November 25, 2008
Ex-TWA attendants decry Delta/NW integration

An American Airlines flight attendant who led the fight to extend recall rights to former TWA flight attendants said he's worried that attendants affected by the Delta/Northwest merger could experience similar problems.

Roger Graham helped organize a successful grassroots effort to extend recall rights past five years to the TWA flight attendants who worked for American after that airline was acquired in 2000. TWA attendants were added to the bottom of the American seniority list, and many were laid off in the months following Sept. 11, 2001. By 2006, many began to lose their right to return to work, which expired after five years.

Graham said Tuesday that the Delta/Northwest merger had the potential for similar problems, pointing out that Delta attendants aren't unionized, while Northwest attendants are represented by the Association of Flight Attendants. Delta has formed employee committees to plan the integration, but Graham said the airline should wait until employees can vote on whether to unionize.

"Delta’s attempt to undermine that legislation and process is reprehensible," he said. "If Delta implements their plan of a 'fair and equitable' integration without first having a union vote, it will most certainly lead many of these flight attendants down the same flight path as the TWA attendants."

Trebor Banstetter

British Airways in merger talks with Qantas

Tuesday December 2, 10:10 am ET By Jane Wardell, AP Business Writer

British Airways says it is in talks with Australian airline Qantas about a potential merger
LONDON (AP) -- British Airways PLC said Tuesday it is in talks with Australia's Qantas Airways Ltd. about a potential merger, sending its shares soaring as it confirmed expectations of consolidation in the hard-hit aviation industry.

BA, which is already pursuing a revenue-sharing deal with American Airlines and Spain's Iberia SA, said it is exploring a "potential merger" with Qantas "via a dual-listed company structure."
In a brief statement released in response to market speculation, BA did not provide any reasoning for the prospective deal but chief executive Willie Walsh has long advocated industry consolidation, arguing that closer cooperation will help airlines cut costs in the current difficult economic climate.

BA, the third-largest airline in Europe, added that its discussions with Iberia on a potential merger are continuing.

"There is no guarantee that any transaction will be forthcoming and a further announcement will be made in due course, if appropriate," BA said in the statement to the London Stock Exchange. It provided no further detail on the structure of the potential deal with Qantas, Australia's largest airline.

The London-based carrier's stock jumped more than 12 percent after the announcement to 156.7 pence ($2.35).

The two airlines are already code sharing partners in the oneworld global alliance, which brings together 10 of the world's carriers including Japan Airlines.

The confirmation from BA on the talks comes a day after the Australian government revealed that it plans to increase the level of foreign ownership allowed in Qantas, but will not permit a takeover. Australian law currently limits a single foreign holding to 25 percent, while a group of foreign holdings can total 35 percent.

A federal government policy paper released Monday proposes lifting the foreign ownership limit -- whether by one company or a group of companies -- to 49 percent. That would allow Qantas and BA to swap equal stakes in each other.

Qantas last month slashed its full-year profit forecast to around 500 million Australian dollars ($316 million), down from an August forecast of AU$750 million. It also said it would cut flights to cope with plummeting demand, despite a recent easing in the oil price.

Walsh last month warned that that the industry was still "heading into the eye of the storm," shortly after BA reported a first-half net loss of 49 million pounds ($77 million).
Analysts have been expecting greater consolidation in the airline industry after the global economic crisis combined with soaring oil prices earlier this year to severely crimp passenger demand.

The International Air Transport Association has reported international passenger traffic declined 1.3 percent in October compared with 2007, following a 2.9 percent drop in September, and forecasts industrywide losses of $2.3 billion this year.

Budget airline Ryanair Holdings PLC on Monday launched a new takeover bid for Aer Lingus, seeking to capitalize on labor unrest at its Irish rival along with the country's economic difficulties.

BA has already filed for worldwide antitrust immunity from U.S. authorities for a revenue-sharing deal with American and Iberia that would see the trio set prices together and share seat capacity on trans-Atlantic flights. American would be the non-merged member of the BA-Iberia linking.

The agreement is the closest alliance the trio can form under strict U.S. airline ownership laws that all but rule out a full merger and follows two earlier failed attempts by BA and AMR Corp.'s American to forge closer ties.

Rival carrier Virgin Atlantic Airways has bitterly opposed that proposed deal, claiming it will seriously damage the competitiveness of the lucrative trans-Atlantic route and increase fares for passengers.

But American and BA contend that the partnership will merely allow the trio to better compete with the other major airline alliances, Star and SkyTeam, which already have antitrust immunity on trans-Atlantic flights and a large presence at other European airports.

BA and American have failed in the past to win an exemption from U.S. competition laws to work more closely together because of their dominance at London's Heathrow Airport, where the pair have more than half the capacity to and from the U.S.

Walsh has argued that the competitive situation has changed since the "open skies" agreement between the U.S. and the European Union came into force in March, allowing airlines to fly to and from any point in the U.S. and any point in the EU.

NWA flight attendants union sues Delta
Tuesday, November 25, 2008 - 11:39 AM ESTDayton Business Journal - by Liz Riggs DBJ Contributor

The union representing Northwest Airlines flight attendants is suing Delta Air Lines Inc. to prevent the carrier from integrating the pre-merger Delta and Northwest seniority lists, saying the action is premature.

According to the suit filed Nov. 11 in U.S. District Court in Washington, D.C., the Association of Flight Attendants-CWA believes that moving ahead with integration before the combined group has the opportunity to vote on union representation constitutes “unlawful interference [by Delta] ... with the rights of those employees to choose their representative and to organize and bargain effectively.”

Atlanta-based Delta (NYSE: DAL) acquired Northwest on Oct. 29. Delta’s flight attendants are not represented by a union; Northwest’s are.

According to the suit, Delta has said it could take up to 12 to 24 months to fully merge the operations of the two carriers and obtain a single operating certificate from the Federal Aviation Administration. Because Delta has not yet received the certificate, the suit alleges the seniority integration process is inappropriate.

Delta is the largest airline flying out of the Dayton International Airport.
E-mail dayton@bizjournals.com. Call (937) 528-4400.

November 14, 2008, 11:12 am
JetBlue Pilots Move To Form Union
Posted by Matt Phillips

On Thursday, JetBlue filed for U.S. regulatory approval to form the low-cost airline’s first labor union, a move that pilots say will position them to cope with future management that may be less friendly to labor, Dow Jones Newswires reports.

“We have complete faith in our current company leadership and believe that this will be a cooperative effort,” Michael Sorbie, the pilots’ spokesman, said in a letter to the National Mediation Board, the agency that oversees airline labor issues. Sorbie added that “as our airline matures, we want to ensure that the career expectations of our pilots will remain intact regardless of organizational changes.”

The letter was posted on the pilot group’s Web site.

JetBlue spokesman Bryan Baldwin said Thursday that “we have been advised that it is JBPA’s intention to file a petition for election, but have not yet been notified by the National Mediation Board. We believe direct relationship with the company is in our pilots’ best interest.”

The pilots group has asked to be an independent negotiator for JetBlue pilots, rather than join an existing union. A spokesperson for the pilots couldn’t immediately be reached for comment. Once the request is approved, pilots can vote on union representation.

The New York carrier was founded in 2000 as a non-union airline, a rarity in an industry where union organizing - particularly for pilots - has been the standard. David Neeleman, the innovative entrepreneur who started JetBlue, referred to all employees as “crew members”. The airline strove to foster a work-friendly atmosphere that circumvented typical labor-management confrontations.

The airline flourished in its early years, offering low ticket prices and good service. It grew as much as 30% a year, and became a Wall Street favorite, making a profit even as major U.S. airlines lost money and struggled to streamline their organizations during a long industry downturn.

JetBlue now is the major carrier at its New York hub at JFK International Airport, employing more than 9,000 workers.

November 18, 2008, 2:21 pm

Has American Airlines Turned Around Its Operation?
Posted by Scott McCartney

As we’ve reported several times in different stories, AMR Corp.’s American Airlines has been struggling with its operation for more than the past year. American officials now admit they went too far in cost-cutting, and the lack of spare parts, spare employees and spare airplanes, combined with overly optimistic schedules, has led to bottom-of-the-industry dependability. Add in continued battles between labor and management and you have one late airline.

American is now trying to turn that around, primarily by building more cushion into its operation. The carrier has added minutes to scheduled flight times, bulking up because delays are measured by comparing actual arrival time at gates with scheduled arrival time. The airline says it has also sped up cruise speeds for flights it slowed down to save fuel, and increased the ground time between flights.

But has the airline turned around yet? On Tuesday, American’s public relations firm, Weber Shandwick, sent a pitch to reporters suggesting a pre-holiday trend story on “American’s Improving Dependability Ratings.” The pitch said American moved from 58.8% on-time performance in June to 83.6% “as of mid-October, advancing its ratings by about 16 percent on average between July and September.”

Comparing airline on-time results in June with mid-October is a bit like comparing the temperature in those months and declaring global warming concerns are dead. Air travel is impacted heavily by summer storms, summer crowds and summer congestion at airports and in the sky. Dependability has improved for every airline this fall as a result of severe schedule cuts that reduced a lot of congestion. And fall is a better flying season for airlines than summer.
So in proper comparisons, how is American faring?

The best way to compare dependability is to compare airlines, since they all fly more or less in the same weather and congestion. (Airlines with heavy presence in New York do have it tougher than others, as we’ve noted before.) According to the Department of Transportation, American ranked eighth among the ten major airlines for dependability in September, the most recent month the government has reported. According to FlightStats.com, a flight-tracking service, American was again eighth among ten majors in October. So far this month, FlightStats shows American with an on-time percentage of 80.32%, which ranks — you guessed it — eighth among ten majors.

But American is running better than it did a year ago. In September, for example, 81.5% of its flights arrived within 15 minutes of schedule, the DOT’s definition of “on-time.” In September 2007, only 78.5% of American’s flights arrived on time, according to DOT. In October, FlightStats counted 81.6% of American’s flights on-time, compared to only 74.3% in October 2007. In the first 15 days of November, American had 80.3% of its flights arrive on time, compared to 78.1% in the same period last year, according to FlightStats.

So dependability has been somewhat better. But it’s been better for other airlines as well.
The real proof, of course, is with the passengers.

Delta begins long integration with Northwest

Friday October 31, 5:58 am

ET By Joshua Freed,

AP Airlines Writer

Delta begins long integration with Northwest; says customers will see little change
MINNEAPOLIS (AP) -- One day after his airline swallowed Northwest Airlines, Delta executive Ed Bastian was in town with a polar bear tie and a smile in a bid to reassure travelers that little would change.

Hubs? They all stay. Flights? Maybe fewer seats, but no outright cuts. Frequent flier miles? You'll keep them all.

Still, Bastian and the rest of the executives who will stir the two airlines together have plenty to do.

"It's probably going to take us two years before we can really operate as a single carrier," Bastian, who is Delta Air Lines Inc.'s chief financial officer, said Thursday. Bastian is also now the chief executive of Northwest, which became a subsidiary of Delta when their tie-up closed on Wednesday.

Although dozens of teams with members from both companies have been working together for months toward the integration, several items still have not been decided yet, Bastian said from behind a "Delta" podium above a ticketing area dominated by Northwest counters. That includes whether Delta will continue to allow a single checked bag for free (Northwest charges a fee), and which planes will go on which routes.

Bastian did not rule out the possibility that Delta would add a checked-bag fee. In any case, both airlines will have the same fee structure soon, he said.

He said Delta would arrange its fleet and schedule in the spring. Only one airplane, the 757, is common to both carriers.

Airline mergers have a checkered history. AMR Corp.'s American closed on a buyout of TWA months before the Sept. 11, 2001, attacks turned the industry upside-down. And US Airways Group Inc. is still struggling with its integration with America West.

"In the past it's been like trying to integrate oil and water," said Mo Garfinkle, who runs airline consulting firm GCW Consulting.

Delta and Northwest will have to integrate different corporate cultures, different software for ticketing and schedules, different fleets, different unions (most of Delta's workers are not unionized) -- and it all has to be done without missing a beat in a 24-7 operation that includes hubs from Tokyo to Amsterdam.

Garfinkle says he is optimistic, because of all the work that the two airlines have already done, and because they seem willing to take it slow.

"I think this is going to be the poster child for successful airline mergers," he said.
Bastian said that regional subsidiary Comair would remain a part of the airline. Comair's future has been uncertain, in part because it flies 50-seat jets that are money-losers when oil prices are high.

"Comair is an important part of the family, just as they've always been," he said.
The airlines have been cutting domestic capacity while in many cases adding international routes. Bastian said that's on hold now because of the economy.

"The growth will be slowed if there's any growth at all on the international seats," he said.
On Wednesday, before the deal closed, Northwest said it had arranged $500 million in loans backed by its remaining unencumbered assets, which had included its old DC-9 planes. Bastian said the borrowing won't change Delta's ability to park or fly the planes as the schedule requires. He said Delta has not settled on a replacement for the DC-9.

Delta is also negotiating with the state of Minnesota over bond debt backed by the state. Northwest signed agreements promising to repay the debt, at a cost of about $230 million, if its headquarters leaves the state. That hasn't happened yet because it's still a Delta subsidiary.
Northwest has its headquarters in Eagan, Minn. The combined carrier will be based in Atlanta.
Minnesota Rep. Debra Hilstrom, D-Brooklyn Center, said she would call a Nov. 13 hearing about the matter in the House Local Government and Metropolitan Affairs Committee, which she chairs.

October 31, 2008, 9:10 am
Five Issues Delta-Northwest Marriage Could Face
Posted by Matt Phillips

It’s well established that airline mergers aren’t always smooth affairs. Here are five things that the executives tasked with creating a “new” Delta out of the Atlanta-based carrier and Northwest have likely been considering for months — and why travelers should care.

Reservation glitches: Merging hundreds of routes and reservations is no easy task. It took quite a while for US Airways, which merged with America West back in 2005, to straighten out its schedule.

Back in October 2007, Scott wrote a column in which US Airways CEO Doug Parker said some issues arose as a result of an effort to unify US Airways and America West’s reservation system. “Reservations were lost, flights were delayed and many customers fumed in long lines. For many months, US Airways had two separate check-in lines depending on whether your reservation was made through the old US Airways system or the America West system,” Scott wrote.

Pilot issues: In past mergers, seniority integration has been a major sticking point leading to litigation and years of bad feelings. (Seniority determines pay and schedules for pilots.) Some Northwest pilots have been around long enough to remember the hostility that followed that carrier’s 1986 acquisition of Republic Airlines. The deal doubled Northwest’s size, but the integration led to months of lost baggage and years of worker infighting. Senior pilots at the airline still identify themselves as “red book,” meaning they were covered by the old Northwest contract, or “green book,” Republic’s contract. Why should you care? Well, back in 1999, after American Airlines acquired tiny Reno Air, an integration dispute triggered an illegal pilot sickout that disrupted travel nationwide for 11 days. As Susan Carey and Paulo Prada wrote in the Journal, this is one issue in the Delta/Northwest tie-up that isn’t yet resolved. But Delta’s 6,000 pilots and Northwest’s 5,000 already have voted for a common labor contract and agreed to abide by an arbitrator’s ruling if they can’t agree by next month.

Cranky Workers: Poor customer service has been a problem with airline mergers before. Generally speaking, the ongoing uncertainty of mergers can sap employee morale. (After all, one rationale behind combining two airlines — cost savings — often translates into job cuts.) The list of potential merger problems can seem endless. For instance, during the US Airways/America West integration, one sticking point was how empty seats on flights were given to employees. America West employees got to ride in empty seats on a first-come, first-served basis, while US Airways, employees got seats based on seniority. While this might seem like inside baseball, all these issues play a role in employee attitudes, and consequently, passengers’ experience with those employees.

Generalized confusion: As Northwest joins Piedmont, AirCal, Republic, and Mohawk in the great airline-brand scrapyard in the sky, it’s crucial that the “new” Delta makes it clear which airline’s terminals, gates and check-in counters will be in use for customers. It sounds simple, but sometimes airlines can take an extremely long time to iron this stuff out. In a November 2006 column, Scott wrote how Delta’s terminal at New York’s Kennedy was still waiting for full merger integration 15 years after Delta bought Pan Am’s European business, making Delta’s Kennedy operations confusing — even for some cab drivers.

The false start: After airlines merge, it often takes awhile before they’re ready to enact major changes in operations and procedures. Again, the US Airways/America West deal may serve as an example. The integration of the two started off smoothly but ran into large operational snags — poor on-time and baggage handling, people stranded at airports — that inconvenienced customers. (It’s important to note, however, that US Airways has made big strides in straightening most of them out.)

That said, there are plenty of reasons to believe that the integration of Delta-Northwest will be less rocky than other airline marriages. For one, Delta’s CEO Richard Anderson — who will lead the combined carrier — has been in charge of both companies, which may give him special insight into how the two cultures will blend.

Readers, we know many of you are airline experts. What other unexpected bumps lie down the road?

Reuters

Delta buys Northwest to create biggest airline

Wednesday October 29, 9:58 pm ET
By John Crawley

WASHINGTON (Reuters) - Delta Air Lines (NYSE:DAL - News) swallowed rival Northwest Airlines Inc on Wednesday in a $2.6 billion merger that created the world's biggest airline and prompted new speculation about further industry consolidation.

The all-stock transaction, the first domestic airline combination in three years, closed after clearing its biggest and last regulatory hurdle earlier in the day -- U.S. Justice Department antitrust review.

Justice officials cited the likelihood of "substantial and credible efficiencies" without harming consumers or competition.

Government approval was expected. Industry vigorously made the case to regulators earlier this year, when airline finances were rockier than they are now, that consolidation was an important tool for remaining viable with fuel prices high and the economy worsening.

"The airline industry faces a very difficult economic environment around the world and this merger gives Delta increased flexibility to adapt to the economic challenges ahead," said Richard Anderson, the Delta chief executive who will head the combined entity.

The new, larger Delta will be an international powerhouse with unparalleled scheduling and pricing strength with service to 375 cities worldwide, experts said. The company estimates a combined $2 billion in cost savings and revenue enhancements annually.

An ambitious plan is to link the long-established strength of Northwest in Asia with Delta's expanding overseas network, and leverage benefits from the transatlantic SkyTeam alliance that includes AirFrance/KLM.

"There are global corporations but no global airlines. The race to become the first truly global airline has an incredible reward to it," said consultant Darryl Jenkins. "The revenue potential is something that we have not seen yet. That's the synergy that will make this very lucrative."

Jenkins and other experts said the deal's potential may reignite merger fever, which burned this year until fuel prices started their dramatic rise this summer to record heights and prompted sharp airline cost cutting.

Doug Parker, chief executive of US Airways Group (NYSE:LCC - News) and a long-time proponent of consolidation, said last week that he still believes mergers are right for the industry. US Airways failed last year in its bid for Delta.

Calyon Securities analyst Ray Neidl said that economic wild cards could impede consolidation. A credit crunch and fuel price volatility must diminish before airlines can explore mergers, he said.
"Down the road, there will be more consolidation or attempts," Neidl said.

INTEGRATING OPERATIONS

Northwest's history dates to 1926 and its common stock first traded in 1941. But the company now operates as a wholly owned subsidiary of Delta until the two fully integrate their operations. That process is expected to take up to two years and cost no more than $600 million.

Integration can be tricky. For instance, US Airways Group Inc (NYSE:LCC - News) has yet to fully combine its work force after merging with America West in 2005.

Delta said customers should continue to check-in and do business directly with the airline operating their flights just as they did before the merger.

For the time being, the carriers will maintain separate web sites as well as two reservation systems and loyalty programs.

The new company will retain the Delta brand and be headquartered in Atlanta, where Delta is based. The new Delta begins operations with 75,000 employees.

In the coming days, Delta will distribute an equity stake to substantially all U.S.-based employees with international employees participating through cash payments in lieu of stock. The pilots' unions of both airlines have agreed to a unified contract but still must negotiate a seniority arrangement, a detail that almost derailed merger prospects earlier this year.

The new Delta has said no frontline employees will be involuntarily furloughed as a result of the merger and that no hubs will be closed. The old Delta's strength was in the South while Northwest operations are based in the northern cities of Minneapolis and Detroit.

As approved by shareholders at both companies earlier this year, Northwest stockholders will receive 1.25 Delta shares for each Northwest share they own. Based on Delta's closing stock price on Wednesday, this exchange ratio is the equivalent of $9.99 per Northwest common share.
Delta shares closed down 2.1 percent at $7.99 on Wednesday on the New York Stock Exchange, while Northwest finished 0.6 percent higher at $9.90.

Government approval of the deal comes as airline finances begin to improve with fuel prices falling sharply off record highs. But carriers are now cutting back service to save money as travel demand softens due to economic weakness.

Northwest posted a $317 million third-quarter loss due to writedowns on its fuel hedging. Without the adjustment, the company earned $93 million and beat Wall Street share price estimates. Delta's third-quarter loss was $50 million.

(Additional reporting by Diane Bartz, Randall Mikkelsen and Kyle Peterson in Chicago; Editing by Gary Hill)

US Airways, AirTran and JetBlue report steep losses
By Christopher Hinton, MarketWatch
Last update: 4:46 p.m. EDT Oct. 23, 2008

NEW YORK (MarketWatch) - Fuel costs and non-cash charges related to its hedging program helped push US Airways into a significant third-quarter loss.

The Tempe, Ariz., legacy carrier wasn't alone. Also reporting swings to quarterly losses Thursday were low-cost carriers JetBlue Airways Corp and AirTran Holdings.

The smallest of the six so-called legacy carriers, said it swung quarterly loss of $689 million, or $8.45 a share, from a gain of $177 million, or $1.87 a share, in the year-ago period.
Total operating revenues rose 7.4% to $3.26 billion from $2.13 billion, while passenger-unit revenue jumped 4.6% to 12.71 cents.

Excluding items, the airline said it would have lost $2.35 a share. Analysts polled by FactSet Research expected, on average, a loss of $2.30 a share.

Shares of US Airways plunged nearly 16% to close at $7.14, along with the broader sector as investors brace for a possible oil-production cut among OPEC members. The stock hit its lowest point on record at $1.45 when oil hit $147 a barrel in July.

US Airways' total fuel bill in the quarter rose 60% to $1.11 billion due to those record oil prices. Since then prices have crashed to below $70, resulting in significant mark downs for the airline's fuel hedging program that's meant to buffer higher oil prices.

It's a scenario felt across the industry as the world's oil and jet fuel market remain volatile. Over the last two weeks, Northwest Airlines Southwest Airlines Co.
all reported losses due to the sharp rise and then falloff in oil prices.

Still, falling oil prices and steep seat-capacity cuts are expected to benefit the industry next year, and US Airways said Thursday its expects 2009 a "much better" year for the company as well.

Further, the carrier said it secured an additional $950 million in financing.
AirTran and JetBlue also report quarterly losses on fuel

Along with US Airways, JetBlue and AirTran were also predicting clear skies ahead.
"The great industry guide-up continues, with AirTran and JetBlue adding their voices to the chorus of airlines this season painting a brighter view of the fourth quarter and beyond," said J.P. Morgan analyst Jamie Baker in a note to investors.

AirTran Holdings said it swung to a third-quarter loss of $107.1 million, or 91 cents a share, compared to a profit of $10.6 million, or 11 cents a share, in the year-ago period.
The Orlando, Fla., airline said revenue rose 11% to $673.3 million.
Analysts polled by FactSet expected, on average, a loss of 41 cents a share on sales of $671.1 million.

The company cited record-high fuel costs, which accounted for more than 50% of its expenses for the quarter, as a significant contributor to the loss.

Downgrading the company Thursday was Standard & Poor's Equity Research, saying the carrier's wider-than expected loss raises concern over its financial position. Further, the AirTran is more exposed to leisure and short-haul markets, which are likely to fare worse in a sustained downturn.

In an interview with MarketWatch, Chief Financial Officer Arne Haak said passenger numbers has slowed down a "little bit" for October, and for the first week of November. December so far looks "pretty good," he said.

Nonetheless, S&P cut its rating to hold from buy, with a 12-month price target of $4, down from $5.50. Shares of AirTran fell 7.2% to close at $3.20.

Meanwhile, JetBlue ( said it lost $4 million, or 2 cents a share, in the third-quarter. In the same period a year ago, the Forest Hills, N.Y., carrier earned $23 million, or 12 cents a share.
Operating revenue for the quarter totaled $902 million, up 17.9%.

Analysts polled by FactSet Research estimated, on average, a loss of 5 cents a share and sales of $896 million.

In the near term, JetBlue said it sees continued strength in bookings.

In an investor, note, J.P. Morgan upgraded the low-cost carrier to overweight from neutral.
"JetBlue remains one of the least-liked large jet operators, and has materially lagged the sector's recent sprint to the upside," the research firm said in a note. "In light of a significantly boosted 2009 outlook and continued liquidity improvements, we suggest investors focus on this laggard."
Shares of JetBlue bounced back with the broader market to end up 1 cent at $5.02.

Christopher Hinton is a reporter for MarketWatch based in New York.

World's Largest Airliner Lands at LAX
Monday, March 19, 2007 6:23 PM
Airbus A380 Will Undergo Tests

LOS ANGELES, Mar. 19, 2007 -- The world's largest airliner made its West Coast debut today, touching down at Los Angeles International Airport to complete its bicoastal American unveiling.
The massive Airbus A380 descended out of a dank, gray sky and made a picture-perfect landing just before 9:30 a.m. as spectators cheered from both sides of the airport.

About 15 minutes earlier, an A380 touched down on the other side of the country, at New York's John F. Kennedy International Airport.

The A380, which burns about one gallon of gas per passenger every 80 miles and can fly some 8,000 nautical miles, can seat as many as 550 passengers. Airbus has 166 orders from 15 airlines for the new plane, which has already made tests flights in Europe and to Asia.

The Los Angeles flight, operated by Australian airline Qantas, was devoid of passengers and crew, save for those in the cockpit.

Toulouse, France-based Airbus said that the plane will undergo tests at LAX, including airfield maneuvers, docking at the terminal gate and ground and gate handling exercises.

The New York flight carried 550 people, including four pilots, four Airbus crew members, 23 Lufthansa cabin crew and 519 passengers, mostly Airbus and Lufthansa employees along with some reporters.

The flight was operating just as if it were a commercial trek, with full dining and entertainment services.

Los Angeles officials fought hard to host the A380's inaugural landing, and wrote a letter to Airbus earlier this year urging executives to reconsider plans for an initial landing only in New York. Los Angeles officials contended Airbus was reneging on a promise to make the first U.S. stop in Los Angeles, which kept its word to speed up construction of new $9 million gate for the giant jet. Airbus relented just three weeks ago.

Los Angeles' airport agency ultimately plans to spend about $121 million to prepare for the A380, and has already written checks for about $50 million to improve runway and taxiway intersections. LAX, the fifth-busiest airport worldwide, is expected to be the first U.S. destination for the A380 when it enters commercial service.

(Copyright ©2008 by The Associated Press. All Rights Reserved.)

Airlines Who Have Departed For The Last Time

AMR Places Big Order for New Jets

AP

American Airlines to buy Boeing 787s

Wednesday October 15, 9:30 pm ET By David Koenig, AP Business Writer

American Airlines to buy new Boeing 787s to help make fleet more fuel-efficient

DALLAS (AP) -- American Airlines, suffering through one of the worst slumps to hit the aviation industry, is splurging on 42 new jets that have never flown a single paying passenger yet and come with a total sticker price of about $8 billion.

American, the nation's largest airline, said it also took rights to buy up to 58 more of the Boeing 787-9 aircraft.

Officials at American acknowledge that Wednesday's announcement is a bold move -- and a bit contrarian.

They are betting that the airline industry will be looking a lot better when the planes are ready for delivery, starting in 2012 and running through 2018.

"We've been criticized before for buying airplanes at the peak of the market only to have them delivered in the valley," said Daniel Garton, executive vice president of American parent AMR Corp. "Maybe this time we'll get the timing right."

Garton even compared American's move to the strategy of value investors such as Warren Buffett -- buy when everyone else is running from the market.

American also had important operational reasons for ordering the Boeing 787, which is to feature a fuselage made of new lightweight material instead of the traditional aluminum skin.

American has 150 wide-body jets that are used heavily on international routes. Many of

them are nearing retirement age. At a minimum, the 787s would be replacements for older planes that burn 20 percent more fuel.

That's a major consideration for an airline that spent $2.72 billion on fuel in the July-to-September period.

The new planes could even carry American's hopes to expand its international service, which has held up much better than domestic service in the current slump. The 787 is designed to carry up to 290 passengers and have a range of up to 8,500 nautical miles.

International routes are among American's most profitable, and they could get another boost if federal regulators grant American's wish for an antitrust exemption to expand its partnership with British Airways. Such approval would let American, BA and Iberia work together in setting prices and schedules on trans-Atlantic flights.

AMR Chairman and Chief Executive Gerard Arpey said the new plane represented a prudent investment for the long haul. It will reduce fuel and maintenance costs, and cut greenhouse gas emissions -- airlines may eventually face payments for those emissions.

Without discussing details, Arpey said the deal had "flexibility" built in to let American manage its fleet replacement and growth.

The order would be American's second big move to upgrade its fleet, among the oldest for U.S. carriers. The Fort Worth-based airline has already announced it will take delivery of 76 Boeing 737-800 aircraft in 2009 and 2010 to replace gas-guzzling MD-80s, which are used heavily on domestic routes.

AMR reported Wednesday that it had an operating loss of $360 million in the third quarter. That came on top of more than $1.7 billion in losses in the first half of the year. AMR has $15.4 billion in total debt -- $10.7 billion if you give the company credit for its cash and short-term investments.

So how will it afford planes that are worth around $8 billion, according to list prices? (Airlines usually get discounts, particularly on big orders, but American declined to give financial terms of the Boeing deal.)

It plans to borrow.

"We're pretty confident that we'll be able to find financing," Garton said in an interview.
American just completed lining up financing for 20 Boeing 737s that it had previously ordered.
The 787 purchase order is contingent on American's pilots going along. The union and management have clashed on many other issues, but Arpey said he believes the two sides can agree on how much pilots will earn for flying the new plane.

The order was welcome news at Boeing Co. facilities around Seattle. It could be Boeing's biggest plum of the year in dollar value, likely trumping Air China's announcement in July that it will buy 45 planes with a list price of $6.3 billion.

The orders indicate that Boeing's airline customers are not spooked by the machinists' strike that has closed Boeing's commercial airplane factories since Sept. 6. Some airlines are still making long-term fleet purchases.

The strike, however, will likely delay the first test flight of the 787, which had been planned for later this year. The production schedule has already been pushed back several times because of other glitches.

The first airline scheduled to receive the plane, All Nippon Airways Co., said late last month that it expected to get its first one next August.

**************************************

From "The Street.com" below

Deal

is contingent on American reaching an agreement with its pilots to fly the aircraft. 10/15/08 - 05:02 PM EDT

Ted Reed

Despite a volatile economy and a $360 million third-quarter adjusted loss, American Airlines parent AMR (AMR Quote - Cramer on AMR - Stock Picks) said Wednesday it has ordered 42 Boeing (BA Quote - Cramer on BA - Stock Picks) 787 jets and has options for 58 more. "This is a difficult decision in these incredibly volatile times, but it is fundamental to the long-term strategy of the company, and we felt it was a wise decision to make," said Dan Garton, executive vice president for marketing, in an interview. "

Airlines are often criticized for buying at the peak and having the airplanes delivered four years later, for buying when things are great and then having the [deliveries] when things are bad," he said. The order has a book value of $20 billion, but airlines invariably pay less than book value for new aircraft. Garton said American is not concerned about financing, since the first delivery is four years off. "It's very likely there will be some slippage to the original schedule," given delays in the 787 program and the ongoing strike at Boeing.

While it's rare for a carrier to acknowledge that an order might not be on schedule the day it's placed, Garton noted that "it's not ideal to enter into an agreement when you have uncertainty, but it's a reality we have to face." The planes would replace aging widebodies in the American fleet, including Airbus 300s, as well as 767s and 777s.

The first 42 deliveries are scheduled for 2012 to 2018, with the 58 option deliveries tentatively planned for 2015 to 2020. The deal is contingent on American reaching an agreement with its pilots to fly the aircraft. Meanwhile, AMR said its third-quarter loss resulted primarily from a fuel bill that was $1.1 billion higher than in the same quarter a year earlier. The loss was equivalent to $1.39 a share. Analysts surveyed by Thomson Financial had estimated a loss of $1.50. Revenue rose 8% to $6.4 billion, slightly ahead of expectations.

AMR to slash more capacity in 2009
Airline also sets plans to take delivery of more fuel-efficient aircraft
By Christopher Hinton, MarketWatch
Last update: 4:40 p.m. EDT Oct. 15, 2008

NEW YORK (MarketWatch) -- AMR Corp., the largest U.S. airline and owner of American Airlines, said Wednesday that it would slash more of its seat capacity next year to offset an anticipated economic recession.
The Fort Worth, Texas, airline also said it intends to take delivery of up to 100 more fuel-efficient aircraft beginning in 2012.

For the fourth quarter, AMR expects to pull down about 8.3% of its mainline capacity, with domestic capacity expected to decline 12.5% and international capacity to fall less than 1% compared to last year.

AMR said it expects its mainline capacity to decline 3.7% and plans to cut 9% next year, including a 14% reduction of mainline domestic capacity.

"These reductions will help to offset weakness in the revenue environment associated with a recessionary economy and... we think it makes sense to revise our capacity downward further for next year while at the same time accelerating our fleet replacement with more fuel-efficient aircraft," said Chief Financial Officer Thomas Horton on a post-earnings call.

In a note to investors, J.P. Morgan analyst Jamie Baker said that next year's capacity-reduction guidance is consistent with the airline's prior forecast, and said the industry in general has yet to undertake the unprecedented cuts needed to reflect the recent "global malaise."

However, Baker noted, "AMR guidance, while characteristically devoid of demand commentary, portends a fourth-quarter outcome modestly ahead of both our own forecast and that of consensus."

Shares of AMR slipped once cent to close at $8.78.

For the recent quarter, the carrier reported a profit of $45 million, or 17 cents a share, down from $175 million, or 61 cents a share, in the year-ago third quarter.

Excluding one-time items, such as a $432 million gain from the sale of American Beacon Advisors and a $27 million charge related to capacity reductions, AMR would have posted a third-quarter loss of $360 million, or $1.39 a share.

Analysts polled by FactSet Research had expected, on average, a loss of $1.44 a share.
Quarterly operating revenue rose 8% to $6.42 billion from $5.95 billion, helped by higher fares and new passenger fees.

AMR said it would buy up to 100 more fuel-efficient Boeing 787 Dreamliner aircraft beginning in 2012. The company intends to buy 42 Boeing 787s and has the rights to add 58 more starting in 2015.

Dreamliner is its next-generation, wide-body aircraft, built with lighter materials and more efficient engines to help reduce fuel burn.

"While fuel prices have fallen from record-high levels a few months ago, the economic uncertainty, and what that might mean for travel demand, is a serious concern," said AMR's Chief Executive Gerard Arpey. "It would also be shortsighted to conclude that fuel prices, which remain volatile, are no longer a challenge."

For the fourth quarter, AMR said it was planning for an average system price of $2.76 a gallon. The company has 38% of its anticipated jet fuel consumption hedged at an average price of $3.33 a gallon.

AMR paid $3.57 a gallon on average in the third quarter, up 65% from $2.17 in the same quarter last year.

The total fuel bill for the airline increased 56% to $2.72 billion.

AMR said its end-of-the-quarter cash balance was $4.62 billion, compared to $5.5 billion at the end of the second quarter.

United Airlines to lay off 414 mechanics

Wednesday October 8, 4:14 pm ET

United Airlines laying off 414 mechanics as part of previously announced cuts
MINNEAPOLIS (AP) -- United Airlines said on Wednesday it will lay off 414 mechanics at its San Francisco maintenance base.

The layoffs are part of 7,000 job eliminations announced previously by the Chicago-based carrier as it reduces its flying and eliminates the Boeing 737 from its fleet.

United spokeswoman Megan McCarthy said the notices went to the workers on Sept. 29, and the layoffs will take effect on Dec. 7.

"We feel it's reprehensible they're laying off people while work is being outsourced overseas where there are less-qualified mechanics working on the planes," said Paul Molenberg, a spokesman for Teamsters Local 856 in San Bruno, Calif., which represents the laid-off workers.

Every major work group at United is shrinking. Enough flight attendants volunteered for furloughs that it avoided involuntary layoffs, allowing it to reduce the cabin staff by 1,550 positions. McCarthy said efforts to reduce 950 pilot positions will continue into next year, and cuts of as many as 1,600 managers are continuing, too, she said.

That leaves the Teamsters-represented mechanics, as well as baggage handlers and customer service agents represented by the International Association of Machinists and Aerospace Workers. McCarthy said totals for those groups have not been announced.
United shares rose 14 cents, or 2.8 percent, to $5.16 in afternoon trading.

October 8, 2008, 4:14 pm
Air France Ends an ‘Open Skies’ Experiment
Posted by Scott McCartney

Air France is dropping its Los Angeles-London non-stop flight, taking with it some of the cheapest tickets available to London.

It’s rare for airlines to fly internationally without at least beginning or ending the flight at one of their hub airports. You usually need connecting passengers to fill big jets. But Los Angeles-London was an experiment for Air France, a trip the airline inaugurated with the passage of the Open Skies treaty between the U.S. and the European Union. Air France flies from Los Angeles to Paris, and decided to see if Los Angeles and London were big enough markets to support a once-a-day trip.

But there’s tough competition on this route from British Airways, Virgin Atlantic and American Airlines, all carriers with bigger bases of frequent flier program members and corporations with travel deals in either city. (Some cynically saw the flight as retaliation by Air France against British Airways for launching its Open Skies treaty experiment, the airline it calls “Open Skies,” from Paris.)

Just look at prices for a trip next week to see how poorly Air France is faring.

For a one-week trip leaving Monday, Air France offers a coach price of $954 including taxes and fees, according to Orbitz.com. That’s cheaper than flights from New York to London on the same dates, even though Los Angeles is obviously a longer trip. And it’s a whole lot cheaper than an Air France ticket from Los Angeles to Paris on the same dates: $2,897. Other airlines seem able to ignore Air France, too, in the Los Angeles-London market. British Airways’ cheapest Los Angeles-London fare for the same dates was $3,102, according to Orbitz.

(Travel tip: If you’re going to Paris from Los Angeles anytime soon, take the London flight and book a Chunnel ticket - you’ll save big bucks. Heck, if you’re going to London from just about anywhere in the U.S., think about going to LA and using the cheap Air France fare to get you across the Atlantic.)

The lack of passengers means Air France is surrendering and shifting the flight in its winter schedule to New York-London, where it will offer one daily non-stop.

(The L.A.-London flight will halt on Nov. 6. And the London-JFK route is expected to start in the summer of 2009.)

Its SkyTeam partner, Delta Air Lines, has two flights a day. New York-London is one of the most competitive markets in the world, with multiple major players and often competitive fares. It’s still an experiment for Air France to see whether a French airline can build enough traffic in the U.S. and U.K. without a hub.

With the move, pricing will become rational again. Los Angeles-London tickets will actually be more expensive than New York-London. At least until another airline starts experimenting

AP

American Airlines flight attendants to picket

Wednesday October 8, 3:50 pm ET

American Airlines flight attendants to picket at airports Friday over working conditions
FORT WORTH, Texas (AP) -- American Airlines flight attendants will protest poor working conditions by picketing at four airports on Friday, according to union officials.

The Association of Professional Flight Attendants said Wednesday that members face increasing challenges dealing with reduced flight schedules, crowded planes and collecting charges for food and beverages.

The union, which is seeking pay raises from labor negotiations with American, said attendants will picket at Dallas-Fort Worth International Airport, Los Angeles International Airport, New York's LaGuardia Airport and Miami International Airport.

American, the nation's largest airline, is a unit of Fort Worth-based AMR Corp. The union said it represents more than 18,000 attendants at American.

Shares of American Airlines parent AMR Corp. fell 20 cents, or 3 percent, to $6.55 in afternoon trading.

Sun Country files for bankruptcy (Sun Country is a sweat shop...Ed.)

By Shawn Langlois & Sue Chang, MarketWatch
Posted 6:11 p.m. EDT Oct. 6, 2008

SAN FRANCISCO (MarketWatch) -- Cash-strapped Sun Country Airlines filed for bankruptcy protection Monday after its owner of two years, Thomas Petters, was arrested last week for wire fraud, money laundering and obstruction of justice, The Wall Street Journal reported in its online edition.

Sun Country had run into cash problems after Petters became the target of a federal investigation for allegedly defrauding hedge funds, the newspaper said. He had resigned as chairman and chief executive of the company earlier last week, the report said.

Petters, through his company Petters Group Worldwide, bought Sun Country two years ago, adding to his portfolio of investments, which also include Fingerhut and Polaroid.
The Mendota Heights, Minn.-based low-cost carrier -- the second biggest in the state after Northwest Airlines, said it will continue to operate and doesn't expect the filing to result in any disruptions.

Sun Country, which had previously filed for bankruptcy in 2002 before emerging with new ownership, had been looking to get a short-term loan from its owner to help get it through a slow fall season of travel and into winter, when travel generally picks up.

But Stan Gadek, the airline's CEO, said last week that he needed to distance the company, which is not being investigated, from Petters, who allegedly fleeced investors for personal enrichment and to pay off other lenders.

American cuts September flying capacity 7%
10:10 PM CDT on Friday, October 3, 2008

(as previously announced)
By TERRY MAXON tmaxon@dallasnews.com

American Airlines Inc. said Friday it reduced its flying capacity by 7 percent in September, cutting it to the smallest it has been in a September since 2001, when terrorist attacks grounded all airline flights in the U.S. for several days.

Excluding 2001, American hasn't operated with so little capacity in a September since 1998.
Spokesman Tim Smith said the airline has reduced its flying "to bring capacity more in line with actual demand, as well as our ability to price our services at fares that are closer to the costs of providing the service."

American and many other airlines began cutting capacity – measured in available seat miles – after Labor Day as they adjusted to the higher cost of jet fuel. Though energy prices have dropped recently, the carriers published their schedules months ago and have indicated they plan to go ahead with additional cutbacks later this year and in 2009.

"There will be another round [of cuts] in our November schedule to bring our capacity reductions to the fourth-quarter numbers we've announced," Mr. Smith said – about 12 percent on domestic flights and 8 percent systemwide.

American flew 12.87 billion available seat miles last month, down 7 percent from September 2007. It operated 12.25 billion in 2001, American's lowest capacity since it operated 12.76 billion available seat miles in 1998.

American also said its traffic fell 9.1 percent in September, joining most other major carriers in reporting a loss in passengers to go along with the drop in capacity. The biggest declines were posted by American; United Airlines Inc., down 9.2 percent; and Continental Airlines Inc., off 10.9 percent.

With nine of the 10 largest U.S. carriers releasing their September results so far, only Alaska Airlines Inc., with a 0.8 percent increase, and Delta Air Lines Inc., with 2 percent, have reported more traffic than a year earlier. The nine carriers as a group saw a 5.7 percent decline in traffic.
Among that nine, only Southwest Airlines Co. reported flying more capacity than in September 2007. The nine carriers collectively flew 5 percent less capacity than a year earlier.

American made sharp reductions early in September in its San Juan, Puerto Rico, hub, as well as selective cuts elsewhere in its system including an end to service out of Oakland, Calif.
The Puerto Rican cutbacks also hurt results of its commuter unit, American Eagle Airlines Inc., which reported Friday that its September traffic plummeted 17.2 percent on a 9.9 percent cut in capacity. The biggest drop came at American Eagle's San Juan-based Executive Airlines Inc., which saw its traffic decline 21.9 percent.

October 3, 2008

American Airlines Attendants endorse Allen in Missouri’s 8th Congressional district

Forsyth, MO – The Association of Professional Flight Attendants (APFA) voted unanimously to endorse Joe Allen as its candidate for Missouri’s 8th Congressional district. APFA is the nation’s largest independent flight attendant union representing more than 19,000 flight attendants at American Airlines the nation’s largest airline and is a unit of AMR Corp.

“I am honored by this labor endorsement of the Association of Professional Flight Attendants.” Allen stated. “The US aviation system and its workforce are in an economic tailspin faced with a multitude of issues and consequence. It is extremely important this industry and America’s aviation workers have a voice in Washington that comprehends these issues and the measures that must be taken to protect this industry and its workforce.”

APFA’s endorsement is the second major endorsement from airline workers in as many months after the Association of Flight Attendants endorsed Allen in August; combined they represent over 74,000 members and working families.

Delta Shuttle’s First Class Option: Will it Be Worth It?

September 26, 2008, 4:55 pm
Posted by Matt Phillips

Delta announced plans to offer a first-class cabin in its East Coast shuttle service in December, as well as a Spring starting point for internet service on the flights between New York, Washington and Boston.

Starting Dec. 1, customers will have the option of choosing first or economy class on shuttle flights, as the airline tweaks its MD-88 shuttle fleet and reconfigures the planes to add a 14-seat first-class cabin in addition to 128 economy seats. The company’s press release isn’t overly detailed when it comes to describing exactly what the first-class fares on the shuttle will get you, saying only that passengers there “will enjoy an expanded selection of snack options, a more expansive offering of complimentary cocktails and wider, more comfortable seats.”

Delta spokeswoman Betsy Talton tells us that it will cost between $100 and $250 more for a first-class shuttle seat, depending on the route. When we asked her for more details on what the first-class cabin would have she told us that passengers there will get free cocktails, in addition to the free beer and wine that will remain available to economy customers. We didn’t get much more info on exactly what kind of snacks would be considered suitable for first class. (Beluga maybe?)

On the internet front, the company had already announced back in August that it would roll out Wi-Fi access on its domestic fleet using Aircell’s Gogo service, which lets customers use Wi-Fi enabled devices, such as laptops, smartphones and PDAs. It’ll cost $9.95 on all shuttle flights.

(Aircell is the outfit that began providing Wi-Fi on some American flights back in August.)

Airline consultant Stuart Klaskin tells the Terminal that he sees the addition of a first-class cabin to Delta’s shuttle service — US Airways also has a first-class cabin in its shuttle — as a smart move, suggesting that it could help generate incremental revenue for Delta and erase some advantages in comfort — bigger seats — and convenience (like constant access to internet and phone service) that might drive some travelers to take Amtrak.

Klaskin also says airlines see shuttle service as an opportunity to court a premium customer base — the lawyers, financial types and politicians who flitter between the three cities. So, offering a premium product tailored toward such passengers makes sense, he said. \

On the other hand, Delta hops between New York and Washington only last for a bit more than 80 minutes at the most. New York and Boston is about the same, while Washington to Boston can be a bit longer, about 1 hour and 40 minutes. So, those of you that frequent the congested East Coast corridor, what do you think?

Will Delta’s first-class shuttle service fly? And what do you think of Amtrak as an option for trips between New York and Washington, D.C.?

U.S. Airlines Grounding 500+ Planes This Fall
Posted by Scott McCartney

JP Morgan tallied up all the U.S. aircraft on their way to the desert, to Russia or the Third World this fall, and it’s a rather staggering number. All told, U.S. airlines are grounding 512 airplanes. That happens to be the same number of passenger jets in Northwest Airlines Corp.’s entire fleet.
In essence, airlines are taking a carrier the size of Northwest out of the skies.

They are grounding about 10%-12% of U.S. capacity, which means fewer flight choices and higher fares for travelers. With the slow economy, there’s less demand for air travel. And continued high fuel prices mean carriers have to raise ticket prices to earn profits. But higher prices mean even less demand for tickets, so the only way for airlines to sustain those prices is to take seats off the market and ground planes.

At the end of 2007, U.S. airlines had 3,972 mainline jets in their fleets and 2,836 regional jets and turboprops, according to the Air Transport Association. The grounding of 281 mainline jets takes 7% of the total out of the skies. Regional jets suffer a bigger loss, with 11.4% of those small jets being grounded; so far, only 2.5% of turboprops will be retired, at least among the airlines who have reported fleet plans.

The loss of regional jets may be something to celebrate if you’re among those travelers who dislike the cramped quarters of 50-seat jets. But the disappearance of those jets is concerning for small communities that rely on those planes for air service.

Here’s a breakdown of reductions by carrier, courtesy of JP Morgan:

• Continental: 67 mainline jets (737-300s and 737-500s); 64 regional jets


• Delta: 15-20 mainline jets; 100 regional jets


• United: 100 mainline jets (94 737s and six 747s)


• American: 40 mainline jets (30 MD80s, 10 A300s); 37 regional jets and 26 turboprops


• Northwest: 47 mainline jets (14 757s/A320s and 33 DC-9s)


• US Airways: 12 mainline jets


• JetBlue: four regional jets

A tally of all the U.S. aircraft on their way to retirement this fall turns out to be a rather staggering number. All told, U.S. airlines are grounding 512 airplanes. That’s the same number of passenger jets in Northwest Airlines Corp.’s entire fleet.

AP
UAL flight attendants avoid mandatory furloughs
Wednesday September 24, 4:40 pm ET

United Airlines: Volunteers will prevent forced flight attendants furloughs
CHICAGO (AP) -- Enough United Airlines flight attendants have volunteered for furloughs, making involuntary cuts unnecessary, the carrier said on Wednesday.

United aimed to shrink the cabin staff by 1,550, and all those spots were filled by volunteers who will keep benefits such as medical and free travel, according to a message from Alex Marren, United's senior vice president for onboard service.

The furloughs begin Nov. 1.

United is a unit of UAL Corp. and is the nation's second-largest airline. Like other carriers it has been shrinking the amount of flying it does in an effort to charge enough to cover fuel prices that have risen sharply since last year.
UAL shares closed down $1.45, or 12.3 percent, at $10.35.

American Tries to Turn the Corner On Late Bags and Arrivals

By TERRY MAXON / The Dallas Morning News
tmaxon@dallasnews.com

What's wrong with American Airlines?

The carrier, which in the 1980s called itself the On-Time Machine, hasn't earned that label for quite a long time.

American Airlines is adding more minutes to its flight and ground times in an effort to improve its arrival record. The carrier is also trying to improve its baggage handling and customer satisfaction after getting bad marks in performance. "

American Airlines is adding more minutes to its flight and ground times in an effort to improve its arrival record. The carrier is also trying to improve its baggage handling and customer satisfaction after getting bad marks in performance.

Over the past year, American has ranked last in on-time arrivals among all U.S. carriers that report performance numbers to the U.S. Department of Transportation. It has performed worse than the industry average for 20 straight months.

The carrier consistently ranks low among its peers in customer satisfaction. It mishandles a greater share of its baggage than the industry average. It has been at the top of the industry in numbers of canceled flights.

What's going on here?

American is taking drastic steps to rejigger its schedule and beef up its operations this fall to improve the dependability of its flights, if not their speed. Early results in August and September have been promising.

But executives freely, though glumly, acknowledge how poorly American has done.
"There's really no excuse for our performance of late," says Bob Cordes, American Airlines Inc. vice president of operations planning and performance. "It really hasn't been up to snuff."
"No excuses," adds Mark Mitchell, American's managing director of customer experience. "I do believe from a leadership perspective, we've learned along the way and we're committed to regaining American's position."

Among the indicators of American's problems:

•It finished last among 19 U.S. carriers in on-time arrivals for four straight months between March and June, before improving to 16th in July – its highest finish in nine months.

•Its on-time marks have been beneath the industry average every month since December 2006.

•For the 12 months ending July 31, American was last among all carriers in on-time flights, with only 67.5 percent arriving within 14 minutes of schedule. That was 6.7 percentage points worse than the industry average of 74.2 percent.

•Among the 10 largest carriers, American ranked second-worst in the rate of lost-bag complaints for the year ending July 31, ahead of only Delta Air Lines Inc.

•It has had the third-highest rate of flight cancellations through the first seven months of 2008, ahead of only two regional carriers, Mesa Air Group Inc. and American's own partner, American Eagle. Even excluding about 3,300 flights canceled in a maintenance inspection in April, American still ranked near the bottom.

St. Louis University professor Brent D. Bowen, who co-authors the annual Airline Quality Rating Index, said that customers absolutely care whether their flights operate on time.
"It's the top indicator for air travel consumers," said Dr. Bowen, chairman of the aviation science department at the university's Parks College of Engineering, Aviation and Technology.

In his survey of more than 5,000 frequent travelers this year, 48 percent rated on-time flights as the most important factor when they fly. Next were customer service at 24 percent and on-time bag arrival at 23 percent, he said.

As airlines are taking away free meals and snacks and other amenities, "about the only thing left for people to expect is on-time service. The bad news is they know it's not going to be good."

Operational nightmare

Until fairly recently, American tended to finish around the middle of the pack, with its on-time numbers not far off the industry average.

A massive operational nightmare on Dec. 29, 2006, drew attention to American, when tens of thousands of passengers were delayed for hours – in some cases days – by a daylong thunderstorm that hung over North Texas and American's hub at Dallas/Fort Worth International Airport.

In the wake of sharp criticism, American officials pledged to do better at handling weather disruptions and other problems. But December 2006 seems to have marked the beginning of a long period of subpar operational performance by the Fort Worth-based carrier.

Month after month, American blamed extraordinarily bad weather, air traffic control snarls or unusual events such as the safety inspections it undertook under pressure from the Federal Aviation Administration in April.

But there has seemed to be no respite from the "special" months; other airlines that were flying in the same weather with the same air traffic controllers have consistently beaten American's record.

American believes that the answer is to add time to its schedule, both on the length of the average flight and the length of stops on the ground. It is taking other steps as well, but the added schedule time represents the thrust of American's attempt to return to an acceptable on-time record.

The changes won't speed up flights. But the added time increases the cushion for dealing with problems.

Mr. Cordes said 2006 was a pretty good year for flying weather, notwithstanding the Dec. 29 debacle. Schedule planners expected – or hoped for – the same in 2007.
"I think it went back to a sense of operational optimism," he said. " 'Oh,' we just thought, 'the weather will get better. The storms will go away.' "
When 2007 turned out to be bad, planners thought 2008 would be better. Until July, it hasn't been.

Since the start of 2007, American has recorded four of its top 10 days for flight diversions, when weather has forced the airline to land planes at airports other than their intended destination.
"It sounds like rationalization," Mr. Cordes said. "But the fact of the matter is we've been dealing with these weird weather events for a year and a half."

Schedule changes

The carrier built more time into the schedule in September and will do so again in November, implementing the lessons the airline learned earlier in 2008, he said.

"Unfortunately, the lag time is a good six to nine months from the time you analyze it and say we're going to have to invest in this because things are not changing," Mr. Cordes said.
For an example of how the schedule changes will work, consider American's Flight 743, an afternoon nonstop flight from Dallas/Fort Worth to LaGuardia in New York.

Until Sept. 2, American scheduled the flight to take 3 ¾ hours from gate to gate. On Sept. 3, the time was increased by five minutes. On Nov. 2, it'll go up another 25 minutes, to 4 ¼ hours.
The schedule changes will affect both the time airplanes are supposed to be in the air and on the ground.

With the changes, American's McDonnell Douglas MD-80s, the mainstay of its fleet, will spend at least 45 minutes on the ground, up from 40 minutes.

The Boeing 737-800s are now scheduled to be on the ground at least 50 minutes, up from 40 minutes.

In recognition that much of American's delays start or end in the New York area, American is adding another 10 minutes to those ground times for flights arriving at New York's LaGuardia Airport after 2 p.m. It is adding 10 minutes to flights arriving at Newark after 3 p.m.
And in San Francisco, where fog is often a problem, American is adding 10 minutes to morning arrivals, Mr. Cordes said.

Ground crews will be scheduled for 20 minutes between flights rather than 10, to make sure that flights have adequate staffing for bag handling and other servicing, he said.
American used to staff spare gates at D/FW Airport so it could respond quickly if extra flights arrived or a gate was occupied by an airplane with mechanical problems. It ended that practice several years ago, but this month it began staffing four or five spare gates to better handle disruptions, Mr. Cordes said.

Union factor

Whether coincidence or not, the airline's on-time problems have grown as it has entered negotiations with its three major unions: the Allied Pilots Association in summer 2006, the Transport Workers Union in fall 2007 and the Association of Professional Flight Attendants this summer.

Mr. Cordes and Mr. Mitchell said they don't think morale issues or employee problems have contributed much – if at all – to operational problems for American. Mr. Mitchell noted that the number of teams working to improve the airline's customer service has grown over the past year.

Laura Glading, president of the flight attendants' union, said there is a link between employee morale and customer service, particularly as the airline has cut staffing and onboard amenities.
However, "the flight attendants are doing an incredibly stellar job, without the tools, to try to make lemonade out of lemons," she said.

The Allied Pilots Association has been increasingly critical of the airline's management, blaming it for the delays, cancellations and other problems.

Bill Haug, secretary-treasurer of the pilots' union, noted that the airline's performance has declined since employees took big concessions in pay, benefits and working conditions in 2003.
Along with the concessions, American created an "annual incentive plan" to reward employees for finishing high in the U.S. Department of Transportation's rankings of on-time arrivals, baggage handling and other areas.

Despite the incentive plan, he said, "we have not improved one bit. ... You can sit and theorize all you want [about the reasons]. But there's no question whose responsibility it is. It's theirs."
Without directing comments specifically to American, Dr. Bowen said that a lack of cooperation among different groups and with management leads to poor on-time performance.

"After everything bad that has been happening to airline employees over these past eight years, how do you expect them to happily cooperate?" he said. "That's the management challenge. If you have a happy workforce in an airline, you'll have a well-performing airline