Wednesday, June 30, 2010

Ticket Buyers Sue To Stop $3B Continental-United Deal
June 30, 2010 - 5:18 pm

A group of 49 individual ticket buyers who say the proposed $3 billion merger between UAL Corp.'s United Air Lines Inc. and Continental Airlines Inc. would hurt airline industry competition have filed a suit seeking to stop the deal.

Higher ticket prices and diminished service are the likely result of the merger, according to the lawsuit filed Monday in the U.S. District Court for the Northern District of California by first-named plaintiff Michael C. Malaney of Michigan and purchasers of airfares from across the U.S.
The "probable and planned" anti-competitive results of the merger would include fewer flights, fewer available seats, fewer amenities and an impetus toward further airline consolidation, according to the suit.

Malaney and his fellow plaintiffs seek an injunction blocking the merger pursuant to the Clayton Antitrust Act. Their complaint values the United-Continental deal at $8.3 billion, a combination of the $3 billion in equity that would change hands and the $5.3 billion in assumed long-term debt at Continental.

United spokeswoman Megan McCarthy said Wednesday the suit is without merit.

The merger "will benefit customers with the most comprehensive route network, connecting people across the world and the U.S., including 148 small communities," she said.

The lawsuit is just the latest potential obstacle standing in the way of the tie-up between the two major air carriers.

Last week the pilots of United and Continental, represented by the Air Line Pilots Association International, said they had run into a roadblock while negotiating a transition agreement with the airlines' management.

The parties have been unable to reach a deal on generating an integrated seniority list for pilots who will fly post-merger, the pilots' union said Friday.

"Success requires that management continue to focus on getting past these initial issues and allow us to move forward with the joint collective bargaining process," said Wendy Morse, who represents United pilots.

Earlier in June, skeptical lawmakers in the U.S. House of Representatives grilled the CEOs of Continental and UAL, expressing concern about the merger's potential to curb competition in the airline industry and its effect on employees.

And in early May the U.S. Department of Justice's Antitrust Division said it would go over the merger with a fine-tooth comb to make sure it wouldn't hurt competition.

McCarthy noted on Wednesday that the airlines are "cooperating with the Department of Justice as they thoroughly review our merger."

Continental and United serve more than 144 million passengers per year with service to 370 destinations in 59 countries. They had a combined revenue of $29 billion in 2009.
The plaintiffs are represented by the
Alioto Law Firm, Gray Plant Mooty and Messina Law Firm PC.

Counsel information for the airline defendants was not immediately available.
The case is Malaney et al. v. UAL Corp. et al., case number 10-cv-02858, in the U.S. District Court for the Northern District of California.

--Additional reporting by Jacqueline Bell
To see court documents and read similar stories,
Peanuts can't be banned on flights without proof, DOT says
6/30/2010 7:01 By
Charisse Jones, USA TODAY

It's much ado about peanuts.

The Transportation Department has asked the public for weeks to comment on whether the once-popular, but increasingly rare, snack for passengers should be banned or restricted on airline flights for the sake of those who suffer serious allergies.

But whichever way public sentiment falls, there can be no ban on peanuts without scientific proof to back it up.

The department issued a clarification last week saying that it would abide by a provision in decade-old funding legislation that says no airline can be made to stop serving peanuts until 90 days after Congress and the Transportation secretary receive a peer-reviewed study that finds "severe" allergic reactions to the tiny peanut particles that might be present on a plane.
The department isn't commissioning such a study, but the public can continue to weigh in until Aug. 9, and the comments will be reviewed.

A possible ban was among consumer protection rules proposed by the department earlier this month. It also proposed raising compensation for fliers who are bumped off oversold flights.
Restricting peanuts was important to some peanut-allergy sufferers who choose not to fly for fear of a reaction in the middle of a flight.

Jennifer Roeder of the Food Allergy & Anaphylaxis Network in Fairfax, Va., says, "The most practical solution ... would be to simply discontinue serving packaged peanut snacks on all flights."

Several airlines have quit serving peanuts, including Continental, JetBlue, United, Virgin America and American. But some caution that they serve products that contain other types of nuts or are made in facilities where peanuts are handled.

Delta, the world's biggest airline, is among the few carriers that continue to serve peanuts.

Tuesday, June 29, 2010

PROMISES, PROMISES: FAA slow on cockpit fires
PROMISES, PROMISES: Despite complaints, FAA has yet to order airlines to act on cockpit fires

Joan Lowy and Joshua Freed, Associated Press Writers, On Tuesday June 29, 2010, 12:38 pm EDT

WASHINGTON (AP) -- Federal aviation officials have known for years that cockpit window heaters in some Boeing planes catch fire. But they haven't required airlines to fix the problem, even after dozens of incidents that unnerved pilots and, in many cases, forced emergency landings.

Pilots have complained about heaters that burned, smoldered or sent electric currents dancing across cockpit windows since at least 2002, according to an Associated Press search of a NASA aviation safety database. Safety investigators have traced the problem to a simple loose screw.
None of the reported incidents was deadly, but they were scary.

Sometimes, flames would reappear after flight crews had blasted them with fire extinguishers. In many cases, the window heater would cause an inside ply of windshield to shatter into spidery cracks that obstructed pilots' view. Sometimes, pilots and instrument panels were sprayed with glass.

Pilots reported having to remove their oxygen masks in smoky cockpits in order to reach circuit breakers or grab fire extinguishers.

The National Transportation Safety Board has prodded the Federal Aviation Administration to make airlines fix the problem, concerned that a major accident could happen if nothing is done. The FAA has yet to mandate the repairs, although it has promised the NTSB since 2004 that it would.

"There is no shortage of information. In fact, there's no shortage of incidents," NTSB Chairman Deborah Hersman said in an interview. "What's missing is the will to do something about it."
The FAA did propose a safety fix in March 2008, two months after heavy smoke filled the cockpit of an American Airlines 757 flying from Puerto Rico to Philadelphia. The flight was diverted to Palm Beach, Fla., while terrified passengers were instructed on procedures for a rough ground or ocean landing.

"It was absolutely horrifying. There's no other way to describe it," said Rebekah Conrad, 23, who was among two dozen students who held hands, sang hymns and prayed through the ordeal.
More than two years later, the FAA's safety fix still is not final. The regulator promised to expedite it after a cockpit fire last month forced a United Airlines 757 to make an emergency landing at Washington Dulles International Airport. In that incident, United pilots emptied one fire extinguisher on the flames, and sent a flight attendant for a second extinguisher after the fire reignited.

The FAA hopes to issue a final order next month, said FAA spokesman Les Dorr. He said the process has been slowed by the FAA's obligation to respond to airlines who objected to the proposed remedy. Also, Dorr said, the FAA and Boeing have received new information about the extent of the problem.

Boeing has acknowledged at least 29 incidents globally involving cockpit window heaters in its 747, 757, 767 and 777 models since 2002. Their tally includes only those incidents where there was evidence of flame or smoke, not emergency landings due to electrical arcing or cracked windows.

NASA's Aviation Safety Reporting System, a database to which pilots, flight attendants, airline mechanics and others voluntarily report safety concerns, and NTSB records contain 24 cockpit window heater incidents in those Boeing models over the same time period.

Twelve were fires, but the other 12 involved arcing -- hot, lightning-like streams of electricity -- along windows, as well as cracked or shattered windows, which were not included in Boeing's count.

There appears to be a similar problem with the Boeing 737, the most widely used airliner in the United States. The NASA database contains 16 reports of fire, smoke, electrical arcing or cockpit window cracking in 737s since 2002.

The window heater problem has led to at least 14 emergency landings and four flight diversions by 757 and 777 models over the past eight years, according reports to the NASA database and NTSB records. There were another 11 emergency landings by 737s during the same period, records show.

There also was one December 2007 report in the NASA database of arcing and a shattered window in a Boeing 727 that ultimately made an emergency landing.

"We need to have FAA, Boeing and the company take a real, honest look at this systemic window heat problem, implement a fix and get the word out before another crew has to fly a B757 in the smoke with a broken window in front of them spitting glass at them," one pilot complained in February 2008.

Between 2004 and 2007, NASA sent four safety alerts to the FAA and the NTSB regarding cockpit fires, smoke or arcing in the 757. It sent a similar safety alert about the 737 in July 2003.
For their part, major carriers American Airlines, Delta Air Lines, United Airlines and US Airways are either replacing the old windows or stepping up inspections.

Boeing spokesman Peter Conte acknowledged electrical arcing in cockpit window heaters has led to cracked windows in the 737. He said the problem was not considered dangerous because the arcing happens between window layers, unlike the incidents in other Boeing models, and doesn't cause smoke or flames. The 737's heaters require less power to warm the plane's smaller windows, he noted.

However, a May 2003 report filed with NASA describes a window fire in a 737 with "blowtorch" flames, smoke and sparking. The plane, which was on a test flight, made an emergency landing. Two other reports mention smoke as well as arcing and window cracking.

Two years ago, the FAA said its proposed remedy would affect 1,212 planes. That order does not include 737s.

The NTSB said it learned of the window heater problems after two 757 cockpit fires in January 2004. Safety investigators traced the fires to arcing caused by a loose screw that chafed power wires connected to heating wires in the windows, which were manufactured by PPG Aerospace.
But the source of the problem may have been known even earlier. A March 2002 report in the NASA database describes a 757 cockpit fire that was traced to a loose screw in the window heater terminal. The problem was uncovered by the airline involved, which was not named in the NASA report.

The FAA's 2008 proposal would require airlines to check for the loose screw and replace damaged windows -- a task that some airlines say would require extensive window disassembly because the screws are difficult for mechanics to reach.

"Even with small hands it cannot be held," a Continental Airlines safety official wrote the FAA in 2008. "This, coupled with poor view ability, turns a very simple installation into a very complex installation."

Freed reported from Minneapolis.
American Enhances Existing 737-800 Fleet
Updates to 76 Aircraft to Include New Cabin Interiors, Improved Inflight Entertainment Systems and Additional Storage

Updated 737s Will Match Customer Amenities on 84 New 737-800s that American is Adding to its Fleet by 2011

Press Release Source: American Airlines On Tuesday June 29, 2010, 10:00 am EDT
FORT WORTH, Texas, June 29 /PRNewswire-FirstCall

American Airlines today announced that the second of its original 76 Boeing 737-800s – which are being updated to match the customer benefits and amenities featured on its newly-delivered 737-800 aircraft – begins flying with a range of new features to improve the travel experience. Once the updates are completed, American's initial fleet of 76 737-800s will match the 84 new Boeing 737-800 aircraft that American began receiving in March 2009 and will continue to receive through 2011.

The new 737-800s are being delivered to American with several enhancements, all of which will be added to the initial 76 737-800 fleet. These include new, more comfortable and spacious First and Economy Class seats, bigger overhead storage bins, updated inflight entertainment systems, and AC power ports. In addition, the new configuration of the 737-800s allows for 12 additional Economy Class seats, for a total of 160 seats.

A prototype of the updated aircraft has been in service since February. American will continue to upgrade the remaining 74 aircraft in its original fleet by installing new seats, new cabin interiors, enhanced inflight entertainment systems, and more storage throughout the aircraft. By accelerating its 737-800 fleet renewal plan last year, American took a significant step in its efforts to invest in products and services that benefit customers, while enhancing its competitive position with new aircraft that are 35 percent more fuel efficient on a seat mile basis than the MD-80 airplanes they will replace. American took delivery of 31 new 737-800s in 2009 and will take delivery of 45 this year and 8 in 2011.

"American remains focused on our long-term future, so it is vital that we continue to reinvest in our products and services to enhance the travel experience for our loyal customers," said Lauri Curtis, American's Vice President – Onboard Service. "Upgrading our existing fleet of 737s to match the new deliveries will benefit our customers, employees, shareholders and the communities we serve. These efforts will also keep our product competitive while offering cost, environmental and operational benefits."

Upon completion, the updated 737s will feature new First Class seats designed specifically for American by Weber Aircraft. The seats have a "slim-line" seatback design and innovative seat bottom that create enhanced space and increase customer comfort. The Economy Class cabin will feature 144 newly-designed seats that utilize a higher recline pivot to provide increased knee room. Throughout the cabin, drop-down LCD monitors will replace CRT monitors and a digital media file server will provide better-quality video and audio entertainment. A 110 volt AC power port will be located at every First Class seat, and two power ports will be located per every three Economy Class seats for easy accessibility.

In addition, bigger overhead storage bins will significantly increase customer cabin luggage capacity by allowing rolling bags to be loaded wheels first. Over time, American intends to equip all of its 737s with Gogo® Inflight Internet service, which will allow passengers to surf the Web, check email and send instant messages conveniently from the air.

The update effort began in May and the retrofitting is being done by American's mechanics at its maintenance base in Tulsa, Okla.

"Projects like this 737 retrofit are unique, rewarding and are appreciated by our engineering and maintenance teams, because we know that our work is going to directly improve the onboard experience of our customers," said Bill Cavitt, Vice President – Engineering, Performance Improvement Strategies and Quality Assurance.

To view footage of the 737 retrofit being done by American's mechanics in Tulsa, please visit:

Monday, June 28, 2010

Is American Airlines Eagle ready to leave the nest?
Saturday, Jun. 26, 2010

New routes, new first-class seats and a new chief executive have all come to American eagle this year. But is the regional carrier for American Airlines ready to fly on its own? And if it is, can its parent company, Fort Worth-based AMR Corp., find anyone interested in buying an airline with 260 planes that generates around$2.1 billion in revenue? Last month, AMR Chief Financial Officer Tom Horton said the company believes that it makes sense for Eagle to eventually separate from American and will consider such a move in "a more sensible market environment."

A spinoff, public offering or outright sale has been on the table for Eagle in the past. In the meantime, the carrier has added over a dozen flights at Dallas/Fort worth Airport in the past year and has been adding back capacity, particularly to Mexico, that it had dropped during the recession. And this summer, Eagle will begin offering first-class seats on some regional jets for the first time “I don't think I'm looking for any immediate upheaval in what Eagle's been doing," said Dan Gorton, who was named chief executive this month.

"It's focused on providing feed to American Airlines." 'Very profitable places ‘Most of Eagle's fleet still has fewer than 50 seats, but it's no longer the puddle jumper that the flying public might imagine it to be. The carrier has added Bombardier CRJ aircraft that can seat 70 passengers and have a first-class cabin. It's flying longer routes, such as New York City to Atlanta. Out of D/FW, the carrier has added several new destinations such as Cheyenne, Wyo., Fayetteville, N.C., and Manhattan, Kan.

All are close to military bases and facilities. That strategy is helping Eagle boost its revenue, as military airfares are usually higher, airline analyst Mike Boyd said."They've found some very profitable places to put their airplanes," Boyd said.

And while American Airlines has continued to cut capacity compared with last year, Eagle added back flights starting in October. By April, Eagle reported an increase in year-over-year available seat miles of 8.8 percent, and ASMs-- a measure of capacity -- were up 4.9 percent in May.

Eagle is still growing, but labor contracts limit its capacity in relation to American. Eagle represents about 6 percent of the carriers' combined capacity. That's far less than other big carriers' regional operations. Industry analyst Darryl Jenkins says regional jets today account for nearly 16 percent of total industry capacity.

Even as that capacity has declined about 17 percent in the past 15 years, however, regionals have grown by 217percent."If you look at American versus others, such as United, you'll see everybody is increasing regional flying," Jenkins said. What AMR should do with Eagle?

In 2007, AMR got serious about selling or spinning off Eagle. But when the recession hit, the company pulled Eagle off the market. Now, Gorton is considering the options. Gorton, who headed Eagle from 1995to 1998, said that there are growth opportunities for Eagle and that it may make more sense for the carrier to be separate.
FDA report reveals airline food could pose health threat
6/28/2010 1:02

Gary Stoller, USA TODAY

Many meals served to passengers on major airlines are prepared in unsanitary and unsafe conditions that could lead to illness, government documents examined by USA TODAY show.
Food and Drug Administration (FDA) inspectors have cited numerous catering facilities that prepare airline food for suspected health and sanitation violations following inspections of their kitchens this year and last, according to inspection reports obtained through the Freedom of Information Act.

FDA inspectors found live roaches

The inspections were at U.S. facilities of two of the world's biggest airline caterers, LSG Sky Chefs and
Gate Gourmet, and another large caterer, Flying Food Group.

The three caterers operate 91 kitchens that provide more than 100 million meals annually to U.S. and foreign airlines at U.S. airports. They provide meals for nearly all big airlines, including Delta, American, United,
US Airways and Continental.

The FDA reports say many facilities store food at improper temperatures, use unclean equipment and employ workers who practice poor hygiene. At some, there were cockroaches, flies, mice and other signs of inadequate pest control.

"In spite of best efforts by the FDA and industry, the situation with in-flight catered foods is disturbing, getting worse and now poses a real risk of illness and injury to tens of thousands of airline passengers on a daily basis," says Roy Costa, a consultant and public health sanitarian.
Conditions open the door to food-poisoning outbreaks, says Costa, a former Florida state food inspector who volunteered to review the FDA reports obtained by USA TODAY.

All three caterers say they work hard to ensure food is safe. And airlines say they monitor the food that goes onto their planes.

LSG Sky Chefs has "comprehensive and multilayered quality-control standards in place to ensure our customers receive safe, healthy and high-quality food," says spokeswoman Beth Van Duyne.

Norbert van den Berg of Gate Gourmet says findings are taken "very seriously" and the company uses an independent auditor for quality assurance. Glenn Caulkins of Flying Food Group also says his company's facilities are independently audited for quality assurance.
JetBlue spokesman Bryan Baldwin says the airline requires caterers to provide results of FDA inspections and does its own "impromptu" visits to their facilities.
Airline food putting 'thousands at risk'
by Staff Writers
From: NewsCore
June 29, 2010 8:21AM

Tens of thousands could be at risk, says the report

FOOD companies that supply in-flight meals to most major US airlines could cause serious illness for "tens of thousands of passengers" every day due to unsafe and unclean practices.
Airline food: The good, bad and ugly

From cockroaches and rats near the food to workers with poor hygiene, a US Food and Drug Administration (FDA) report obtained by USA Today lists several infractions made by the three companies that provide food to Delta, American, United, US Airways and Continental, among others.

The unsanitary environments at LSG Sky Chefs, Gate Gourmet and Flying Food Group, could cause food-poisoning outbreaks and pose a major threat to public health.

"In spite of best efforts by the FDA and industry, the situation with in-flight catered foods is disturbing, getting worse and now poses a real risk of illness and injury to tens of thousands of airline passengers on a daily basis," said Roy Costa, a consultant and public health sanitarian, to the newspaper.

Airlines insisted they have quality control standards in place, while the food companies vehemently denied any unsafe practices. A rep from Gate Gourmet said the findings of the report would be taken "very seriously."
The Impact From Lower Cost Carriers - American to Discontinue Boston-San Francisco Route

After operating the Boston (BOS) to San Francisco (SFO) route non-stop since 1998, American Airlines (
AMR) recently announced it will discontinue their twice daily round-trips between BOS and SFO effective this November.

This analytical report uses the most recent publicly available data to show the competitive landscape for the BOS-SFO route for year 2009 and Q1 2010. Note: some 2010 data is not yet available.

Before reviewing the recent data, it’s worth noting some past history for the BOS-SFO market:

From 1998 to 2009, United (UAUA) and American were virtually (see note) the only two airlines with non-stop flights between BOS & SFO. Note: In 2004 and 2005, America West and Delta (DAL) briefly operated flights in the BOS-SFO market. JetBlue (JBLU) started seasonal service in 2007.

During the time American and United were the only two airlines in the BOS-SFO non-stop market, passenger yields were at or above overall system yields.

In February 2009, Virgin America entered the BOS-SFO market. In May 2009, JetBlue went from seasonal to daily full year service.

Available seats (monthly) in the BOS to SFO market increased by over 60% as they went from just over 30,000 at the beginning of 2009 to over 53,000 in August.

During year 2009, American and JetBlue’s available seats between BOS and SFO remained mostly stable while United and Virgin America increased capacity significantly. Throughout the year, United claimed approximately 50% of the available seats. Starting in 2010, when compared to 2009, JetBlue has nearly doubled the available seats in the BOS-SFO market.

In spite of the significant increase in capacity by Virgin America and JetBlue, American and United maintained the highest load factors for most of the year in the BOS to SFO market. Further, United and American’s summer load factors in this market were significantly higher than their overall system load factors for the same time period.

It would be logical to expect the added capacity from Virgin America and JetBlue, both of which are lower cost carriers, would drive fare yields lower. This in fact did occur as the average fare in the second quarter dropped significantly from the first quarter when United and American were primarily the only two carriers operating this route.

However, after the average fare fell by 14% from Q1 to Q2, even with the significant increase in added seats, the Q3 average fare increased by 10%. This fare increase was likely caused by seasonal demand and further pushed by an overall industry increase in fares. Note: Q1 2010 fares are not yet available.

All airlines reconcile route segment revenue with segment costs. Any airline will or should attempt to garner the highest profits possible. To achieve higher profits, airlines frequently move aircraft to markets that may provide higher yields and more (potential) profit.
While load factors in this specific market were relatively high, excluding Virgin America, passenger yields were considerably less than each airlines system yield.

For year 2009, American had the highest (negative) differential between their system passenger yield and the average yields in the Boston to San Francisco market.

Through the later 90’s into the early 2000’s, BOS-SFO yields relative to other markets were very high. When looking at the historical impact of lower cost competitors into the BOS-SFO market, the drop in average passenger yields has been significant. Using Q2 data from 1998 thru 2003, BOS-SFO yields were consistently higher than American’s system yields. In 2004 when lower cost carrier America West entered the market, BOS-SFO yields dropped by over 30%.

Since 2004 BOS-SFO average Q2 yields have remained consistently less than American’s system yields. As more detailed above, in year 2009, the BOS-SFO yield (negative) differential for American increased substantially as available capacity nearly doubled. Note: American typically has at or near the industry’s highest passenger system yields.

Conclusion- the BOS to SFO market has seen the available seat capacity nearly double from what it was in early 2009. For year 2010, JetBlue is adding significant capacity to/from BOS. This market “saturation” drives fares lower, especially over the winter months when passenger demand typically drops.

Accepting there may be other reasons beyond the data provided in this analysis, it appears the reason for American pulling out of the BOS-SFO market may be because there are other higher yield markets to operate the equipment that has been used on the BOS-SFO segment.
Data sources: SEC, BTS, and DOT

Virgin America does not file SEC filings. As such some data may not be available.
Internal company data may be different from what is provided in this report. Any errors are unintentional.
JFK airport's main runway set to reopen Tuesday after massive 4-month construction project

On Monday June 28, 2010, 3:18 pm EDT

NEW YORK (AP) -- The main runway at New York's John F. Kennedy International is reopening after four months of repairs.

It will reopen officially on Tuesday at an 11 a.m. EDT ceremony. It has been repaved with concrete instead of less-durable asphalt and widened to accommodate today's bigger planes.
The Port Authority of New York and New Jersey, which manages the three main New York area airports, says the massive construction project ended within its $376 million budget.
Union at American Airlines: Contract offer dead
Union says American Airlines offer no longer valid, seeks next step toward possible strike

On Monday June 28, 2010, 6:18 pm EDT

FORT WORTH, Texas (AP) -- A union representing ground workers at American Airlines says a contract offer that was once headed for a ratification vote is now dead, and it's seeking to move closer toward a possible strike.

The Transport Workers Union said Monday it asked the National Mediation Board to declare a stalemate.

If the board goes along, it could end mediated talks between the two sides and eventually begin a 30-day cooling-off period, after which workers could legally strike.

The airline thought it had a tentative deal in May, but the union's president reversed a decision by negotiators and declined to send the company's last contract offer to members for a vote. American, part of AMR Corp., said it included raises.

Thursday, June 24, 2010

Tiny turtle causes taxiing plane to return to gate

By KATE BRUMBACK, Associated Press Writer Kate Brumback, Associated Press Writer – 53 mins ago

ATLANTA – A caged, 2-inch turtle traveling with a 10-year-old girl caused a crew to turn around a taxiing plane, take the girl and her sisters off the flight and tell them they couldn't bring their pet along.

The sisters threw the animal and cage in the trash and returned to their seats crying Tuesday after AirTran Airways employees on the jetway said they couldn't care for the turtle while their father drove to retrieve it. Two days later, however, Carley Helm was reunited with Neytiri even though at first the family thought the pet was emptied with the trash.

Carley was heading home to Milwaukee after visiting her father in Atlanta with sisters Annie, 13, and Rebecca, 22, when the flap unfolded.

Rebecca said the three were led onto the jetway and told they'd have to get rid of the baby red ear slider — named Neytiri after the princess in the movie "Avatar" — if they wanted to reboard.

"I asked, 'What do you mean get rid of it?' and they said throw it away," she said. "I was very sad, and I felt bad for my littlest sister because it was her first pet and she was planning to take care of it herself."

While the sisters say they were told to put the animal in the trash, AirTran says they chose that themselves, despite an offer to fly later at no extra charge.

AirTran company policy bars animals other than cats, dogs and household birds in the cabin, said spokesman Christopher White. White cited a Centers for Disease Control and Prevention report that says the reptiles have been known to carry salmonella bacteria.

The sisters say they made it past security screeners and an AirTran gate agent before boarding. One flight attendant told them to stow the cage under their seat, they say.

But with the flight rolling toward its takeoff, an attendant told them the turtle wasn't allowed in the cabin.

Rebecca Helm called their father, and he began driving back to the airport. She asked an AirTran employee to make arrangements with her father to look after the pet until he could get there, but the employee refused.

"I basically had to make a really fast decision because the whole plane was being delayed," Rebecca Helm said. The bin wasn't very full and she thought the turtle could be found easily once her dad arrived, she said.

Rebecca twice declined the offer to take a later flight, White said.

"We don't have the personnel or the facilities to care for people's pets," White said.
Rebecca asked if throwing the pet away would allow for them to get back on the flight, White said. The gate agent did not tell the sisters what to do but said they could not get on the plane with the turtle, White said.

"At no time did any AirTran Airways crew member order or suggest that they put the turtle in the trash," he said.

Half an hour later, the sisters' father called, saying he wanted to come look through the trash, White said. The gate agent looked, couldn't find the turtle and assumed it had been emptied, he said.

The airline discovered Wednesday that the ramp supervisor had rescued the turtle from the trash "out of his own compassion" and given it to another crew member, who took it home for her 5-year-old son, White said.

AirTran told that crew member the original owners wanted it back, and the airline arranged for the turtle to fly as cargo to Milwaukee on Thursday, White said.

The sisters' mother reported what happened to animal rights group PETA, which sent a letter to AirTran demanding an investigation and disciplinary action.

For their part, Rebecca Helm says her sisters "are very happy to have the turtle back."

Tuesday, June 22, 2010

Airplane Passengers Want End to Crying Kids.
The Human Air Horn
Jason Notte 06/22/10 - 12:28 PM EDT

In its annual consumer survey of 1,200 passengers released yesterday, travel site
AirfareWatchdog found that 68% want passengers traveling with children confined to a separate section of the airplane.

Oddly, several of those who firmly believe that the price of one's ticket doesn't entitle them to bring a human air horn on to an eight-hour flight are travelling parents themselves -- as 83% of respondents traveled with children in the past year.

Not surprisingly, this notion hasn't gained much traction with airlines. With Delta(DAL), United(UAUA), Continental(CAL) and other network airlines combining for a $275 million operating loss in the fourth quarter, according to the Bureau of Transportation Statistics, they and their low-cost counterparts are rushing to present themselves as family friendly. Segregating children to one area of the plane and sequestering them from the unfettered flying masses likely flies in the face of that strategy.

Another reason airlines aren't biting: Passengers want everyone a few seats removed from them. AirfareWatchdog's survey also found that 51% of passengers don't want pets in the cabin and that passengers' biggest fears about a potential seatmate included "sick or coughing" at No. 1 and "overweight" at No. 2.

Also, passengers tend to bluster about this topic quite a bit. When AirfareWatchdog conducted a similar survey in 2008, 85% of respondents wanted passengers with children placed elsewhere in the cabin, with 58% saying airlines "should have done this a long time ago." Why the nearly 20 percentage point dropoff?

In the 2008 survey, 27% admitted such a plan would never work -- with the Air Transportation Association admitting that increasingly crowded flights would make a child section "logistically difficult." Plus, as any passenger who's gone coast-to-coast with a crying child can tell you, tantrums eventually tire themselves out.
-- Written by Jason Notte in Boston.

United-Continental merger raises fears of higher airfares
6/22/2010 7:01 AM

If United and Continental airlines merge, passengers will end up paying higher fares — right?
Aaron Gellman, who's spent 40 years in and around the airline industry as an analyst, consultant, researcher, teacher and board member, is convinced of it.

"Concentration in any industry leads to higher prices," says the veteran transportation economist who teaches at Northwestern University in Chicago.

By implication that means the proposed merger announced last month between United (UAUA) and Continental (CAL)— to create the world's biggest airline and trim to four the number of the USA's big "legacy" airlines with routes around the country and the globe — won't be a good deal for travelers.

But that may not be true in today's air travel market, in which competition from low-cost airlines has grown even as big legacy airlines have merged and formed partnerships.
The best evidence: Airfares today are cheap by historical measure.

There have been a dozen mergers between conventional network airlines since the U.S. airline industry was deregulated in 1978. And the most desirable routes of defunct carriers such as Pan Am, Eastern and Braniff have been assimilated into the remaining airlines' sprawling networks.
Although ticket prices are rising now, the average basic domestic fare in the fourth quarter of last year was $319, according to data from the Transportation Department's Bureau of Transportation Statistics.

(Basic fares as reported by airlines generally exclude taxes, fees and surcharges.) That was during the recession. And it was down from $345 in 2008, when airlines raised fares rapidly in response to high oil prices.

But even that $345 average basic fare, a record high in nominal terms, was inexpensive once inflation is taken into account. If fares had risen at the rate of inflation since 1996, the average fourth-quarter fare in 2008 would have been $374. It would have been $379 in last year's fourth quarter, based the Bureau of Labor Statistics' consumer price index.

"Clearly, there are other factors in the price of fares besides consolidation and concentration," says economist William Swelbar, a research engineer at MIT's International Center for Air Transportation.

No. 3 plus No. 4 equals No. 1

The Justice Department's antitrust division will decide whether United, currently the third-largest of the country's conventional network airlines, can merge with No. 4 Continental to form a carrier that would surpass the traffic of Delta Air Lines, which became the world's largest in 2008 by buying Northwest.

The merged airline, proposed May 3 by United CEO Glenn Tilton and Continental CEO Jeff Smisek, would fly under United's name. It would have nearly $30 billion a year in revenue, about 70,000 workers and a fleet of up to 600 mainline jets and about 1,000 regional aircraft operated by affiliates. The new United Airlines would carry about 144 million passengers a year to 370 destinations in 59 nations.

The two CEOs estimate the new United could generate an extra $800 million to $900 million a year in revenue by 2013 by offering the broadest global travel network in the world. Ideally, they say, this would make it more attractive to more travelers and to corporations seeking volume contracts with an airline that can get people to the most markets with greatest ease. They argue that their airlines must combine to compete profitably.

The merger would accelerate the trend toward consolidation of traditional carriers. In the USA, it would reduce the field of competitors to just four — maybe even three if, as many analysts suggest, American responds by acquiring US Airways.

At the heart of whether the Justice Department will approve a new megacarrier is whether competition would be reduced so much that the nation's big, network airlines could drastically raise fares to maximize profits.

That's the concern of industry analysts such as Gellman and of some in Congress such as Rep. James Oberstar, D-Minn., chairman of the House Transportation and Infrastructure Committee, who opposes the merger.

In a congressional hearing last week, Oberstar told the United and Continental CEOs, "You guys hate competition. You want to be the competitor that dominates the market." The merger, he said, would leave "little choice for passengers, little choice for cities and little choice for competition."

Continental CEO Smisek, however, argued, "This is a brutally competitive industry. It is today and will be after this merger."

Congress cannot block the merger, but it can seek to influence the Justice Department's decision. Sen. Kay Bailey Hutchison, D-Texas, said at a Senate Commerce Committee hearing last week that she thought the merger would be approved. If it is, Oberstar warned, he'd seek to re-regulate the industry to protect consumers.

Different kind of merger?

Close partnerships already exist in the industry. United and Continental, for instance, are members of the 27-carrier Star global airline alliance. The two nearly merged in 2008. And last year they received an antitrust waiver from the government allowing them to combine their international operations as if they were a single carrier. Their joint venture is not yet fully operational. But even if the Justice Department opposes the full merger, the joint venture will survive.

There are other considerations that the Justice Department will look at when deciding whether to bless the marriage. For instance: Unlike several past mergers between airlines that competed head-to-head on dozens of key routes, a United-Continental union would be an "end-to-end" merger that the Justice Department's evaluation standards are set up to favor. The two carriers offer overlapping non-stop flights on just 13 domestic routes.

"It's fair to say that the short-term effect on routes where merging carriers already compete ... is that fares increase," says Steven Morrison, an economist at Boston's Northeastern University. "But that's only in the short run. The more important question is: 'What's going to happen in the long run?' "

Morrison wrote a 1996 study on the long-term impact mergers have had on fares. It's a study that the Justice Department has used in evaluating antitrust implications of more recent cases. He looked at fares a decade after three mergers in the mid-1980s: TWA and Ozark Airlines, Northwest and Republic airlines, and USAir and Piedmont Airlines.

Fares on what had been overlapping routes by a combined TWA-Ozark and Northwest-Republic rose more than the industry average, he found, but only for a short period.

Ten years after the mergers, fares on those routes were comparable to or below those on other routes.

In the case of USAir and Piedmont, however, fares on routes where they had competed head-to-head were as much as 45% higher 10 years after their 1986 merger than fares on comparable routes around the nation.

Even so, Morrison concluded, mergers don't inevitably push prices up.

"In the short run — yeah, on some routes fares will go up higher than would otherwise be the case," he says. "But in the long run, that's probably not true. And it's very hard to predict because each merger has its own idiosyncrasies in how the two networks fit together, what their operating costs will be, the size and location and nature of cities where their hubs are, the unions involved and who's managing the combined company."

Low-cost competition

Two other variables come into play on whether ticket prices will climb: consumers and, most important, competitors.

Consumers have become accustomed over 32 years of airline deregulation to expect low fares. Some travelers, mostly business travelers, may pay high prices to get where they need to go at a moment's notice. But findings indicate that if prices rise beyond most consumers' level of expectations and comfort, even by only a few dollars, they won't fly.

"There's a price where people say, 'To heck with it, I'm not going, or I'll teleconference, or I'll drive or take the train,' " Morrison says. "Now, my $250 limit may be somebody else's $500 limit. But it's safe to say that the demand curve slopes downward as airlines raise the price."
And then there are competitors. Today, the traditional network carriers face competition from low-cost airlines such as
JetBlue, AirTran, Virgin America, Frontier, Spirit and the giant of the discounters: Southwest Airlines.

"There have been circumstances in the past where mergers have taken place and fares moved up," Swelbar says. "But whenever prices move to above-market levels, that's an opportunity for competitors to come in and discipline the market."

Low-cost carriers now have about 30% of the domestic market, according to MIT's Airline Data Project. And, Morrison says, they "aren't shy about taking on the big carriers anymore." United has 10.5% of the market and Continental 7.7%, according to OAG-Aviation Consulting Services.
Even Gellman, who testified before Congress in 2008 in opposition to the Delta-Northwest merger, recognizes the potential of low-cost carriers to keep domestic fares down.

If mergers drive fares too high, he warns, "Southwest will go into their markets and beat the hell out of them. Whatever market Southwest enters, they're the winner."

But low-cost airlines don't fly many international routes. Hubert Horan, a former industry executive and consultant, says that's where the price danger exists for travelers.

Since 2004, trans-Atlantic fares have risen three times faster than fares on domestic routes, Horan told Congress last week. He attributes that to a reduction of competition because of mergers and because of joint-venture arrangements between U.S. network airlines and their foreign partners.

Power to raise prices

Gellman also says that the low-cost carriers' low-fare, high-volume business model won't work in smaller communities.

That leaves network carriers with the broadest and deepest reach into hundreds of U.S. and foreign cities. And that, he says, could give them power to push prices to unfair levels on thousands of routings around the world where there's not likely to be low-cost competition.
Swelbar scoffs at such worries for most U.S. travelers.

"Draw a 200-mile radius around the 69 airports that Southwest now serves," he says. "Ninety-five percent of U.S. air travel demand comes from within those circles.

"That's a staggering number," Swelbar says, "and that's before we even consider the impact of the JetBlues and the AirTrans. It means that for many people who don't like higher fares, the first leg of their vacation will be on the highway to the more distant airport. But they will continue to have access to relatively low-priced air service."
American Airlines Adds Boarding Pass Printing Capability to Mobile Device, Improving Service to the Customer
Customers Benefit From American's Industry Technology Leadership

Press Release Source: American Airlines On Tuesday June 22, 2010, 10:00 am EDT
FORT WORTH, Texas, June 22 /PRNewswire-FirstCall/

American Airlines today announced that airport employees using the airline's mobile YADA device – which stands for Your Assistance Delivered Anywhere – are even better equipped to serve customers anywhere in the airport with the additional ability to print boarding passes.
Customers in Dallas/Fort Worth; New York (both at JFK and LaGuardia); Chicago; Miami; Boston; Albuquerque N.M.; St. Louis; and San Juan, Puerto Rico, can now be aided by airport employees anywhere in the airport. The mobile YADA device enables airport employees to provide real-time information on flights, gates, standby lists, print bag tags and boarding passes, and even pull up maps of other airports.

"YADA is a major step in the enhanced customer experience at American Airlines and is part of a suite of real-time technologies that have transformed our operations," said Mark DuPont, Vice President – Airport Services Planning. "Today, customers interact with airport employees primarily at the counters in front of and behind security. YADA allows us to better assist customers anywhere in the airport, especially during weather-related, off-schedule operations when lines can become long."

"This is a prime example of American's technology leadership as YADA provides our airport employees with more real-time mobile functionality than any other airline," said Monte Ford, Senior Vice President and Chief Information Officer. "Our customers are mobile by definition, and when we can equip our employees with real-time mobile technology that enables them to make better decisions on behalf of the customer, we all benefit. Our airport employees do an excellent job interacting with customers and meeting their needs – YADA enables them to come out from behind the counter and provide real-time information, bag tags, boarding passes and other answers wherever the customer is in the airport."

American's goal is to eventually have a YADA device at every gate, making it part of a message suite that gives the airline the ability to communicate quickly with agents across the system in the event of an off-schedule operation such as a weather event, that can cause flight delays and cancellations.

American launched a pilot of YADA in Boston in Summer 2009 using Logan and Boston-area travelers as the first in the country to help American test this technology.
About American Airlines
Longterm, Bet on American Airlines CAL, DAL, AMR, LCC - TheStreet TV

American Airlines Looks Good For the Long Haul
(click here )
Longterm, Bet on American Airlines CAL, DAL, AMR, LCC - TheStreet TV

Sunday, June 20, 2010

A Refutation of the Arguments Against the United-Continental Merger
by Davide Pavone June 20, 2010 }

The merger between United Airlines (
UAUA) and Continental Airlines (CAL) has generated lively debate amongst analysts, politicians, and business leaders. This article refutes the more common arguments against the horizontal agreement.

Mergers do not work.

Given that their own success, as well as the future of the firm, is at stake, it is vital that United and Continental managers correctly assess the benefits and costs of the horizontal agreement. The assessment is inherently subjective, and does not simply include cost calculations and revenue projections.

Successful business arrangements are akin to successful marriages; they work efficiently, but only the parties involved are aware of the relative costs and benefits. Moreover, like a marriage, the agreement’s success depends more on a tacit understanding than objective cost-benefit calculations. A regulatory agency is not in a position to accurately estimate the benefits and costs of any horizontal merger.

It is not possible for regulators to apply the rule of reason as they lack the required information. Regulators assume the existence of the information they require to decide a case. The necessary information is embedded in future economic activity, becomes available once the future economy activity has occurred, and is apparent only to the concerned economic agents. It is fallacious to state ex ante that the costs of a merger are greater than its benefits, or the merger will be unsuccessful. Given that the knowledge of future prices is required to determine whether a merger will be profitable, the success of a merger is only determined ex post.

The merger would reduce service and jobs.

The question to ask is not how a reduction in air service and jobs may be prevented, but whether factors of production are being allocated efficiently. If it is not possible for the post-merger United to earn its cost of capital on a particular route, the route should be terminated. If United continues to operate the route, the use of factors of production is wasteful. By eliminating unprofitable air service and jobs, United allows scarce factors of production to be used (more) profitably.

The post-merger airline would have a considerable market share and significant market power.
In order to discuss United’s post-merger market share, it is necessary to first define the relevant market. Unfortunately for merger opponents, it is not possible to define the relevant market in a non-arbitrary fashion.

Suppose we wish to determine United’s post-merger market share. Should the relevant market be defined nationally, or divided into regional submarkets? If the latter approach is chosen, do we simply examine flights between two specific airports (e.g. LAX and ORD), or two general areas (e.g. the LA basin and Chicago)? Do we assume that all passengers are homogeneous, or take differences into account (e.g. business traveler as opposed to leisure traveler)? How are these questions to be answered unambiguously?

For the sake of argument, let us assume that it is possible to determine the post-merger airline’s market share in a non-arbitrary manner. Despite this achievement, the number would be meaningless as economic theory does not provide a threshold above which a firm may earn economic profit in the long-run.

It is fallacious to state that a firm with a market share of (say) 33.3% has sufficient market power to earn economic profit in the long-run. Likewise, it is erroneous to conclude that market output will fall, and the market price will rise, due to a horizontal agreement which raises the Herfindahl index of market concentration by (say) 175 points. The thresholds are completely arbitrary and have no scientific value. But, what if the merger does permit the airline industry to raise air fares?

Contrary to what certain political and business leaders may think, a rise in airline ticket prices would not indicate market power. In order for the higher price to be “monopolistically-competitive”, the lower price must have been “competitive.” However, how do we know that the lower price was indeed a competitive price? We do not know.

Given that a clearly established competitive price does not exist, it would be incorrect to declare that the higher prices are monopolistically-competitive. In fact, it could be argued that prices rose from a “sub-competitive” level to one that is “competitive.” Moreover, merger opponents fail to realize that the demand for air travel is (generally) elastic.

It is generally difficult for an airline to obtain market power because the demand curve for air travel, as it presents itself to each airline, is elastic (click on charts to enlarge). In other words, the percentage change in quantity demanded is greater than the percentage change in price. As a result, the market power argument against the merger is not relevant.


The arguments put forward by merger opponents are not supported by economic theory. Regulators are not in a position to evaluate the advantages and disadvantages of the merger. Moreover, contrary to the prevailing attitude, it is only possible to determine the success of the merger ex post. Lastly, the arguments concerning a reduction in output, loss of jobs, and creation of market power are not relevant to the debate.

Disclosure: The author holds no positions with regards to UAUA and CAL.
About the author:
Davide Pavone

Davide Pavone is an undergraduate student enrolled in the Desautels Faculty of Management (McGill University). He is pursuing a Bachelor of Commerce, and his main and secondary fields of study are finance and economics respectively.

Friday, June 18, 2010

On the Road
A Summer Invasion of the Body Scanners

Published: June 14, 2010

At 6 a.m., Tucson International Airport was already busy in these initial days of the summer crush. Buying a newspaper at the gift shop, I heard loud cackling from the floor. A furry toy dog was tumbling around by my feet, laughing manically.

“It does that whenever somebody moves,” the clerk said, rolling her eyes. “Lots of people are buying them.”

I imagined the poor woman having to spend her entire workday listening to the racket from such a toy, called Chuckle Buddies,which costs $19.99. “Do you want me to step on it?” I asked.

“Thank you, but they have more,” she said.

Here we go, I thought, annoyed already as I began what would be a long day at three airports in the Southwest. I had to spend a short time in Albuquerque. My afternoon return trip required a connection in Las Vegas.

With travel demand picking up, this summer I’m going to report occasionally on days spent at airports. My initial review of the experience is mixed, but mostly positive.

The security line at the pleasant Tucson airport moved efficiently. “Good morning! The sun is shining, the birds are singing,” chirped the Transportation Security Administration officer who checked credentials. That was nice. Good cheer is contagious in air travel.

My flight to Albuquerque on Southwest Airlines boarded efficiently, though it was full. It left on time. The flight attendants were pleasant. As we approached Albuquerque, a flight attendant thanked the passengers for flying Southwest and joked, “We do know that you have a choice in flying, though not necessarily a better choice.” People laughed.

The Albuquerque International Sunport, which strikes me as a silly name, was also busy, but things moved smoothly.

A few hours later, when I returned to the airport for my trip home, I spotted in the security area a lane devoted to one of those new body-imaging machines that have been causing so much concern. You know, the ones that the T.S.A. calls advanced imaging technology machines and critics call strip-search machines.

The security agency has 105 of them at 31 airports, and is awarding contracts to have about 450 installed at various airports by the end of this year. Eventually, these machines will replace the familiar magnetometers that you walk through at checkpoints.

I have reported previously, and will continue doing so, on the various issues raised by these new machines, including privacy (the machines see through clothing), as well as the security agency’s need to detect nonmetallic weapons. That imperative was underscored last Christmas, when the so-called underwear bomber tried to detonate plastic explosives on a flight to Detroit.

But as more of us encounter these machines, I thought it might be useful to share my initial experience so I deliberately headed for the lane with one.

First, you need to remove everything from your clothes, including wallets from pockets, because the machines see mass, metal or not. You can choose to carry your wallet in a hand, I was told. I was also told I had to remove my belt, which had never previously been an issue.

A screener directed me into the portal, within which another screener told me to stand on rubber footprints with my legs slightly spread.

“Stand still, hands over your head,” she said, causing me some concern because I have dropped a few pounds recently and my traveling jeans, beltless, are precariously loose. A glass shutter slid in front of me as the machine did its scan. That was easy, I thought, tugging at my pants, which I had managed to keep up.

But on the far end of the portal waited another agent, who said he needed to inspect the wallet I had chosen to keep in my hand. “Stand facing me,” he said as he began rifling through the bills and cards in my wallet.

I evidently did not comply fully with his specifications. “You really need to stand facing me directly and look directly at me, sir,” he said sharply. Except for the “sir” part, I had a flashback to boot camp many years earlier.

No weaponry having been found in my wallet, I was dismissed. I trudged off to fetch my shoes and my carry-on, then continued on to my flight (on time) to Las Vegas.

My impression of the new machine? It took a long time and felt invasive. And I did not like being ordered around by the security screener. Let me hear about your experiences.

A version of this article appeared in print on June 15, 2010, on page B6 of the New York edition.

Wednesday, June 16, 2010

Congressmen would bring back airline regulation
is OK'dCongressmen say they will try to bring back financial regulation of airlines if merger

Joan Lowy, Associated Press Writer, On Wednesday June 16, 2010, 4:48 pm EDT

WASHINGTON (AP) -- Restoring financial regulation of the airline industry will be put before Congress, if the Justice Department approves a proposed merger of United and Continental airlines, two key House members said Wednesday.

At a hearing on the merger, Reps. James Oberstar, D-Minn., chairman of the House Transportation and Infrastructure Committee, and Jerry Costello, D-Ill., chairman of the panel's aviation subcommittee, expressed concern about the impact the proposed deal could have on consumers and airline workers.

Deregulation has been credited with making airline travel affordable for the average American. But Oberstar pointed to the $2.7 billion the airlines earned in baggage fees in 2009 as evidence that consumers are no longer benefiting from the system. He said he believes there's support in the House for re-regulation.

"Hardly a day passes where I don't walk out on the (House) floor that someone asks me, 'When are we going to re-regulate the airlines?'" Oberstar told reporters after the hearing.

The legislation would impose federal regulation of airline pricing and re-establish a government gatekeeper role similar to that played by the old Civil Aeronautics Board prior to deregulation in 1978, Oberstar said. The board set standards for companies trying to enter the airline market and decided on a case-by-case basis which companies should be granted permission to fly passengers.

Deregulation worked for a while, bringing new, lower-cost carriers into the market and driving down fares, said Oberstar, who -- as a junior congressman -- voted in favor of deregulation. Most of those air carriers -- as well as several "legacy" carriers dating back prior to deregulation -- are gone.

The CEOs of United and Continental, who testified at the hearing, complained that competing against a steady influx of low-cost carriers who drive prices artificially low and then go bankrupt has weakened the airline industry.

Airlines have also suffered repeated shocks in recent years, including the Sept. 11 terror attacks, the SARS virus, volatile oil prices and the economic downturn. They have shed more than 158,000 full-time jobs since employment peaked in 2001 and lost an estimated $30 billion to $60 billion in recent years. At least 13 airlines have filed for bankruptcy in the past several years.

"The status quo for this industry is unacceptable," said United's Glenn Tilton.

United's proposed merger with Continental would create the nation's largest airline. Tilton and Continental's Jeffery Smisek said the new company would be able to compete more effectively against large, foreign carriers in the international market.

The new airline's financial success will be based on "synergies" produced by combining the two carriers, not higher fares, Tilton said.

However, industry experts and consumer advocates were skeptical that there would be any synergy savings other than reduced competition.

Costello said the committee will ask the Justice Department, which is reviewing the merger proposal, to determine if there is evidence to support the synergy claims.

"I'm looking for a way to preserve competition," Oberstar said. "That's what I voted for in 1978."

Tuesday, June 15, 2010

Airline stocks rally as execs vouch that recovery continues
June 15, 2010, 5:25 p.m. EDT

By Christopher Hinton , MarketWatch
NEW YORK (MarketWatch) -- The sector benchmark for airline stocks hit its highest point in almost three years Tuesday, rallying after executives from major U.S. carriers said revenue growth has nearly returned to prerecession levels.

All 13 of the airline index's component stocks traded in the black -- and shares of Continental Airlines /quotes/comstock/13*!cal/quotes/nls/cal (CAL 24.81, +0.10, +0.40%) , UAL Corp. /quotes/comstock/15*!uaua/quotes/nls/uaua (UAUA 23.74, +0.83, +3.62%) and US Airways Group /quotes/comstock/13*!lcc/quotes/nls/lcc (LCC 10.37, -0.09, -0.86%) all reached 52-week highs.

During a series of analyst meetings in New York, executives from Continental, US Airways and Delta Air Lines /quotes/comstock/13*!dal/quotes/nls/dal (DAL 14.01, +0.02, +0.14%) noted premium-paying business travel continued to recover, albeit slowly. Along with greatly reduced seating capacity, the return of such premium-class customers has helped lift average fare and unit revenue for the airlines.

"Our unit revenue numbers for each quarter of 2010 should be better than they were in 2007, and we will approach the 2008 numbers. ... We should be at the 2008 levels by the end of this year," said Ed Bastian, president of Atlanta-based Delta.

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Along with unit revenue, cash balances are running high, with Delta forecasting $7 billion in free cash flow between now and 2012.
Read more about Delta's outlook .

For its part, Continental said it expects to end the current quarter with about $3.5 billion, its highest end-of-quarter balance on record.

The so-called legacy carriers, which also include American parent AMR

Corp. /quotes/comstock/13*!amr/quotes/nls/amr (AMR 8.83, +0.04, +0.46%) , typically outperform the market as they benefit disproportionately from an improving economy, according to Deutsche Bank analyst Michael Linenberg.

On Monday, Linenberg initiated buy ratings for all the legacy carriers, as well as the Seattle-based network carrier Alaska Air /quotes/comstock/13*!alk/quotes/nls/alk (ALK 52.06, +0.30, +0.58%) .

"Major airline stocks are highly exposed to the three revenue segments that were most impacted during the global recession: long-haul international, business-premium travel, and cargo," Linenberg said in a note to investors.

But beyond the peak-travel season this summer, there are some dark clouds to navigate. Unemployment remains high, global production remains sluggish and consumer spending remains restrained.

On Wednesday, FedEx Corp. /quotes/comstock/13*!fdx/quotes/nls/fdx (FDX 83.12, +0.11, +0.13%) is scheduled to report fourth-quarter financial results as management updates the shipping giant's outlook.

As an economic bellwether, the Memphis-based company's projected freight and cargo shipments will be watched closely by analysts for business trends -- as well as any signs of decelerating global trade and prospects for a double-dip recession.
Read more about the FedEx outlook .

Christopher Hinton is a reporter for MarketWatch based in New York.
U.S. Airline Recovery Quickens

U.S. airline executives said recovery in business travel has accelerated alongside gains in international and domestic passenger revenue, bucking lingering concerns about higher fuel prices.

The improvement in sector fortunes also is seen as more sustainable than after previous downturns, as even low-cost carriers like Southwest Airlines Co. have slowed expansion plans.
"Corporate revenues are driving a considerable amount of the improvement," said
Ed Bastian, president of Delta Air Lines Inc., the country's largest carrier by traffic.

Mr. Bastian said at an industry conference Tuesday that revenue from corporate sales was up 63% year to year through May 31, and continued to strengthen. Revenue per passenger mile on flights to Asia rose 50% in June, and was up 30% on trans-Atlantic services, he said.

Delta, meanwhile, boosted its estimate for second-quarter operating margin to 10% to 11%, from an April forecast of 8% to 10%.

Passengers boarding a United Airlines flight at Denver's airport last month. Airline executives say the industry's fortunes are improving.

Most major U.S. carriers forecast double-digit-percentage gains in their average passenger revenue for the second quarter, helped by more corporate travel after the unprecedented declines of as much as 40% seen a year ago. The revenue picture has strengthened through the quarter, with United Airlines' parent UAL Corp. leading the industry with a forecast for an increase of 26% to 27% in the three months to June 30 from a year earlier.

"We're also seeing corporations beginning to allow their employees to travel in the premium cabins," said Gerard Arpey, chairman and chief executive of American Airlines parent AMR Corp.

Some executives, however, remain cautious despite the positive trends. "Business travel, although it's improving, is still nowhere close to fully recovered," said Southwest Airlines' treasurer, Laura Wright.

Southwest and other carriers also expect to receive an increase from gaining passengers of Spirit Airlines Inc., which canceled all of its flights through Thursday amid a pilots' strike that started last Friday.

While returning passengers are bolstering airline cash balances, executives also remain wary of regulatory intervention.

United Airlines and merger partner Continental Airlines Inc. plan to respond to a request for more information from competition authorities early next month.

Kathryn Mikells, chief financial officer of UAL, said at the conference that the absence of joint labor contracts wasn't a barrier to a combination that would surpass Delta as the world's largest carrier.

Ms. Mikells and Jeff Smisek, Continental's chairman and CEO, reiterated at the conferencethat they saw no competition issues after the Department of Justice made a second request for information on the proposed deal last week.

Continental and United announced a merger plan last month that has split lawmakers on Capitol Hill, with the House subcommittee on aviation holding a hearing Wednesday into the potential effect of the deal on consumers and competition.

Write to Doug Cameron at