FAA investigates Southwest Airlines' parts, repairs
10:59 PM CDT on Tuesday, August 25, 2009
By ERIC TORBENSON / The Dallas Morning News
etorbenson@dallasnews.com
The Federal Aviation Administration is investigating Southwest Airlines Co.'s use of unauthorized parts and repairs on its older Boeing 737 planes just months after the carrier paid the agency $7.5 million to settle maintenance violations.
An FAA inspector working at a maintenance shop used by Dallas-based Southwest questioned whether some parts on Boeing 737-300 and 737-500 series planes were authorized for use.
The parts under examination divert hot engine exhaust away from the wings when the plane's flaps are extended.
As a result, Southwest grounded 46 aircraft Saturday, causing significant delays in its system and cut its on-time performance to less than two-thirds from its typical 90 percent.
FAA spokesman Lynn Lunsford said that the agency was still in the process of understanding how the unauthorized parts got onto the aircraft and that it was too early to comment on any possible enforcement against Southwest.
Southwest said the issue was about whether a vendor correctly documented the repair and parts used on the planes. Southwest also said it wasn't about whether the parts themselves were authorized to be used on the aircraft, said spokeswoman Beth Harbin.
Southwest and Chicago-based Boeing Co. worked on a solution to address the problem with the FAA, but Southwest chose to temporarily ground the planes Saturday. The FAA allowed Southwest to fly the aircraft for 10 days until a permanent solution is reached.
"We are all working toward that resolution now, but there are no conclusions or mandates at this point," Harbin said Tuesday night.
The parts in question – hinge fittings located near the jet engines – aren't considered critical enough to jeopardize the immediate safety of the airplane. If they don't work properly, they can put too much pressure on the flaps – wing panels used to help control the plane.
What's unclear is whether a new investigation would violate the terms of the settlement reached with the FAA on March 2 that lowered a proposed fine of $10.2 million for the carrier's failure to do required inspections on some of its planes.
That settlement stated that Southwest needed to comply with a series of new procedures in its maintenance department, including adding more staff and improving its training manuals.
Southwest flew nearly 60,000 flights in 2006 and 2007 on aircraft that weren't checked for cracks, and the airline had a relationship with regulators that an FAA whistleblower called too cozy.
The resulting congressional hearings created considerable embarrassment for Southwest and for the FAA.
More recent problems have continued to raise questions about Southwest's maintenance practices.
An unexplained football-size tear in a Southwest jet bound for Baltimore July 13 forced the aircraft into an emergency landing, though no one was hurt.
The National Transportation Safety Board continues to investigate the cause of the rip in the top of the plane's fuselage.
Southwest, like many major airlines, pays other companies to do heavy maintenance on its fleet of 544 Boeing 737s.
Following the series of inspection issues at both Southwest and at Fort Worth-based American Airlines Inc., the FAA cracked down on enforcement and has been substantially more aggressive in enforcing airworthiness directives designed to keep the flying public safe.
Thursday, August 27, 2009
Wednesday, August 26, 2009
Surviving the dreaded tarmac delay
By HARRY R. WEBER, AP Airlines Writer Harry R. Weber, Ap Airlines Writer – Wed Aug 26, 2:06 pm ET
ATLANTA – You're tired, hungry, have a cranky baby on your lap and all you want to do is get off the plane, but you can't because it's been on the tarmac for hours waiting to take off.
While such delays are rare, they can be more common during the hot summer due to thunderstorms and, this year, because of fewer flights to get you to your destination if your flight is canceled.
A six-hour delay with 47 people aboard a small Continental Express plane at a Minnesota airport this month is the extreme. In June, the most recent month for which data is available, there were 278 tarmac delays of 3 hours or more. That was the most this year but still only .05 percent of the total number of scheduled flights that month.
Information is the best ammunition in such situations. Experts advise that passengers be prepared. Here are answers to some questions travelers may ask.
Q. Can't I just get off the plane?
A. No. The captain has ultimate control of the plane and generally will determine if and when to return to the gate and allow passengers to get off.
"It's not a democracy," says Robert Mann, an airline industry consultant in Port Washington, N.Y.
Passengers can request that the aircraft return to the gate, or if they have a cell phone they can call airline customer service or their carrier's frequent flier hotline and exert pressure that way. If you have a medical condition or are ill, notify the crew immediately. But taking matters into your own hands is ill-advised. An FAA spokeswoman says unruly passengers who make a run for the aircraft door could be arrested for interfering with the crew.
Q. Why would the airline choose to keep the passengers onboard rather than let them get off?
A. It takes a lot of time to get passengers off a plane and then back on again. If the weather clears up at the airport where you are heading, the crew may have a limited opportunity to take off. Tarmac delays often occur because of bad weather, congestion and air traffic control issues. Further delays could be caused by allowing passengers to get off, which also could mean passengers with connecting flights might miss those connections.
Airline operations also are a factor. Because of weak demand for air travel due to the ailing economy, airlines have taken large chunks of seats out of the air and are offering fewer flights and frequencies to some destinations.
"It may add to the reason there are the tarmac delays and not the cancellations," says Terry Trippler, an airline and travel expert based in Minneapolis. "The airlines realize that there aren't a lot of flights to get them onto alternate flights, and that's why they rather just wait and get them out."
Q. How long can the crew keep me on the plane before heading back to the gate?
A. There's no law or rule mandating that the crew allow you to get off after a certain period. Legislation introduced in the Senate in July would require planes delayed more than three hours to return to a gate. A rule proposed by the Department of Transportation would require airlines to have contingency plans for dealing with lengthy tarmac delays.
Some airlines have implemented customer commitments in recent years to try to appease passengers. JetBlue Airways vows to deplane passengers if an aircraft is delayed on the ground for five hours. That was instituted in 2007 after passengers on a JetBlue flight waited 11 hours on the tarmac at New York's John F. Kennedy International Airport.
Q. Will I get something to eat and drink while I wait?
A. Airlines generally only stock enough food and drinks for the length of the flight. Passengers on the Continental Express flight later complained about not being offered food and drink during their lengthy tarmac delay. Several airlines have procedures for dealing with onboard delays that include making sure the cabin temperature is appropriate and passengers have access to restrooms, and food and water.
After a recent AirTran Airways flight from Pittsburgh to Atlanta was diverted to Chattanooga, Tenn., flight attendants offered bottled water and pretzels to passengers during the 90-minute tarmac delay.
Delta Air Lines says on its Web site that in the event of onboard ground delays under certain circumstances, it promises to make timely announcements regarding the flight status, allow customers to use cell phones and laptop computers and provide snacks and beverages to customers when "reasonable and safe to do so." Experts advise that passengers should carry food and drink with them on flights in case of a delay while onboard.
"Instead of that extra pair of shoes in your carryon, you put an extra sandwich or an extra bottle of water," Trippler says.
Q. What can I do to pass the time during a tarmac delay?
A. On a long delay you might be hoping that you're not stuck next to someone who wants to share his life story. In that case on-flight TV or radio may be your salvation. What's more, it's always smart to carry something to read to get you through a delay no matter how long.
If you have a connecting flight that you might miss, use your cell phone to call airline customer service and rebook your next flight. The one thing experts agree on is that it is important to stay calm in those situations.
Q. What kind of compensation am I entitled to if I experience a tarmac delay?
A. Typically, circumstances beyond the control of an airline are not covered in terms of passengers being provided compensation, says aviation consultant Mark Kiefer of CRA International in Boston. However, airlines have discretion to help passengers out, and some even have policies for allowing for compensation when there are tarmac delays.
For instance, JetBlue customers who experience an onboard ground delay on arrival for two hours or more after scheduled arrival time are entitled to a voucher. The voucher is good for future travel on JetBlue in the amount paid by the customer for their roundtrip ticket.
Q. Where can I get more information about airline policies regarding tarmac delays?
A. Airline Web sites are a good place to start. Check the airline's contract of carriage, which outlines its responsibilities to customers and the action it will take in various situations.
By HARRY R. WEBER, AP Airlines Writer Harry R. Weber, Ap Airlines Writer – Wed Aug 26, 2:06 pm ET
ATLANTA – You're tired, hungry, have a cranky baby on your lap and all you want to do is get off the plane, but you can't because it's been on the tarmac for hours waiting to take off.
While such delays are rare, they can be more common during the hot summer due to thunderstorms and, this year, because of fewer flights to get you to your destination if your flight is canceled.
A six-hour delay with 47 people aboard a small Continental Express plane at a Minnesota airport this month is the extreme. In June, the most recent month for which data is available, there were 278 tarmac delays of 3 hours or more. That was the most this year but still only .05 percent of the total number of scheduled flights that month.
Information is the best ammunition in such situations. Experts advise that passengers be prepared. Here are answers to some questions travelers may ask.
Q. Can't I just get off the plane?
A. No. The captain has ultimate control of the plane and generally will determine if and when to return to the gate and allow passengers to get off.
"It's not a democracy," says Robert Mann, an airline industry consultant in Port Washington, N.Y.
Passengers can request that the aircraft return to the gate, or if they have a cell phone they can call airline customer service or their carrier's frequent flier hotline and exert pressure that way. If you have a medical condition or are ill, notify the crew immediately. But taking matters into your own hands is ill-advised. An FAA spokeswoman says unruly passengers who make a run for the aircraft door could be arrested for interfering with the crew.
Q. Why would the airline choose to keep the passengers onboard rather than let them get off?
A. It takes a lot of time to get passengers off a plane and then back on again. If the weather clears up at the airport where you are heading, the crew may have a limited opportunity to take off. Tarmac delays often occur because of bad weather, congestion and air traffic control issues. Further delays could be caused by allowing passengers to get off, which also could mean passengers with connecting flights might miss those connections.
Airline operations also are a factor. Because of weak demand for air travel due to the ailing economy, airlines have taken large chunks of seats out of the air and are offering fewer flights and frequencies to some destinations.
"It may add to the reason there are the tarmac delays and not the cancellations," says Terry Trippler, an airline and travel expert based in Minneapolis. "The airlines realize that there aren't a lot of flights to get them onto alternate flights, and that's why they rather just wait and get them out."
Q. How long can the crew keep me on the plane before heading back to the gate?
A. There's no law or rule mandating that the crew allow you to get off after a certain period. Legislation introduced in the Senate in July would require planes delayed more than three hours to return to a gate. A rule proposed by the Department of Transportation would require airlines to have contingency plans for dealing with lengthy tarmac delays.
Some airlines have implemented customer commitments in recent years to try to appease passengers. JetBlue Airways vows to deplane passengers if an aircraft is delayed on the ground for five hours. That was instituted in 2007 after passengers on a JetBlue flight waited 11 hours on the tarmac at New York's John F. Kennedy International Airport.
Q. Will I get something to eat and drink while I wait?
A. Airlines generally only stock enough food and drinks for the length of the flight. Passengers on the Continental Express flight later complained about not being offered food and drink during their lengthy tarmac delay. Several airlines have procedures for dealing with onboard delays that include making sure the cabin temperature is appropriate and passengers have access to restrooms, and food and water.
After a recent AirTran Airways flight from Pittsburgh to Atlanta was diverted to Chattanooga, Tenn., flight attendants offered bottled water and pretzels to passengers during the 90-minute tarmac delay.
Delta Air Lines says on its Web site that in the event of onboard ground delays under certain circumstances, it promises to make timely announcements regarding the flight status, allow customers to use cell phones and laptop computers and provide snacks and beverages to customers when "reasonable and safe to do so." Experts advise that passengers should carry food and drink with them on flights in case of a delay while onboard.
"Instead of that extra pair of shoes in your carryon, you put an extra sandwich or an extra bottle of water," Trippler says.
Q. What can I do to pass the time during a tarmac delay?
A. On a long delay you might be hoping that you're not stuck next to someone who wants to share his life story. In that case on-flight TV or radio may be your salvation. What's more, it's always smart to carry something to read to get you through a delay no matter how long.
If you have a connecting flight that you might miss, use your cell phone to call airline customer service and rebook your next flight. The one thing experts agree on is that it is important to stay calm in those situations.
Q. What kind of compensation am I entitled to if I experience a tarmac delay?
A. Typically, circumstances beyond the control of an airline are not covered in terms of passengers being provided compensation, says aviation consultant Mark Kiefer of CRA International in Boston. However, airlines have discretion to help passengers out, and some even have policies for allowing for compensation when there are tarmac delays.
For instance, JetBlue customers who experience an onboard ground delay on arrival for two hours or more after scheduled arrival time are entitled to a voucher. The voucher is good for future travel on JetBlue in the amount paid by the customer for their roundtrip ticket.
Q. Where can I get more information about airline policies regarding tarmac delays?
A. Airline Web sites are a good place to start. Check the airline's contract of carriage, which outlines its responsibilities to customers and the action it will take in various situations.
Tuesday, August 25, 2009
American Airlines retires Airbus A300 jets after 21 years
09:21 PM CDT on Tuesday, August 25, 2009
By TERRY MAXON tmaxon@dallasnews.com
American Airlines Inc. has flown its last flights with the Airbus A300, more than 21 years after it began flying the wide-body jet.
The last American flight flown by an Airbus landed shortly after midnight Monday at John F. Kennedy International Airport in New York, ending the airplane's history with the Fort Worth-based carrier.
American spokesman Tim Smith said a combination of factors led to the decision to take the Airbuses out of American's fleet.
"One, we are in the process of cutting capacity. Two, these airplanes are a likely candidate for retirement, in that they are older than most of the airplanes in our fleet," Smith said Tuesday.
In addition, the A300 requires different training and maintenance from the other airplanes in American's fleet, he said.
All told, "it's a good time to take them out of the fleet," Smith said.
American ordered an initial 25 Airbus A300s in March 1987, to be leased from Airbus, and accepted delivery in 1988 and 1989.
It later bought another 10 that were delivered between 1991 and 1993.
One of the leased airplanes crashed shortly after takeoff from Kennedy in November 2001, leaving American with 34 before it made the decision to ground the Airbus fleet.
American placed an order for 15 Boeing 767-300ERs at the same time it acquired the 25 Airbus jets, and Smith noted that the two aircraft types were very similar, with two engines, two aisles and international range.
Even though American had no Airbus airplanes before the order, "we were in a growth mode," Smith said. "We needed wide-body aircraft for a broad number of missions, and we could not get 767-300ERs as quickly as we liked. All that came together to have us look at the A300."
While the Boeing model for years was the heavy hitter for American's international routes, Smith said, the Airbus "was in one particular way a better aircraft than the Boeing 767-300ER, and that's in its cargo capability."
Its huge cargo hold, combined with a lot of seating, made the A300 the perfect airplane for American's growing Caribbean network. The airplane primarily flew out of Miami and New York Kennedy, plus American's hub in San Juan, Puerto Rico.
American officials announced in July 2008 that they would park the entire Airbus fleet by the end of 2009 as part of its plans to reduce capacity.
Eventually, American plans to replace the Airbus with the Boeing 787, a new aircraft that has faced substantial delays. American expects to take its first 787 in the second half of 2013. American's first A300 jets joined the fleet in the late 1980s. Their huge cargo holds and seating capacity made them perfect for the airline's growing Caribbean network.
09:21 PM CDT on Tuesday, August 25, 2009
By TERRY MAXON tmaxon@dallasnews.com
American Airlines Inc. has flown its last flights with the Airbus A300, more than 21 years after it began flying the wide-body jet.
The last American flight flown by an Airbus landed shortly after midnight Monday at John F. Kennedy International Airport in New York, ending the airplane's history with the Fort Worth-based carrier.
American spokesman Tim Smith said a combination of factors led to the decision to take the Airbuses out of American's fleet.
"One, we are in the process of cutting capacity. Two, these airplanes are a likely candidate for retirement, in that they are older than most of the airplanes in our fleet," Smith said Tuesday.
In addition, the A300 requires different training and maintenance from the other airplanes in American's fleet, he said.
All told, "it's a good time to take them out of the fleet," Smith said.
American ordered an initial 25 Airbus A300s in March 1987, to be leased from Airbus, and accepted delivery in 1988 and 1989.
It later bought another 10 that were delivered between 1991 and 1993.
One of the leased airplanes crashed shortly after takeoff from Kennedy in November 2001, leaving American with 34 before it made the decision to ground the Airbus fleet.
American placed an order for 15 Boeing 767-300ERs at the same time it acquired the 25 Airbus jets, and Smith noted that the two aircraft types were very similar, with two engines, two aisles and international range.
Even though American had no Airbus airplanes before the order, "we were in a growth mode," Smith said. "We needed wide-body aircraft for a broad number of missions, and we could not get 767-300ERs as quickly as we liked. All that came together to have us look at the A300."
While the Boeing model for years was the heavy hitter for American's international routes, Smith said, the Airbus "was in one particular way a better aircraft than the Boeing 767-300ER, and that's in its cargo capability."
Its huge cargo hold, combined with a lot of seating, made the A300 the perfect airplane for American's growing Caribbean network. The airplane primarily flew out of Miami and New York Kennedy, plus American's hub in San Juan, Puerto Rico.
American officials announced in July 2008 that they would park the entire Airbus fleet by the end of 2009 as part of its plans to reduce capacity.
Eventually, American plans to replace the Airbus with the Boeing 787, a new aircraft that has faced substantial delays. American expects to take its first 787 in the second half of 2013. American's first A300 jets joined the fleet in the late 1980s. Their huge cargo holds and seating capacity made them perfect for the airline's growing Caribbean network.
Wednesday, August 12, 2009
Delta plans domestic hub at LaGuardia
Wednesday, August 12, 2009, 9:31am EDT
Delta plans to start a domestic hub at New York’s LaGuardia Airport, thanks to an exchange of flying rights with US Airways.
Atlanta-based Delta (NYSE: DAL) reported a deal with US Airways (NYSE: LCC) to exchange certain flying rights and airport facilities at LaGuardia and Washington's Reagan National airports, allowing Delta to expand its New York customer service by creating a domestic hub at LaGuardia.
The agreement, which is subject to government approvals, calls for US Airways to transfer 125 operating slot pairs to Delta at LaGuardia and Delta to transfer 42 operating slot pairs to US Airways at Reagan National. The airlines also will swap gates at LaGuardia between the Marine Air Terminal and US Airways' Terminal C to consolidate all Delta operations -- including the Delta Shuttle -- into an expanded main terminal facility with 11 additional gates for Delta customers.
Delta plans a nearly $40 million construction project at LaGuardia to connect the current Delta and US Airways main terminals; rebrand US Airways' existing main terminal gates, ticket counters and lounges to Delta's standards; and create a new dedicated check-in area for Medallion, First Class, BusinessElite and Shuttle customers. The project will be completed in 2010.
Delta expects to more than double the number of nonstop destinations it serves from LaGuardia by adding or preserving service to more than 30 small- and medium-sized communities. Delta will add new flights to more than a dozen cities not currently served by US Airways. In every slot where US Airways operates small turboprops, Delta will operate larger jets. This will allow more than 2 million additional passengers to use LaGuardia each year without increasing the total number of takeoffs and landings.
"Increasing Delta's service in the world's most competitive and largest air service market is a key part of our long-term strategy,” said Delta CEO Richard Anderson, in a news release. “This transaction will provide substantial benefits to our customers, employees and shareholders in years to come."
Wednesday, August 12, 2009, 9:31am EDT
Delta plans to start a domestic hub at New York’s LaGuardia Airport, thanks to an exchange of flying rights with US Airways.
Atlanta-based Delta (NYSE: DAL) reported a deal with US Airways (NYSE: LCC) to exchange certain flying rights and airport facilities at LaGuardia and Washington's Reagan National airports, allowing Delta to expand its New York customer service by creating a domestic hub at LaGuardia.
The agreement, which is subject to government approvals, calls for US Airways to transfer 125 operating slot pairs to Delta at LaGuardia and Delta to transfer 42 operating slot pairs to US Airways at Reagan National. The airlines also will swap gates at LaGuardia between the Marine Air Terminal and US Airways' Terminal C to consolidate all Delta operations -- including the Delta Shuttle -- into an expanded main terminal facility with 11 additional gates for Delta customers.
Delta plans a nearly $40 million construction project at LaGuardia to connect the current Delta and US Airways main terminals; rebrand US Airways' existing main terminal gates, ticket counters and lounges to Delta's standards; and create a new dedicated check-in area for Medallion, First Class, BusinessElite and Shuttle customers. The project will be completed in 2010.
Delta expects to more than double the number of nonstop destinations it serves from LaGuardia by adding or preserving service to more than 30 small- and medium-sized communities. Delta will add new flights to more than a dozen cities not currently served by US Airways. In every slot where US Airways operates small turboprops, Delta will operate larger jets. This will allow more than 2 million additional passengers to use LaGuardia each year without increasing the total number of takeoffs and landings.
"Increasing Delta's service in the world's most competitive and largest air service market is a key part of our long-term strategy,” said Delta CEO Richard Anderson, in a news release. “This transaction will provide substantial benefits to our customers, employees and shareholders in years to come."
Tuesday, August 04, 2009
Which Airlines Will Survive?
Tom Van Riper, 08.04.09, 12:00 PM EDT
Another losing quarter, despite painful cutbacks. Consolidation may be the only solution. How many more seats can the airlines pull from the sky? Apparently not enough to turn the industry around for a sustained period.
The nine largest U.S. airlines--those accounting for about 88% of all domestic traffic--lost a collective $1.5 billion during the recently completed second quarter. This despite per-seat traffic numbers (known in the industry as load factor) flying close to an all-time high, according to Robert Herbst, an independent airline analyst who complies industry statistics on his Web site, airlinefinancials.com.
His prognosis for the third quarter: a 20% or so decline in revenue for most big carriers from the same quarter in 2008, as business and leisure travelers continue to cut back. He predicts the July load factors that airlines are set to announce this week will show that planes were close to 90% full.
"To see this kind of load factor and still lose money is very unusual compared to the industry's history," Herbst says.
The problem? Too many airlines. With the economy already taking a bite out of demand, cutting the supply of seats only goes so far when they're spread among nine major carriers, plus regional competition. The industry is essentially engaged in an ongoing fare war, a tough way to price seats high enough to cover costs.
An improving economy, inevitable at some point, figures to push oil prices as much as customer demand. Will carriers ever be able to set prices optimally?
"Not unless you have major restructuring, including consolidation," says Marick Masters, a business professor at Wayne State University who has long followed the industry. In other words, spreading out 88% of the domestic flying public among six airlines would work a lot better than spreading them among nine. Until then, "it's a dim future for as far as we can see in the future."
Herbst estimates that the majors will need to combine cost cuts and revenue increases by at least 15% in order to turn marginal profits while upgrading their aging fleets. The problem, as he sees it, is that most carriers have been through big restructurings either in or outside of bankruptcy, leaving little room for further cost cuts in an industry with a costly infrastructure that includes equipment, terminal rentals and expensive labor.
"Most carriers will cut capacity further, which will reduce some costs, but there are so many fixed costs to cover," he says. Meanwhile, price competition keeps the revenue side challenged.
Herbst does expect most major carriers, including Delta, JetBlue and Air Tran, to squeak out operating profits in 2009. But the razor thin margins offer little cushion against any one-time costs that might pop up.
The bulk of the operating losses figure to come from United, American and U.S. Airways ( LCC - news - people ), which he predicts finish 2009 a combined $1.7 billion in the red on an operating basis. AMR Corp. ( AMR - news - people ), American's parent, just privately placed $276 million in debt to finance equipment, on which it will pay 13% interest.
The biggest problems, though, are at U.S. Airways and United, both of which could easily land in bankruptcy in less than a year, both Herbst and Masters believe. Low market caps and a lack of unencumbered assets to borrow against makes raising cash a problem, Herbst notes.
"At least United has strength in its Asia-Pacific routes," he says. "U.S. Airways just has little to offer that you can't find elsewhere." Sounds like a reason to have at least one fewer airline.
Tom Van Riper, 08.04.09, 12:00 PM EDT
Another losing quarter, despite painful cutbacks. Consolidation may be the only solution. How many more seats can the airlines pull from the sky? Apparently not enough to turn the industry around for a sustained period.
The nine largest U.S. airlines--those accounting for about 88% of all domestic traffic--lost a collective $1.5 billion during the recently completed second quarter. This despite per-seat traffic numbers (known in the industry as load factor) flying close to an all-time high, according to Robert Herbst, an independent airline analyst who complies industry statistics on his Web site, airlinefinancials.com.
His prognosis for the third quarter: a 20% or so decline in revenue for most big carriers from the same quarter in 2008, as business and leisure travelers continue to cut back. He predicts the July load factors that airlines are set to announce this week will show that planes were close to 90% full.
"To see this kind of load factor and still lose money is very unusual compared to the industry's history," Herbst says.
The problem? Too many airlines. With the economy already taking a bite out of demand, cutting the supply of seats only goes so far when they're spread among nine major carriers, plus regional competition. The industry is essentially engaged in an ongoing fare war, a tough way to price seats high enough to cover costs.
An improving economy, inevitable at some point, figures to push oil prices as much as customer demand. Will carriers ever be able to set prices optimally?
"Not unless you have major restructuring, including consolidation," says Marick Masters, a business professor at Wayne State University who has long followed the industry. In other words, spreading out 88% of the domestic flying public among six airlines would work a lot better than spreading them among nine. Until then, "it's a dim future for as far as we can see in the future."
Herbst estimates that the majors will need to combine cost cuts and revenue increases by at least 15% in order to turn marginal profits while upgrading their aging fleets. The problem, as he sees it, is that most carriers have been through big restructurings either in or outside of bankruptcy, leaving little room for further cost cuts in an industry with a costly infrastructure that includes equipment, terminal rentals and expensive labor.
"Most carriers will cut capacity further, which will reduce some costs, but there are so many fixed costs to cover," he says. Meanwhile, price competition keeps the revenue side challenged.
Herbst does expect most major carriers, including Delta, JetBlue and Air Tran, to squeak out operating profits in 2009. But the razor thin margins offer little cushion against any one-time costs that might pop up.
The bulk of the operating losses figure to come from United, American and U.S. Airways ( LCC - news - people ), which he predicts finish 2009 a combined $1.7 billion in the red on an operating basis. AMR Corp. ( AMR - news - people ), American's parent, just privately placed $276 million in debt to finance equipment, on which it will pay 13% interest.
The biggest problems, though, are at U.S. Airways and United, both of which could easily land in bankruptcy in less than a year, both Herbst and Masters believe. Low market caps and a lack of unencumbered assets to borrow against makes raising cash a problem, Herbst notes.
"At least United has strength in its Asia-Pacific routes," he says. "U.S. Airways just has little to offer that you can't find elsewhere." Sounds like a reason to have at least one fewer airline.
Saturday, August 01, 2009
A Frontier Air Pilot’s Take on Southwest Air’s Bid
By Michael Corkery
Southwest Airlines has said its potential purchase of Frontier Airlines Holdings out of bankruptcy-court proceedings would depend partly on whether it can obtain a labor agreement with Frontier’s pilots union.
What Southwest is looking for from Frontier’s 720 pilots is unclear. So Deal Journal spoke with John Stemmler (left), the Frontier Airline Pilots Association president, who is headed to Dallas on Monday to meet with Southwest management and its pilots’ union to start discussions. Stemmler spoke about his fears of the sale leading to job losses at Frontier and the phasing out of airline’s favorite animal logo.
And while Republic Airways Holdings, a holding company for regional airlines, has also bid on Frontier and said it wanted to extend the pilots’ contract by three years if it wins the auction for the company, Stemmler says.
Deal Journal: Would you be happy with Southwest Air buying Frontier?
John Stemmler: It’s too early to tell. We haven’t been formally approached by Southwest, but the company has said in internal communications that they are looking for some kind of labor agreement with the pilots. Absent that agreement, they might not go through with the deal.
DJ: Do you expect there will be any job losses from any acquisition.
Stemmler. There are roughly 2,500 back office people at Frontier in Denver that are what they call synergistic cost centers. (In other words, they are overlapping with Southwest operations and vulnerable to cuts). These aren’t the people whom I represent, but they are my friends. The Southwest deal would probably eliminate more of these jobs than a Republic deal because Republic doesn’t have the ticketing and back office operations that Frontier provides.
DJ: Do you expect that seniority of Frontier pilots in a combined work force with Southwest will be a major sticking point.
Stemmler. It’s the biggest issue. Seniority is life in aviation. There as many formulas for seniority as there have been mergers. The best-case scenario is that they phase out Frontier’s Airbuses and retrain Frontier pilots to fly 737s (the Boeing plane in the Southwest fleet), resulting in no net work-force reduction. The worst case is that Southwest ignores Frontier’s seniority and our pilots are put at the back of the list.
DJ: Will a sale kill Frontier’s corporate culture?
Stemmler. We are small airline. I’ve been at the company for nine years and we’ve all flown together. It’s much different at a bigger airline. Change is painful. We have done so well, recording a profit over the past eight months. It’s tough for employees to get their arms around the idea that we need a financial sponsor to get through bankruptcy.
The tails of Frontier Airlines planes decorated with wildlife portraits stand at the gates at Denver International Airport in 2003.
DJ: What about Frontier’s famous animal logos, will you miss that?
Stemmler. Kids go crazy about it (each of Frontier’s 51 planes has a different animal on the tail). Passengers will ask what animal is this plane. The experience of going through airports since 911 has been getting increasingly worse. But we are still trying to have fun.
DJ: Do you think your pilots will be able to integrate into Southwest’s own folksy culture?
Stemmler. It’s a very similar thing. They stress that this is not just about putting butts in seats and moving them. It’s about giving customers a pleasant experience. They seem to get it.
DJ: Some pilots would love to fly for Southwest because they pay so well.
Stemmler. There was a time when people when people wouldn’t dream about going to Southwest because you didn’t know if it would still be flying in a few years because it was such a small company. Now these are coveted jobs. It went from one of the lowest paying to one of the highest. Southwest has grown to point to where it’s really stable, which you can’t say about a lot of other airlines.
By Michael Corkery
Southwest Airlines has said its potential purchase of Frontier Airlines Holdings out of bankruptcy-court proceedings would depend partly on whether it can obtain a labor agreement with Frontier’s pilots union.
What Southwest is looking for from Frontier’s 720 pilots is unclear. So Deal Journal spoke with John Stemmler (left), the Frontier Airline Pilots Association president, who is headed to Dallas on Monday to meet with Southwest management and its pilots’ union to start discussions. Stemmler spoke about his fears of the sale leading to job losses at Frontier and the phasing out of airline’s favorite animal logo.
And while Republic Airways Holdings, a holding company for regional airlines, has also bid on Frontier and said it wanted to extend the pilots’ contract by three years if it wins the auction for the company, Stemmler says.
Deal Journal: Would you be happy with Southwest Air buying Frontier?
John Stemmler: It’s too early to tell. We haven’t been formally approached by Southwest, but the company has said in internal communications that they are looking for some kind of labor agreement with the pilots. Absent that agreement, they might not go through with the deal.
DJ: Do you expect there will be any job losses from any acquisition.
Stemmler. There are roughly 2,500 back office people at Frontier in Denver that are what they call synergistic cost centers. (In other words, they are overlapping with Southwest operations and vulnerable to cuts). These aren’t the people whom I represent, but they are my friends. The Southwest deal would probably eliminate more of these jobs than a Republic deal because Republic doesn’t have the ticketing and back office operations that Frontier provides.
DJ: Do you expect that seniority of Frontier pilots in a combined work force with Southwest will be a major sticking point.
Stemmler. It’s the biggest issue. Seniority is life in aviation. There as many formulas for seniority as there have been mergers. The best-case scenario is that they phase out Frontier’s Airbuses and retrain Frontier pilots to fly 737s (the Boeing plane in the Southwest fleet), resulting in no net work-force reduction. The worst case is that Southwest ignores Frontier’s seniority and our pilots are put at the back of the list.
DJ: Will a sale kill Frontier’s corporate culture?
Stemmler. We are small airline. I’ve been at the company for nine years and we’ve all flown together. It’s much different at a bigger airline. Change is painful. We have done so well, recording a profit over the past eight months. It’s tough for employees to get their arms around the idea that we need a financial sponsor to get through bankruptcy.
The tails of Frontier Airlines planes decorated with wildlife portraits stand at the gates at Denver International Airport in 2003.
DJ: What about Frontier’s famous animal logos, will you miss that?
Stemmler. Kids go crazy about it (each of Frontier’s 51 planes has a different animal on the tail). Passengers will ask what animal is this plane. The experience of going through airports since 911 has been getting increasingly worse. But we are still trying to have fun.
DJ: Do you think your pilots will be able to integrate into Southwest’s own folksy culture?
Stemmler. It’s a very similar thing. They stress that this is not just about putting butts in seats and moving them. It’s about giving customers a pleasant experience. They seem to get it.
DJ: Some pilots would love to fly for Southwest because they pay so well.
Stemmler. There was a time when people when people wouldn’t dream about going to Southwest because you didn’t know if it would still be flying in a few years because it was such a small company. Now these are coveted jobs. It went from one of the lowest paying to one of the highest. Southwest has grown to point to where it’s really stable, which you can’t say about a lot of other airlines.
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