Friday, July 30, 2010
Friday July 30, 2010, 4:20 pm EDT
WASHINGTON (Reuters) - Northwest Airlines, now a part of Delta Air Lines (NYSE:DAL - News), has agreed to plead guilty to conspiring to fix the prices of air cargo, the U.S. Justice Department said on Friday.
Northwest agreed to plead guilty to a single felony count that its now-shuttered Northwest Airlines Cargo conspired to fix prices, the department said. It agreed to pay a fine of $38 million.
"As a part of the conspiracy, Northwest Airlines Cargo monitored and enforced adherence to the agreed-upon rates," the department said in a statement.
Delta said the price-fixing occurred before it bought Northwest in 2008. "Northwest terminated the employment of the individual who it believed had primary responsibility for the conduct in question," Delta said in an email.
Sixteen airlines have pleaded guilty or agreed to do so in the department's long-running probe into price-fixing in air cargo, the Justice Department said.
The airlines have paid more than $1.6 billion in criminal fines, and four executives have been sentenced to prison.
Antitrust enforcers in Australia and the European Union, among others, have also prosecuted air cargo price fixing cases.
Major airlines caught up in the probe include British Airways (LSE:BAY.L - News), Korean Air Lines (003490.KS), Qantas Airways Ltd (ASX:QAN.AX - News), Japan Airlines (Other OTC:JALFQ.PK - News), Cathay Pacific Airways (HKSE:0293.HK - News), Air France (Paris:AIRF.PA - News) and EL AL Israel Airlines Ltd (Tel Aviv:ELAL.TA - News). and Nippon Cargo Airlines Co. Ltd.
(Reporting by Diane Bartz; Editing by Tim Dobbyn)
Wednesday, July 28, 2010
TUCSON - A helicopter has crashed near Park & Glenn Avenue in Midtown. A statement from Air Methods, the company operating the helicopter, confirms that all three crewmembers on board suffered fatal injuries.
According to the statement, a paramedic, flight nurse, and a pilot were on board Eurocopter AS350 helicopter based out of Douglas, Arizona when it crashed into a yard in midtown Tucson at 1:40 p.m. There were no patients on board.
"This is a sad day for all of us at Air Methods and we extend our heartfelt sympathy to the family and friends of our employees who perished while on duty," said Aaron Todd, chief executive officer of Air Methods Corporation.
News 4 has confirmed that the helicopter was operating for LifeNet, an emergency medical services company.
Sarah Perotti, the Tucson manager of LifeNet, gave the following statement:
"We can confirm there has been an incident, but we do not have exact details. We all want to get the story correct. We will need time to determined what has occurred. Our corporate spokesman will be in touch with you with further information. We appreciate your support."
Three people were killed when a medical evacuation helicopter crashed on Tucson's north side Wednesday afternoon
Killed in the crash were the pilot, flight nurse and paramedic, said Air Methods, the Colorado-based company that operated the LifeNet medical helicopter. There were no patients aboard the aircraft, the company said.
The AS350 B3 Eurocopter, which was based in Douglas, crashed into a fence in front of a house on North Park Avenue just south of East Glenn Street and burst into flames. A witness said the pilot appeared to manuever the stricken helicopter away from the home.
Authorities earlier said that one person was killed and two were critically injured in the crash. Air Methods confirmed at about 5:30 p.m. that all three aboard had died.
"This is a sad day for all of us at Air Methods and we extend our heartfelt sympathy to the family and friends of our employees who perished while on duty," said Aaron Todd, chief executive officer of Air Methods Corp.
The helicopter's pilot was in contact with the control tower at Tucson International Airport at the time of the crash, but there was no indication of a problem, said Lynn Lunsford, an FAA spokesman.
The aircraft was traveling from Marana to Douglas at the time, but was not transporting a patient, Lunsford said. It crashed about 1:45 p.m.
Eyewitness Ricardo Carrasco said the helicopter's rotors stopped working and it started plummeting toward the ground.
He said the pilot managed to steer the chopper away from the house.
"If he (the pilot) hadn't turned around he'd have hit the house," said Carrasco, who ran toward the helicopter after it crashed but wasn't able to get close because of a "a wall of flames."
He and bystanders helped evacuate people in the neighborhood. There are no reports of injuries to residents or bystanders.
"One of the employees heard a loud boom, but he didn't know what it was and he went back to working on a car," said Tyler Edwards, 34, a service advisor at Stuttgart Autohaus, 614 E. Glenn St.
"Two people walked in who said they saw the craft go down. It appeared it had a malfunction and they saw it go down and then there was a lot of black smoke," said Edwards of the husband and wife who walked into the shop that repairs Volkswagens and Audis.
He said not long after the incident police squad cars, motorcycle officers, paramedics and fire engines began "flying down the street."
Officers began closing down the street at North First Avenue and East Glenn Street toward the east, Edwards said. Traffic began piling up in the area but motorists remained patient, he said.
House shook, flames intense
John Townsend, 74, who lives in the house where the helicopter crashed into the fence said he heard a loud noise shortly before 2 p.m. and then the house shook. He said he went into the back yard and saw smoke and flames.
Immediately after the crash Townsend said he didn’t realize it was a helicopter. He said he grabbed a garden house to try to put out the flames, but the fire and smoke were too intense and he went back inside.
Townsend said a neighbor banged on his front door and told him to get out of the house.
The FAA is sending inspectors to the crash site. The agency will conduct the investigation along with the National Transportation Safety Board.
Airline pilot pleads guilty to taking under-skirt photo of 15-year-old at Philadelphia airport
On Tuesday July 27, 2010, 3:37 pm EDT
PHILADELPHIA (AP) -- An airline pilot who used his cell phone to take photos up a teenager's skirt at Philadelphia International Airport has pleaded guilty to invasion of privacy.
US Airways pilot Joseph Pereira was sentenced Tuesday in Philadelphia Family Court to one year of probation. He will be evaluated for a sex offender treatment program.
Authorities say Pereira used his cell phone to take photos under the skirt of a 15-year-old girl on June 24.
US Airways spokesman Morgan Durrant says the 55-year-old pilot from Wexford, Pa., is suspended.
Pereira earlier resigned as a girls softball coach at North Allegheny High School, near Pittsburgh. School officials said there have been no other complaints about Pereira in 13 years of coaching.
US Airways asks judge to resolve pilots' seniority dispute to speed up joint contract talks
Monday July 26, 2010, 11:30 pm EDT
PHOENIX (AP) -- US Airways has asked a federal judge to resolve a seniority dispute involving its pilots.
Executives with the Tempe, Ariz.-based carrier said Monday's legal action in U.S. District Court in Phoenix is called a complaint for declaratory relief. They say the dispute has significantly stalled efforts to negotiate a joint contract covering the 4,000 pilots joined together by the merger of America West and US Airways five years ago.
The airline's pilots union says it will vigorously oppose the company's move. The US Airline Pilots Association says the court has no jurisdiction in labor contract negotiations.
Seniority is important to pilots and flight attendants because it dictates their schedules, pay, vacations and promotions.
Wednesday, July 28, 2010, 10:37am CDT
Houston Business Journal - by Christine Hall Reporter
Continental Airlines Inc. may get slapped with a $230,000 fine from the Federal Aviation Administration for operating an airplane that was not in compliance.
he FAA said it proposed the civil penalty on the Houston airline after alleging that on Aug. 12, 2008, Continental (NYSE: CAL) failed to install a washer while replacing the nose landing gear wheel and tire on a Boeing 767.
Continental subsequently operated the aircraft on 22 flights even though a warning in the maintenance manual stated that failing to install the washer could lead to wheel bearing failure.
FAA inspectors found the violation during a records check and noted three identical earlier violations, according to the agency.
CW 31 Sacramento By Rob Silverblatt Rob Silverblatt – Tue Jul 27, 5:27 pm ET
Even as BP shareholders celebrate CEO Tony Hayward's impending departure, many have been quick to raise concerns about how much the beleaguered executive will be paid when he heads out the door. After Hayward steps down in October, he will reportedly receive roughly $930,000 per year in pension payments--as well as a one-time severance payout worth about $1.6 million. With stock shares and stock options included, the total size of his package could swell to $18 million, according to one estimate.
Critics have already berated BP for its inclusion of the $1.6 million severance check, calling it improper for the company to reward Hayward, whose high-profile gaffes have put him at the center of public outrage surrounding the oil spill. "At a time when BP should be devoting every possible resource to ending the spill, cleaning up the Gulf and fully compensating the residents who have had their livelihoods impacted, I find it extremely troubling that BP's board would consider providing such a large severance package to Mr. Hayward," Rep. Ed Markey, a Massachusetts Democrat, said in a letter to BP.
Still, Jeff McCutcheon, an executive compensation expert at the firm Board Advisory, calls Hayward's severence check a "very reasonable" price for BP to pay for the ability to start moving on. "Whatever they're paying to Tony Hayward is a rounding error," he says. "What the board is really trying to do is get the company back on the right track. They're focusing on the big picture. ... That means a radical change in direction, and you can't do that under somebody who has been so tarnished by the past."
All told, Hayward's case is hardly unique. In fact, the past few years have been replete with examples of unpopular executives leaving their jobs with multimillion-dollar packages in hand. In the process, they've reignited the debate about what restrictions should be put in place regarding executive compensation. Apart from Hayward, here are five more officials whose payouts have raised eyebrows:
Stanley O'Neal, Merrill Lynch (Package worth: $161.5 million). Stanley O'Neal became CEO of Merrill Lynch in 2002, shortly after the tech bubble burst. Early in his tenure, O'Neal made few friends with his decision to fire upwards of 20,000 employees. By the time that the next bubble--the housing market--showed signs that it was ready to implode, he had even fewer allies left. In the third quarter of 2007, Merrill reported $2.24 billion in losses. The firm, which had billions of dollars' worth of exposure to bad mortgages, was ultimately rescued by Bank of America.
Robert Nardelli, Home Depot (Package worth: $210 million). Unlike some of the other executives who made this list, Robert Nardelli didn't exactly run his company into the ground. Even though its stock price struggled, Home Depot expanded substantially under Nardelli's watch. Still, Nardelli, once celebrated as a disciplined leader who almost inherited the GE throne, is now equally remembered for the shocking size of the compensation package he received when he was forced out. Ironically, it was Nardelli's large paycheck--he made $38.1 million as part of his last yearly contract with Home Depot--that prompted shareholders to call for his ouster.
Jimmy Cayne, Bear Stearns (Package worth: $61 million). When Bear Stearns collapsed, Cayne was the firm's chairman--but not its CEO. Previously, he had been CEO for 15 years, but he relinquished that title after being widely lambasted for being out of touch. According to critics, Cayne, an avid bridge player, seemed to be more interested in the card game than the day-to-day operations of the company. Cayne eventually sold his stock in Bear Stearns for $61 million.
Martin Sullivan, AIG (Package worth: $47 million). Insurer AIG, whose colossal struggles forced the government to step in with a massive rescue package, is one of the highest-profile examples of a company being run into the ground. The firm also earned a reputation for its overly generous executive compensation. Sullivan tapped into that, taking with him a package that at the time was valued at $47 million. Later, the company froze $19 million in payouts to Sullivan amid inquiries from the New York attorney general's office.
Robert Rizzo, public official (Package worth: $30 million). In one of this year's more bizarre--and, to California residents, maddening--stories, officials are still trying to figure out how Robert Rizzo, who up until this month served as the city manager of Bell, Calif., stayed under the public radar for so long. Rizzo, whose CEO-like work for the debt-strapped city mysteriously earned him $787,637 per year, could end up getting upwards of $30 million in pension payouts. It now appears that outrageous salaries were the norm in Bell: Its police chief, for instance, made $457,000 per year.
Tuesday, July 27, 2010
"Membership in oneworld would strengthen Air Berlin's competitive position and enable it to participate in the alliance's revenue enhancement and cost reduction activities," the airline said in a regulatory filing ahead of a news conference scheduled for Tuesday.
Air Berlin also announced that it entered into code-share agreements with American Airlines and Finnair on Monday. The deal will allow the airline to offer tickets starting Nov. 1 on American flights to 15 U.S. destinations and two in the Bahamas, and Finnair flights to Helsinki, within Europe and to Asia.
The news comes a week after the U.S. Department of Transportation granted oneworld members American Airlines, British Airways and Iberia airline final approval to create a joint business governing flights between North America and Europe, and gave anti-trust immunity to the three airlines, plus fellowoneworld members Finnair and Royal Jordanian Airlines.
Monday's agreement covers key aspects of Air Berlin's membership in oneworld and calls for the airline to work towards completing a full membership agreement under the sponsorship of British Airways.
By David Chartier, Macworld
It seems that some airlines aren't content leaving their customers in the hands of third-party apps like FlightTrack Pro and Flight Status Pro.
American Airlines has boarded the App Store with an official, feature-packedapp for iPhone and iPod touch.
American Airlines for iPhone can lend a hand through your entire trip: It can check your flight status, let you set a parking reminder by snapping a photo, check in for flights, store your mobile boarding pass, display
terminal maps, and even let you enroll in and monitor your AAdvantage miles program.
Oh, and it apparently also includes a Sudoku game. (For layovers and while you're waiting in those seemingly never-ending security lines, we presume.)
American Airlines isn't the first airline to touch down in the App Store, though its only app-wielding U.S. competitor at the moment seems to be Southwest Airlines.
American Airlines for iPhone and iPod touch is available now in the App Store for free, and it requires iOS 3.1.3 or later.
Monday, July 26, 2010
Tiffany HawkWriter, travel-industry insider
Posted: July 23, 2010 01:21 PM
According to The New York Post, yesterday federal agents charged a former American Airlines flight attendant with making terrorist threats. After being fired for throwing a coffee pot at a co-worker, Rodney Lorenzo allegedly said he would retaliate by giving cockpit-access instructions to Islamic terrorist groups.
The coffee-pot incident suggests Mr. Lorenzo is not your average mentally-stable flight attendant, and American surely made the right decision in firing him. Nevertheless, it's frightening to think of what could happen if airline workers were to "go postal." Especially when you consider that air crews are now among the most poorly treated work groups in the nation.
Most Americans are protected by the Fair Labor Standards Act of 1938, which limits a workday to eight hours and a workweek to 40 hours, but airlines are exempt. Governed only by the Federal Aviation Administration, they can push flight attendants up to 20 hours per day with no overtime. And thanks to ever-shortening layovers, they may only get four or five hours of sleep in between flights.
When I became a flight attendant in 2000, these brutal schedules existed, but they were the exception. My layovers probably averaged 13 hours. By the time I left in 2008, I could expect only eight or nine hours. When you consider that a layover is clocked from touchdown to takeoff, my "rest" included deplaning, traveling to and from the hotel, reporting back to the airport an hour before the next flight in order to brief with the crew, ready the airplane, board passengers, hang coats, and even pass out pre-departure mimosas.
I have been so tired that I have fallen asleep standing up. I have walked through the cabin, struggling under the weight of a coffee pot and asked "Cream or sugar? Cream or sugar?" I have cried in the lobby of a crowded hotel when, after a sixteen-hour duty day that ended at dawn, they were out of rooms.
Do I sound disgruntled yet?
The FAA's bare-minimum work restrictions were designed to be supplemented by collective bargaining agreements, most of which were dismantled after 9/11 through "temporary" employee concessions or bankruptcy proceedings.
Unfortunately, growing revenues are not easing the burden. As legacy US carriers now post a billion dollars in second-quarter profits, they continue to squeeze frontline employees - asking for even longer hours, shorter rest breaks, and further pay cuts. In many cases, these sacrifies are demanded while executives rack up salaries as much as 200 times that of their employees.
Yes, I am bitter. But relax, I won't be selling any of my insider-knowledge to Al Qaeda. Neither am I writing this for my benefit. Although I would love to go back to the job I had pre-9/11, I will not work as a flight attendant again. By publicly advocating for more rest and improved contracts, I have long burned any bridges there.
The question I ask is this: As contract negotiations stall and strikes loom at United and American, as Frontier unionizes and Virgin America attempts to, how will we as consumers respond? Will we support them, or will we spend our energy fighting for cheaper fares?
Airline workers deserve the fair labor standards we take for granted. Without them, you and I could pay the ultimate price.
Friday, July 23, 2010
ByTed Reed, TheStreet.com Staff Reporter , On Friday July 23, 2010, 12:01 pm EDT
CHARLOTTE, N.C. (TheStreet) -- Want more evidence that US Airways needs a merger? Throughout the world -- and the nation, -- major airlines are defined by their hubs. That's a problem for US Airways, because its hubs are not the best.
"US Airway's largest hub, with 612 daily departures to 120 destinations, is Charlotte Douglas International (downtown Charlotte is pictured above). The only southeast hub besides Atlanta (the world's busiest airport), Charlotte is a well-managed airport with the lowest per-passenger cost of any major hub and a recently-opened third parallel runway. In fact, US Airways has built Charlotte into the 11th busiest U.S. airport, in terms of passengers.
"Charlotte is a great hub, but it's a smaller city than Atlanta," said US Airways President Scott Kirby, speaking recently at the Bank of America Merrill Lynch investor conference. Philadelphia, US Airways' other eastern hub, "is a great hub and a great international launching point, but it's a smaller city than New York," said Kirby.
Phoenix, US Airways' third hub, ranks ninth in total passengers and ninth in origin and destination passengers, but lacks business passengers, who often pay higher fares.
Charlotte lacks just one thing: origin and destination (O&D) passengers, folks who begin or end their travel there.
The best hubs tend to be those with the largest numbers of O&D passengers; airlines can charge more for non-stop flights, their premier product. When they offer one-stop flights through their hubs, they must compete with other airlines offering exactly the same product: one-stop flights through their hubs.
In 2009, Atlanta had 26.2 million O&D passengers, according to the Transportation Department's Bureau of Transportation Statistics. Atlanta ranked fifth in the U.S. Charlotte had 9.4 million, and ranked 31, the lowest for any major hub.
US Airways has said this dynamic puts it at a 10% disadvantage in revenue per available seat mile, relative to its peers. (A revenue passenger mile, a key industry metric, is one passenger carried one mile.)
To produce the same profitability as its peers, US Airways requires a cost advantage, which it achieves with 10% lower costs. "The way for our employees to ultimately get to industry standard wages is to combine with one of those networks that has even better profitability and even better hubs," Kirby said.
"From a global perspective, a strong local traffic composition is the key ingredient" in the capability of a hub, said OAG consultant Stan Hula. "Once you get into details the equation becomes more complex. The issues are the population of the hub city, the wealth of that population, the nature of the traffic and how much competition there is for it. Then you similarly look at the flow components. But without strong local traffic, you have a weak hub no matter what else you have."
In fact, the three largest O&D markets are not key hubs. Los Angeles International the number one O&D market, is a strong international hub but not so good domestically because it lacks destinations to the west and no airline has been able to accumulate a dominant share of its passengers. The other top two O&D markets are Las Vegas and Orlando, but the large number of leisure passengers that pass through them balk at paying high fares.
It's fair to say that it did not take any particular genius for the Big Three airlines to establish their hubs in big cities that became great hubs.
Delta started as a passenger airline in Monroe, La., and moved its headquarters to Atlanta in 1941. Dallas was a key city for American by 1930. In 1978, around the time that airlines began to create hubs, American moved its headquarters to Fort Worth. United, meanwhile, was formed in 1930 after a predecessor bought a large, Chicago-based carrier.
By contrast, one principal US Airways predecessor was formed to carry mail to the Allegheny Mountain region centered near Pittsburgh, while the other was formed in Winston-Salem, N.C., about 75 miles from Charlotte, in 1947. Before its 2005 merger with America West, US Airways had hubs in Pittsburgh, Charlotte and Philadelphia, three cities within a day's drive of one another.
US Airways executives have long recognized the airline's plight and have sought to overcome it through mergers. Onetime CEO Stephen Wolf said repeatedly that the carrier was the last of its kind, neither a low-cost carrier nor an international carrier with a global route system. Wolf and longtime associate Larry Nagin pursued a 2000 merger with United, where they had worked together to build a global carrier.
After arriving at US Airways in 2005, CEO Doug Parker tried a hostile takeover of Delta, but the carrier fought him off. Parker has twice entered negotiations with United; both times, United preferred to merge with Continental.
Now speculation about a US Airways/American merger abounds. The concept seems to have the support of everybody -- except American itself .
But US Airways knows what it needs. As Kirby has said: "Further down the road, there's a high probability that US Airways will wind up merging with either United, Delta or American."
-- Written by Ted Reed in Charlotte, N.C.
Thursday, July 22, 2010
WASHINGTON/NEW YORK (Reuters) - Airline results on Thursday provided new evidence that the industry recovery is on track, driving shares higher, but the bumpy economy prompted an outlook for slow progress.
Continental Airlines Inc (NYSE:CAL - News), JetBlue Airways (NasdaqGS:JBLU - News), and Alaska Air Group (NYSE:ALK - News) all handily beat Wall Street expectations, reporting stronger profits on rebounding demand and big revenue gains driven by higher fares and new fees.
Those reports followed profit reports from Delta Air Lines (NYSE:DAL - News) and United Airlines, a unit of UAL Corp (NasdaqGS:UAUA - News), earlier in the week, reflecting the robust revenue trend on higher passenger demand.
Continental executives, who see strong revenue trends continuing in July, nevertheless adopted a cautious tone on the pace of recovery gains.
"We like the trends we are seeing, but continue to believe this will be a long, slow recovery," Jim Compton, CAL's chief marketing officer, told analysts on a conference call.
(See graphic: airline recovery http://link.reuters.com/xak98m)
ROOM FOR REVENUE JUMP
Higher fares have boosted results as have ancillary bag and other fees, which are expected to decline as passengers check less luggage. For example, Continental said its average fare-per-revenue passenger rose 20.6 percent.
Analysts believe there is more room for revenue growth, which underpinned one of the industry's best quarters in recent memory.
"We're not back to peak revenues yet," said Helane Becker, an analyst with Dahlman Rose & Co.
Earlier this week, US Airways Group (NYSE:LCC - News) said the U.S. economic recovery was tepid and Delta's third-quarter outlook was characterized as conservative. Delta, however, forecast a full-year profit.
AMR Corp's (NYSE:AMR - News) American Airlines narrowed its quarterly loss, but analysts raised concerns that its growth potential could be limited, given that other U.S. rivals with strong international networks have merged or are planning to do so.
Continental is expected to merge with United Airlines by the fourth quarter becoming the world's largest airline. Delta is the current industry leader.
AHEAD OF ANALYST EXPECTATIONS
Continental posted net income of $233 million, or $1.46 per share, compared with a year-earlier net loss of $213 million, or $1.72 per share.
Excluding $24 million of merger-related costs and other charges, Continental reported a profit of $1.60 per share. Analysts on average had expected $1.51, according to Thomson Reuters I/B/E/S.
JetBlue's net income rose to $30 million, or 10 cents per share, from $20 million, or 7 cents per share, a year earlier.
Analysts on average were expecting earnings of 8 cents per share.
Alaska reported earnings of $58.6 million, or $1.60 per share, compared with $29.1 million, or 79 cents per share in the year-earlier period.
Excluding special items for fuel hedge accounting and aircraft transition charges, earnings were $84 million, or $2.29 per share, ahead of analysts' expectations of $2.12 per share.
It was Alaska's best quarterly performance ever on an adjusted basis.
(Additional reporting by Karen Jacobs in Atlanta, editing by Maureen Bavdek and Gunna Dickson)
Wednesday, July 21, 2010
The stress of traveling continues to climb as planes and airports keep getting more crowded and fliers are forced to deal with longer lines, more fees and rude passengers.
AIRPLANE ETIQUETTE TIPS
To make your flight more enjoyable, travel and etiquette experts say:Do
Bring headphones to block out noise and other irritations.
Carry an eye mask. Pretending to nap can sometimes silence a chatty seatmate.
Consider paying for extra legroom or the chance to board early.
Ask a flight attendant to change your seat if possible.Don'tRecline your seat before asking the passenger behind you if it's OK.
Rush to the airport. It will only set you on edge before the trip even starts.
Sweat the small stuff. The flight will be over soon enough.
By Charisse Jones, USA TODAY
When Mike Nugent flies, nothing annoys him more than settling into his seat, the plane taking off, and the passenger in front reclining into his lap. So he's come up with a solution.
"I put my knee right in the middle of the back of the seat," Nugent, 66, says. "They think it's broken. They try (to recline) two or three times, then they give it up."
Nugent, a hospital laundry consultant who's on the road most days of the year, has another way to sidestep the irritation that can accompany flying. "I've started to drive as often as I can," he says.
Long gone are the days when air travel was an elegant experience. Many road warriors say that courtesy, at the airport or on the plane, is becoming about as rare as a free, hot in-flight meal. They grouse that inconsiderate, or downright rude, behavior is more common and that it's spurred by an increasing discomfort with all aspects of flying, from security rules to bare-bones service, that put travelers on edge.
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And behavior is unlikely to get better, some involved in the travel industry say, because irritants such as extra airline fees and more crowded planes aren't going away soon.
"The flying experience is terrible," says Anne Banas, executive editor of SmarterTravel.com. "You're getting less legroom. People fight over things like capacity in overhead bins. Airlines are charging bag fees. ... Airlines are doing things that are making it more difficult and uncomfortable for the passenger, and the customer service isn't getting that much better. You compound those factors, and you have a lot of frustration in the air."
Frustration can lead to bad manners.
"So much of etiquette is based on knowing what to expect from someone else," says Lizzie Post, spokeswoman for the Emily Post Institute, which was founded by manners maven Emily Post and is dedicated to the promotion of etiquette.
Passengers, she says, "don't know how long that security line is going to be. They don't know if they have anything in their bag that will meet regulations in this airport but not that airport. The nerves get up, and that's when we lose our awareness of the other people around us."
Frustrations add up
Complaints abound. Road warriors fret about parents who won't quiet screeching toddlers, the guy who had garlic for lunch and won't stop talking, and supersized seatmates who intrude on their space. They speak of dirty planes, testy flight attendants and loud passengers who won't turn off their cellphones.
There's the lady trying to stuff a steamer trunk into an overhead bin in the front of the cabin when her seat is in the back, and the passengers who give you whiplash dragging your seat down to pull themselves up.
And there can be a healthy dose of aggravation before you even board the plane, frequent fliers say, such as security screening rules that vary depending on the airport and flights canceled at the last minute with little explanation.
"I don't care whether it's a Big Mac or a Subway sandwich, the food smells gross in a confined place," Margaret Bowles, a lawyer in Tampa, complained in an e-mail. "If you are going to eat a sandwich, get one that isn't cooked and doesn't have onions or peppers."
"There needs to be a flying etiquette pamphlet handed out to anyone who takes less than three trips per year," writes frequent flier Faith Varwig.
Sometimes, behavior goes from merely discourteous to disruptive, and flights are diverted.
On July 10, a Southwest flight heading to Islip, N.Y., from Orlando was diverted to Raleigh, N.C., when a passenger began using foul language and became verbally abusive to the flight crew, says Paul Flaningan, a Southwest spokesman. In another incident this month, a Southwest flight from Chicago to Salt Lake City was diverted to Denver when a passenger began to act erratically and refused to sit down.
Travelers aren't just finding fault with the behavior of fellow passengers. A national Consumer Reports survey released in May found airline passengers were most annoyed by ubiquitous fees airlines charge to check a bag. On a scale of 1 to 10, with 10 being the most vexing, bag charges scored an 8.4. Other fees, for such items as blankets, scored 8.1, while unhelpful airline workers got a 7.7.
More stressful flyingA decline in manners can be tied in part to a flying experience that's more stressful as security has intensified after the terror attacks of Sept. 11. And many airlines have cut service and added fees to make ends meet, some industry observers say.Flying may get more stressful as people who'd put travel on hold during the economic downturn return to the air and find smaller planes and fewer available flights.
"Planes are flying more passengers," says Corey Caldwell, spokeswoman for the Association of Flight Attendants. "There's less available seats ... in a stressful environment and a very close environment. A lot of times there are disruptions that do occur."
Unruly behavior on the part of passengers "has heightened since 9/11, and we often see spikes when there's a new implementation of a rule or policy or procedure," Caldwell says. "(It's) really because these passengers are being exposed to more and more stressors."
Attendants are under more pressure, she says."Flight attendants are having to be vigilant on a lot more fronts than they have before, and so after a 14- or 16-hour day, I think anyone is a little more stressed," she says.Paul DeStefano, who travels two or three times a week, has a couple of peeves. One is flatulence.
"It is something that just infuriates me," says DeStefano, 43, of Bridgewater, N.J. "We're all human, but you're stuck in a tube with somebody for four hours and they have the audacity to think it's OK to let it loose."DeStefano, who runs the sales force of a consumer products business, says he's also bothered by the sight of men who won't help elderly women or mothers who are struggling with their bags.
"You should fly as though your mother's with you," he says. "Would she expect you to pass gas? No. Would she expect you to get the bag? Yes."
Larry Stocker, a frequent flier, has a list of retorts at the ready.For the fellow passenger who hasn't bathed, "I'll just say. 'Do you use a deodorant?' " For the guy yelling into a cellphone, "I say, 'This is a really interesting conversation. Could you tone it down because I'm trying to take a nap.' "
Stocker, 58, who is president of his own company, says he wasn't always so forward. But boorish behavior by fellow passengers is "so much more prevalent today ... you can almost feel like you're forced to take some action on your own behalf."
Some irritants, such as the kid constantly kicking the back of your seat, have long been traveling pitfalls. But the digital age has ushered in new nuisances.
Peter Juhren, 52, who travels 175,000 miles a year for his job, says he's had to ask passengers to more gently tap the console on the back of his seat. "Sometimes you get somebody behind you, especially when they're playing a game ... and they're just pounding away," says Juhren, a corporate service manager for a construction equipment business, who lives in Salem, Ore.Pauline Weaver says she once had to admonish a fellow flier who kept texting long after passengers were told to stop.
"I tapped her on the shoulder, and I said, 'You've got to turn it off or I'm going to tell the flight attendant,' " says Weaver, 61, a lawyer based in Hayward, Calif. "I don't know from a hill of beans whether (the portable device) would have impacted the plane, but I don't really care. You're just not supposed to do it. ... If you want to fly, you have to follow the rules. If you don't want to, take a train."Industry observers and etiquette experts say there are some behaviors that you just have to make your peace with when you're sharing a cramped, public space.
But there are ways to deal.
"People ask us all the time how do you combat the rudeness," Lizzie Post says. "I go out there, and I'm one less rude person. You consider things. I'm not going to bring my really smelly fish leftovers on the plane. I'm going to bring a turkey sandwich."Travel experts say that you can ask the person behind you if it's OK to recline your seat, recline only halfway or for part of the flight.
Bring along headphones to block out noise, and it's fine to politely inform a seatmate that you're not in the mood to chat.
Airlines, on the other hand, should look at courtesy and customer service as a matter of dollars and cents, says Stuart Greif, vice president and general manager for global travel and hospitality for J.D. Power and Associates.
A J.D. Power survey released last month found that passenger satisfaction with North American airlines was up but still below the levels that existed before the widespread implementation of fees. And Greif says satisfaction continues to lag behind other industries, such as autos or insurance.
"Ultimately, those that make their customers happy and feel valued ... are the ones that are going to earn more revenue and be here in the long term," Greif says of airlines.
Despite all the frustrations that can crop up, frequent flier DeStefano says he still manages to see the bright side.
"I still get a little kick in the pants every time the airplane gets off the runway," he says. "You're taking a plane full of ... people at 500-plus miles an hour, going a time zone away.
"The fact that it works as well as it does is amazing."
Associated Press, 07.21.10, 10:31 AM EDT DALLAS
American Airlines orders 35 Boeing jets to upgrade its fleet and phase out gas-guzzling planes.
American said Wednesday the Boeing ( BA - news - people ) 737-800 jets will be delivered in 2011 and 2012. American has a commitment to finance all 35 planes but did not disclose details.
The order adds to those for 84 other 737s American started receiving in April 2009. The Boeing jets replace MD-80 series aircraft that burn more fuel and have been the subject of safety investigations.
American estimates the new planes will save 800,000 gallons of fuel per plane each year. Fuel and labor are an airline's top expenses.
CEO Gerard Arpey said it wasn't easy to decide to order new planes during a weak economy. AMR ( AMR - news - people ) has lost more than $4 billion since the start of 2008.
Tuesday, July 20, 2010
U.S. Department of Transportation Joins the European Union in Endorsing Joint Business oneworld Customers Now Gain Expanded Flight Networks, Improved Travel Choices and Services, and Enhanced Frequent Flyer Programs
Press Release Source: American Airlines On Tuesday July 20, 2010, 5:36 pm EDT
FORT WORTH, Texas, July 20 /PRNewswire-FirstCall/ -- American Airlines, British Airways, and Iberia today received final approval from the U.S. Department of Transportation (DOT) to create a joint business governing flights between North America and Europe and will expand their global cooperation as a result of receiving antitrust immunity. Fellow oneworld® members Finnair and Royal Jordanian also received antitrust immunity from DOT. The European Union approved the joint business on July 14.
"This is an important day for the customers, employees and shareholders of American Airlines and our joint business partners in the oneworld alliance," said Gerard Arpey, Chairman and CEO of AMR Corp., the parent of American Airlines. "We are pleased that U.S. and EU regulators have approved our long-sought-after alliance proposal. We wish to thank all those who supported us in this effort, and we look forward to delivering enhanced competition for customers on trans-Atlantic flights. By working collaboratively with our oneworld partners, we will enhance our product offerings, strengthen our route networks, and better position our airlines to compete in the ever-changing global aviation marketplace."
"This is a great day for all three airlines and the oneworld alliance. We've waited 14 years to bring the benefits of the trans-Atlantic joint business to our customers and level the playing field with the other two global alliances," said British Airways Chief Executive Willie Walsh. "As we have argued all along, the EU-U.S. market is highly competitive and Heathrow's liberalization in 2008 opened it up even further. We are delighted that the U.S. and EU authorities have recognized this.
"We're pleased that the DOT and EU have worked together to ensure that there is consistency in the number of slots that the three airlines have to give up to our competitors to use on services from Heathrow to the U.S. We made the pragmatic decision to give up these slot pairs so that we can start operating the joint business as soon as possible."
"We are delighted we have received approval for our joint business, as it will be very positive for our employees, our shareholders and, most important of all, for our customers," said Iberia's Executive Chairman Antonio Vazquez. "A new kind of collaboration among our three airlines will lead to better service levels for our customers.
This means that our customers will have more destinations to choose from around the world, better scheduled travel times, better connections, and more competitive fares. I am convinced that consolidation is the best and only way to succeed in the airline industry, and the approvals we have received to create a joint business are a very important step towards this consolidation process."
"Besides DOT officials, who thoroughly reviewed our application, we'd like to thank Senate Commerce Committee Ranking Member Kay Bailey Hutchison of Texas, Assistant Senate Majority Leader Dick Durbin and House Aviation Subcommittee Chairman Jerry Costello, both of Illinois, Senator John Cornyn of Texas, as well as the nearly 500 elected and public officials from 47 states, Washington, D.C., and Puerto Rico, who filed letters of support for our proposal, including Texas Governor Rick Perry," said Will Ris, American's Senior Vice President – Government Affairs.
"We also greatly appreciate the support expressed by the Transport Workers Union of America, Air Transport Division, which represents 26,000 workers at American and its regional affiliate, American Eagle; the Association of Professional Flight Attendants; and those American Airlines employees in London represented by UNITE the Union, Branch LE/2005, which sent letters to U.S. Secretary of Transportation Ray LaHood and Members of Congress urging approval of the oneworld carriers' antitrust immunity application," said Ris.
"We also thank the more than 1,500 non-profit civic and community organizations and educational institutions, travel industry-related organizations, corporations, small businesses, and other for-profit organizations whose collective support demonstrates that global antitrust immunity will benefit consumers and communities in the United States and beyond," Ris added.
Under the joint business agreement, the three airlines will cooperate commercially on flights between the United States, Mexico and Canada, and the European Union, Switzerland and Norway while continuing to operate as separate legal entities. They will expand their codeshare arrangements on flights within and beyond the U.S. and European Union, significantly increasing the number of destinations that the airlines can offer customers.
The final DOT and EU decisions are a significant step toward strengthening customer choice because they will better position oneworld to compete in the global marketplace with other alliances that have already received trans-Atlantic antitrust immunity. Customers can travel more easily on the three airlines' combined route network that will serve 433 destinations in 105 countries with 5,178 daily departures, providing more frequent and convenient schedule options than any of the three carriers could offer individually.
By working together, the airlines will expand customer choice by supporting routes that would not be economically viable for a single airline. Customers also will receive numerous benefits, including expanded opportunities to earn and redeem frequent flyer miles and elite tier benefits and continued reciprocal airport lounge access.
Monday, July 19, 2010
By JAD MOUAWAD
Published: July 19, 2010
Delta Air Lines reported its biggest quarterly profit in a decade on Monday, but investors were concerned that Delta and the rest of the airline industry would repeat the mistakes that have jeopardized many past recoveries.
Delta Air Lines said profit growth was helped by higher ticket prices for business travelers and growth in international routes.
Delta’s revenue per passenger flown one mile — a crucial industry metric — rose more than 19 percent as a result of higher ticket prices for business travelers and growth in international routes. That helped the airline report a net income of $467 million in the second quarter, or 55 cents a share, compared with a loss of $257 million, or 31 cents a share, in the same period last year.
Despite that strong performance, stock prices fell across the industry on Monday as Wall Street questioned whether airlines were moving too quickly to restore some of the deep cuts in capacity they had made in the last couple of years to stem losses.
“The real engine behind the recovery in the second quarter has been capacity cuts,” said Hunter Keay, an airline analyst at Stifel, Nicolaus & Company. “Investors don’t want to see more supplies added to an industry whose Achilles’ heel has been an imbalance of supply and demand.”
Delta’s shares closed at $11.38, down 2.9 percent, after declining as much as 11 percent in morning trading. The carrier’s rivals, including American Airlines, Continental Airlines and United Airlines, report earnings in coming days.
The airline business is a typically cyclical one: when the economy picks up, airlines usually order more planes and add more seats, which pushes down prices. At the Farnborough International Airshow, the aerospace industry’s largest trade show, which kicked off on Monday, Airbus and Boeing announced more than 200 combined new orders on the first day alone.
Like other airlines, Delta has been cutting the number of planes in its fleet to adapt to the drop in passenger demand, which was especially marked last year. The company’s capacity — or the number of seats it offers — fell 0.6 percent in the last quarter. It has 958 planes, 59 fewer than in the same period last year.
But Delta’s chief executive, Richard H. Anderson, indicated on a conference call with analysts on Monday that Delta’s capacity would grow 5 to 7 percent in the fourth quarter to make up for last year’s sharp pullback. He also forecast capacity growth of 1 to 3 percent in 2011.
Delta is not planning to increase the number of planes it has; rather, it wants to fly them more often.
Delta executives asserted that they remained careful not to add too much new capacity. Edward H. Bastian, the company’s president, described the plan as merely correcting last year’s tightening. “We recognize the importance of capacity restraint in improving the financial performance of the business,” he said on the conference call.
The industry is struggling to recover from the recession, which cut deeply into passenger traffic last year, especially among the most lucrative business travelers. Some analysts pointed out that with a weak economic recovery, passengers were still tentative about resuming air travel.
The number of international passengers rose 6 percent in the first five months of the year, according to the International Air Transport Association, with premium traffic rising more rapidly. Still, business travelers remain below pre-recession numbers.
Airlines responded by grounding planes to lower their costs. They have also sought to increase revenue through luggage fees and higher ticket prices. Air fares have risen for five of the last six months, according to data from the Bureau of Transportation Statistics.
Because many passengers buy their tickets in advance, there is typically a lag between the state of the economy and the financial performance of airlines.
There are also concerns about the health of the economy, which could put a damper on the airlines’ fortunes.
“It’s been a tepid recovery for the airlines,” said Basili Alukos, an airline analyst at Morningstar.
Still, Wall Street analysts were encouraged by Delta’s performance in the last quarter. The company is the world’s largest airline since it acquired Northwest Airlines. If the planned merger of United Airlines and Continental Airlines wins approval, that airline will become the new No. 1.
Delta’s overall revenue, which includes ticket sales, bag and other fees, and cargo, rose 17 percent, to $8.2 billion, in the quarter.
Delta provided an upbeat forecast for the rest of the year, anticipating double-digit gains in revenue in the third quarter.
“We are seeing strong improvements in these early stages of the economic recovery and believe there’s room for more revenue growth as the economy continues to stabilize,” Mr. Bastian said.
Vicki Bryan, an analyst at Gimme Credit, an independent research service on corporate bonds, said Delta had done a good job of bolstering its balance sheet and refinancing some of its heavy debt load inherited from Northwest. She noted that the company generated more than twice the margins on its earnings before interest, taxes, depreciation and amortization as its competitors.
It also has “dramatically stronger free cash flow versus its high-yield peers, and the merger benefits will help to accelerate profitability and competitive strength,” she wrote in a research note. “We expect revenue growth and profitability to be restored in 2010, despite a potentially more tepid economic recovery.”
By JANE WARDELL and EMMA VANDORE, AP Business Writer Jane Wardell And Emma Vandore, Ap Business Writer – 26 mins ago
FARNBOROUGH, England – Arch rivals Boeing Co. and Airbus announced new orders worth almost $18 billion at the start of the Farnborough International Airshow on Monday, raising hopes that the aviation industry is on the way back up after a dire two-year slump.
The aerospace market "has come back faster than we expected" and Boeing has twice raised its internal forecasts for the number of orders at the biennial show, said Boeing Commercial Airplanes President Jim Albaugh.
"We are going to have a significant amount of orders over the next few days," Albaugh said as he updated analysts, journalists and other industry players on Boeing's commercial plane program. "This is going to be a good air show for us and I think it's going to be a good air show for Airbus as well."
Boeing kicked off the traditional order book race by unveiling a deal with Dubai-based airline Emirates for 30 777-300ER jetliners, worth $9.1 billion at list prices. But it revealed that 18 of these were previously attributed to an unidentified customer on its order book, taking the value of the new deal down to $3.6 billion.
Boeing also announced that GE Capital Aviation Services ordered 40 Boeing 737-800s for $3 billion at list prices.
GECAS, General Electric's commercial aircraft leasing arm, placed a bigger order with Airbus for 60 single-aisle A320s worth $4.9 billion at list prices.
EADS-owned Airbus also announced a $4.4 billion order from Air Lease Corp. for 20 A321 aircraft and 31 A320s.
"This is a great way to start the show," said Airbus CEO Tom Enders after the deal was announced.
Russian flag carrier Aeroflot ordered another 11 of the A330-300 aircraft, worth $1.7 billion at list prices.
Airbus chief salesman John Leahy said on Saturday that he had bet EADS head Louis Gallois "that we'll more than double" the 131 gross orders that Airbus has made to the end of June.
Canada's Bombardier, a rising challenger to established giants like Airbus and Boeing, received an order for three business jets from Qatar Airways, a deal worth $122 million at list prices.
Analysts, who are looking to the Farnborough show outside London to take the pulse of the industry's health, expect the event to be more upbeat than last year's sister show in Le Bourget near Paris.
But they aren't looking for commercial plane orders anywhere near the record-breaking $88.7 billion worth announced in Farnborough in 2008 before the global credit squeeze took hold of the industry.
The International Air Transport Association has forecast that global industry profits will reach $2.5 billion this year, an upturn from the huge $9.4 billion loss in 2009.
Asia and North America are expected to lead the recovery, with Europe lagging behind. Strikes at some airlines, the debt crisis and the volcanic ash cloud that caused major disruptions this spring are all hurting Europe's recovery.
Most of the new plane buyers are expected to be from strong emerging markets in the Middle East and Asia.
ATR, an Italian-French aircraft manufacturer based in Toulouse and owned by EADS parent Airbus and Finmeccanica, may announce orders for turboprop planes.
Boeing and Airbus also head into the event facing growing challenges to their duopoly in the mid-sized civilian jet market from smaller manufacturers, including Canada's Bombardier and Brazil's Embraer.
Boeing made an early bid to keep the limelight on Sunday with the international debut of its fuel-efficient 787. But it was forced to acknowledge that the first delivery of the aircraft to Japan's ANA — already more than two years overdue because of production problems — could slip into 2011. The company blamed administrative delays.
As the aviation side of the biennial event began to take off, concerns remained about the defense sector amid sharp cuts to national defense budgets by debt-wary government.
In the U.S., the world's biggest single defense market, the Pentagon is looking to trim some $100 billion of savings from personnel and procurement over the next five years. In Britain, Europe's largest market, the government is considering cuts of up to 20 percent.
Analysts will also be watching for developments in the bitter Boeing-Airbus battle to win a $35 billion contest to provide aerial tankers to the U.S. Air Force — the World Trade Organization ruled earlier this month that European governments gave Airbus illegal subsidies for the project.
Airbus' long-delayed A400M military transport plane is providing a high profile symbol of the problems facing the defense sector.
Britain has already scaled down its order for the four-engine military transport, which will take part in the daily flying display at Farnborough.
Airbus expects to start delivering A400Ms sometime after December 2012 , around four years behind schedule and 50 percent over budget because of technical glitches.
The original seven customer nations for the aircraft — Belgium, Britain, France, Germany, Luxembourg, Spain and Turkey — agreed with Airbus' parent European Aeronautic Defense & Space Co. in March to spend an additional euro3.5 billion to save the project after months of bickering about who should pay for cost overruns.
More than 1,000 exhibitors from 38 countries have signed up for Farnborough, with delegations from Egypt, Taiwan and Morocco attending for the first time. Organizers also cited stronger interest from major players China and Russia.
The show runs July 19-25 at an airfield about 30 miles (50 kilometers) west of central London.
By Kyle Peterson Kyle Peterson – Sun Jul 18, 12:21 pm ET
FARNBOROUGH, England (Reuters) – Boeing Co's new 787 Dreamliner touched down in Britain on Sunday on its first trip outside the United States, thrilling hordes of eager planespotters who came out to see the breakthrough carbon-composite plane.
A media circus ensued as Boeing executives, including CEO Jim McNerney, emerged smiling from the plane, though McNerney did not actually fly to England with the plane, instead getting on board after landing.
Social media was active with blow-by-blow coverage of the arrival, pointing to the intense interest in the plane not only within the business but also in the flight-enthusiast community.
The 787 is expected to take the spotlight at next week's Farnborough Airshow. Last-minute technical issues had raised fears in recent weeks that the plane might not make its long-anticipated trip to the show, but the plane arrived doing a flyover with a "tilt and wave" before landing.
Boeing executives have said they aim to deliver the first Dreamliner to Japan's All Nippon Airways by the end of 2010, but they have cautioned that the delivery could be delayed to early 2011.
Speaking to reporters later in London, Jim Albaugh, chief executive of Boeing Commercial Airplanes, reiterated that caution, saying Boeing still hopes to achieve its year-end goal but deliveries could move to next year.
Speaking after landing the plane, test pilot Mike Bryan told reporters that landing on Farnborough's "short" runway after the nine-hour flight reminded him of his time landing on aircraft carriers in the Navy. But he was full of praise for the plane, which he flew from Seattle with 16 crew and a full compliment of flight-testing systems.
"One thing I can say right now is we could literally put fuel in it and passengers could go flying in it," he said.
The plane he flew -- Dreamliner No. 3 -- will never see regular passenger service, though. It is one of three test planes strictly for that purpose. The next three test planes to be built, however, are expected to eventually be sold.
The aircraft promises greater fuel efficiency and its lightweight materials and innovative design have captured the imagination of the industry.
Yet flight testing has been going more slowly than expected after the twin-engined passenger plane made an inaugural flight last December -- which itself was the subject of frenetic global media coverage.
Deliveries of the long-range passenger jet to the first Japanese customer have been delayed by more than two years due to production problems.
(Writing by Ben Berkowitz, Editing by Jeremy Laurence and David Holmes)
Sunday, July 18, 2010
Published: Sunday, 18 Jul 2010 6:07 PM ET
By: Albert Bozzo Senior Features Editor
Things are looking up for the U.S. airline industry. The big question is how long they will stay that way.
After two dreadful years, including a $4 billion loss in 2009, 2010 will should solid profits, starting with second-quarter earnings due out next week.
“It’s a feast or famine industry,” says airline analyst Michael Derchin of CRT Capital Group. “We're now in the feast phase.”
Derchin and other industry watchers cite better-than-expected demand, especially in the international and business travel categories, industry discipline in keeping capacity tight (fewer, fuller planes) and high but manageable fuel prices as the main drivers.
“We are at a point where the industry is generating a fair amount of pricing power,” says airline consultant Robert Mann.
Derchin is forecasting the major airlines will post $1.7 billion in net profits for the second quarter, versus about a billion-dollar loss in the year-ago period; and $3 billion in the third quarter—which includes most of the fat summer-travel season—compared to a $250-million loss in the 2009 period.
He expects profits of $3.9 billion this year and $6.7 billion in 2011—not bad after seven unprofitable years in the past decade and what’s generally forecast to be a modest overall economic recovery.
For an industry that’s had more than its share of nasty external shocks, airlines are benefiting from a pleasant surprise or two.
International and business travel—both of which carry higher margins--are strong.
“Corporate travel has made a lot stronger comeback than many would have forecast, “ says Mann.
“The Pacific is just booming,” says Durchin, who notes that Delta—which has a strong presence in the region through its merger with Northwest—has seen its passenger load factor (a key measure of capacity utilization) rise 20 percent from a year ago. “Even the Atlantic has been stronger than we thought it would be.”
Self Help, Self Improvement
Though economic fundamentals are clearly much better than in the past two, the industry itself can take a fair share of the credit for the turnaround.
After years of cost cutting—including some drastic and dramatic moves following the oil spike and financial crisis of 2008—carriers have trimmed their fleets and kept that way.
“They really started cutting capacity in September 2008,” says Roger King, an analyst with Credit Sights. “They were desperate.
Such capacity cuts have clearly produced longer lines and fuller planes for travelers, but they have yielded better margins for the airlines.
Based on available seat miles, a key industry metric, domestic capacity fell 10-percent between 2007 and 2009.
Analysts say airlines are now gun shy about expanding capacity and taking planes out of mothballs, even when possible. (Many of those planes are older, less fuel-efficient models, which though profitable during the best of times, require more maintenance.)
“They don’t have a lot of planes on order--and those that are on order, as soon as it arrives, an old plane gets dropped off.” says King. “They don’t have the ability to up capacity.”
Plane Orders Not On The Horizon
Casual industry observers might conclude that the bodes well for aircraft manufacturers like Boeing and Airbus, which will be among the many showing off their wares at the Farnborough Air Show in the U.K. next week, but it’s probably still too soon in the cycle for that.
“We're not at a point where we can expect too many orders,” says Mann, adding some airlines have undertaken minor “overdue fleet renewal.”
The bulk of the two aircraft giants order sheet so far this year have not been from the major U.S. carriers, or their European rivals. Much of the growth has driven by buyers from the Middle East, Latin American and Asia-Pacific regions, where the expansion of the middle class has brought new demand for air travel.
Not that U.S. carries aren’t interested.
“A lot of the older jets were not designed for $80 oil,” says King.
“What's driving demand for aircraft is fuel efficiency and the green movement,” adds Derchin.
Though Boeing’s long distance, jumbo 787, or Dreamliner, has stolen much of the spotlight, partly because of its running delays, both Boeing and Airbus are now deciding whether to re-engineer their narrow body and most popular models (737, A320) for greater fuel efficiency or create totally new planes.
Either way, U.S. airlines can and will wait.
“Balance sheets aren't in the position to support additional investment,” says Mann.
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