most passengers in coach. On a flight from Washington to Frankfurt last year, Odysseas Papadimitriou, the chief executive of WalletHub.com, a personal finance social network, was challenged by a tall passenger seated behind him when he reclined his seat. “He was like, ‘Hey, watch it, buddy. I don’t fit here with you reclining the seat,’ ”  he said.

Mr. Papadimitriou called the flight attendant to mediate the dispute and eventually tilted his seat back, but the price he paid to recline was a fitful night’s sleep, as the other passenger grumbled and pushed against the back of his seat for the rest of the flight.

There are ways of resolving conflicts other than bumping into other passengers, as Mr. Rowland, the speaker and consultant, found.

“I lean forward and tap them on the shoulder and say, ‘I’ll buy you a drink if you don’t push your seat back,’ ”  Mr. Rowland said. “It’s made flying very pleasant.”

Wednesday, December 18, 2013

 Airlines: No in-flight calls. Period.
Published: Wednesday, 18 Dec 2013 | 1:03 PM ET
By: Robert Ferris | Special to CNBC.com  

While the Federal Communication Commission reconsiders its longtime ban on in-flight-phone calls, Delta Air Lines says its own policy will remain as it is: no, no and no. And after it previously considered allowing in-flight calls, JetBlue has also decided to prohibit them.

The FCC is considering a proposal to step aside and let airlines determine their own policies on using electronic devices in the air. In an apparent attempt to test public opinion, the commission issued an open invitation to anyone willing to comment on the matter.

(Read more: 'Inattentive parents' top list of worst fliers)

Delta CEO Richard Anderson responded with a statement Wednesday, saying both his company's customers and crews are still cold on the idea of passengers chatting away into phones on flights.

Which electronics are banned in flight?

CNBC's Phil LeBeau breaks down the FAA rules: Anything with a cell signal is still banned, but e-readers, among other devices, will be allowed.

"In fact, a clear majority of customers who responded to a 2012 survey said they felt the ability to make voice calls on-board would detract from—not enhance—their experience," he said. "Delta employees, particularly our in-flight crews, have told us definitively that they are not in favor of voice calls on-board."

However, should the FCC overturn the ban, Delta said it will compromise by allowing passengers to text, email, or use their phones in other ways. Just so long as they do so silently.

JetBlue representative Morgan Johnston cited similar customer feedback to support its decision to forbid in-flight calls.

"We've heard from many customers, and the majority have shared that they do not want voice or video calls allowed on board," Johnston said in an email to CNBC. "We do not allow customers to use VOIP onboard, and have no plans on installing the cellular transponders that would allow cellular calls."

United Airlines gave CNBC a statement less final, saying the company is "evaluating the views of our customers and crew members on in-flight calling, and at this time we don't intend to permit use of cellphones."

Thursday, December 12, 2013

American Air Is a Sleeper Stock if US Airways/America West Is a Precedent

BY Ted Reed |  12/12/13 - 05:59 AM EST

CHARLOTTE, N.C. (TheStreet) -- The new American Airlines (AAL_) went public Monday with a half dozen analysts recommending it. 

New American may not meet the classic definition of being a sleeper stock, one that is likely to achieve unexpected success. Rather, it is a sleeper because of the promise that could be unleashed by having the America West management team take over American's vast route network, and perhaps because of all the lessons learned from previous mergers including the 2005 America West/US Airways combination.

"AAL shares appear to be trading as if this is a typical merger: we believe there is more to the story," wrote Imperial Capital analyst Bob McAdoo in a report issued Monday. McAdoo said he expects schedule changes visible as early as January will show the new management's impact.

In a previous report, McAdoo said the America West team could find $1 billion worth of revenue gains by eliminating unprofitable flying, which would buttress the value of the remaining seats.
Additionally, JP Morgan analyst Jamie Baker wrote Monday that "the earnings power of new American appears sorely underappreciated by the equity market, in our view." Baker has a $37 target price and has put the shares on the firm's "analyst focus list."

So expectations are high for the shares. New American traded for the first time on Monday morning at $23.95, after a one-for-one exchange with shares of US Airways, which traded as LCC. American shares closed Wednesday at $25.99, up $1.11 on a day when shares in every other major airline were down.

When the same management team, headed by CEO Doug Parker, President Scott Kirby and Chief Financial Officer Derek Kerr took over at US Airways in 2005, they quickly made improvements, primarily capacity cuts. In the first quarter as a merged company, revenue per available seat mile on the US Airways routes improved by 27.7%, a very high number. So Wall Street has faith in the team.
On Monday, CRT Capital analyst Mike Derchin initiated coverage with a buy rating and a target price of $31; he called AAL "one of our favorite ideas."

Derchin said equity distributions over the next 120 days should create buying opportunities. He said labor goodwill, a strong cash positioned and a strengthened OneWorld alliance, due to the addition of the US Airways destinations, will all benefit the shares.

"The main risk is now merger integration," Derchin wrote. "We believe management knows from personal experience and recent industry successes and failures how to get it right."

In an interview Monday, Terri Pope, US Airways/American vice president for Charlotte Douglas International Airport, said she has managed through four mergers at US Airways. "I've seen planning in the last 24 months that I had never seen in those four mergers," Pope told reporters on Monday. One lesson, she said, is that "it's not about how fast you make it happen, but that you make it happen the right way."

The point is that not only has the airline industry learned from the closely watched mergers over the past decade, but also that throughout its management ranks US Airways has people with broad experience in overseeing mergers. That was not the case at Delta (DAL_) or United (UAL_), which both stumbled in completing their mergers.

In his note, Baker wrote that new American's EBITDAR margins already rival Delta's and exceed United's" and we expect AAL to widen its lead going forward." Of the three, he said, Delta presents the least risk, with "little being asked of management besides staying the course, (while) United still requires heavy lifting, (yet) shares already trade at a premium following management assurances to do better.

"This leaves AAL, with a management team that has tackled integration in the past and is starting from a base of profitability already rivaling DAL's," Baker wrote. Like McAdoo, he warned that emergence from bankruptcy, accompanied by equity distributions, can lead to selling pressure.
Delta, he said, lost 18% of its value in the first month after emerging from bankruptcy, while United lost 10%.

Wolfe Research analyst Hunter Keay also said he sees favorable comparisons with United and Delta. In a recent report, Keay wrote that new American's "large discount to Delta and United is simply too much."

Keay also suggested "that the AAL merger integration risks are overblown (because) labor is large mollified entering the process and hard knocks IT experience from US Airways' prior merger (same executives, same reservations systems) should yield valuable lessons learned." He has a $39 price target and calls AAL his top pick.

Written by Ted Reed in Charlotte, N.C.
 To contact this writer, click here.
Follow @tedreednc

Monday, December 02, 2013

US Airways Can Find $1B in Revenue Gains at AMR, Analyst Says

Stock quotes in this article: AAMRQ, LCC 

CHARLOTTE, N.C. (TheStreet) -- American Airlines has cut costs by $1 billion in bankruptcy, and now the US Airways  (LCC_) management team is likely to find another $1 billion in financial gains from cutting unprofitable routes and better matching aircraft to routes, a veteran airline analyst said.

"This transaction is as much about fixing AMR as it is about normal merger integration," Imperial Capital analyst Bob McAdoo wrote in a recent report. McAdoo said he sees "well over $1 billion in opportunities to improve AMR's revenue generation potential and financial profitability, simply by shifting priorities and assets.

"AMR Corp. has been a chronic underachiever, particularly in generating revenue," he wrote. "AMR has struggled to generate revenue despite having its hubs arguably in some of the largest and most attractive U.S. cities and also having the largest U.S. carrier presence at London's Heathrow Airport, arguably the most important international airport in the world."

Shares in existing US Airways group and AMR Corp. are scheduled to cease trading on Friday. Dec. 6. On Monday, Dec. 9, AAL shares will begin trading. Existing LCC shares will be converted on a one-for-one basis to AAL shares. LCC shares closed Friday at $23.48, up 74% year to date. McAdoo has an outperform rating on the shares and a $36 target price.

In his report, McAdoo listed three key areas where he believes revenue per available seat mile (RASM) gains can be easily achieved.

On JFK-LAX, the largest U.S. market in terms of revenue, American loses $70 million annually, McAdoo estimated. While its competitors all operate narrow-body aircraft, American flies three-class Boeing 767 nine times a day. Those 767s have fewer seats than competitive aircraft, meaning higher costs per seat mile -- 44% higher costs per seat mile to generate only 7% more revenue than Virgin American, McAdoo wrote. The solution? American already plans to replace the 767s with Airbus A321s.

On JFK-Heathrow, American suffers from "its quantity of slots and its ego-driven tendency to virtually always fly each London flight with its largest B777 aircraft, (and) finds itself unable to always profitably operate to each of its hubs." Furthermore, American's hub in Chicago competes with its hub in Dallas and Los Angeles for London traffic, with the Chicago one-stop undercutting the non-stops. The solution? Cut flights.

On various domestic routes, for instance Chicago-La Crosse, Wis., American uses uneconomic 44-seat aircraft to fly four to five times daily, with the flights only two-thirds full. By contrast, McAdoo wrote, Delta (DAL_) flies Minneapolis-La Crosse three times a day with a 48-seat aircraft and generates far higher RASM.

In a 2005 merger, the America West management team led by Doug Parker took over at US Airways following a bankruptcy. In the first quarter as a merged company, revenue per available seat mile on the US Airways routes improved by 27.7%. Much of the improvement reflected capacity reductions. McAdoo said he believes the America West management team, little changed from 2005, will make similar improvements at American.

"Arriving from the much smaller America West Airlines in 2005, the (team) promptly delivered industry-leading margins at then bankrupt US Airways, a company three times the size of America West," McAdoo wrote. "The team, then and we assume now, has a determination to eliminate flying that could not be made profitable.

Monday, November 11, 2013

Forget house flipping: billionaires flip their super jets

9 hours ago
A Gulfstream G650 business jet stands on display during the Cheongju International Airport Air Show in Cheongju, South Korea, on Oct. 25. Demand is so high for the jet that some billionaires are flipping them for a hefty profit.
SeongJoon Cho / Bloomberg via Getty Images
A Gulfstream G650 business jet stands on display during the Cheongju International Airport Air Show in Cheongju, South Korea, on Oct. 25. Demand is so high for the jet that some billionaires are flipping them for a hefty profit.
The age of house flipping may have faded. But the super rich have found a new path to instant profits: flipping their megajets.

Demand for the biggest, most expensive Gulfstream jet — the G650 — is so strong that owners have started flipping them to other buyers. In some deals, the sellers are pulling in profits of between $5 million and $7 million per flip.

Billionaire Bernie Ecclestone, the Formula One tycoon, recently flipped his G650 to an Asian businessman for $72 million — at least $6 million more than his purchase price, according to people familiar with the deal. The transaction, first reported by BizjetBlogger, came just weeks after Ecclestone received the plane from Gulfstream. (Ecclestone couldn't be reached for comment, but BizjetBlogger said the plane was too large for some of Ecclestone's favorite airports).

Jet brokers and consultants said at least two other buyers have flipped their G650s recently for more than $70 million. At least two other deals are in the works, they said. One of these is an American billionaire negotiating with a buyer in Asia. The other deals involved billionaires in Russia, Latin America and the Middle East.
The flips highlight the strong demand for large-cabin planes — the biggest, most expensive private jets — at a time when the rest of the private jet market is still languishing. Business jet deliveries are still down more than 30 percent from their peak in 2008, and prices for some planes have fallen by more than half, brokers say.

But large-cabin planes are a hot commodity among billionaires and global companies. With their long range and ample cabins, they can carry more passengers over longer distances and in greater comfort. The G650, with a base price of $64.5 million, is the king of the large-cabin private jets, with a range of well over 7,000 miles and a maximum speed of Mach 0.925.

The G650 also is very scarce. Only around 30 to 35 have been delivered since its launch last year, according to brokers.

Still, the jet has become the must-have plane for the world's billionaires, with Ralph Lauren and Oprah Winfrey both lining up for one. Demand is so strong that a buyer signing a contract today won't get their G650 until the third quarter of 2017. That's why many buyers are willing to pay more than $70 million to get their planes today.

"These are billionaires who are willing to pay a premium to avoid the wait," said Philip Rushton, founder of Aviatrade, an aviation consulting and brokerage firm.
The deals are a double-edged sword for Gulfstream. While they highlight the strong demand and value of its aircraft, they also show that customers are now making millions off of its product. The company said that it is "not privy to the details" of any flips, "if customers are, in fact, getting a premium for the aircraft, it's a testament to the amazing capabilities of the G650."

The real problem for Gulfstream is clients trying to sell their planes before they are delivered. Gulfstream said that, "Customers cannot sell the aircraft before they've physically taken delivery of it. This prevents speculation, which isn't good for the market."

The company has a "non-assignability" clause in its contracts, meaning the ownership can't be reassigned after a contract is signed.

Some customers tried to get around the clause by buying the plane under the name of a newly created aviation company. They would then sell the company to a new buyer, essentially transferring ownership of the plane through the company sale. Brokers said Gulfstream caught on to the game and is now requiring the signer of the contract to be involved in the final delivery.
"They're really doing their best to deter this," said Jay Duckson of Central Business Jets.
By CNBC's Robert Frank. Follow him on Twitter @robtfrank.

Why Europeans Put Bigger Planes on Trans-Atlantic Flights

The days when flying over the Atlantic automatically meant a seat on a two-aisle jumbo jet are over. U.S. carriers have switched many ocean-crossing flights to slender Boeing 757s, a smaller airplane than the typical wide-body giants favored by European airlines headed to North American destinations. The strategic split in airplane size is the result of differences in fare-pricing software, reliance on hub airports, and passenger preferences in the two markets. Here’s why Europeans fly larger than Americans:

1. U.S. airlines manage fares more tightly. Revenue management software is widely used across the U.S. industry to oversee how many seats are sold at specific prices—a strategy that can maximize profitability when tweaked just so. Deploying sophisticated algorithms to determine pricing was a direct result of the industry’s deregulation in 1978—a process that occurred nearly 20 years earlier than in Europe, airline analyst Robert Mann notes. The software does best when managing an airplane without that many seats. “Too much capacity (larger gauge with more seats) puts those tools outside their sweet spot and unable to deliver improvements in unit revenue,” Mann wrote in an e-mail. “This is why half of U.S. domestic frequencies are on regional partners’ smaller jets.”

2. Hubs play a huge role in aircraft size. The legacy U.S. airlines all have multiple hubs to feed, whereas British Airways (IAG:LN) and Air France (AF:FP) each has essentially one. United (UAL), for example, flies to London Heathrow from six of its eight U.S. hubs, seeing those multiple frequencies as a competitive weapon to lure corporate travelers who fly to the U.K. British Airways, however, feeds nearly all its North American traffic through Heathrow, which it says makes larger airplanes more logical.

“The B757 allows us to serve certain cities that we may not be able to serve profitably with a larger aircraft—this fact makes the service possible in the first place,” US Airways (LCC) spokesman Todd Lehmacher says, citing the summer service to Shannon. That route was successful and will return in 2014. Delta (DAL) also has found niche uses in Europe for the 757, as has American with a daily flight from New York to Madrid. (The main downside is flying west in winter, when high winds can boost fuel burn and necessitate expensive diversions for refueling.)

4. Europeans pay for cabin comforts. The traditional European flag carriers have a relatively robust business for first and business-class seats, compared with their American counterparts. Lufthansa (LHA:GR) is the largest provider of premium-cabin seating across the Atlantic and needs at least 60 business-class seats on most of its flights to North America to meet demand, spokesman Nils Haupt says. So while United can make do with 16 business-class seats on a 757, Lufthansa will not (usually) struggle too mightily to sell the 98 biz-class seats in its massive 526-seat A380s—nor the eight in first class.

Friday, November 08, 2013

Too fat to fly: French family stranded in US

A British Airways aircraft takes off from Heathrow Airport in west London
A British Airways aircraft takes off from Heathrow Airport in west London (AFP Photo/Ben Stansall)
Chicago (AFP) - A French family who came to the United States for medical treatment said they were stranded in Chicago after British Airways determined their son was too fat to fly.
Kevin Chenais, 22, spent a year and a half at the Mayo Clinic for treatment of a hormone disorder which led him to weigh 500 pounds.

His mother was near tears as she described the family’s problems to the local CBS affiliate.
"We blame British Airways because now they just leave us, and they brought us here,” Christina Chenais told the station.

"If they could bring him here with that problem in economy, there was a way to take him back by economy but just get him back home for his medical treatments to continue."

The family spent a week in an airport hotel trying to resolve the matter and, running out of money, has decided their only option is to take a train to New York and cross the Atlantic on the Queen Mary cruise ship.

Kevin Chenais requires round-the-clock oxygen and medical attention.

"I’m sure a lot of big people like me or bigger cannot travel because they have the same problem,” he told the station, head hanging down as he sat up in bed.

"This time before leaving I knew something would go wrong."

A British Airways spokesperson told AFP that its customer service team "worked diligently to find a solution."

"We will always try to accommodate someone if it's possible and safe to do so," Caroline Titmuss wrote in an e-mail.

"Unfortunately, it is not possible to safely accommodate the customer on any of our aircraft and the family has been offered a full refund."

The airline said it provided hotel accommodation for the family along with "guidance and support" to help explore other travel options.

A spokeswoman for the French consulate told AFP it "attempted a mediation with British Airways, but the position of the airline is firm on the security issue."

It has provided the family with the names of two lawyers who may be able to help.
The Chenais family did not immediately return requests for comment.