Govt to hit airlines harder for bumping passengers
By DAVID KOENIG, AP Airlines Writer David Koenig, Ap Airlines Writer – 1 hr 28 mins ago
DALLAS – Giving up your airline seat may become a little less painful.
Federal officials are expected to announce this week a plan to raise the maximum amount that airlines must pay passengers who get bumped off an oversold flight, currently at $400 or $800 depending on how long a trip is delayed.
Bumpings rose in three of the past four years and jumped 10 percent to 762,422 in 2009, the highest total since 2002. They soared 17 percent in this year's first quarter.
The potential inconvenience is greater now too. Airlines have cut back on flights and planes are more crowded, so bumped passengers could wait hours or even days to find alternate arrangements.
Passenger-rights groups have pushed the Transportation Department to raise the payout limits to $800 and $1,200 per traveler if the airline bumps you involuntarily. The agency has signaled that it plans some type of inflation adjustment in the limits, which were last raised in 2008. Officials declined to provide details.
The issue is overbooked flights. Airlines are allowed to sell more tickets than they have seats on the assumption that some passengers — usually those with refundable tickets — won't show up. What travelers' groups such as FlyersRights want is a limit on how many extra seats airlines can sell per flight. But industry insiders say that may be impractical because no-show rates vary by route, day and even hour.
When a flight is overbooked, airlines must first ask for volunteers before involuntarily bumping ticket holders. While volunteers can get travel vouchers, people forced off flights must be paid in cash or check. Critics say airlines often flout that rule. The Transportation Department recently fined Southwest Airlines $200,000 for that and other shortcomings in its bumping practices.
In the first three months of this year, American Eagle, the regional affiliate of American Airlines, was most likely to bump passengers involuntarily. US Airways, Continental, ExpressJet and Southwest were next. For several years, JetBlue has been the least likely to bump — it says it gives customers $1,000 if they're booted off a flight.
The government has been moving to give airline customers more protections. One new rule prohibits the airlines from keeping passengers on a plane on the tarmac more than three hours. This week, the agency will also unveil proposed requirements for more information about advertised fares and checked-bag fees, and for contingency plans when aircraft are stuck on the tarmac for long delays.
Last year one in every 763 passengers got bumped from a flight, according to government figures. That includes volunteers and those forced to give up their seat. The numbers show that more passengers are volunteering to give up their seats, a reversal of the trend a few years ago.
Passenger-rights advocates say bigger payments to people forced to give up their seats could in turn force airlines to give volunteers more generous offers. But that remains to be seen.
Kate Hanni, who organized FlyersRights, says without limits on how many extra seats airlines can sell, "they'll find more deceptive ways to grab people's money and not give it back."
Monday, May 31, 2010
Friday, May 28, 2010
Airlines try to get merger off the ground
By Jeremy Lemer
Published: May 28 2010 20:46
Financial Times London
When Jeff Smisek and Glenn Tilton, the chief executives of Continental Airlines and United Airlines, testified before the Senate antitrust subcommittee this week on the proposed merger of their two companies they painted a compelling vision.
Their merger would create a global airline combining complementary networks, better able to protect jobs and important local routes.
Sitting beside them, however, two consumer advocates took a dimmer view.
The tie-up, they said, would lead to reduced service, higher prices on important routes and make the industry more, not less, vulnerable to strikes and shocks.
The gap between the two viewpoints highlights the surprising fact that even after decades of consolidation there is little consensus about its benefits or even clarity about how it is supposed to work.
Since 2000 alone, there have been three big mergers in the US, most recently between Delta Air Lines and Northwest, but the US carriers have managed to make more than $15bn of operating losses.
In making their case, Continental and United argued that this time would be different. The pair expect the greater “scope and scale of their network” to win $900m of extra business a year.
Put in plain English, they are gambling that expanded schedules at key airports and enhanced package deals will make their offering more appealing to high spending, globe-trotting corporate clients.
The trouble is that “revenue is a zero sum game”, according to Don Carty, who ran American Airlines when it bought the bankrupt Trans World Airlines in 2001. “You can’t count on revenue synergies because implicitly you are taking revenues from someone and they will have a strategy to take them back.”
With additional revenues looking challenging, the analyst community is banking on domestic capacity cuts to make the sums work. Kevin Crissey, with UBS, is typical when he writes that: “We’d be surprised if they weren’t approaching 10 per cent.”
The companies’ reluctance to talk about capacity reductions is understandable, Mr Carty says. “It is really all about politics ... If [they] start talking about capacity drawdowns, somebody is going to get upset.”
Reduced flying, Mr Carty says, means fewer jobs for workers, disgruntled unions and pressure on state politicians to ask awkward questions at congressional hearings and pester the Department of Justice, which is reviewing the merger.
For the regulators, it would raise concerns about higher prices. But recent academic research suggests that competition from low-cost rivals and the transparency of online booking sites keep prices in check even when airlines merge.
Instead, trimming capacity relies on the unspoken idea that big-spending business customers are travellers of necessity. When seats are cut, the number of corporate passengers tends to stay the same, meaning that low-fare leisure travellers are displaced. Costs go down and average fares go up.
But even a reduction in domestic capacity may not help as much as hoped.
While traditional airlines such as Continental and United cut flights in the recession and have pledged to remain disciplined, low-cost carriers have maintained their positions and have every reason to add more capacity when demand returns.
If they do, they will be able to undercut rivals and take market share at the expense of legacy airlines, says Michael E. Levine, a former senior airline executive who teaches at New York University School of Law.
“At best, United and Continental are talking about $1.2bn from synergies, or 5 per cent of total revenues ... not much of a margin for error.”
Copyright The Financial Times Limited 2010.
By Jeremy Lemer
Published: May 28 2010 20:46
Financial Times London
When Jeff Smisek and Glenn Tilton, the chief executives of Continental Airlines and United Airlines, testified before the Senate antitrust subcommittee this week on the proposed merger of their two companies they painted a compelling vision.
Their merger would create a global airline combining complementary networks, better able to protect jobs and important local routes.
Sitting beside them, however, two consumer advocates took a dimmer view.
The tie-up, they said, would lead to reduced service, higher prices on important routes and make the industry more, not less, vulnerable to strikes and shocks.
The gap between the two viewpoints highlights the surprising fact that even after decades of consolidation there is little consensus about its benefits or even clarity about how it is supposed to work.
Since 2000 alone, there have been three big mergers in the US, most recently between Delta Air Lines and Northwest, but the US carriers have managed to make more than $15bn of operating losses.
In making their case, Continental and United argued that this time would be different. The pair expect the greater “scope and scale of their network” to win $900m of extra business a year.
Put in plain English, they are gambling that expanded schedules at key airports and enhanced package deals will make their offering more appealing to high spending, globe-trotting corporate clients.
The trouble is that “revenue is a zero sum game”, according to Don Carty, who ran American Airlines when it bought the bankrupt Trans World Airlines in 2001. “You can’t count on revenue synergies because implicitly you are taking revenues from someone and they will have a strategy to take them back.”
With additional revenues looking challenging, the analyst community is banking on domestic capacity cuts to make the sums work. Kevin Crissey, with UBS, is typical when he writes that: “We’d be surprised if they weren’t approaching 10 per cent.”
The companies’ reluctance to talk about capacity reductions is understandable, Mr Carty says. “It is really all about politics ... If [they] start talking about capacity drawdowns, somebody is going to get upset.”
Reduced flying, Mr Carty says, means fewer jobs for workers, disgruntled unions and pressure on state politicians to ask awkward questions at congressional hearings and pester the Department of Justice, which is reviewing the merger.
For the regulators, it would raise concerns about higher prices. But recent academic research suggests that competition from low-cost rivals and the transparency of online booking sites keep prices in check even when airlines merge.
Instead, trimming capacity relies on the unspoken idea that big-spending business customers are travellers of necessity. When seats are cut, the number of corporate passengers tends to stay the same, meaning that low-fare leisure travellers are displaced. Costs go down and average fares go up.
But even a reduction in domestic capacity may not help as much as hoped.
While traditional airlines such as Continental and United cut flights in the recession and have pledged to remain disciplined, low-cost carriers have maintained their positions and have every reason to add more capacity when demand returns.
If they do, they will be able to undercut rivals and take market share at the expense of legacy airlines, says Michael E. Levine, a former senior airline executive who teaches at New York University School of Law.
“At best, United and Continental are talking about $1.2bn from synergies, or 5 per cent of total revenues ... not much of a margin for error.”
Copyright The Financial Times Limited 2010.
Comair to bring back 70 pilots, 40 attendants
Friday, May 28, 2010, 1:27pm EDT
Commuter airline Comair told its employees it would recall from furlough at least 70 pilots and 40 flight attendants to provide more flight hours for parent Delta Air Lines.
In a memo to employees, Comair said it will send out recall letters and begin training, with the goal of having the first group of pilots ready by the end of July.
The airline said in the memo that Delta asked it to increase its flying time starting in June, with an additional 200 block hours. A block hour is measured from the time an aircraft leaves the gate until it arrives at its destination gate.
Comair’s block hours will be increased gradually through November, when they are expected to reach an additional 1,100 hours, the airline said.
The Erlanger-based airline began furloughing employees last summer, when Delta began reducing its capacity at the Cincinnati/Northern Kentucky International Airport. Atlanta-based Delta (NYSE: DAL) operates a hub at the airport and employs about 2,200 workers locally
Friday, May 28, 2010, 1:27pm EDT
Commuter airline Comair told its employees it would recall from furlough at least 70 pilots and 40 flight attendants to provide more flight hours for parent Delta Air Lines.
In a memo to employees, Comair said it will send out recall letters and begin training, with the goal of having the first group of pilots ready by the end of July.
The airline said in the memo that Delta asked it to increase its flying time starting in June, with an additional 200 block hours. A block hour is measured from the time an aircraft leaves the gate until it arrives at its destination gate.
Comair’s block hours will be increased gradually through November, when they are expected to reach an additional 1,100 hours, the airline said.
The Erlanger-based airline began furloughing employees last summer, when Delta began reducing its capacity at the Cincinnati/Northern Kentucky International Airport. Atlanta-based Delta (NYSE: DAL) operates a hub at the airport and employs about 2,200 workers locally
UAUA-CAL Merger Sparks Layoff Fear
Zacks Equity Research, On Friday May 28, 2010, 10:21 am EDT
The proposed merger of U.S. air carriers United Airlines, a wholly owned subsidiary of UAL Corp. (NasdaqGS: UAUA - News), and Continental Airlines (NYSE: CAL - News) triggers concerns of retrenchment, especially in Houston, where Continental is based, and Cleveland, where Continental operates a hub. Since the airline industry is highly unionized, this can pose a problem while integrating the workforce.
The airlines stated that there would be some job losses while integrating the operations of the two companies, but have no plans for large cuts to the combined workforce of approximately 90,000 employees. The deal is awaiting approval from shareholders and an anti-trust review by the Department of Justice.
The chief executive of United Airlines is confident that any U.S. regulatory concerns about the carrier's proposed merger with Continental Airlines will be satisfactorily addressed.
The merger of United−Continental is expected to cost $3.2 billion to United, which would involve compensating each Continental shareholder with 1.05 shares of the former company. This exchange will leave United owning 53% of the newly formed company, which will be christened as United Continental Holdings, with the rest owned by Continental. The combined entity will retain the old name − United Airlines − but will carry Continental’s logo and will be headquartered in Chicago.
The deal will create the world’s largest airline with enhanced capacity and improved service, overtaking Delta Airlines (NYSE: DAL - News), which acquired Northwest Airlines last year. The combined company will be well positioned to succeed in an increasingly competitive global and domestic aviation industry, better positioned than any airline standing alone. The combined company will create a network that can compete for long-haul and high-volume business travel.
The integrated company will have 14 domestic overlapping routes, including Houston-Washington, Cleveland-Denver, Cleveland-Washington, and Houston-San Francisco. It does not have any international overlapping routes.
The airlines expect savings in the range of $200 to $300 million per year from cutting overlapping costs. The combined company is expected to generate annual revenues of $29 billion (United reported $16 billion of revenues in 2009 and Continental reported $12.6 billion) and will save costs in the range of $1.0 – 1.2 billion by 2013.
UAL CORP NEW (UAUA): Read the Full Research Report
Zacks Equity Research, On Friday May 28, 2010, 10:21 am EDT
The proposed merger of U.S. air carriers United Airlines, a wholly owned subsidiary of UAL Corp. (NasdaqGS: UAUA - News), and Continental Airlines (NYSE: CAL - News) triggers concerns of retrenchment, especially in Houston, where Continental is based, and Cleveland, where Continental operates a hub. Since the airline industry is highly unionized, this can pose a problem while integrating the workforce.
The airlines stated that there would be some job losses while integrating the operations of the two companies, but have no plans for large cuts to the combined workforce of approximately 90,000 employees. The deal is awaiting approval from shareholders and an anti-trust review by the Department of Justice.
The chief executive of United Airlines is confident that any U.S. regulatory concerns about the carrier's proposed merger with Continental Airlines will be satisfactorily addressed.
The merger of United−Continental is expected to cost $3.2 billion to United, which would involve compensating each Continental shareholder with 1.05 shares of the former company. This exchange will leave United owning 53% of the newly formed company, which will be christened as United Continental Holdings, with the rest owned by Continental. The combined entity will retain the old name − United Airlines − but will carry Continental’s logo and will be headquartered in Chicago.
The deal will create the world’s largest airline with enhanced capacity and improved service, overtaking Delta Airlines (NYSE: DAL - News), which acquired Northwest Airlines last year. The combined company will be well positioned to succeed in an increasingly competitive global and domestic aviation industry, better positioned than any airline standing alone. The combined company will create a network that can compete for long-haul and high-volume business travel.
The integrated company will have 14 domestic overlapping routes, including Houston-Washington, Cleveland-Denver, Cleveland-Washington, and Houston-San Francisco. It does not have any international overlapping routes.
The airlines expect savings in the range of $200 to $300 million per year from cutting overlapping costs. The combined company is expected to generate annual revenues of $29 billion (United reported $16 billion of revenues in 2009 and Continental reported $12.6 billion) and will save costs in the range of $1.0 – 1.2 billion by 2013.
UAL CORP NEW (UAUA): Read the Full Research Report
Thursday, May 27, 2010
Critic on United-Continental: An Airline Too Big to Fail
May 27, 2010, 6:35 pm — Updated: 8:19 pm
A consumer advocate argued at a Senate hearing on Thursday that the proposed merger of United Airlines and Continental Airlines would create an airline that was too big to fail, one that the government would need to bail out if it ran into trouble.
“Just as we have seen with the banks, with financial services companies and with automobile manufacturers, we are now seeing the domestic airline industry evolving into an oligopoly of 800-pound gorillas,” William J. McGee, a consultant with the Consumer’s Union, which publishes Consumer Reports magazine, said at the hearing, held by the Judiciary Committee.
The chief executives of both airlines said that the merger would help create a newer, more efficient airline, and that cost savings would be made without resorting to hiking up ticket prices.
But Mr. McGee cited the consolidation of the airline industry to a handful of legacy companies, a development that he argued had reduced consumer choice, raised fares and cut service in crucial markets. He noted the disappearance of seven major airlines over the last 20 years, most recently TWA and Northwest Airlines.
Should United merge with Continental, only four major airlines would remain, wiping out 20 percent of the nation’s air service in one fell swoop.
“In the past, Wall Street investors and executives at competing airlines have decried any form of assistance to financially struggling carriers, asserting the government should let the marketplace decide which airlines survive and which airlines fail,” Mr. McGee said. “In the future, these same parties will reverse that argument claiming that a megacarrier such as United-Continental will be too big to fail. And they will be right.”
– Cyrus Sanati
May 27, 2010, 6:35 pm — Updated: 8:19 pm
A consumer advocate argued at a Senate hearing on Thursday that the proposed merger of United Airlines and Continental Airlines would create an airline that was too big to fail, one that the government would need to bail out if it ran into trouble.
“Just as we have seen with the banks, with financial services companies and with automobile manufacturers, we are now seeing the domestic airline industry evolving into an oligopoly of 800-pound gorillas,” William J. McGee, a consultant with the Consumer’s Union, which publishes Consumer Reports magazine, said at the hearing, held by the Judiciary Committee.
The chief executives of both airlines said that the merger would help create a newer, more efficient airline, and that cost savings would be made without resorting to hiking up ticket prices.
But Mr. McGee cited the consolidation of the airline industry to a handful of legacy companies, a development that he argued had reduced consumer choice, raised fares and cut service in crucial markets. He noted the disappearance of seven major airlines over the last 20 years, most recently TWA and Northwest Airlines.
Should United merge with Continental, only four major airlines would remain, wiping out 20 percent of the nation’s air service in one fell swoop.
“In the past, Wall Street investors and executives at competing airlines have decried any form of assistance to financially struggling carriers, asserting the government should let the marketplace decide which airlines survive and which airlines fail,” Mr. McGee said. “In the future, these same parties will reverse that argument claiming that a megacarrier such as United-Continental will be too big to fail. And they will be right.”
– Cyrus Sanati
Facts about the United-Continental combination
Facts about the proposed United-Continental combination
On Thursday May 27, 2010, 5:39 pm EDT
Facts about the proposed combination of United and Continental Airlines:
Cost: $3 billion.
Expected savings from cutting overlapping costs: $200 million to $300 million per year.
Overlap: 14 domestic routes, including Houston-Washington; Cleveland-Denver; Cleveland-Washington; Houston-San Francisco.
No international overlap.
Combined daily departures: About 5,300.
Combined destinations: 473.
Facts about the proposed United-Continental combination
On Thursday May 27, 2010, 5:39 pm EDT
Facts about the proposed combination of United and Continental Airlines:
Cost: $3 billion.
Expected savings from cutting overlapping costs: $200 million to $300 million per year.
Overlap: 14 domestic routes, including Houston-Washington; Cleveland-Denver; Cleveland-Washington; Houston-San Francisco.
No international overlap.
Combined daily departures: About 5,300.
Combined destinations: 473.
Boeing's 787 tested in Colorado Springs; Continental plans route for new jet
Thursday, May 27, 2010, 8:06am
Denver Business Journal - by Mark Harden
One of the Boeing Co.'s test versions of its new 787 Dreamliner jet was in Colorado Springs the last few days for tests at a high-altitude airport.
The jet -- one of four in the Chicago jetmaker's 787 test fleet -- was stationed in Colorado Springs for several days "for a short series of high-field-elevation tests," Boeing said in a statement Wednesday. The jet left Colorado Springs Airport Wednesday and flew to California, according to the FlightAware tracking website.
Earlier this month, another 787 conducted touch-and-go maneuvers in Colorado Springs, the company said.
The jet recently in the Springs was earlier tested in Mesa, Ariz., under low-altitude, hot-weather conditions.
The mid-sized, long-range Dreamliner will carry from 210 to 290 passengers on routes of 7,650 to 8,500 miles, depending on the model. It is designed to use 20 percent less fuel than comparably sized planes.
It's a jet that Denver leaders see as key to opening new air routes from Denver International Airport to Tokyo and possibly other Asian destinations.
Tom Clark, executive VP of the Metro Denver Economic Development Corp., told the Denver Business Journal last December that the mid-sized 787 was designed by Boeing for smaller markets like Denver, and could be key to opening up new routes between Denver and Asia, possibly flown by All Nippon Airways, which has placed a large 787 order. (Click here for Clark's analysis.)
Over the last six months, Boeing's 787 test jets have logged 840 hours of flying time. Boeing (NYSE: BA) expects to add two more jets to the Dreamliner test fleet soon.
In other 787 news, Continental Airlines became the first carrier to announce plans to use the 787 on a specific route.
Continental (NYSE: CAL) said Wednesday it plans to start flying the jet on Nov. 16, 2011, between its Houston hub and Auckland, New Zealand, subject to government approval.
Continental plans to merge with United Airlines, the largest carrier at DIA, if approved by shareholders and regulators.
Thursday, May 27, 2010, 8:06am
Denver Business Journal - by Mark Harden
One of the Boeing Co.'s test versions of its new 787 Dreamliner jet was in Colorado Springs the last few days for tests at a high-altitude airport.
The jet -- one of four in the Chicago jetmaker's 787 test fleet -- was stationed in Colorado Springs for several days "for a short series of high-field-elevation tests," Boeing said in a statement Wednesday. The jet left Colorado Springs Airport Wednesday and flew to California, according to the FlightAware tracking website.
Earlier this month, another 787 conducted touch-and-go maneuvers in Colorado Springs, the company said.
The jet recently in the Springs was earlier tested in Mesa, Ariz., under low-altitude, hot-weather conditions.
The mid-sized, long-range Dreamliner will carry from 210 to 290 passengers on routes of 7,650 to 8,500 miles, depending on the model. It is designed to use 20 percent less fuel than comparably sized planes.
It's a jet that Denver leaders see as key to opening new air routes from Denver International Airport to Tokyo and possibly other Asian destinations.
Tom Clark, executive VP of the Metro Denver Economic Development Corp., told the Denver Business Journal last December that the mid-sized 787 was designed by Boeing for smaller markets like Denver, and could be key to opening up new routes between Denver and Asia, possibly flown by All Nippon Airways, which has placed a large 787 order. (Click here for Clark's analysis.)
Over the last six months, Boeing's 787 test jets have logged 840 hours of flying time. Boeing (NYSE: BA) expects to add two more jets to the Dreamliner test fleet soon.
In other 787 news, Continental Airlines became the first carrier to announce plans to use the 787 on a specific route.
Continental (NYSE: CAL) said Wednesday it plans to start flying the jet on Nov. 16, 2011, between its Houston hub and Auckland, New Zealand, subject to government approval.
Continental plans to merge with United Airlines, the largest carrier at DIA, if approved by shareholders and regulators.
Monday, May 24, 2010
Texas man charged with assaulting flight attendant
Texas man charged with assaulting Delta flight attendant on flight from Puerto Rico
On Monday May 24, 2010, 5:41 pm EDT
SAN JUAN, Puerto Rico (AP) -- A Texas man has been charged with assaulting a flight attendant in a disturbance that led the captain to make an emergency return to Puerto Rico.
The FBI says 38-year-old Anthony David Watson of Fredericksburg, Texas, walked to the rear of the Delta Air Lines plane, suggested the attendant enter the lavatory with him and then punched her in the face when she yelled for help.
Monday's statement says Watson also punched a passenger who intervened before he was restrained by passengers and handcuffed.
The scuffle came 20 minutes into an Atlanta-bound flight Friday.
The charge against Watson carries a maximum penalty of 20 years in prison. Bail was set at $100,000. It was not immediately clear whether he has a lawyer.
Texas man charged with assaulting Delta flight attendant on flight from Puerto Rico
On Monday May 24, 2010, 5:41 pm EDT
SAN JUAN, Puerto Rico (AP) -- A Texas man has been charged with assaulting a flight attendant in a disturbance that led the captain to make an emergency return to Puerto Rico.
The FBI says 38-year-old Anthony David Watson of Fredericksburg, Texas, walked to the rear of the Delta Air Lines plane, suggested the attendant enter the lavatory with him and then punched her in the face when she yelled for help.
Monday's statement says Watson also punched a passenger who intervened before he was restrained by passengers and handcuffed.
The scuffle came 20 minutes into an Atlanta-bound flight Friday.
The charge against Watson carries a maximum penalty of 20 years in prison. Bail was set at $100,000. It was not immediately clear whether he has a lawyer.
Thursday, May 20, 2010
Mergers & Acquisitions
Waning Star of the Air Struggles as Solo Act
May 20, 2010, 9:07 am — Updated: 12:30 pm -->
Has American Airlines, for decades the industry’s leader, been backed into a corner?
First, Delta Air Lines’ merger with Northwest Airlines two years ago knocked American to No. 2. Now, the proposed union between United and Continental Airlines would push American down to third, Jad Mouawad reports in The New York Times.
All this leaves American with some of the industry’s highest costs, as well as poor labor relations and a smaller network of routes. Some analysts contend that the airline has few options other than merging with US Airways, which was left out when United decided to go for Continental. Others see American as the “Ugly Betty” of the industry, an airline struggling to find a suitable partner.
“American has been used to cruising at 55 miles per hour ahead of everyone, but now two competitors that are very well capitalized, with much larger networks, have suddenly passed them over,” said Hunter K. Keay, an airline analyst at Stifel Nicolaus. “The critical question is whether this is not time for American to speed up.”
American’s executives counter that they will not be forced into making a rash move, nor into blindly following the industry’s matchmaking trend. Instead, they argue that being a little smaller will allow their airline to be more nimble.
“We are not ceding anything to anyone, but we are trying to build something that we believe will be able to be profitable,” Gerard J. Arpey, the airline’s chairman and chief executive, said in a recent interview at its headquarters in Fort Worth.
Rather than trying to compete everywhere with everyone, American seeks to focus on five major cities in the United States — Dallas, Chicago, Los Angeles, Miami and New York. It is more important to be big in cities that account for a significant portion of the nation’s air travel, its executives reason, instead of spreading itself too thinly.
Overseas, American is betting on its international alliance, Oneworld, to expand its reach in Europe and Asia, because of partnerships with British Airways and Japan Airlines.
“Our strategy is not driven by ranking but by making sure we have a network and a group of partners around the world that will be as strong — if not as big,” Mr. Arpey said.
By most measures, American remains a formidable airline. It flies about 286,000 people each day, employs 87,000 people, and along with its regional carrier, American Eagle, operates around 3,400 daily flights to 250 cities and 40 countries.
At its shareholders’ meeting on Wednesday, American said it expected that the Oneworld alliance would mean $500 million for AMR, the airline’s parent. It also has an impressive history, introducing coast-to-coast jet service in the 1950s, pioneering electronic reservations in the ’60s and offering the first major frequent-flier program in the ’80s.
But the last decade has been brutal for American and the rest of the industry. Airlines suffered from terrorist attacks, global pandemics and recessions that have curtailed air travel. Oil prices soared. For every dollar-a-barrel increase in the price of oil, American’s annual fuel costs increased by $70 million. Fares, meanwhile, have been kept in check because of pressure from low-cost competitors.
As a result, American was profitable for only three of the last 10 years. It racked up losses of $10 billion over that period.
But critics on Wall Street and among the company’s unions say they doubt the company can turn its fortunes around. They say American’s management is too timid and unwilling to cut unprofitable routes, and it has failed to rein in costs, among the highest in the industry. The United-Continental deal is just the latest blow.
Lloyd Hill, the head of American’s pilots union, the Allied Pilots Association, said the company suffered from a “leadership vacuum.” And in a conference call last month, one Wall Street analyst publicly dressed down the company’s executives for a lack of passion.
Shares of AMR are down 9 percent this year, the worst performance by a major airline and well below the sector’s average gain of 13 percent. By contrast, shares of UAL, United’s parent, have gained 46 percent; Delta is up 20 percent in the same period.
Bob McAdoo, a senior airline analyst at Avondale Partners, said that American lags its peers. “Everybody else has seen improvements in recent years, and American hasn’t really done much of that,” he said.
American is one of only three major carriers that have never filed for bankruptcy, along with Southwest Airlines and Alaska Airlines. As a result, the company is hobbled with much higher costs than its competitors, most of which have used bankruptcy proceedings to rewrite their labor contracts and airplane leases, terminate pensions and health benefits, and restructure their debt. If it had contracts similar to Delta’s or Continental’s, the company estimates its expenses would be $600 million lower each year.
Mr. Arpey defends his record. “I still believe in principles in a business that will often push you to compromise your principles,” he said. “I believe in the long run it will serve our institution and our stakeholders that we honored our commitment to our creditors, funded our pension plans and have done our very best to do everything consensually. But that remains to be seen.”
The company anticipates that once other airlines start to renegotiate their contracts, labor costs will rise through the industry, narrowing American’s cost disadvantage. That, in turn, may put more pressure on rival airlines to increase fares.
Michael Boyd, an aviation consultant, said American had a strong domestic network and dominant routes to South America. He also praised the company’s decision to buy new fuel-efficient planes and ground less efficient ones.
“All the talk where they have to find a domestic partner, and where they have to be the biggest, does not make a lot of sense,” Mr. Boyd said. “Remember, the brontosaurus was a really big dinosaur.”
While American has not ruled out a merger, its executives have said on many occasions that they feel no need to consolidate. Instead, the airline is counting on its international alliance with Oneworld to catch up with Delta and United, which have been able to cash in on their competing alliances for years.
American’s application for antitrust immunity for a joint venture across the Atlantic with British Airways, first submitted 13 years ago, was granted this year by the Transportation Department, and European authorities are also expected to give their green light this year.
American hopes to replicate its major cities strategy in the United States by focusing on a handful of major global hubs — including London and Tokyo.
“If you spread yourself too thinly, you win fewer battles,” said Dan Garton, American’s chief marketing officer. He said that it was more valuable for American to add flights to London and expand its depth of service than to stretch itself to smaller markets like Venice or Kiev. “We try to fly to markets that have the biggest bang for our bucks,” he said.
Waning Star of the Air Struggles as Solo Act
May 20, 2010, 9:07 am — Updated: 12:30 pm -->
Has American Airlines, for decades the industry’s leader, been backed into a corner?
First, Delta Air Lines’ merger with Northwest Airlines two years ago knocked American to No. 2. Now, the proposed union between United and Continental Airlines would push American down to third, Jad Mouawad reports in The New York Times.
All this leaves American with some of the industry’s highest costs, as well as poor labor relations and a smaller network of routes. Some analysts contend that the airline has few options other than merging with US Airways, which was left out when United decided to go for Continental. Others see American as the “Ugly Betty” of the industry, an airline struggling to find a suitable partner.
“American has been used to cruising at 55 miles per hour ahead of everyone, but now two competitors that are very well capitalized, with much larger networks, have suddenly passed them over,” said Hunter K. Keay, an airline analyst at Stifel Nicolaus. “The critical question is whether this is not time for American to speed up.”
American’s executives counter that they will not be forced into making a rash move, nor into blindly following the industry’s matchmaking trend. Instead, they argue that being a little smaller will allow their airline to be more nimble.
“We are not ceding anything to anyone, but we are trying to build something that we believe will be able to be profitable,” Gerard J. Arpey, the airline’s chairman and chief executive, said in a recent interview at its headquarters in Fort Worth.
Rather than trying to compete everywhere with everyone, American seeks to focus on five major cities in the United States — Dallas, Chicago, Los Angeles, Miami and New York. It is more important to be big in cities that account for a significant portion of the nation’s air travel, its executives reason, instead of spreading itself too thinly.
Overseas, American is betting on its international alliance, Oneworld, to expand its reach in Europe and Asia, because of partnerships with British Airways and Japan Airlines.
“Our strategy is not driven by ranking but by making sure we have a network and a group of partners around the world that will be as strong — if not as big,” Mr. Arpey said.
By most measures, American remains a formidable airline. It flies about 286,000 people each day, employs 87,000 people, and along with its regional carrier, American Eagle, operates around 3,400 daily flights to 250 cities and 40 countries.
At its shareholders’ meeting on Wednesday, American said it expected that the Oneworld alliance would mean $500 million for AMR, the airline’s parent. It also has an impressive history, introducing coast-to-coast jet service in the 1950s, pioneering electronic reservations in the ’60s and offering the first major frequent-flier program in the ’80s.
But the last decade has been brutal for American and the rest of the industry. Airlines suffered from terrorist attacks, global pandemics and recessions that have curtailed air travel. Oil prices soared. For every dollar-a-barrel increase in the price of oil, American’s annual fuel costs increased by $70 million. Fares, meanwhile, have been kept in check because of pressure from low-cost competitors.
As a result, American was profitable for only three of the last 10 years. It racked up losses of $10 billion over that period.
But critics on Wall Street and among the company’s unions say they doubt the company can turn its fortunes around. They say American’s management is too timid and unwilling to cut unprofitable routes, and it has failed to rein in costs, among the highest in the industry. The United-Continental deal is just the latest blow.
Lloyd Hill, the head of American’s pilots union, the Allied Pilots Association, said the company suffered from a “leadership vacuum.” And in a conference call last month, one Wall Street analyst publicly dressed down the company’s executives for a lack of passion.
Shares of AMR are down 9 percent this year, the worst performance by a major airline and well below the sector’s average gain of 13 percent. By contrast, shares of UAL, United’s parent, have gained 46 percent; Delta is up 20 percent in the same period.
Bob McAdoo, a senior airline analyst at Avondale Partners, said that American lags its peers. “Everybody else has seen improvements in recent years, and American hasn’t really done much of that,” he said.
American is one of only three major carriers that have never filed for bankruptcy, along with Southwest Airlines and Alaska Airlines. As a result, the company is hobbled with much higher costs than its competitors, most of which have used bankruptcy proceedings to rewrite their labor contracts and airplane leases, terminate pensions and health benefits, and restructure their debt. If it had contracts similar to Delta’s or Continental’s, the company estimates its expenses would be $600 million lower each year.
Mr. Arpey defends his record. “I still believe in principles in a business that will often push you to compromise your principles,” he said. “I believe in the long run it will serve our institution and our stakeholders that we honored our commitment to our creditors, funded our pension plans and have done our very best to do everything consensually. But that remains to be seen.”
The company anticipates that once other airlines start to renegotiate their contracts, labor costs will rise through the industry, narrowing American’s cost disadvantage. That, in turn, may put more pressure on rival airlines to increase fares.
Michael Boyd, an aviation consultant, said American had a strong domestic network and dominant routes to South America. He also praised the company’s decision to buy new fuel-efficient planes and ground less efficient ones.
“All the talk where they have to find a domestic partner, and where they have to be the biggest, does not make a lot of sense,” Mr. Boyd said. “Remember, the brontosaurus was a really big dinosaur.”
While American has not ruled out a merger, its executives have said on many occasions that they feel no need to consolidate. Instead, the airline is counting on its international alliance with Oneworld to catch up with Delta and United, which have been able to cash in on their competing alliances for years.
American’s application for antitrust immunity for a joint venture across the Atlantic with British Airways, first submitted 13 years ago, was granted this year by the Transportation Department, and European authorities are also expected to give their green light this year.
American hopes to replicate its major cities strategy in the United States by focusing on a handful of major global hubs — including London and Tokyo.
“If you spread yourself too thinly, you win fewer battles,” said Dan Garton, American’s chief marketing officer. He said that it was more valuable for American to add flights to London and expand its depth of service than to stretch itself to smaller markets like Venice or Kiev. “We try to fly to markets that have the biggest bang for our bucks,” he said.
Wednesday, May 19, 2010
Virgin: the world's best passenger complaint letter?
Here we reproduce a complaint letter sent to Sir Richard Branson, which is currently being emailed globally and is considered by many to be the world's funniest passenger complaint letter.
Published: 12:48PM GMT 26 Jan 2009
'Look at this Richard. Just look at it'
'Answer me this Richard, what sort of animal would serve a desert with peas in?'
'It's your hamster in the box and it's not breathing. That's how I felt when I peeled back the foil and saw this'
'I needed a sugar hit. Luckily there was a small cookie provided. It had caught my eye earlier due to it's baffling presentation'
'It was incredibly hard to capture Boris Johnson's face through the flickering white lines running up and down the screen'
'Is that Ray Liotta? A question I found myself asking over and over again throughout the gruelling half-hour I attempted to watch the film like this'
'Richard...What is that white stuff?'
Dear Mr Branson
REF: Mumbai to Heathrow 7th December 2008
I love the Virgin brand, I really do which is why I continue to use it despite a series of unfortunate incidents over the last few years. This latest incident takes the biscuit.
Ironically, by the end of the flight I would have gladly paid over a thousand rupees for a single biscuit following the culinary journey of hell I was subjected to at thehands of your corporation.
Look at this Richard. Just look at it:
I imagine the same questions are racing through your brilliant mind as were racing through mine on that fateful day. What is this? Why have I been given it? What have I done to deserve this? And, which one is the starter, which one is the desert?
You don’t get to a position like yours Richard with anything less than a generous sprinkling of observational power so I KNOW you will have spotted the tomato next to the two yellow shafts of sponge on the left. Yes, it’s next to the sponge shaft without the green paste. That’s got to be the clue hasn’t it. No sane person would serve a desert with a tomato would they.
Well answer me this Richard, what sort of animal would serve a desert with peas in:
I know it looks like a baaji but it’s in custard Richard, custard. It must be the pudding. Well you’ll be fascinated to hear that it wasn't custard. It was a sour gel with a clear oil on top. It’s only redeeming feature was that it managed to be so alien to my palette that it took away the taste of the curry emanating from our miscellaneous central cuboid of beige matter. Perhaps the meal on the left might be the desert after all.
Anyway, this is all irrelevant at the moment. I was raised strictly but neatly by my parents and if they knew I had started desert before the main course, a sponge shaft would be the least of my worries. So lets peel back the tin-foil on the main dish and see what’s on offer.
I’ll try and explain how this felt. Imagine being a twelve year old boy Richard. Now imagine it’s Christmas morning and you’re sat their with your final present to open. It’s a big one, and you know what it is. It’s that Goodmans stereo you picked out the catalogue and wrote to Santa about.
Only you open the present and it’s not in there. It’s your hamster Richard. It’s your hamster in the box and it’s not breathing. That’s how I felt when I peeled back the foil and saw this:
I know what you’re thinking. You’re thinking it’s more of that Baaji custard. I admit I thought the same too, but no. It’s mustard Richard. MUSTARD. More mustard than any man could consume in a month. On the left we have a piece of broccoli and some peppers in a brown glue-like oil and on the right the chef had prepared some mashed potato. The potato masher had obviously broken and so it was decided the next best thing would be to pass the potatoes through the digestive tract of a bird.
Once it was regurgitated it was clearly then blended and mixed with a bit of mustard. Everybody likes a bit of mustard Richard.
By now I was actually starting to feel a little hypoglycaemic. I needed a sugar hit. Luckily there was a small cookie provided. It had caught my eye earlier due to it’s baffling presentation:
It appears to be in an evidence bag from the scene of a crime. A CRIME AGAINST BLOODY COOKING. Either that or some sort of back-street underground cookie, purchased off a gun-toting maniac high on his own supply of yeast. You certainly wouldn’t want to be caught carrying one of these through customs. Imagine biting into a piece of brass Richard. That would be softer on the teeth than the specimen above.
I was exhausted. All I wanted to do was relax but obviously I had to sit with that mess in front of me for half an hour. I swear the sponge shafts moved at one point.
Once cleared, I decided to relax with a bit of your world-famous onboard entertainment. I switched it on:
I apologise for the quality of the photo, it’s just it was incredibly hard to capture Boris Johnson’s face through the flickering white lines running up and down the screen. Perhaps it would be better on another channel:
Is that Ray Liotta? A question I found myself asking over and over again throughout the gruelling half-hour I attempted to watch the film like this. After that I switched off. I’d had enough. I was the hungriest I’d been in my adult life and I had a splitting headache from squinting at a crackling screen.
My only option was to simply stare at the seat in front and wait for either food, or sleep. Neither came for an incredibly long time. But when it did it surpassed my wildest expectations:
Yes! It’s another crime-scene cookie. Only this time you dunk it in the white stuff.
Richard…. What is that white stuff? It looked like it was going to be yoghurt. It finally dawned on me what it was after staring at it. It was a mixture between the Baaji custard and the Mustard sauce. It reminded me of my first week at university. I had overheard that you could make a drink by mixing vodka and refreshers. I lied to my new friends and told them I’d done it loads of times. When I attempted to make the drink in a big bowl it formed a cheese Richard, a cheese. That cheese looked a lot like your baaji-mustard.
So that was that Richard. I didn’t eat a bloody thing. My only question is: How can you live like this? I can’t imagine what dinner round your house is like, it must be like something out of a nature documentary.
As I said at the start I love your brand, I really do. It’s just a shame such a simple thing could bring it crashing to it’s knees and begging for sustenance.
Yours Sincererly
XXXX
Paul Charles, Virgin’s Director of Corporate Communications, confirmed that Sir Richard Branson had telephoned the author of the letter and had thanked him for his “constructive if tongue-in-cheek” email. Mr Charles said that Virgin was sorry the passenger had not liked the in-flight meals which he said was “award-winning food which is very popular on our Indian routes.”
Here we reproduce a complaint letter sent to Sir Richard Branson, which is currently being emailed globally and is considered by many to be the world's funniest passenger complaint letter.
Published: 12:48PM GMT 26 Jan 2009
'Look at this Richard. Just look at it'
'Answer me this Richard, what sort of animal would serve a desert with peas in?'
'It's your hamster in the box and it's not breathing. That's how I felt when I peeled back the foil and saw this'
'I needed a sugar hit. Luckily there was a small cookie provided. It had caught my eye earlier due to it's baffling presentation'
'It was incredibly hard to capture Boris Johnson's face through the flickering white lines running up and down the screen'
'Is that Ray Liotta? A question I found myself asking over and over again throughout the gruelling half-hour I attempted to watch the film like this'
'Richard...What is that white stuff?'
Dear Mr Branson
REF: Mumbai to Heathrow 7th December 2008
I love the Virgin brand, I really do which is why I continue to use it despite a series of unfortunate incidents over the last few years. This latest incident takes the biscuit.
Ironically, by the end of the flight I would have gladly paid over a thousand rupees for a single biscuit following the culinary journey of hell I was subjected to at thehands of your corporation.
Look at this Richard. Just look at it:
I imagine the same questions are racing through your brilliant mind as were racing through mine on that fateful day. What is this? Why have I been given it? What have I done to deserve this? And, which one is the starter, which one is the desert?
You don’t get to a position like yours Richard with anything less than a generous sprinkling of observational power so I KNOW you will have spotted the tomato next to the two yellow shafts of sponge on the left. Yes, it’s next to the sponge shaft without the green paste. That’s got to be the clue hasn’t it. No sane person would serve a desert with a tomato would they.
Well answer me this Richard, what sort of animal would serve a desert with peas in:
I know it looks like a baaji but it’s in custard Richard, custard. It must be the pudding. Well you’ll be fascinated to hear that it wasn't custard. It was a sour gel with a clear oil on top. It’s only redeeming feature was that it managed to be so alien to my palette that it took away the taste of the curry emanating from our miscellaneous central cuboid of beige matter. Perhaps the meal on the left might be the desert after all.
Anyway, this is all irrelevant at the moment. I was raised strictly but neatly by my parents and if they knew I had started desert before the main course, a sponge shaft would be the least of my worries. So lets peel back the tin-foil on the main dish and see what’s on offer.
I’ll try and explain how this felt. Imagine being a twelve year old boy Richard. Now imagine it’s Christmas morning and you’re sat their with your final present to open. It’s a big one, and you know what it is. It’s that Goodmans stereo you picked out the catalogue and wrote to Santa about.
Only you open the present and it’s not in there. It’s your hamster Richard. It’s your hamster in the box and it’s not breathing. That’s how I felt when I peeled back the foil and saw this:
I know what you’re thinking. You’re thinking it’s more of that Baaji custard. I admit I thought the same too, but no. It’s mustard Richard. MUSTARD. More mustard than any man could consume in a month. On the left we have a piece of broccoli and some peppers in a brown glue-like oil and on the right the chef had prepared some mashed potato. The potato masher had obviously broken and so it was decided the next best thing would be to pass the potatoes through the digestive tract of a bird.
Once it was regurgitated it was clearly then blended and mixed with a bit of mustard. Everybody likes a bit of mustard Richard.
By now I was actually starting to feel a little hypoglycaemic. I needed a sugar hit. Luckily there was a small cookie provided. It had caught my eye earlier due to it’s baffling presentation:
It appears to be in an evidence bag from the scene of a crime. A CRIME AGAINST BLOODY COOKING. Either that or some sort of back-street underground cookie, purchased off a gun-toting maniac high on his own supply of yeast. You certainly wouldn’t want to be caught carrying one of these through customs. Imagine biting into a piece of brass Richard. That would be softer on the teeth than the specimen above.
I was exhausted. All I wanted to do was relax but obviously I had to sit with that mess in front of me for half an hour. I swear the sponge shafts moved at one point.
Once cleared, I decided to relax with a bit of your world-famous onboard entertainment. I switched it on:
I apologise for the quality of the photo, it’s just it was incredibly hard to capture Boris Johnson’s face through the flickering white lines running up and down the screen. Perhaps it would be better on another channel:
Is that Ray Liotta? A question I found myself asking over and over again throughout the gruelling half-hour I attempted to watch the film like this. After that I switched off. I’d had enough. I was the hungriest I’d been in my adult life and I had a splitting headache from squinting at a crackling screen.
My only option was to simply stare at the seat in front and wait for either food, or sleep. Neither came for an incredibly long time. But when it did it surpassed my wildest expectations:
Yes! It’s another crime-scene cookie. Only this time you dunk it in the white stuff.
Richard…. What is that white stuff? It looked like it was going to be yoghurt. It finally dawned on me what it was after staring at it. It was a mixture between the Baaji custard and the Mustard sauce. It reminded me of my first week at university. I had overheard that you could make a drink by mixing vodka and refreshers. I lied to my new friends and told them I’d done it loads of times. When I attempted to make the drink in a big bowl it formed a cheese Richard, a cheese. That cheese looked a lot like your baaji-mustard.
So that was that Richard. I didn’t eat a bloody thing. My only question is: How can you live like this? I can’t imagine what dinner round your house is like, it must be like something out of a nature documentary.
As I said at the start I love your brand, I really do. It’s just a shame such a simple thing could bring it crashing to it’s knees and begging for sustenance.
Yours Sincererly
XXXX
Paul Charles, Virgin’s Director of Corporate Communications, confirmed that Sir Richard Branson had telephoned the author of the letter and had thanked him for his “constructive if tongue-in-cheek” email. Mr Charles said that Virgin was sorry the passenger had not liked the in-flight meals which he said was “award-winning food which is very popular on our Indian routes.”
Monday, May 17, 2010
Airline cockpit fire prompts emergency landing
Long-standing safety concerns probed in cockpit fire that prompted B757 emergency landing
Joan Lowy and Joshua Freed, Associated Press Writers, On Monday May 17, 2010, 5:43 pm
WASHINGTON (AP) -- Investigators are looking into whether long-known problems with the heating system in a cockpit window of the Boeing 757 played a role in a fire that forced an airliner to make an emergency landing near Washington, federal safety officials said Monday.
United Airlines Flight 27 en route from New York to Los Angeles with 112 people aboard made an emergency landing at Dulles International Airport in Virginia on Sunday night due to a cockpit fire, a spokeswoman for the Federal Aviation Administration said.
The fire was extinguished before the plane landed and no injuries were reported, FAA spokeswoman Holly Baker said.
Among the plane's passengers were Pamela Adlon, a star on the Showtime series "Californication"; Jarrod Spector, a star of the Broadway show "Jersey Boys"; and Justin Bartha, who appeared in the "The Hangover" and the "National Treasure" movies.
Adlon, who was sitting in the second row, said she smelled smoke about 30 minutes into the flight.
"All of a sudden the cockpit door opened and it was the captain and he said, 'I need a fire extinguisher.' And there were flames coming out of the cockpit," Adlon told The Associated Press in a phone interview from her Los Angeles home.
An attendant brought a fire extinguisher but the first cabin filled with smoke, she said.
When the plane arrived at Dulles, the runway was filled with emergency vehicles and fire trucks. She said passengers had to stay in their seats and a firefighter came on board and opened the cockpit door.
"We saw the windshield was completely cracked and shattered," she said. "We realized it was really bad. We were really lucky."
Keith Holloway, a spokesman for the National Transportation Safety Board, said the board has dispatched three investigators to examine the cockpit to determine the cause of the fire.
"We haven't narrowed down what the issues are with this incident yet," Holloway said. He added that the board will be investigating whether the cause of the fire was due to "a recurring problem" involved in previous 757 cockpit fires, or a new issue.
The board recommended to the FAA in 2007 that airlines be required to replace the windshield heat terminal blocks on all Boeing 747s, 757s, 767s and 777s. The FAA proposed a rule in March 2008 that gave airlines a choice of regularly inspecting the heat terminal blocks on 757s, 767s and 777s or replacing the terminal blocks. Boeing 747s weren't included in the proposed order.
However, FAA records show airlines strongly criticized the proposal and it hasn't been made final. FAA spokesman Les Dorr said the rule is expected to become final in August. Airlines said in comments submitted to FAA that the agency's proposal wouldn't resolve the cause of the electrical arcing that led to the fires.
Airlines aren't required to comply with a rule until it's final, although many do.
The NTSB's recommendation was made in response to two fires that erupted in 757 cockpits in January 2004: an American Airlines flight in Dallas and an Air Greenland flight in Copenhagen.
Also, in 2006 a fire was reported on a Delta Air Lines 757 in the corner of a cockpit window. The pilots put it out with a fire extinguisher and cut power to the window heat, according to an FAA report on the incident. The plane had been en route from Tampa, Fla. to Hartford, Conn., but diverted to Savannah, Ga.
FAA said in 2008 that it was aware of nine incidents of electrical arcing at the terminal blocks, and "more than one incident" of open flames. The agency didn't specify in which Boeing model the incidents occurred.
There have been concerns about the cockpit heating systems of 757s for at least two decades. A 1990 safety directive from the FAA ordered airlines to inspect the window heating system of 757s for undersized wiring. The FAA proposed a $1.45 million civil penalty against Northwest Airlines this March for failing to carry out some of those inspections until 2008.
"Left uncorrected, the problem could cause overheating, smoking and possibly a fire," the FAA wrote when it fined Northwest.
None of the 757s turned out to have the wrong wires, according to Delta Air Lines Inc., which bought Northwest.
The 757s are one of the most widely used aircraft in the U.S. FAA in 2008 said that its proposal for inspecting terminal blocks would affect 1,212 Boeing planes registered in the United States.
United spokesman Mike Trevino said the plane took off from New York's John F. Kennedy International Airport and was diverted to Dulles, where it landed at 9:36 p.m.
Another passenger, Phil Lobel, who has a public relations business in Los Angeles, told The Associated Press that about 30 minutes into the flight he detected an electrical burning smell. He said flight attendants began going over emergency instructions with passengers in the exit rows.
Passengers said that the plane landed where a half-dozen or more emergency vehicles met the plane at Dulles.
About an hour after the plane landed, Lobel said he received an e-mail from United apologizing for the "experience" he had on the flight.
AP Airlines Writer Joshua Freed contributed from Minneapolis. Associated Press Writer Nafeesa Syeed contributed from Washington.
Online:
NTSB: http://www.ntsb.gov
FAA: http://www.faa.gov
Long-standing safety concerns probed in cockpit fire that prompted B757 emergency landing
Joan Lowy and Joshua Freed, Associated Press Writers, On Monday May 17, 2010, 5:43 pm
WASHINGTON (AP) -- Investigators are looking into whether long-known problems with the heating system in a cockpit window of the Boeing 757 played a role in a fire that forced an airliner to make an emergency landing near Washington, federal safety officials said Monday.
United Airlines Flight 27 en route from New York to Los Angeles with 112 people aboard made an emergency landing at Dulles International Airport in Virginia on Sunday night due to a cockpit fire, a spokeswoman for the Federal Aviation Administration said.
The fire was extinguished before the plane landed and no injuries were reported, FAA spokeswoman Holly Baker said.
Among the plane's passengers were Pamela Adlon, a star on the Showtime series "Californication"; Jarrod Spector, a star of the Broadway show "Jersey Boys"; and Justin Bartha, who appeared in the "The Hangover" and the "National Treasure" movies.
Adlon, who was sitting in the second row, said she smelled smoke about 30 minutes into the flight.
"All of a sudden the cockpit door opened and it was the captain and he said, 'I need a fire extinguisher.' And there were flames coming out of the cockpit," Adlon told The Associated Press in a phone interview from her Los Angeles home.
An attendant brought a fire extinguisher but the first cabin filled with smoke, she said.
When the plane arrived at Dulles, the runway was filled with emergency vehicles and fire trucks. She said passengers had to stay in their seats and a firefighter came on board and opened the cockpit door.
"We saw the windshield was completely cracked and shattered," she said. "We realized it was really bad. We were really lucky."
Keith Holloway, a spokesman for the National Transportation Safety Board, said the board has dispatched three investigators to examine the cockpit to determine the cause of the fire.
"We haven't narrowed down what the issues are with this incident yet," Holloway said. He added that the board will be investigating whether the cause of the fire was due to "a recurring problem" involved in previous 757 cockpit fires, or a new issue.
The board recommended to the FAA in 2007 that airlines be required to replace the windshield heat terminal blocks on all Boeing 747s, 757s, 767s and 777s. The FAA proposed a rule in March 2008 that gave airlines a choice of regularly inspecting the heat terminal blocks on 757s, 767s and 777s or replacing the terminal blocks. Boeing 747s weren't included in the proposed order.
However, FAA records show airlines strongly criticized the proposal and it hasn't been made final. FAA spokesman Les Dorr said the rule is expected to become final in August. Airlines said in comments submitted to FAA that the agency's proposal wouldn't resolve the cause of the electrical arcing that led to the fires.
Airlines aren't required to comply with a rule until it's final, although many do.
The NTSB's recommendation was made in response to two fires that erupted in 757 cockpits in January 2004: an American Airlines flight in Dallas and an Air Greenland flight in Copenhagen.
Also, in 2006 a fire was reported on a Delta Air Lines 757 in the corner of a cockpit window. The pilots put it out with a fire extinguisher and cut power to the window heat, according to an FAA report on the incident. The plane had been en route from Tampa, Fla. to Hartford, Conn., but diverted to Savannah, Ga.
FAA said in 2008 that it was aware of nine incidents of electrical arcing at the terminal blocks, and "more than one incident" of open flames. The agency didn't specify in which Boeing model the incidents occurred.
There have been concerns about the cockpit heating systems of 757s for at least two decades. A 1990 safety directive from the FAA ordered airlines to inspect the window heating system of 757s for undersized wiring. The FAA proposed a $1.45 million civil penalty against Northwest Airlines this March for failing to carry out some of those inspections until 2008.
"Left uncorrected, the problem could cause overheating, smoking and possibly a fire," the FAA wrote when it fined Northwest.
None of the 757s turned out to have the wrong wires, according to Delta Air Lines Inc., which bought Northwest.
The 757s are one of the most widely used aircraft in the U.S. FAA in 2008 said that its proposal for inspecting terminal blocks would affect 1,212 Boeing planes registered in the United States.
United spokesman Mike Trevino said the plane took off from New York's John F. Kennedy International Airport and was diverted to Dulles, where it landed at 9:36 p.m.
Another passenger, Phil Lobel, who has a public relations business in Los Angeles, told The Associated Press that about 30 minutes into the flight he detected an electrical burning smell. He said flight attendants began going over emergency instructions with passengers in the exit rows.
Passengers said that the plane landed where a half-dozen or more emergency vehicles met the plane at Dulles.
About an hour after the plane landed, Lobel said he received an e-mail from United apologizing for the "experience" he had on the flight.
AP Airlines Writer Joshua Freed contributed from Minneapolis. Associated Press Writer Nafeesa Syeed contributed from Washington.
Online:
NTSB: http://www.ntsb.gov
FAA: http://www.faa.gov
Thursday, May 13, 2010
A merger saga from Ozark to TWA to AA to nothing
by Jerry Castellano on May 12, 2010
“What we learn from history is that people don’t learn from history.”Warren Buffett
Another merger, another promise of improved service, another CEO declaring that this will only add to the choices travelers already have. Lots of neat words like “efficiencies” and “synergies” throw around. If your B.S. meter isn’t pegging it’s time to check the batteries.
Merging any company, but especially an airline, is like taking the parts from two dissimilar cars and trying to build a single vehicle, but I guess they don’t teach this in the leading business schools.
*Charlie Leocha has already written a couple of excellent articles that I think pretty accurately describe what the outcome will be, especially for the employees. But having experienced two such mergers as an employee I thought I would add my two cents.
My airline career began with Ozark Air Lines in February of 1978. Little did I know how literally I was participating in the end of an era. In December, the Kennedy – Cannon bill became law and the long-debated concept of airline deregulation became reality. It would take a book or several to adequately describe the results of that single piece of legislation so let’s just say for now that all the rules were changed and what had been a relatively cozy business was thrown into a chaos that the industry is still trying to work through.
Thanks to many factors, Ozark Airlines did well in the new environment. We were already the hometown airline in St. Louis, which was at that time the twelfth largest urban region in the country. We expanded, but not too quickly nor too ambitiously, a strategy that ultimately proved fatal to a few other carriers.
As we reached the mid-1980s, signs were everywhere that airlines were clearly on their way to a new and not necessarily better destination. Some, like Braniff, simply shut down.
Concessionary contracts and “B Scale” agreements became the new standard. Because there was no longer an intrinsic value to a particular route since any airline could pretty much apply and fly anywhere. Airlines dropped many non-stop routes and began to form the hub and spoke models that persist today. Meanwhile TWA, which had always been a presence in St. Louis, decided after deregulation to establish a hub there as well, and therefore became our rival.
By late 1985 Ozark workers knew something was up, but virtually all of us were shocked when it was announced that had been purchased by TWA. The general feeling was “anyone but them.” TWA had just been taken over by Carl Icahn, who forced some tough concessions like 20-plus percent pay cuts on employees, and were on the verge of damaging strike by their flight attendants. (Another thing apparently not taught at business schools: If you’re in a customer service business and your front-line employees are not happy, your customers won’t be either and will go elsewhere.)
Employees of a merged company learn very quickly what “employment at will” really means. First to go were the “redundant” management and non-contract personnel. As union members, we flight attendants enjoyed at least the delusion of a bit more security, but were about to learn just how illusionary this was. Just for reference, in some prior acquisitions crew members and other contract personnel were merged using a “relative position” method,” meaning if you were say, in the 50th percentile of the seniority list in your smaller airline you would be placed in the same relative position in the new list.
As you might imagine, this created a lot of friction when pilots at the larger Pan American World Airways found themselves placed under the acquired National Airlines pilots with less actual seniority.In the end, those of us under contract held our date-of-hire seniority, which worked out all right for some groups, like the flight attendants, but not for others, like some Ozark pilots who at ten years seniority were now flying as captains.
Since TWA had not done a lot of pilot hiring during that time, these people “lost their seat” along with the pay and perks that went with it. Some in this position quit and went elsewhere, a very dramatic move in a seniority-based industry, which basically meant they felt they would be better off at the bottom of a carrier that was growing than at their present position at one that appeared to be stalled. For some this turned out to be true, at least for a while.As flight attendants, on the plus side we kept our seniority, though not our relative positions, and we were not displaced to another hub.
In fact, the options were expanded to fly from the TWA LAX and JFK hubs. On the down side, we wound up working a few days more a month for about 10% less pay and reduced benefits, for a company that was on a much shakier financial foundation than Ozark had ever been. And it is very difficult to quantify or even describe the cultural differences. Ozark had about 3,000 employees, and while it sounds like a cliché we truly enjoyed a family environment. We were not prepared for the divisive atmosphere that permiated TWA, though over time we got used to it.
Fast forward to early 2001. After fourteen years, two bankruptcies and years of financial struggle and pay cuts many former Ozark employees were still asking why it could not have been anyone except TWA that had purchased us and our future. Every other major carrier seemed to be in great shape, and we were continually concerned that we would be the next Eastern or Pan Am. So the announced acquisition by American Airlines sounded like our ship had finally come in. By this time, I had moved into a management position in Flight Operations Training, but like all crew members I still held my seniority rights.
But, if the TWA acquisition of Ozark was disappointing, the American acquisition of TWA was devastating.
The first sign that this was not going to be a good deal was when American’s management decided if we stayed in our training specialist positions (with no guarantee of continuing employment) we would have to relinquish our seniority, something they did not require of their own employees. Remember, seniority is the coin of the realm in the airline business, and compared to the American workforce, those of us with TWA were relatively senior. Even though previous TWA contracts had resulted in further reductions in pay and benefits, one of the trade-offs we managed to retain were very explicit scope clauses, which protected our seniority in an acquisition. However, one of American’s demands following the announced purchase was that TWA would have to yet again file chapter-eleven bankruptcy, which as Continental employees well know, abrogates all working agreements. Thus, virtually all contract groups were stapled to the bottom of their respective seniority lists.
So today, no former Trans World flight attendants, some with more than 40 years of experience and seniority, are employed by American. This move was later judged to be so egregious that it is prohibited in subsequent acquisitions, but this prohibition is not retroactive. So a better analogy might be the AA ship came to rescue us, after which the crew took our clothing and threw us overboard.
So I truly feel sympathy for the employees of what may very well soon be the former Continental Airlines, who, through commendable effort lifted the once great carrier from the depths back to the top. I feel the pain of those who weathered the disastrous Lorenzo years, the first time bankruptcy was used explicitly to abrogate agreements. (That tactic has since been outlawed as well.)
Sometimes it seems we’re all Sisyphus, doomed to continue trying to get the rock back up the hill, and you know how that story continues.
by Jerry Castellano on May 12, 2010
“What we learn from history is that people don’t learn from history.”Warren Buffett
Another merger, another promise of improved service, another CEO declaring that this will only add to the choices travelers already have. Lots of neat words like “efficiencies” and “synergies” throw around. If your B.S. meter isn’t pegging it’s time to check the batteries.
Merging any company, but especially an airline, is like taking the parts from two dissimilar cars and trying to build a single vehicle, but I guess they don’t teach this in the leading business schools.
*Charlie Leocha has already written a couple of excellent articles that I think pretty accurately describe what the outcome will be, especially for the employees. But having experienced two such mergers as an employee I thought I would add my two cents.
My airline career began with Ozark Air Lines in February of 1978. Little did I know how literally I was participating in the end of an era. In December, the Kennedy – Cannon bill became law and the long-debated concept of airline deregulation became reality. It would take a book or several to adequately describe the results of that single piece of legislation so let’s just say for now that all the rules were changed and what had been a relatively cozy business was thrown into a chaos that the industry is still trying to work through.
Thanks to many factors, Ozark Airlines did well in the new environment. We were already the hometown airline in St. Louis, which was at that time the twelfth largest urban region in the country. We expanded, but not too quickly nor too ambitiously, a strategy that ultimately proved fatal to a few other carriers.
As we reached the mid-1980s, signs were everywhere that airlines were clearly on their way to a new and not necessarily better destination. Some, like Braniff, simply shut down.
Concessionary contracts and “B Scale” agreements became the new standard. Because there was no longer an intrinsic value to a particular route since any airline could pretty much apply and fly anywhere. Airlines dropped many non-stop routes and began to form the hub and spoke models that persist today. Meanwhile TWA, which had always been a presence in St. Louis, decided after deregulation to establish a hub there as well, and therefore became our rival.
By late 1985 Ozark workers knew something was up, but virtually all of us were shocked when it was announced that had been purchased by TWA. The general feeling was “anyone but them.” TWA had just been taken over by Carl Icahn, who forced some tough concessions like 20-plus percent pay cuts on employees, and were on the verge of damaging strike by their flight attendants. (Another thing apparently not taught at business schools: If you’re in a customer service business and your front-line employees are not happy, your customers won’t be either and will go elsewhere.)
Employees of a merged company learn very quickly what “employment at will” really means. First to go were the “redundant” management and non-contract personnel. As union members, we flight attendants enjoyed at least the delusion of a bit more security, but were about to learn just how illusionary this was. Just for reference, in some prior acquisitions crew members and other contract personnel were merged using a “relative position” method,” meaning if you were say, in the 50th percentile of the seniority list in your smaller airline you would be placed in the same relative position in the new list.
As you might imagine, this created a lot of friction when pilots at the larger Pan American World Airways found themselves placed under the acquired National Airlines pilots with less actual seniority.In the end, those of us under contract held our date-of-hire seniority, which worked out all right for some groups, like the flight attendants, but not for others, like some Ozark pilots who at ten years seniority were now flying as captains.
Since TWA had not done a lot of pilot hiring during that time, these people “lost their seat” along with the pay and perks that went with it. Some in this position quit and went elsewhere, a very dramatic move in a seniority-based industry, which basically meant they felt they would be better off at the bottom of a carrier that was growing than at their present position at one that appeared to be stalled. For some this turned out to be true, at least for a while.As flight attendants, on the plus side we kept our seniority, though not our relative positions, and we were not displaced to another hub.
In fact, the options were expanded to fly from the TWA LAX and JFK hubs. On the down side, we wound up working a few days more a month for about 10% less pay and reduced benefits, for a company that was on a much shakier financial foundation than Ozark had ever been. And it is very difficult to quantify or even describe the cultural differences. Ozark had about 3,000 employees, and while it sounds like a cliché we truly enjoyed a family environment. We were not prepared for the divisive atmosphere that permiated TWA, though over time we got used to it.
Fast forward to early 2001. After fourteen years, two bankruptcies and years of financial struggle and pay cuts many former Ozark employees were still asking why it could not have been anyone except TWA that had purchased us and our future. Every other major carrier seemed to be in great shape, and we were continually concerned that we would be the next Eastern or Pan Am. So the announced acquisition by American Airlines sounded like our ship had finally come in. By this time, I had moved into a management position in Flight Operations Training, but like all crew members I still held my seniority rights.
But, if the TWA acquisition of Ozark was disappointing, the American acquisition of TWA was devastating.
The first sign that this was not going to be a good deal was when American’s management decided if we stayed in our training specialist positions (with no guarantee of continuing employment) we would have to relinquish our seniority, something they did not require of their own employees. Remember, seniority is the coin of the realm in the airline business, and compared to the American workforce, those of us with TWA were relatively senior. Even though previous TWA contracts had resulted in further reductions in pay and benefits, one of the trade-offs we managed to retain were very explicit scope clauses, which protected our seniority in an acquisition. However, one of American’s demands following the announced purchase was that TWA would have to yet again file chapter-eleven bankruptcy, which as Continental employees well know, abrogates all working agreements. Thus, virtually all contract groups were stapled to the bottom of their respective seniority lists.
So today, no former Trans World flight attendants, some with more than 40 years of experience and seniority, are employed by American. This move was later judged to be so egregious that it is prohibited in subsequent acquisitions, but this prohibition is not retroactive. So a better analogy might be the AA ship came to rescue us, after which the crew took our clothing and threw us overboard.
So I truly feel sympathy for the employees of what may very well soon be the former Continental Airlines, who, through commendable effort lifted the once great carrier from the depths back to the top. I feel the pain of those who weathered the disastrous Lorenzo years, the first time bankruptcy was used explicitly to abrogate agreements. (That tactic has since been outlawed as well.)
Sometimes it seems we’re all Sisyphus, doomed to continue trying to get the rock back up the hill, and you know how that story continues.
Wednesday, May 12, 2010
7 Hidden Hotel Room Germ Magnets
From the TV Remote to the Water Glasses, Beware of Hidden Hotel Dangers
By SCOTT MAYEROWITZ
May 12, 2010
Hotels, with their daily housekeeping, might seem like a haven from the dust, grime and filth of home. But be warned: germs can lurk in even the cleanest-appearing rooms. And you would be shocked where. When it comes to germs the priciest hotels aren't necessarily the cleanest.
Just think about how many past guests have hit that alarm clock with their dirty, sweaty hands?
And then there is the TV remote control, probably the most touched item in the room. Not everybody is great about washing their hands and how thorough of a cleaning do you really think the remote gets?
"There definitely can be hidden dangers in any hotel room, so you want to be smart," said Anne Banas, executive editor of travel Web site SmarterTravel.
For the TV remote, she said, "put it in a plastic baggie and then use it. Then you don't have to worry about it and you're good to go."
Want a nice cold glass of water before calling it a night? Think twice about that, too.
"One of the ones that's really, really bad that people wouldn't even think about is the hotel glasses," Banas said. "A lot of times the cleaning crews will clean those glasses with the very same chemicals they're using to clean your toilet."
Other times they might have their gloves on from cleaning the bathroom and not take off the gloves before touching the glasses, he said. There have even been examples of luxury hotels where the staff has used Windex to clean the glassware.
"My advice is to never use the hotel glasses or to wash them yourself," Banas said. "I just tend to avoid them entirely."
Brooke Ferencsik, of user-generated review site TripAdvisor, also avoids the glassware.
"If it is not in a plastic wrap, I am not using," he said.
Staying Healthy on Vacation
When Ferencsik checks into a hotel room he takes an antibacterial wipe and cleans all the high traffic areas in his room: the remote, alarm clock, telephone, door knobs and handles on the dresser.
"If you find something that you don't like, you can always ask for another room. If it's particularly bad, you might want to change hotels," Ferencsik said.
Of course, checking reviews can give travelers some respite from the really atrocious hotels. But even high-end properties can hide germs.
"There's no faster way to ruin a trip than to check in that dirty hotel room," Ferencsik said.
And then there is the bed.
"As soon as you get to your hotel room, a lot of people want to just plop down on the bed," Banas said. "Before you do that, just take off that comforter and throw it on the floor. It's not laundered regularly and you don't want to expose yourself to whatever might be on there."
Ferencsik said he always removes the duvet cover.
"Always. It doesn't matter how clean it looks to me," he said. "Just remove it. I would rather be safe than sorry."
If that wasn't enough, consider this: It might not just be germs lurking in your room. It could be infested with bedbugs. The problem is that you really can't see them and they don't just hide in the bed.
Banas suggest looking at your sheets for small little blood stains that indicates that bed bugs have bitten other guests.
Ferencsik said to check the mattress around the headboard and the seams. If there are black specs or red specs, beware. It's a sign of bed bug feces.
Finally, bed bugs don't just live in the bed. Don't let your suitcase rest on the bed or the floor. If the room has a luggage rack, use it. Otherwise put it high up on the furniture.
From the TV Remote to the Water Glasses, Beware of Hidden Hotel Dangers
By SCOTT MAYEROWITZ
May 12, 2010
Hotels, with their daily housekeeping, might seem like a haven from the dust, grime and filth of home. But be warned: germs can lurk in even the cleanest-appearing rooms. And you would be shocked where. When it comes to germs the priciest hotels aren't necessarily the cleanest.
Just think about how many past guests have hit that alarm clock with their dirty, sweaty hands?
And then there is the TV remote control, probably the most touched item in the room. Not everybody is great about washing their hands and how thorough of a cleaning do you really think the remote gets?
"There definitely can be hidden dangers in any hotel room, so you want to be smart," said Anne Banas, executive editor of travel Web site SmarterTravel.
For the TV remote, she said, "put it in a plastic baggie and then use it. Then you don't have to worry about it and you're good to go."
Want a nice cold glass of water before calling it a night? Think twice about that, too.
"One of the ones that's really, really bad that people wouldn't even think about is the hotel glasses," Banas said. "A lot of times the cleaning crews will clean those glasses with the very same chemicals they're using to clean your toilet."
Other times they might have their gloves on from cleaning the bathroom and not take off the gloves before touching the glasses, he said. There have even been examples of luxury hotels where the staff has used Windex to clean the glassware.
"My advice is to never use the hotel glasses or to wash them yourself," Banas said. "I just tend to avoid them entirely."
Brooke Ferencsik, of user-generated review site TripAdvisor, also avoids the glassware.
"If it is not in a plastic wrap, I am not using," he said.
Staying Healthy on Vacation
When Ferencsik checks into a hotel room he takes an antibacterial wipe and cleans all the high traffic areas in his room: the remote, alarm clock, telephone, door knobs and handles on the dresser.
"If you find something that you don't like, you can always ask for another room. If it's particularly bad, you might want to change hotels," Ferencsik said.
Of course, checking reviews can give travelers some respite from the really atrocious hotels. But even high-end properties can hide germs.
"There's no faster way to ruin a trip than to check in that dirty hotel room," Ferencsik said.
And then there is the bed.
"As soon as you get to your hotel room, a lot of people want to just plop down on the bed," Banas said. "Before you do that, just take off that comforter and throw it on the floor. It's not laundered regularly and you don't want to expose yourself to whatever might be on there."
Ferencsik said he always removes the duvet cover.
"Always. It doesn't matter how clean it looks to me," he said. "Just remove it. I would rather be safe than sorry."
If that wasn't enough, consider this: It might not just be germs lurking in your room. It could be infested with bedbugs. The problem is that you really can't see them and they don't just hide in the bed.
Banas suggest looking at your sheets for small little blood stains that indicates that bed bugs have bitten other guests.
Ferencsik said to check the mattress around the headboard and the seams. If there are black specs or red specs, beware. It's a sign of bed bug feces.
Finally, bed bugs don't just live in the bed. Don't let your suitcase rest on the bed or the floor. If the room has a luggage rack, use it. Otherwise put it high up on the furniture.
Tuesday, May 11, 2010
Another Too Big To Fail Firm
Lee E. Ohanian, 05.11.10, 04:04 PM EDT
A United and Continental merger would provide relatively few benefits to the broader economy.
United Airlines and Continental Airlines, the fourth- and fifth-largest American air carriers, recently announced plans to merge, which would make the combined carrier the largest in the world. It is very topical today to discuss "too big to fail" (TBTF) when it comes to assessing the size and characteristics of financial institutions and auto makers, both of which needed large taxpayer cash infusions to continue operating in late 2008 and early 2009.
But if the Continental-United merger is approved by the Department of Justice (DOJ), we are setting ourselves up for another TBTF firm, one with relatively few benefits from the merger to the broader economy.
In gauging the benefits and costs of mergers, policymakers understand that the overall economy benefits from the merger-acquisition process when these transactions reallocate capital and labor to the most efficient and high-value producers. In these cases, mergers and acquisitions reduce costs and expand output, benefiting not only those directly involved with the merging organizations, but also the society more broadly.
However, not all mergers provide consumers with the benefits of lower prices and more output. Another motivation for mergers is to reduce competition and thereby raise prices and reduce output, which harms consumers. This market-power motivation for mergers is particularly strong when the merging companies are large and, if combined, have a substantial market share. The DOJ's merger review process focuses on the possible anticompetitive effects of a merger when deciding on whether to approve a merger.
From society's point of view, assessing any merger involves trading off its possible costs and benefits. While the United-Continental deal will benefit shareholders and others directly involved with those companies, it is unclear whether this merger offers much to the rest of the economy. Both companies have historically struggled in competing with very efficient carriers, such as Southwest Airlines. Will a merged Continental-United substantially improve efficiency and benefit the economy? Or will it be anything like the merger of two other large carriers, Northwest and Republic, with efficiency falling and prices rising substantially following their merger?
The 1986 Northwest-Republic merger is noteworthy because it involved two sizable carriers (though smaller than Continental or United), and it created a near monopoly for the combined Northwest carrier at Minneapolis and Detroit, with nearly 80% market share, and with other carriers having access to very few gates.
This means that even if other carriers had wanted to enter those markets, they couldn't secure enough gates to make it sufficiently profitable. With such high market shares, post-merger Northwest fares through both their Minneapolis and Detroit hubs rose considerably, leading both the Department of Transportation and the General Accounting Office to conclude that those fares were substantially higher than average, and that this reflected limited competition out of the Minneapolis and Detroit airports.
You may have thought that post-merger Northwest would become very profitable as a result of its near monopoly status and high fares at its Minneapolis and Detroit hubs. But it ultimately wasn't that profitable, as costs rose significantly and Northwest declared bankruptcy in 2005. And it is not surprising that costs rose substantially.
James Schmitz, an economist at the Federal Reserve Bank of Minneapolis, has shown that industries with near monopoly power are often plagued by labor problems that are associated with rising costs and low productivity, as workers compete for a share of monopoly profits.
Lee E. Ohanian, 05.11.10, 04:04 PM EDT
A United and Continental merger would provide relatively few benefits to the broader economy.
United Airlines and Continental Airlines, the fourth- and fifth-largest American air carriers, recently announced plans to merge, which would make the combined carrier the largest in the world. It is very topical today to discuss "too big to fail" (TBTF) when it comes to assessing the size and characteristics of financial institutions and auto makers, both of which needed large taxpayer cash infusions to continue operating in late 2008 and early 2009.
But if the Continental-United merger is approved by the Department of Justice (DOJ), we are setting ourselves up for another TBTF firm, one with relatively few benefits from the merger to the broader economy.
In gauging the benefits and costs of mergers, policymakers understand that the overall economy benefits from the merger-acquisition process when these transactions reallocate capital and labor to the most efficient and high-value producers. In these cases, mergers and acquisitions reduce costs and expand output, benefiting not only those directly involved with the merging organizations, but also the society more broadly.
However, not all mergers provide consumers with the benefits of lower prices and more output. Another motivation for mergers is to reduce competition and thereby raise prices and reduce output, which harms consumers. This market-power motivation for mergers is particularly strong when the merging companies are large and, if combined, have a substantial market share. The DOJ's merger review process focuses on the possible anticompetitive effects of a merger when deciding on whether to approve a merger.
From society's point of view, assessing any merger involves trading off its possible costs and benefits. While the United-Continental deal will benefit shareholders and others directly involved with those companies, it is unclear whether this merger offers much to the rest of the economy. Both companies have historically struggled in competing with very efficient carriers, such as Southwest Airlines. Will a merged Continental-United substantially improve efficiency and benefit the economy? Or will it be anything like the merger of two other large carriers, Northwest and Republic, with efficiency falling and prices rising substantially following their merger?
The 1986 Northwest-Republic merger is noteworthy because it involved two sizable carriers (though smaller than Continental or United), and it created a near monopoly for the combined Northwest carrier at Minneapolis and Detroit, with nearly 80% market share, and with other carriers having access to very few gates.
This means that even if other carriers had wanted to enter those markets, they couldn't secure enough gates to make it sufficiently profitable. With such high market shares, post-merger Northwest fares through both their Minneapolis and Detroit hubs rose considerably, leading both the Department of Transportation and the General Accounting Office to conclude that those fares were substantially higher than average, and that this reflected limited competition out of the Minneapolis and Detroit airports.
You may have thought that post-merger Northwest would become very profitable as a result of its near monopoly status and high fares at its Minneapolis and Detroit hubs. But it ultimately wasn't that profitable, as costs rose significantly and Northwest declared bankruptcy in 2005. And it is not surprising that costs rose substantially.
James Schmitz, an economist at the Federal Reserve Bank of Minneapolis, has shown that industries with near monopoly power are often plagued by labor problems that are associated with rising costs and low productivity, as workers compete for a share of monopoly profits.
Monday, May 10, 2010
OAG Report Provides United and Continental Merger Analysis
Press Release Source: OAG Aviation On Monday May 10, 2010, 3:01 pm EDT
WASHINGTON, May 10 /PRNewswire/ -- Following the May 3, 2010 announcement of Continental and United airlines of a merger agreement, OAG Aviation Consulting Services has compiled the following information and analysis of a potential partnership between the two airlines:
Worldwide & U.S. Domestic Market Share and Rankings - Based on both Available Seat Miles (ASMs) and Seat Capacity
Market share at Top Hubs
Regional Partner Summary
Fleet Overview
The findings show that the proposed merger of United Airlines and Continental Airlines would create the largest airline in the world by many measures – airline revenue, available seat miles (ASMs) and revenue passenger miles (RPMs) – both within the United States and worldwide. Delta Air Lines today is the leader in all of those categories.
The new United Airlines will be second to Delta in terms of worldwide seat departures, and third behind Delta and Southwest Airlines in domestic seats. American Airlines will move from second to third in U.S. and worldwide ASMs, and from third to fourth in total and domestic seats.
"Merger assessments usually focus on shares of the partners in a variety of differently-defined markets, ranging from a single airport pair, to dominance of one or more hubs to a set of traffic flows through hubs," said Sanford (Sandy) Rederer, Senior Consultant, OAG Aviation Consulting Services. "This information is of great interest to the communities whose air service will be impacted by the merger."
OAG's comprehensive databases, which summarize market shares for the two airlines (including United Express, Continental Express and Continental Connection operations) at airports where their operations are prominent, show a combined 70% share of seat departures at Cleveland and 87% at Houston Intercontinental Airport (or 68% including Houston Hobby Airport as well as Intercontinental). Shares are 37% at Chicago (48% for O'Hare alone) and 26% for New York (but 73% for Newark, alone).
By way of comparison, American has a 74% seat departure share in the Dallas-Fort Worth area (this includes Love Field and Dallas/Fort Worth International; 86% at DFW Airport alone); Delta has a 76% seat share at Atlanta and higher-than-80% seat shares at Detroit and Minneapolis. US Airways operates almost 90% of Charlotte seats.
Also available in the attached report is a fleet overview of the two airlines. Both airlines operate significant numbers of narrowbody Boeing 757 aircraft and widebody Boeing 767s and 777s. United also flies the Boeing 747 on its extensive Pacific system. In the important category of aircraft with 100 to 150 seats, United operates the Airbus 320 family and Continental flies Boeing 737s.
"Fleet mix is significant during an airline merger, going well beyond how many aircraft each airline has and affecting the management and integration of operations and pilot workforces," said Rederer.
All data is for May 2010, and has been compiled from OAG Schedules iNET, © 2010, UBM Aviation Worldwide Ltd. OAG Schedules iNET tracks trends and changes in commercial airline schedules, routes, frequency and capacity developments, dating back to 1979. Detailed data is available upon request and for purchase, please contact: diana.cronan@ubmaviation.com.
About OAG
OAG provides the industry's most accurate single source for airline information, with essential aviation data and analytics sourced from its comprehensive proprietary airline schedules, fleet and MRO (maintenance, repair and overhaul) databases. OAG is a UBM Aviation business. For more information, go to http://www.oagaviation.com/.
About OAG Aviation Consulting Services
OAG Aviation Consulting Services is a unit of OAG Aviation, specializing in providing value-added analysis anchored in the OAG rich databases. Services include business planning; air service development; economic, market analysis and forecasting; industry issue analysis, air cargo; maintenance repair and overhaul (MRO); and expert witness.
Clients rely on OAG Professional Services' resources and skills to supplement internal staff, validate internal studies and provide independent opinions to meet government and regulatory requirements.
Press Release Source: OAG Aviation On Monday May 10, 2010, 3:01 pm EDT
WASHINGTON, May 10 /PRNewswire/ -- Following the May 3, 2010 announcement of Continental and United airlines of a merger agreement, OAG Aviation Consulting Services has compiled the following information and analysis of a potential partnership between the two airlines:
Worldwide & U.S. Domestic Market Share and Rankings - Based on both Available Seat Miles (ASMs) and Seat Capacity
Market share at Top Hubs
Regional Partner Summary
Fleet Overview
The findings show that the proposed merger of United Airlines and Continental Airlines would create the largest airline in the world by many measures – airline revenue, available seat miles (ASMs) and revenue passenger miles (RPMs) – both within the United States and worldwide. Delta Air Lines today is the leader in all of those categories.
The new United Airlines will be second to Delta in terms of worldwide seat departures, and third behind Delta and Southwest Airlines in domestic seats. American Airlines will move from second to third in U.S. and worldwide ASMs, and from third to fourth in total and domestic seats.
"Merger assessments usually focus on shares of the partners in a variety of differently-defined markets, ranging from a single airport pair, to dominance of one or more hubs to a set of traffic flows through hubs," said Sanford (Sandy) Rederer, Senior Consultant, OAG Aviation Consulting Services. "This information is of great interest to the communities whose air service will be impacted by the merger."
OAG's comprehensive databases, which summarize market shares for the two airlines (including United Express, Continental Express and Continental Connection operations) at airports where their operations are prominent, show a combined 70% share of seat departures at Cleveland and 87% at Houston Intercontinental Airport (or 68% including Houston Hobby Airport as well as Intercontinental). Shares are 37% at Chicago (48% for O'Hare alone) and 26% for New York (but 73% for Newark, alone).
By way of comparison, American has a 74% seat departure share in the Dallas-Fort Worth area (this includes Love Field and Dallas/Fort Worth International; 86% at DFW Airport alone); Delta has a 76% seat share at Atlanta and higher-than-80% seat shares at Detroit and Minneapolis. US Airways operates almost 90% of Charlotte seats.
Also available in the attached report is a fleet overview of the two airlines. Both airlines operate significant numbers of narrowbody Boeing 757 aircraft and widebody Boeing 767s and 777s. United also flies the Boeing 747 on its extensive Pacific system. In the important category of aircraft with 100 to 150 seats, United operates the Airbus 320 family and Continental flies Boeing 737s.
"Fleet mix is significant during an airline merger, going well beyond how many aircraft each airline has and affecting the management and integration of operations and pilot workforces," said Rederer.
All data is for May 2010, and has been compiled from OAG Schedules iNET, © 2010, UBM Aviation Worldwide Ltd. OAG Schedules iNET tracks trends and changes in commercial airline schedules, routes, frequency and capacity developments, dating back to 1979. Detailed data is available upon request and for purchase, please contact: diana.cronan@ubmaviation.com.
About OAG
OAG provides the industry's most accurate single source for airline information, with essential aviation data and analytics sourced from its comprehensive proprietary airline schedules, fleet and MRO (maintenance, repair and overhaul) databases. OAG is a UBM Aviation business. For more information, go to http://www.oagaviation.com/.
About OAG Aviation Consulting Services
OAG Aviation Consulting Services is a unit of OAG Aviation, specializing in providing value-added analysis anchored in the OAG rich databases. Services include business planning; air service development; economic, market analysis and forecasting; industry issue analysis, air cargo; maintenance repair and overhaul (MRO); and expert witness.
Clients rely on OAG Professional Services' resources and skills to supplement internal staff, validate internal studies and provide independent opinions to meet government and regulatory requirements.
Sunday, May 09, 2010
Continental-United merger poses questions
By Dan Reed, USA TODAY
Whose service will greet passengers at the merged Continental and United airline: Continental's highly rated or United's low-rated?
Will the new airline — to fly under the United name — have two, three or four classes of seats? Will it fly big or little planes?
The new airline needs to get approved by federal regulators before it can fly. And the airlines have yet to put together teams that will work out answers to important passenger questions.
"It's very early in the process," Continental spokeswoman Christen David says. "We've had lots of questions asked already, including, 'What operating system will we use, Vista or Windows 7?' But we don't have any answers yet."
Among key issues for passengers:
•Customer service. Continental is regarded as having the better image. It ranked second among U.S. airlines in the University of Michigan's latest American Customer Satisfaction index, second only to Southwest. United came in last.
•Classes of seating. United has conventional first, business and coach sections, plus an "Economy Plus" section with economy seats that have a few extra inches of legroom. Continental has a standard coach section, plus "Business First." It's a hybrid designed to be near first-class quality but priced near business class.
•Size of planes. More than half of United's departures are flown under contract by United Express carriers, which fly smaller planes. Continental farms out a smaller share to regional affiliates.
Millions of dollars in revenue hang on how the issues are decided. For example, Continental can pack a maximum of 285 passengers on its Boeing 777s used on international routes. United can get only 253 passengers on its 777s. But 138 of those passengers on United's 777s pay premium prices to sit in first, business or Economy Plus sections.
"There are two key areas of concern: product delivery and service delivery," says marketing consultant Shashank Nigam, CEO of SimpliFlying.com. "They are two different things: One has to do with the seats and cabins and how all the amenities are packaged. The other has to do with how the airline's people greet and handle and serve passengers. Continental and United do those things very differently from one another today."
Industry consultant and analyst Michael Boyd at the Boyd Group International says success may hinge as much on whether the new airline flies its big, mainline jets or the smaller, less-comfortable planes of its regional affiliates.
"More customers will fly on small jets than will ever sit in first class," Boyd says. "So that decision will affect far more people than anything else United and Continental can decide."
By Dan Reed, USA TODAY
Whose service will greet passengers at the merged Continental and United airline: Continental's highly rated or United's low-rated?
Will the new airline — to fly under the United name — have two, three or four classes of seats? Will it fly big or little planes?
The new airline needs to get approved by federal regulators before it can fly. And the airlines have yet to put together teams that will work out answers to important passenger questions.
"It's very early in the process," Continental spokeswoman Christen David says. "We've had lots of questions asked already, including, 'What operating system will we use, Vista or Windows 7?' But we don't have any answers yet."
Among key issues for passengers:
•Customer service. Continental is regarded as having the better image. It ranked second among U.S. airlines in the University of Michigan's latest American Customer Satisfaction index, second only to Southwest. United came in last.
•Classes of seating. United has conventional first, business and coach sections, plus an "Economy Plus" section with economy seats that have a few extra inches of legroom. Continental has a standard coach section, plus "Business First." It's a hybrid designed to be near first-class quality but priced near business class.
•Size of planes. More than half of United's departures are flown under contract by United Express carriers, which fly smaller planes. Continental farms out a smaller share to regional affiliates.
Millions of dollars in revenue hang on how the issues are decided. For example, Continental can pack a maximum of 285 passengers on its Boeing 777s used on international routes. United can get only 253 passengers on its 777s. But 138 of those passengers on United's 777s pay premium prices to sit in first, business or Economy Plus sections.
"There are two key areas of concern: product delivery and service delivery," says marketing consultant Shashank Nigam, CEO of SimpliFlying.com. "They are two different things: One has to do with the seats and cabins and how all the amenities are packaged. The other has to do with how the airline's people greet and handle and serve passengers. Continental and United do those things very differently from one another today."
Industry consultant and analyst Michael Boyd at the Boyd Group International says success may hinge as much on whether the new airline flies its big, mainline jets or the smaller, less-comfortable planes of its regional affiliates.
"More customers will fly on small jets than will ever sit in first class," Boyd says. "So that decision will affect far more people than anything else United and Continental can decide."
Friday, May 07, 2010
Dangerous landing at JFK Airport By AA Boeing 767
Thursday, May 06, 2010
QUEENS (WABC) -- The pilot of an American Airlines plane and an air traffic controller had a disagreement that forced the pilot to make an emergency landing at JFK Airport.
"American 2 heavy, 22L. You're clear to land," the air traffic controller at the JFK tower said.
When the pilots of the passenger-filled 767 American Airlines plane got their landing instructions from the Kennedy Tower, they realized they'd be touching down into a 35-mile per hour cross wind.
"We can't land on 22," the pilot responded. "We're breaking off approach and if you don't give us to runway 31 right, we're going to declare an emergency."
"The winds again increased, exceeded the characteristics of the plane, and he was forced to have another option," said Steve Abraham, of the JFK Controller union. "He had no choice. He couldn't land 22L, it would have been illegal for him."
It would also be dangerous, agreed Abraham.
Landing into a cross wind is much more complicated, but since the closing eight weeks ago of JFK's main runway, air traffic controllers say they've been pressured by the FAA to land planes into tricky cross winds.
There is a safer option, but it would require the use of one runway for all flights in and out of the airport, which would create nightmarish delays.
"It's an issue of capacity versus safety," Abraham said. "If we are on a single runway configuration, landing on runway 31R, which was the runway most in line with the wind, we have major capacity issues, we will run extensive delays."
On Tuesday evening, American Flight 2 out of Los Angeles felt the balance between major delays and safety had been pushed to far.
"You're saying you're declaring an emergency?" the controller asked.
"Three times I told you that, three times, we're declaring and emergency," the pilot responded.
Now, low on fuel, the pilot made it clear he would not land into strong crosswinds.
"American 2 heavy, we are turning around to the left here and landing 31," the pilot said. "Remove everyone from our way, we've declared an emergency, we're on visual."
"American 2 heavy, 31 right clear to land, wind gusting at 24," the JFK tower controller said.
The controller said Tuesday's emergency landing is a warning that with the main runway under construction, safety should not be compromised just to avoid delays.
"I can explain to somebody why they're late," Abraham said. "I can't explain when they don't get there."
If you have a tip about this or any other issue you'd like investigated, please give our tipline a call at 877-TIP-NEWS. You may also e-mail us at the.investigators@abc.com and follow Jim Hoffer on Twitter at twitter.com/nycinvestigates
(Copyright ©2010 WABC-TV/DT. All Rights Reserved.)
Thursday, May 06, 2010
QUEENS (WABC) -- The pilot of an American Airlines plane and an air traffic controller had a disagreement that forced the pilot to make an emergency landing at JFK Airport.
"American 2 heavy, 22L. You're clear to land," the air traffic controller at the JFK tower said.
When the pilots of the passenger-filled 767 American Airlines plane got their landing instructions from the Kennedy Tower, they realized they'd be touching down into a 35-mile per hour cross wind.
"We can't land on 22," the pilot responded. "We're breaking off approach and if you don't give us to runway 31 right, we're going to declare an emergency."
"The winds again increased, exceeded the characteristics of the plane, and he was forced to have another option," said Steve Abraham, of the JFK Controller union. "He had no choice. He couldn't land 22L, it would have been illegal for him."
It would also be dangerous, agreed Abraham.
Landing into a cross wind is much more complicated, but since the closing eight weeks ago of JFK's main runway, air traffic controllers say they've been pressured by the FAA to land planes into tricky cross winds.
There is a safer option, but it would require the use of one runway for all flights in and out of the airport, which would create nightmarish delays.
"It's an issue of capacity versus safety," Abraham said. "If we are on a single runway configuration, landing on runway 31R, which was the runway most in line with the wind, we have major capacity issues, we will run extensive delays."
On Tuesday evening, American Flight 2 out of Los Angeles felt the balance between major delays and safety had been pushed to far.
"You're saying you're declaring an emergency?" the controller asked.
"Three times I told you that, three times, we're declaring and emergency," the pilot responded.
Now, low on fuel, the pilot made it clear he would not land into strong crosswinds.
"American 2 heavy, we are turning around to the left here and landing 31," the pilot said. "Remove everyone from our way, we've declared an emergency, we're on visual."
"American 2 heavy, 31 right clear to land, wind gusting at 24," the JFK tower controller said.
The controller said Tuesday's emergency landing is a warning that with the main runway under construction, safety should not be compromised just to avoid delays.
"I can explain to somebody why they're late," Abraham said. "I can't explain when they don't get there."
If you have a tip about this or any other issue you'd like investigated, please give our tipline a call at 877-TIP-NEWS. You may also e-mail us at the.investigators@abc.com and follow Jim Hoffer on Twitter at twitter.com/nycinvestigates
(Copyright ©2010 WABC-TV/DT. All Rights Reserved.)
Tuesday, May 04, 2010
Despite Delta, Mergers Not Easy
By Ted Reed 05/04/10 - 01:54 PM EDT
And why not? The economy is improving. Continental(CAL) and United(UAUA), which announced their intent to merge on Monday, are performing well. The airline industry, which cut capacity in response to the 2008 fuel-price spike and the subsequent recession, seems to have positioned itself to benefit from the recovery.
Still, "airline mergers are not easy work, in part because so many of the major influences are completely outside everyone's control" said consultant Robert Mann, who cited the SARS epidemic, the Sept. 11 attacks, rising fuel costs and a recessionary economy as examples.
"People on TV are saying that putting together these airlines is easy," said Robert Roach, general vice president of the International Association of Machinists. "It isn't. People say the Delta merger is all put together, but (Delta) is still trying to work out representation issues, and a few thousand of people have lost their jobs" since the merger. Additionally, Roach noted, pilots at US Airways(LCC) have yet to work out seniority integration five years after the merger with America West.
Today, it is widely forgotten that before the Delta merger, airline industry chatter frequently included the thought that airline mergers are disruptive and often unsuccessful.
Failure models abound, including Pan Am with National in 1978, Piedmont with US Air in 1987, American(AMR) with Reno in 1999 and American with TWA in 2001. Not to mention the 1986 Texas Air purchase of Eastern, whose stripped assets helped to build the new Continental.
The list goes on and on. Yet the warm glow from the Delta/Northwest merger seems to have overwhelmed the unpleasant memories.
So forgive Roach, who entered the airline industry as a TWA ramp worker, if he raises a few questions. The IAM, by the way, is the largest union at United, representing 16,000 workers: it also represents 9,500 Continental flight attendants.
"There are various scenarios in mergers -- how they intend to integrate and operate; whether certain cities lose service, which means you lose employees, employee pensions, benefit and job security, and the harm or benefit for passengers." Roach said. "We have not seen any details," he said. "Once we scrutinize the filing, once we do all the due diligence, then we will make a decision as to what position we will take."
Pilots at Continental and United seem willing to discuss a deal along the lines of the one that Delta negotiated with its pilots. But the leaders of both pilots unions say the Delta deal is just a starting point, particularly when it comes to outsourcing flying to regional carriers.
Asked about Cleveland's future on a conference call with reporters and analysts, Continental CEO Jeff Smisek, who would lead the new company, responded: "We understand how important good air service is to Cleveland (and) Cleveland will always be important to the combined carrier." However, he said, "We are always responsive to market demand (and) you need to look at where the demand is."
In fact, although Continental calls Cleveland a hub, that role must be defined broadly, because the Cleveland hub has only about 170 daily departures, mostly on regional jets. In 2008 and 2009, Continental briefly tried trans-Atlantic service from Cleveland, first to Paris, then to London, but shut it down in the recession. According to the Cleveland Plain Dealer, Continental has reduced Cleveland flights 24% since late 2007, compared with cutbacks of 18% at Houston and 10% at Newark. Its Cleveland workforce totals 2,200, while its affiliates employ another 1,000.
On Monday, local officials, including U.S. Rep. Dennis Kucinich, held a news conference to seek to assure that the importance of Cleveland Hopkins is not diminished in the merger. "I wouldn't call us a loser, because we don't know," said airport spokeswoman Jacqueline Mayo. "I don't think they have sat down with us and said 'this is what will happen.' I am sure that eventually, (they) will."
Of course, a key question involves regulatory approval. On the conference call, Smisek reminded that the partners have no international route overlap and that "Continental is strong where United is weak and United is strong where Continental is weak." From a regulatory standpoint, this is "a match made in heaven," he said.
Even for airline geeks, it is a challenge to find a route where Continental and United are the only carriers that provide service. Try it. The only one we found was Cleveland-Denver.
Still, it is a bit early to declare victory. Recall that on the Delta earnings conference call in April, CEO Richard Anderson warned that regulatory approval now comes more slowly than it did in the latter days of the Bush administration, when the Delta/Northwest merger was approved in less than seven months.
Delay is the foremost enemy of this proposed merger, because that allows for more of the exogenous events that always have and always will plague the airline industry.
-- Written by Ted Reed in Charlotte, N.C.
By Ted Reed 05/04/10 - 01:54 PM EDT
And why not? The economy is improving. Continental(CAL) and United(UAUA), which announced their intent to merge on Monday, are performing well. The airline industry, which cut capacity in response to the 2008 fuel-price spike and the subsequent recession, seems to have positioned itself to benefit from the recovery.
Still, "airline mergers are not easy work, in part because so many of the major influences are completely outside everyone's control" said consultant Robert Mann, who cited the SARS epidemic, the Sept. 11 attacks, rising fuel costs and a recessionary economy as examples.
"People on TV are saying that putting together these airlines is easy," said Robert Roach, general vice president of the International Association of Machinists. "It isn't. People say the Delta merger is all put together, but (Delta) is still trying to work out representation issues, and a few thousand of people have lost their jobs" since the merger. Additionally, Roach noted, pilots at US Airways(LCC) have yet to work out seniority integration five years after the merger with America West.
Today, it is widely forgotten that before the Delta merger, airline industry chatter frequently included the thought that airline mergers are disruptive and often unsuccessful.
Failure models abound, including Pan Am with National in 1978, Piedmont with US Air in 1987, American(AMR) with Reno in 1999 and American with TWA in 2001. Not to mention the 1986 Texas Air purchase of Eastern, whose stripped assets helped to build the new Continental.
The list goes on and on. Yet the warm glow from the Delta/Northwest merger seems to have overwhelmed the unpleasant memories.
So forgive Roach, who entered the airline industry as a TWA ramp worker, if he raises a few questions. The IAM, by the way, is the largest union at United, representing 16,000 workers: it also represents 9,500 Continental flight attendants.
"There are various scenarios in mergers -- how they intend to integrate and operate; whether certain cities lose service, which means you lose employees, employee pensions, benefit and job security, and the harm or benefit for passengers." Roach said. "We have not seen any details," he said. "Once we scrutinize the filing, once we do all the due diligence, then we will make a decision as to what position we will take."
Pilots at Continental and United seem willing to discuss a deal along the lines of the one that Delta negotiated with its pilots. But the leaders of both pilots unions say the Delta deal is just a starting point, particularly when it comes to outsourcing flying to regional carriers.
Asked about Cleveland's future on a conference call with reporters and analysts, Continental CEO Jeff Smisek, who would lead the new company, responded: "We understand how important good air service is to Cleveland (and) Cleveland will always be important to the combined carrier." However, he said, "We are always responsive to market demand (and) you need to look at where the demand is."
In fact, although Continental calls Cleveland a hub, that role must be defined broadly, because the Cleveland hub has only about 170 daily departures, mostly on regional jets. In 2008 and 2009, Continental briefly tried trans-Atlantic service from Cleveland, first to Paris, then to London, but shut it down in the recession. According to the Cleveland Plain Dealer, Continental has reduced Cleveland flights 24% since late 2007, compared with cutbacks of 18% at Houston and 10% at Newark. Its Cleveland workforce totals 2,200, while its affiliates employ another 1,000.
On Monday, local officials, including U.S. Rep. Dennis Kucinich, held a news conference to seek to assure that the importance of Cleveland Hopkins is not diminished in the merger. "I wouldn't call us a loser, because we don't know," said airport spokeswoman Jacqueline Mayo. "I don't think they have sat down with us and said 'this is what will happen.' I am sure that eventually, (they) will."
Of course, a key question involves regulatory approval. On the conference call, Smisek reminded that the partners have no international route overlap and that "Continental is strong where United is weak and United is strong where Continental is weak." From a regulatory standpoint, this is "a match made in heaven," he said.
Even for airline geeks, it is a challenge to find a route where Continental and United are the only carriers that provide service. Try it. The only one we found was Cleveland-Denver.
Still, it is a bit early to declare victory. Recall that on the Delta earnings conference call in April, CEO Richard Anderson warned that regulatory approval now comes more slowly than it did in the latter days of the Bush administration, when the Delta/Northwest merger was approved in less than seven months.
Delay is the foremost enemy of this proposed merger, because that allows for more of the exogenous events that always have and always will plague the airline industry.
-- Written by Ted Reed in Charlotte, N.C.
Could American, US Airways deal follow United-Continental?
By Dan Reed, USA TODAY
Will American and US Airways be the next big U.S. airlines to merge?
The attention of investors shifted to the nation's last two stand-alone legacy carriers Monday after United Airlines and Continental Airlines announced they are merging in a $3 billion deal to create what would be the world's biggest carrier.
Those clamoring for yet one more merger may be disappointed, however. A union between American and US Airways doesn't appear imminent. If it was, it would create a company that would rival in size the giant that United and Continental just created.
If approved by regulators and shareholders, the United-Continental combination surpasses Delta Air Lines, which took over Northwest in 2008, to claim the title of biggest.
The new merged airline, which plans to fly under the United name, will have hubs in the major markets of New York, Los Angeles, Chicago, Houston and San Francisco. That will put it in cities with a large number of lucrative business travelers who pay higher fares.
The international network of the new United airline — the Continental name will eventually be dropped, though tails of the new airline's planes will have the old Continental logo on them — will stretch from Shanghai to South America, including 370 destinations in 59 countries.
Its reach will be even greater because its passengers will be able to book and fly with its partners in the Star global alliance. Star, the biggest of the world's three big airline alliances, has 26 member airlines.
The leaders of the two merging airlines — Continental CEO Jeff Smisek and United CEO Glenn Tilton— couldn't contain their enthusiasm Monday at what they have created. Smisek will be CEO of the new airline. Tilton will become non-executive chairman.
Smisek told USA TODAY that the size and breadth of the new United network should attract many more corporate travel contracts. Big corporations seeking to cut volume travel deals want a carrier that can provide the most service to the most destinations.
"We have just delivered to our salespeople the best network that any airline salesperson could ever sell," Smisek said.
Said Tilton in the same interview, "The people who are most excited about this deal are our respective route planners. They are ecstatic about all the possibilities they'll have to put the right planes on the right routes to maximize aircraft utilization and revenue generation."
Competing with giants
The new United's size and reach will only increase the agitation for American and US Airways to not be left in the dust in the trend toward consolidation of old network carriers here and overseas. That's a path that many industry analysts see as the way for chronically money-losing mainline carriers to eventually make a profit.
A merger of the two theoretically would seem the way to compete against the giants.
Investors think so. Shares of AMR, American's parent, and US Airways rose more Monday than did those of United and Continental. AMR shares rose 2.9% to $7.59. US Airways jumped 4.5% to $7.39. United's stock rose 2.4% to $22.11, while Continental's shares closed at $22.86, up 2.3%.
But don't expect a union — at least any time soon.
US Airways would jump at the chance. Its CEO, Doug Parker, has led the call for consolidation, and it was his airline that initially was in talks last month with United.
But officials at American seem disinterested. They don't object philosophically to a merger. But consolidation, they say, is not a cure-all for what ails the U.S. industry.
They also say they don't see any potential partners that interest them. American's high costs, large debt and sour labor relations would make it hard to cut any deal.
The agitation for merger was evident last month when some financial analysts and some industry consultants talked with American's officials about its lackluster first-quarter earnings during a conference call.
In the face of the merger mania, American CEO Gerard Arpey and Chief Financial Officer Tom Horton repeatedly defended their "corner-posts strategy" that calls for American to maintain and build on its market strength in five of the nation's six biggest travel markets: New York City, Chicago, Dallas/Fort Worth, Miami, Los Angeles and Washington, D.C.
Their plan, they said, is for American to use its strength in those markets to funnel more high-fare-paying business travelers into its already dominant Latin American route network and into its pending international joint venture partnerships with British Airways, Iberia, JAL and others in the Oneworld global alliance.
"We have a strong network today," Arpey said during that April 21 conference call. "I'm confident in our corner-posts strategy, because I think our footprint is in the most important business markets in the U.S. already. So we're not necessarily threatened by consolidation among our competitors."
'Is that all you got?'
For the most part, the analysts weren't buying American's argument — not then and not since.
In exasperation over the lack of a more-aggressive response by American to its competitors' big plans, Jamie Baker of JPMorgan Chase asked the American executives in the call, "Is that all you got?"
A week later, airline debt analyst Vicki Bryan at Gimme Credit told investors in a note that in the wake of United-Continental merger, American "could find itself in a distant third place in the U.S. market with 30% less revenue than the two leaders, significantly higher costs by comparison ... and at least twice the (debt) leverage."
She added, "Delta and United-Continental also have a greater capacity to generate higher-quality revenue with more premium and international travel."
On Monday, industry consulting firm AirlineForecasts issued a position paper entitled "United + Continental is good news for all stakeholders: More mergers are needed."
Co-authors Paul Mifsud, Carlos Bonilla and Vaughn Cordle, AirlineForecasts' president, argued that the country's air travel market can't support more than three big conventional network airlines. The United-Continental merger would leave four.
Conventional airlines — those with hub-and-spoke route systems, multiclass service offerings and intercontinental flights — already have seen their share of the domestic air travel market shrink to 53% this year from 80% 10 years ago, according to the AirlineForecasts paper.
The continued growth and profitability of low-cost airlines, whose less-sophisticated but generally lower-price service offerings make them popular with leisure travelers and business travelers who work for smaller firms, will be an ever-growing problem.
The network airlines likely will see their share of the domestic market fall to about 35% to 40% in the years ahead, AirlineForecasts said.
That doesn't leave enough travel demand to support the enlarged United and Delta — and American and US Airways as stand-alone operations, according to Mifsud, Bonilla and Cordle.
Thus, "The odds of liquidation and/or bankruptcy for US Airways and American increase because it will be too difficult, if not impossible, for them to remain viable as stand-alone businesses. Without a new strategic direction and significant changes in the industry's structure, American and US Airways will continue on the slow liquidation path to failure," the trio wrote.
Antitrust review coming
The United-Continental merger must pass an antitrust review by the Department of Justice, but few analysts expect the agency to oppose it. United and Continental currently compete head-to-head on only 14 routes.
United has six hubs — Chicago, Denver, Washington, San Francisco, Los Angeles and Tokyo — and is strong in the Midwest, on the West Coast and in the Mid-Atlantic. It's one of two powerful U.S. carriers in the trans-Pacific and Asian markets.
Continental, meanwhile, has four hubs — Newark, Houston, Cleveland and Guam — and is strong in the South and the Northeast. It's strong in the Latin America and trans-Atlantic markets.
Congress, however, will likely examine whether the deal is in the nation's best interest, as consolidation often leads to higher fares and fewer routes in and out of some cities.
Sen. Jay Rockefeller, D-W.Va., chairman of the Senate Commerce Committee, said Monday he wanted to look at it.
And the Justice Department — which will have final say on the merger — last year objected to United and Continental's request for antitrust immunity to form a venture with Air Canada and Lufthansa that would effectively have allowed them to combine their trans-Atlantic operations.
By Dan Reed, USA TODAY
Will American and US Airways be the next big U.S. airlines to merge?
The attention of investors shifted to the nation's last two stand-alone legacy carriers Monday after United Airlines and Continental Airlines announced they are merging in a $3 billion deal to create what would be the world's biggest carrier.
Those clamoring for yet one more merger may be disappointed, however. A union between American and US Airways doesn't appear imminent. If it was, it would create a company that would rival in size the giant that United and Continental just created.
If approved by regulators and shareholders, the United-Continental combination surpasses Delta Air Lines, which took over Northwest in 2008, to claim the title of biggest.
The new merged airline, which plans to fly under the United name, will have hubs in the major markets of New York, Los Angeles, Chicago, Houston and San Francisco. That will put it in cities with a large number of lucrative business travelers who pay higher fares.
The international network of the new United airline — the Continental name will eventually be dropped, though tails of the new airline's planes will have the old Continental logo on them — will stretch from Shanghai to South America, including 370 destinations in 59 countries.
Its reach will be even greater because its passengers will be able to book and fly with its partners in the Star global alliance. Star, the biggest of the world's three big airline alliances, has 26 member airlines.
The leaders of the two merging airlines — Continental CEO Jeff Smisek and United CEO Glenn Tilton— couldn't contain their enthusiasm Monday at what they have created. Smisek will be CEO of the new airline. Tilton will become non-executive chairman.
Smisek told USA TODAY that the size and breadth of the new United network should attract many more corporate travel contracts. Big corporations seeking to cut volume travel deals want a carrier that can provide the most service to the most destinations.
"We have just delivered to our salespeople the best network that any airline salesperson could ever sell," Smisek said.
Said Tilton in the same interview, "The people who are most excited about this deal are our respective route planners. They are ecstatic about all the possibilities they'll have to put the right planes on the right routes to maximize aircraft utilization and revenue generation."
Competing with giants
The new United's size and reach will only increase the agitation for American and US Airways to not be left in the dust in the trend toward consolidation of old network carriers here and overseas. That's a path that many industry analysts see as the way for chronically money-losing mainline carriers to eventually make a profit.
A merger of the two theoretically would seem the way to compete against the giants.
Investors think so. Shares of AMR, American's parent, and US Airways rose more Monday than did those of United and Continental. AMR shares rose 2.9% to $7.59. US Airways jumped 4.5% to $7.39. United's stock rose 2.4% to $22.11, while Continental's shares closed at $22.86, up 2.3%.
But don't expect a union — at least any time soon.
US Airways would jump at the chance. Its CEO, Doug Parker, has led the call for consolidation, and it was his airline that initially was in talks last month with United.
But officials at American seem disinterested. They don't object philosophically to a merger. But consolidation, they say, is not a cure-all for what ails the U.S. industry.
They also say they don't see any potential partners that interest them. American's high costs, large debt and sour labor relations would make it hard to cut any deal.
The agitation for merger was evident last month when some financial analysts and some industry consultants talked with American's officials about its lackluster first-quarter earnings during a conference call.
In the face of the merger mania, American CEO Gerard Arpey and Chief Financial Officer Tom Horton repeatedly defended their "corner-posts strategy" that calls for American to maintain and build on its market strength in five of the nation's six biggest travel markets: New York City, Chicago, Dallas/Fort Worth, Miami, Los Angeles and Washington, D.C.
Their plan, they said, is for American to use its strength in those markets to funnel more high-fare-paying business travelers into its already dominant Latin American route network and into its pending international joint venture partnerships with British Airways, Iberia, JAL and others in the Oneworld global alliance.
"We have a strong network today," Arpey said during that April 21 conference call. "I'm confident in our corner-posts strategy, because I think our footprint is in the most important business markets in the U.S. already. So we're not necessarily threatened by consolidation among our competitors."
'Is that all you got?'
For the most part, the analysts weren't buying American's argument — not then and not since.
In exasperation over the lack of a more-aggressive response by American to its competitors' big plans, Jamie Baker of JPMorgan Chase asked the American executives in the call, "Is that all you got?"
A week later, airline debt analyst Vicki Bryan at Gimme Credit told investors in a note that in the wake of United-Continental merger, American "could find itself in a distant third place in the U.S. market with 30% less revenue than the two leaders, significantly higher costs by comparison ... and at least twice the (debt) leverage."
She added, "Delta and United-Continental also have a greater capacity to generate higher-quality revenue with more premium and international travel."
On Monday, industry consulting firm AirlineForecasts issued a position paper entitled "United + Continental is good news for all stakeholders: More mergers are needed."
Co-authors Paul Mifsud, Carlos Bonilla and Vaughn Cordle, AirlineForecasts' president, argued that the country's air travel market can't support more than three big conventional network airlines. The United-Continental merger would leave four.
Conventional airlines — those with hub-and-spoke route systems, multiclass service offerings and intercontinental flights — already have seen their share of the domestic air travel market shrink to 53% this year from 80% 10 years ago, according to the AirlineForecasts paper.
The continued growth and profitability of low-cost airlines, whose less-sophisticated but generally lower-price service offerings make them popular with leisure travelers and business travelers who work for smaller firms, will be an ever-growing problem.
The network airlines likely will see their share of the domestic market fall to about 35% to 40% in the years ahead, AirlineForecasts said.
That doesn't leave enough travel demand to support the enlarged United and Delta — and American and US Airways as stand-alone operations, according to Mifsud, Bonilla and Cordle.
Thus, "The odds of liquidation and/or bankruptcy for US Airways and American increase because it will be too difficult, if not impossible, for them to remain viable as stand-alone businesses. Without a new strategic direction and significant changes in the industry's structure, American and US Airways will continue on the slow liquidation path to failure," the trio wrote.
Antitrust review coming
The United-Continental merger must pass an antitrust review by the Department of Justice, but few analysts expect the agency to oppose it. United and Continental currently compete head-to-head on only 14 routes.
United has six hubs — Chicago, Denver, Washington, San Francisco, Los Angeles and Tokyo — and is strong in the Midwest, on the West Coast and in the Mid-Atlantic. It's one of two powerful U.S. carriers in the trans-Pacific and Asian markets.
Continental, meanwhile, has four hubs — Newark, Houston, Cleveland and Guam — and is strong in the South and the Northeast. It's strong in the Latin America and trans-Atlantic markets.
Congress, however, will likely examine whether the deal is in the nation's best interest, as consolidation often leads to higher fares and fewer routes in and out of some cities.
Sen. Jay Rockefeller, D-W.Va., chairman of the Senate Commerce Committee, said Monday he wanted to look at it.
And the Justice Department — which will have final say on the merger — last year objected to United and Continental's request for antitrust immunity to form a venture with Air Canada and Lufthansa that would effectively have allowed them to combine their trans-Atlantic operations.
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