Wednesday, September 29, 2010

Southwest Airlines plane Southwest and AirTran: Excess Baggage?
By Fool TV September 29, 2010

Southwest Airlines (NYSE: LUV) is buying AirTran (NYSE: AAI) for $1.4 billion. This helps Southwest in some obvious ways, such as taking out a competitor (and leaving JetBlue (Nasdaq: JBLU) as its primary low-cost rival), and getting into Delta's (NYSE: DAL) home turf in Atlanta.

But Fool analyst Rex Moore says a question to ask for any merger is "Why now?" An analyst asked exactly that on the conference call announcing the merger. Southwest CEO Gary Kelly gave three reasons: 1) The financial health of the company, 2) there is little or no organic growth left with Southwest's route system, and 3) the right leadership team is in place.

Kelly says making this merger work depends "on whether or not we can make the networks work." The merger creates a larger low-fare airline with 74 airports that either Southwest or AirTran did not serve. This gives management the opportunity to create hundreds of new itineraries, including the possibilities of going to entirely new airports, but it will be challenging to do it efficiently.

The bottom line here: Mergers are tough to pull off. (And the "Why now?" question should also be asked of the proposed "merger of equals" between UAL (Nasdaq: UAUA) and Continental Airlines (NYSE: CAL).) Southwest risks damaging its very valuable brand if the customer experience degrades. But this has been the best-managed airline over the past several years, and as an investor Rex gives it the benefit of the doubt.

Enhanced by Zemanta
British Airways Boeing 747-400 British Airways Accelerates Return of Jumbo Jets After Traveling Rebounds
By Steve Rothwell - Sep 29, 2010 7:25 AM MT

British Airways Plc will return to service two of the eight Boeing Co. 747 jumbo jets it grounded during the recession as demand for travel rebounds faster than the company had anticipated.

The 350-seat 747-400s have been retrieved from storage and are undergoing maintenance checks, with one to be reinstated at the end of January and the other a few weeks later, Chief Executive Officer Willie Walsh said today in an interview.

British Airways is among carriers that responded to the slump by idling jetliners near Victorville on the southern edge of the Mojave Desert in California, where the dry conditions hamper corrosion. The retrieval of the 747s reflects an outlook for demand that’s “more positive” than before, Walsh said.

“In some cases we’re just putting capacity back in where we had taken it out, but we are also looking at new destinations and will probably make some announcement in relation to that in the near future,” the CEO said on the sidelines of the MRO Europe aviation maintenance conference in London.

One of the 747s will be used instead of a Boeing 777 for flights from the U.K. capital’s Heathrow airport to Dallas, freeing up the smaller plane to operate a seventh daily flight to New York John F. Kennedy International Airport, as disclosed in August, British Airways spokesman James von der Fecht said.

“The second 747 is expected to be introduced into our summer 2011 schedule, but the destination it will serve hasn’t yet been decided,” he said.

Jumbo Fleet

British Airways has 49 Boeing 747s in its fleet, including the eight grounded, which are used for long-haul services to cities including Los Angeles, Johannesburg and Sydney.

Wide-body planes accounted for about 25 percent of the 200 aircraft retrieved from storage in May and June as carriers sought to tap rising demand for long-haul trips and a leap in cargo shipments. The number of 747s recalled in June exceeded those mothballed for the first time since January 2009, data compiled by aviation consultant Ascend Worldwide Ltd. shows.

Walsh said in the interview that he is “optimistic about the outlook for 2011,” with British Airways poised to begin services to Cancun in Mexico in November before adding Tokyo Haneda in February and Buenos Aires in March.

Europe’s third-biggest carrier is lifting winter capacity about 7 percent from a year earlier but says it will only add seats where it can do so without depressing prices.

CEO Calls

Walsh said his revelation earlier this month that British Airways and Iberia Lineas Aereas de Espana SA have identified 12 merger candidates they might pursue once their own combination is completed has provoked huge interest from industry leaders.

“I’ve had an incredible number of telephone calls from airline CEO’s asking if they are on the list,” Walsh said. “The pace of consolidation is going to accelerate.”

British Airways and Madrid-based Iberia have agreed to form a new company, International Consolidated Airlines Group SA, subject to the approval of both sets of shareholders, with votes planned for later this year.

The U.K. carrier, Iberia and AMR Corp.’s American Airlines have also signed an agreement to start their trans-Atlantic alliance next month, they said today.

Under the deal, approved by antitrust regulators in July, the three carriers will share revenue from flights between the European Union, Switzerland and Norway and the U.S., Mexico and Canada, irrespective of which of them takes the booking.

To contact the reporter on this story: Steve Rothwell in London at

To contact the editor responsible for this story: Kenneth Wong at

Enhanced by Zemanta
British Airways tailfin British Airways, American and Iberia agree joint business
Venture is worth a combined $7 billion in annual revenues
Sept. 29, 2010, 4:24 a.m.

MADRID (MarketWatch) — British Airways said Wednesday it has inked a transatlantic joint venture with American Airlines and Iberia that is worth a combined $7 billion in annual revenues.

The revenue-sharing deal will allow British Airways, American Airlines, owned by AMR Corp. and Spain’s Iberia to cooperate on flights between the European Union, Switzerland, Norway, the U.S., Mexico and Canada.

No matter which airline takes the booking, all companies will benefit under the terms of the deal, already agreed by regulatory authorities in the European Union and the U.S.

The joint business will launch in October and will also enable the airlines’ One World alliance to “compete on an equal footing” with other global alliances that have been allowed to operate similar businesses for years, British Airways said in a statement.

The airline also said the business will allow customers better access to cheaper fares and more convenient connections.

Shares of British Airways fell 0.4% in London and shares of Iberia dropped 0.5% in Madrid, tracking a broad retreat in European stocks.

A merger is already in the works between Iberia and British Airways, but it still needs to be approved by shareholders at the Spanish airline, which could take place in November.

Meanwhile, operations at British Airways were disrupted this spring by Iceland’s volcanic-ash cloud as well as strikes by cabin crew protesting pay and work conditions. Unite, the union representing the cabin crew, has threatened further strike action, according to media reports.

Stephen Pope, managing editor of Spotlight Ideas, said the deal announced Wednesday has to be seen as “good news” for the three airlines given the benefits of passenger traffic and reduced costs.

“The flag carriers such as BA and IB have to find ways to reduce costs, as the impact of the budget carriers and the recent strikes BA faced have severely dented the bottom line and caused worrying margin compression,” Pope said in emailed comments.

“Of course there will be detractors, e.g. Virgin Atlantic, as they see it creating a monopoly,” he said. “However, the deal was approved in the summer and is this relationship so different from structures of cooperation such as ‘One World’ or ‘Star Alliance’?”

Barbara Kollmeyer is an editor for MarketWatch in Madrid.

Enhanced by Zemanta

Tuesday, September 28, 2010

An Aerial view of Chicago Midway International... Some U.S. airports haven't regained all the service they lost in 2008 when airlines reduced domestic flying due to high oil prices. Large U.S. airports that have seen big reductions in scheduled seats on domestic flights: in September 2010 vs. September 2007

Airport Percentage change

Cincinnati -50%

Oakland -39%

Ontario, Calif. -39%

San Jose -29%

Kansas City -24%

Sacramento -22%

St. Louis -21%

Cleveland -20%

Las Vegas -19%

Tampa -19%

San Diego -18%

Raleigh/Durham -17%

Santa Ana (John Wayne) -17%

Chicago Midway -17%

Pittsburgh -16%

Albuquerque -15%

Orlando -15%

New York Kennedy -14%

Phoenix -13%

Newark -13%

Portland, Ore. -11%

Indianapolis -11%

Memphis -11%

Chicago O'Hare -11%

Houston (Bush) -10%

Nashville -10%

Source: USA TODAY analysis of airline schedule data from OAG -- Official Airline Guide

Enhanced by Zemanta
Image representing TheStreet as depicted in Cr... Delta Election Has Union Hopeful
By Ted Reed 09/28/10 - 10:47 AM EDT

ATLANTA (TheStreet) -- Pat Friend, who has been trying to unionize Delta(DAL_) for 15 years, likes to think she is getting somewhere.

Delta Air Lines Inc. DAL UPA long-awaited flight attendant union representation election at Delta will begin Wednesday, with voting to end November 3.

In 1996, Friend, the national president of the Association of Flight Attendants, convinced union leaders to create an organizing fund. That led to elections at Delta in 2002 and 2008. The first time, the AFA got 5,520 votes, or 29% of the bargaining unit. Nearly everyone who voted backed the union.

The second time, the NMB reported that 5,306 votes were cast, nearly all of which went to AFA.

That was 40% of the shrunken bargaining unit.

Then, in 2008, Delta merged with Northwest, which brought in 7,000 unionized flight attendants. Just looking at the numbers, one can conclude that Friend has reason for optimism in this fall's election, assuming that previous AFA backers at Delta are joined by a sufficient majority of the former Northwest flight attendants. Delta now has about 20,000 flight attendants.

When Friend talks to Northwest flight attendants, she says: "If I had not been working with these Delta flight attendants for all these years, you would be in big trouble right now. It would be very difficult to turn out sufficient yes votes to preserve your union representation. But I absolutely think this combined Delta group will be AFA when we count the votes."

Another factor in the union's favor, besides years of work, is that in May, the National Mediation Board altered a 75-year-old labor law rule. The change means that in union representation elections, the outcome will be based on the votes of a majority of the workers who participate -- rather than requiring a majority of eligible voters.

It used to be that unions had to wage "get out the vote" campaigns against democracy's most insidious opponent: apathy. Now the burden has shifted, Friend said, because now it is the company that must battle apathy.

Delta is not sitting still. Like all companies that battle unions, it has launched a charm offensive and is spending money to make its position known. Like the union, Delta has a strong case to make. Last week the company held a video cast session with CEO Richard Anderson and senior vice president of inflight services Joanne Smith, which was viewed by a live audience in Atlanta as well as flight attendants gathered to watch in four cities.

"This is probably the most important decision you will make as flight attendants in the course of your career at Delta," Anderson said. He argued that Delta provides better working conditions for its flight attendants than a negotiated Northwest contract, even though unionized employees pay dues of $43 a month. "The track record of the AFA has been quite poor when you look at what is obtained for [$43]," he said. Friend disputes this point, noting that Delta flight attendants do not even have a contract. "Whether it stays where it is, that's uncertain," she said. "Flight attendants have no control."

Delta Air Lines Inc. DAL Delta's values, which Anderson listed, include these: "We always tell the truth. We respect other people. We take care of each other. We beat the competition. We act with honesty. And we treat people the way we want to be treated." He said Delta executives are "servant leaders in the industry and we're here to serve you."

One indication of Delta's values, Anderson reminded, is that after the merger the carrier agreed to provide 15% of pre-tax profits and 15% of its stock to employees. Additionally, although the carrier lost billions of dollars in 2007 and 2008, it offered raises in both years. "There's a moral obligation to make this a good place to work," he said.

Not surprisingly, employees selected to ask questions during the broadcast seemed strongly committed to assuring a union defeat. One questioned whether the NMB would fairly count the ballots: Anderson assured that it would. Another said she was "the most distressed I have been in my entire career" by the possibility that Delta could be unionized. She said some of the advantages Delta flight attendants have could disappear in contract negotiations. "I do fly with people who want the union and who bring up picayune little things they expect the union to get for them," she added. She thought Delta could work harder to get the truth out, which no doubt came as a surprise to airline executives who are doing all they possibly can to be sure their story is told.

While numbers appear to favor the union, such elections sometimes hinge on enigmatic factors, especially since each voter brings a unique set of interests. For instance, it is widely felt that many Atlanta-based flight attendants have a cultural affinity for Delta, a symbol of Atlanta and the South for decades. But it is not necessarily so that all of the former Northwest flight attendants are AFA backers. In 2004, Northwest flight attendants left the Teamsters to form an independent union. The union struggled, and some flight attendants asked the AFA to organize them.

"Those individuals who started and led the independent movement were furious that AFA won," Friend said. "Now they are anti-AFA. It is stunning that some people, who supposedly are unionists, are willing to sacrifice union representation for revenge."

Because Obama Administration NMB appointees' altered the board's longstanding policy, the Delta election is being closed watched by labor advocates, labor opponents and the chattering class of the Washington Beltway. Friend said that does not really change things. "It increases the tension in this office, but as far as the flight attendants involved in the campaign, I don't think they are looking out," she said. "They are focused on what they are doing."
-- Written by Ted Reed in Charlotte, N.C.

Enhanced by Zemanta
Southwest Airlines(Old Color) at LAX Southwest CEO Risks Keep-it-Simple Strategy to Reignite Growth
By Mary Schlangenstein and John Hughes - Sep 28, 2010 5:48 AM MT

Southwest Airlines Co. Chief Executive Officer Gary Kelly, taking on his biggest acquisition ever, is dismantling the carrier’s keep-it-simple strategy in a bid to reignite growth.

The largest U.S. low-fare carrier’s decision to buy AirTran Holdings Inc. for $1.4 billion will mark its first foray into a second jet type and its first boost in seating capacity since the end of 2008.

Southwest will also face off with bigger Delta Air Lines Inc. at its primary hub of Atlanta, the world’s busiest airport and the only major U.S. city Southwest doesn’t serve. The Dallas-based carrier will start flying at Washington’s Reagan National, add its first international flights and mesh 8,000 employees into its workforce.

“They ran out of places where they could keep it simple,” David Swierenga, president of consultant AeroEcon in Round Rock, Texas. “They’ve become such a widespread, far-flung airline and served just about every city that met that simple requirement. They figured it was time to go beyond that.”

With the cash-and-stock purchase, Kelly gives up some of the last vestiges of Southwest’s historic low-cost strategy, including flying just one fleet type, Boeing Co. 737s, to hold down maintenance and training costs, making short hops between cities at high frequencies and owning most of its jets.

More Seats

The deal will add 138 planes, ending Southwest’s self- imposed capacity ceiling that began at the end of 2008 and became the longest dormant period in 20 years. The combined company is to have 685 aircraft, including 86 Boeing 717s from AirTran. Southwest’s 737s can carry at least 122 passengers, while AirTran’s 717s have 117 seats.

“Growth is in Southwest’s DNA, and the growth pause of the last several years has not been a naturally comfortable place for the company,” said Douglas Runte, managing director at Piper Jaffray & Co. in New York. “The addition of AirTran will allow them to satisfy their briefly dormant, but always present, inclination for growth.”

AirTran flies to Cancun, Mexico, and the Caribbean, giving Southwest the “perfect opportunity” to add flights outside the U.S. for the first time, Kelly said yesterday at a news conference at Southwest’s headquarters.

Southwest’s offer values Orlando, Florida-based AirTran at $7.69 a share, including its convertible notes. That’s 69 percent more than the carrier’s closing price on Sept. 24.

Southwest rose $1.07, or 8.7 percent, to $13.35 in New York Stock Exchange composite trading yesterday, while AirTran jumped $2.79, or 61 percent, to $7.34.

Merger Terms

Under the merger agreement, each of AirTran’s common shares will be exchanged for $3.75 in cash and 0.321 share of Southwest common stock. Including AirTran debt and capitalized aircraft operating leases, the transaction has a value of about $3.4 billion, the airlines said.

AirTran’s debt as of June 30 included about $280 million in convertible notes, according to a July regulatory filing. Southwest will take on about $2 billion of AirTran’s aircraft operating leases, according to the Standard & Poor’s ratings company.

Southwest will partially fund the purchase with $670 million from cash on hand. The carrier currently has $3.3 billion in cash and short-term investments, and an available $600 million revolving credit line, it said yesterday.

The acquisition will add $2 billion a year in revenue and $400 million in cost and revenue synergies, the companies said.

‘Growth Opportunity’

“We have evolved our company to be able to take on a growth opportunity like this,” Kelly said. “Our own growth prospects near-term are quite modest.”

The merger must be approved by AirTran shareholders and the Justice Department. The U.S. clearance is “not a slam dunk,” said Vaughn Cordle, managing partner of AirlineForecasts LLC in Clifton, Virginia.

The two carriers overlap on 32 markets, more than twice as many as in the pending merger between UAL Corp.’s United Airlines and Continental Airlines Inc., Cordle said in an interview.

The Justice Department will analyze direct service on a route-by-route basis to determine whether the merger leaves too few competitors in any individual market, said Steve Martin, a senior vice president at InterVistas Consulting in Washington. Buffalo, New York-Orlando; Baltimore-Orlando and Baltimore-Las Vegas are among routes that will come under scrutiny, he said.

Acquisition History

Southwest, which started flying in 1971, has made two previous acquisitions: Morris Air in 1993 for $134 million in stock and Muse Air in 1985 for $60.5 million in stock and cash. AirTran, founded in 1993, formerly was called ValuJet.

Southwest failed in a 2009 bid to acquire Frontier Airlines out of bankruptcy. Frontier, based in Denver, was then acquired by Republic Airways Holdings Inc.

While Southwest hasn’t suffered annual losses that ravaged competitors such as American Airlines parent AMR Corp. and UAL, it posted net losses in four of the past eight quarters. The carrier’s third-quarter loss in 2008 was its first in 17 years.

In the 12 months ended Sept. 24, the shares jumped 29 percent, the sixth-best performance among the 12 carriers in the Bloomberg U.S. Airlines Index. UAL more than doubled in the period, and US Airways Group Inc. and Alaska Air Group Inc. each surged 83 percent.

Pilots, Attendants

Southwest told employees yesterday it would add as many as 200 pilots and 300 flight attendants next year, in addition to AirTran employees. Combined, the companies would have about 42,700 employees, based on second-quarter data.

Southwest’s unions will negotiate with AirTran’s unions on how to mesh their seniority lists. There will have to be representation elections and contract negotiations with the carrier because the airlines’ major work groups belong to different unions.

Based on miles flown by paying passengers, Southwest now ranks as the fifth-largest U.S. carrier, while AirTran is eighth. The merged carrier will be No. 4 after United and Continental combine.

Southwest plans to use AirTran’s base in Atlanta and its flight slots at Reagan National to build on its strategy of attracting more business travelers. A blended Southwest and AirTran will account for 69 percent of flights at Baltimore- Washington International.

LaGuardia, Newark

The airline also will gain additional flight slots at New York’s LaGuardia Airport with AirTran. Southwest agreed last month to lease flight space from Continental and United Airlines, which plan to complete their merger this week, at Newark’s Liberty International airport.

“Southwest has, until recently, avoided serving congested Northeast airports,” said Alan Bender, professor of aeronautics at Embry-Riddle Aeronautical University in Daytona Beach, Florida. “This is a major entry into those markets. Southwest is saying it is no longer the airline of ma and pa -- we are going to become the airline of the business person.”

While Southwest flies into several airports that serve as hubs for rival airlines’ connecting flights, it hasn’t yet come up against the dominant position that Delta holds in Atlanta with 75 percent of passengers.

In Los Angeles, American Airlines has 16 percent of passengers, compared with 12 percent for Southwest. In Denver, United has 32 percent of passengers, compared with 15 percent for Southwest, and in San Francisco, United has 34 percent, while Southwest has 8 percent, according to the U.S. Bureau of Transportation Statistics.

‘Greater Appeal’

“We want to have greater appeal to more customers nationwide,” Kelly said. “The gaping hole in our route system right now is Atlanta. There is no easy way for us to get into Atlanta. We can start day one profitably and go from there.”

Southwest plans to extend its policy of not charging for the first two checked bags to AirTran, as well as its offer of a single class of service on aircraft. The combined carrier, which will remain based in Dallas, won’t assign seats.

The deal allows Southwest to eliminate AirTran, the second- biggest discounter, as a competitor and increase pressure on rivals JetBlue Airways Corp., Frontier and Virgin America Inc.

“It’s certainly going to change the competitive dynamics of the low-cost sector,” said Paul Mifsud, a Washington consultant and former airline executive. “They are going to become an extremely big competitive force in the domestic industry.”

To contact the reporter on this story: Mary Schlangenstein in Dallas at; John Hughes in Washington

To contact the editor responsible for this story: Ed Dufner at

Enhanced by Zemanta
AirTran Airways Boeing 737 AirTran Acquisition Offers Glimpse of a New Southwest
by: Jeffrey Breen September 28, 2010

Southwest's (LUV) acquisition of AirTran (AAI) sets the carrier's course for the next decade. With a stroke of the pen, Southwest has simultaneously undertaken three new challenges:

1. Operate a multi-aircraft fleet. In addition to its 52 737-700s, AirTran brings 86 717-200s—and two-class configurations—to Southwest's all-737 fleet. All indications are that Southwest fully intends to keep the smaller 717s, and, moreover, that some smaller AirTran markets would not be viable without the flexibility afforded by the smaller aircraft. But make no mistake: adding a second aircraft to a fleet is no small matter.
Maintenance, aircraft and crew scheduling, and revenue management procedures and systems are all in for upheaval. And there's no "differences course" for pilots seeking to transition between aircraft; they must add on a new type rating. Southwest wouldn't even consider taking on these hurdles if it weren't serious about retaining the bulk of AirTran's service footprint.

2. Serve international destinations. "But they're domestic only" is one of the few remaining "buts" with which legacy carriers can comfort themselves in comparisons to Southwest. With the release of June's domestic traffic data, Southwest finally surpassed American (AMR) in domestic revenue passenger miles for a 12-month period, having long ago eclipsed the pre-merger legacies in total number of domestic passengers. AirTran's experience serving Aruba, Cancun, Montego Bay, Nassau, and Punta Cana will greatly assist their new colleagues through this important learning curve. Chief among the limitations of Southwest's current reservation system—already marked for replacement—is its inability to handle international operations Does AirTran's use of Navitaire's New Skies seal the deal for the Accenture company?

3. Attract more business travelers. An airline won't win a customer if it doesn't fly where he needs to go. And while Southwest CEO Gary Kelly highlighted Atlanta as a "gaping hole" in their current destinations for business travelers, AirTran brings signiificant and much-needed presence in Milwaukee, Boston, LaGuardia, Indianapolis, and DC's Reagan National. With this move, Southwest has a shot to increase its share of the business travel spend where it's already strong, like Chicago, Baltimore, Denver, Houston, and Dallas. Just don't expect the airline without assigned seats to retain AirTran's Business Class.

Much of what will be written about this merger in the days to come will no doubt focus on Atlanta—and rightly so. The drama couldn't be higher with giants Delta (DAL) and Southwest battling it out at the world's busiest airport. But the real story is how this merger helps Southwest transform for its next phase of growth.

Enhanced by Zemanta

Monday, September 27, 2010

' Plotting the Next Airline Deal
September 27, 2010, 3:11 pm — Updated: 3:11 pm

Consolidation among the legacy carriers has been a constant drumbeat in the airline industry the past few years. Might the discount airlines be next?

Southwest Airlines’ announcement Monday that it has reached a deal to acquire another discount carrier, AirTran Airways, for $1.4 billion certainly seems to raise that question. The deal comes less than two weeks after shareholders approved the merger between United Airlines and Continental Airlines, which will create the world’s biggest airline.

“Well, my question to you is, who’s left?” Ray Neidl, an analyst at Maxim Group LLC, told DealBook. “There’s JetBlue. That’s the big question: What are they going to do?”

Shares of JetBlue Airways, which operates 650 daily flights to Southwest’s 3,200, rose nearly 7 percent to $6.35 by Monday afternoon.

But analysts said while that the Southwest deal may eliminate some seats, a far larger consequence would be if it motivates JetBlue to make an acquisition of its own in order to fuel its own expansion.

“This certainly increases the pressure,” said Henry Harteveldt, an analyst at Forrester Research.

A particularly bold target for JetBlue, Mr. Harteveldt said, would be US Airways, whose acquisition would allow JetBlue to transform itself into a truly national airline in one fell swoop. So would a deal with American Airlines, which Helane Becker, an analyst at Dahlman Rose & Company (which advised Southwest in the AirTran deal), suggested as a possibility.

But whether JetBlue would want to enter into such a complex, sweeping deal is unknown. A more culturally compatible takeover target, Mr. Harteveldt suggested, could be Frontier Airlines, which Republic Airways acquired at a bankruptcy-court auction last year after beating out Southwest.

Seth Kaplan, the managing partner at the trade publication Airline Weekly, also mentioned JetBlue and Frontier as a possible match.

“Those are two airlines with pretty similar products – one with a lot of strength in the East and to the Caribbean, one with more strength out West,” Mr. Kaplan said. “That’s the kind of thing that you could imagine.”

But with many legacy carriers already paired off, that is what analysts were largely left to do on Monday: imagining combinations of smaller airlines that could fit together. Mr. Neidl, for example, suggested that Alaska Airlines might be an attractive target for American Airlines or Delta Air Lines. And there is always the question of what will happen to US Airways, which has been mentioned as a possible merger partner for American Airlines.

For Southwest — which rose to prominence by offering travelers a friendlier, value-oriented alternative to the legacy carriers, many of which no longer exist — the deal with AirTran allows the kind of expansion that the airline otherwise would have struggled to realize.

“It sets the stage beautifully for us so that we can resume our growth again with the necessary profits in place,” Gary Kelly, Southwest’s chief executive, said in a conference call on Monday.
AirTran serves 37 airports to which Southwest currently does not fly, most notably Atlanta, the world’s busiest airport. “That’s the big opportunity here,” Mr. Kelly said, adding that AirTran also adds to Southwest’s destinations many smaller cities and some international locales, which will jumpstart Southwest’s eventual effort to expand outside of the United States.

It also would give Southwest more heft in an industry dominated by the few remaining post-consolidation giants. The combined airline would fly to more than 100 airports and serve more than 100 million customers annually.

“Together, we are stronger,” Bob Fornaro, the chief executive of AirTran, said at a news conference Monday, adding that in joining forces, the two airlines “can accomplish more than either of us can accomplish alone.”

Mr. Fornaro was speaking specifically of AirTran and Southwest. But there are surely many other airline executives who could probably say the same thing about their own hypothetical merger.

And so the drumbeat of consolidation continues on.
“With every deal that’s done,” Ms. Becker said, “it shows that it makes a whole lot of sense.”
– Thomas Kaplan

Enhanced by Zemanta
A line of automated and manned ticketing count... Hartsfield’s GM’s first day comes with merger
Monday, September 27, 2010, 3:35pm EDT

Hartsfield-Jackson’s Louis Miller can claim victory on his first day on the job

Louis Miller started his new job as general manager of Hartsfield-Jackson Atlanta International Airport Monday morning. And almost at the exact same time, the news came out that Southwest Airlines (NYSE: LUV) inked a $1.4 billion deal to buy AirTran Airways (NYSE: AAI).

For years and years, those who favored increased competition at Hartsfield-Jackson have been hoping to figure out how to lure Southwest to Atlanta.

But hometown Delta Air Lines Inc. (NYSE: DAL) understandably tried to prevent that from happening by keeping as much control as they could on as many gates at Hartsfield-Jackson as possible.

In fact, the new seven-year lease agreement between the Hartsfield-Jackson and Delta pretty much guaranteed the Atlanta-based airline would retain control of all its current gates and that few of the other gates at the airport would be made available to new competitors.

AirTran, a low-cost carrier, had been fighting on Delta’s turf since the days it was called ValuJet. The last thing Delta wanted was another discount carrier entering the market and creating competitive pressure for lower fares.

In fact, that was part of the reason why there had been tension between former Hartsfield-Jackson General Manager Ben DeCosta and Delta. DeCosta had been pushing for more flexible use of the gates that would have allowed more competition while Delta wanted to keep that flexibility to a minimum. Delta won that one.

But interestingly enough, when AirTran was able to also get the same seven-year lease agreement with control of about 34 gates, all of a sudden the Orlando, Fla.-based carrier became a much more attractive acquisition option for Southwest.

AirTran signed that seven-year lease the same that Louis Miller, who had been the general manager of the Tampa airport, was announced as Atlanta Mayor Kasim Reed’s top choice for the Hartsfield-Jackson job.

At the press conference on Sept. 13, it was clear that Miller was a fan of competition.

“I think increased and enhanced competition is good,” Miller said, quickly adding that Delta certainly was the “most important” airline serving Hartsfield-Jackson.

That said, Miller continued: “You have to treat all your tenants the same… Competition is a good thing. You want to bring in as much competition as one possibly can.”

He went on to say the Tampa airport had strong relationships with Delta, AirTran and Southwest.

“I have good relationships with all the airlines,” Miller said.

He even mentioned Gary Kelly, Southwest Airlines’ chairman, president and CEO, by name.
“You need to talk to everybody,” Miller said.

At that same press conference, Delta executive Harold Bevis had kind words to say about Miller.
“He’ll do a great job,” Bevis said. “Louis has been just a super airport operator wherever he’s been regardless of whether Delta was the largest carrier or not.”

Of course, those comments predated Monday’s news that Southwest was acquiring AirTran and that if the merger went through, Dallas-based Southwest would immediately become the second largest carrier serving Hartsfield-Jackson. That guarantees vigorous competition will be in full force at Atlanta’s airport.

As one observer half-jokingly said Monday morning: “The Miller man has made momentous magic on his first morning at work.”

Welcome to Atlanta, Louis Miller
Enhanced by Zemanta
The sign indicating the headquarters of AMR Co... American Airlines and American Eagle Add More Service to and From Mexico
American Also Will Expand Its Existing Codeshare Relationship With Alaska Airlines On Flights Between West Coast and Mexico

Press Release Source: American Airlines On Monday September 27, 2010, 12:00 pm

FORT WORTH, Texas, Sept. 27 /PRNewswire/ -- American Airlines and its regional affiliate, American Eagle, are increasing their service to and from Mexico. American said the additional service is a result of increased demand, in part related to the suspension of flights by Mexicana Airlines on Aug. 11.

Here are the new flights to be operated by American Airlines:

Dallas/Fort Worth – Mexico City – currently 4 daily round trips, increasing to 5 on Nov. 18.
Miami – Mexico City – currently 3 daily round trips, increasing to 4 on Nov. 18.
Miami – Cancun – currently 4 daily round trips on weekdays and 5 daily round trips on weekends, increasing to 5 every day of the week on Feb. 10, 2011.
Chicago – Mexico City – add one new daily round trip on Dec. 16.

Here are the new flights to be flown by American Eagle:

Dallas/Fort Worth – Guadalajara – currently 2 daily round trips – one on American Airlines and one on American Eagle. On Nov. 18, the route goes to two daily round trips on American. On Dec. 16, the service will increase to 3 daily round trips – one new round trip on American Eagle, in addition to the two round trips on American.
Dallas/Fort Worth – Aguascalientes – currently one daily round trip on American Eagle, increasing to two on Nov. 18.
Dallas/Fort Worth – Leon – currently 3 daily round trips on American Eagle, increasing to 4 on Dec. 16.
Dallas/Fort Worth – Veracruz – new round trip on American Eagle, effective Feb. 10, 2011, pending government approvals.
Dallas/Fort Worth – Queretaro – new round trip on American Eagle, effective Feb. 10, 2011, pending government approvals.

Here are additional services to and from Mexico on which American intends to codeshare with Alaska Airlines/Horizon Air. American will place its AA* code on flights operated by Alaska Airlines or Horizon Air in the following U.S.-Mexico markets, implementing the services later this year after all regulatory approvals are received:
Los Angeles – Mexico City***
Los Angeles – Guadalajara***
Los Angeles – La Paz (operated by Horizon Air)
Los Angeles – Loreto (operated by Horizon Air)
Los Angeles – Mazatlan
Los Angeles – Puerto Vallarta
Los Angeles – Ixtapa/Zihuatanejo
Los Angeles – Manzanillo
San Diego – Puerto Vallarta
San Francisco – Puerto Vallarta

*** American will be selling both local (Los Angeles area) and connecting service (to/from another American or American Eagle flight from other cities) on these two routes. For all other markets listed, American will sell only connecting service.
Enhanced by Zemanta
SAN FRANCISCO - JANUARY 21: The Southwest Airl... Southwest Airlines to buy AirTran for $1.4 billion
A shot at expanding in Northeast and on international routes

Christopher Hinton, MarketWatch

NEW YORK (MarketWatch) — Southwest Airlines Co. plans to buy AirTran Holdings in a $1.4 billion deal that brings it access to the world’s busiest airport along with a foothold at expanding in the Northeast and becoming an international carrier.

Southwest’s agreement to pay $7.69 a share in cash and stock represents a 69% premium over AirTran’s stock before the deal was unveiled Monday morning. The total payout to take over will be $3.4 billion including debt and aircraft operating leases.

Return of the bolt-on deal

Southwest Airlines will buy AirTran Holdings for $1.4 billion in the first major merger among U.S. discount carriers. Mike Reid and David Weidner discuss.

“The acquisition of AirTran fits in beautifully with the strategy that we laid out for the next decade,” Southwest Chairman Gary Kelly told reporters and analysts on a conference call. “I’m happy to say that we have found a way to grow Southwest Airlines profitably.”

Shares of AirTran soared 58% to $7.20 after the market opened; Southwest’s stock rose 4% to $12.77.

News of the deal sparked trading among airline stocks with JetBlue

Airways adding 6% and US Airways climbing 4.6%. But Delta Air Lines were under pressure.
Southwest estimated it could attract more than 2 million new passengers to Atlanta’s airport through its low-fare service, taking on Delta in its home city.

Southwest said it expects the purchase to add to its earnings within a year after closing, which is likely sometime in the first half of next year. The airlines forecast roughly $400 million in cost savings once combined.

“It’s a smart deal,” said Henry Harteveldt, an analyst with Forrester Research. “It’s cheaper and faster to buy AirTran than to wait and grow organically.”

In acquiring AirTran, Southwest will for the first time serve Atlanta’s Hartsfield-Jackson International Airport, the world’s busiest airport in terms of passenger traffic, particularly for frequent-flying business people, and an unseemly gap in the airline’s route system.

“If we’re trying to win business customers in Chicago, you’ve got to get them to Minneapolis, you’ve got to get them to New York, you have to fly them to Boston, that’s where they want to go,” Kelly said. “And the gaping hole when we do our market surveys around the country -- one of the top markets always the business customers are looking for -- is Atlanta.”

“This deal really won’t help any of the other airlines,” said Roger King, an airline bond analyst for CreditSights. “But it’s really a negative for Delta.”

By expanding its markets in the Northeast, analysts said the merger could also put US Airways, Continental Airlines, and its merger partner UAL Corp. and American Airlines parent AMR Corp. on the defensive as well.

As part of the agreement, AirTran is barred from seeking competing offers, and any unsolicited bids must be reviewed by both airlines. The deal includes a $39 million breakup fee.

AirTran also brings with it several international routes to Mexico and the Caribbean.

“We have the desire ourselves, of course, to prepare for international expansion one of these days, and this will be a wonderful learning experience for us,” Kelly said.

Southwest is planning to upgrade its reservation system to begin tracking international flights, an “ambitious project” that could take 15 to 20 years, the company said.

The agreement to purchase AirTran has already been approved by the boards of both

Now the proposal goes before regulators and AirTran shareholders for approval.

If they agree to the deal, AirTran stakeholders would receive $3.75 in cash and 0.321 share of Southwest for each share of AirTran, subject to certain adjustments. Upon closing, AirTran shareholders would own about 7% of the new company.

Citigroup and Dahlman Rose & Co. acted as financial advisers to Southwest Airlines. Vinson & Elkins L.L.P. acted as legal counsel.

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

Enhanced by Zemanta
Southwest Airlines(Old Color) at LAX Southwest expands presence with AirTran buy

On Monday September 27, 2010, 10:04 am
By John Crawley and Kyle Peterson

WASHINGTON/CHICAGO (Reuters) - Southwest Airlines (NYSE:LUV - News) will purchase AirTran Holdings (NYSE:AAI - News) for $1.04 billion in cash and stock in a deal that will allow Southwest to expand its presence in major East Coast markets.

The merger, announced early on Monday, is the first among leading low-cost airlines and the second notable deal this year after United Airlines, UAL Corp (NasdaqGS:UAUA - News) and Continental Airlines (NYSE:CAL - News), which is moving toward completion. Delta Air Lines (NYSE:DAL - News) bought Northwest Airlines in 2008.

Contraction in the U.S. market could lead to higher fares and less service over time but healthier balance sheets, according to analysts who agree that the industry is fragmented and cannot make money consistently.

"The acquisition of AirTran represents a unique opportunity to grow Southwest Airlines' presence in key markets we don't yet serve and takes a significant step toward positioning us for future growth," Southwest Chief Executive Gary Kelly said.

Kelly said the deal with Atlanta-based AirTran would allow Southwest to expand in markets such as New York LaGuardia, Boston Logan, and Baltimore/Washington. It also allows access to leisure markets in the Caribbean and Mexico.

AirTran shares jumped 67 percent to $7.60 in premarket trading on the New York Stock Exchange. Southwest was down slightly at $12.19.

The move by powerhouse Southwest puts pressure on all major rivals, who are still trying to strengthen their eastern U.S. markets to leverage more premium-paying business travel and cement an industry recovery after a severe two-year downturn.

It also raises questions about whether US Airways Group (NYSE:LCC - News) will redouble efforts to find a partner, and whether low cost JetBlue Airways (NasdaqGS:JBLU - News) will seek out some kind of deal.

"Southwest had been waiting to expand this past downturn and I think this acquisition proves that substantial organic growth is a thing of the past," said Morningstar equity analyst Basili Alukos.

The proposed merger is contingent on approval by shareholders at both companies and U.S. Department of Justice antitrust clearance. Bigger carriers in recent merger deals have pointed to the expanding low-cost sector, which would shrink by one airline, if the proposal goes through.

The United/Continental and Delta/Northwest mergers easily won regulatory approval.
Including AirTran's existing net indebtedness and capitalized aircraft operating leases, the transaction value is about $3.4 billion, the carriers said.

Southwest said excluding the impact of one-time costs, the acquisition is expected to add to its pro-forma earnings per share in the first year after the closing of the deal.

(Additional reporting by A.Ananthalakshmi in Bangalore; Editing by Maureen Bavdek)

Enhanced by Zemanta

Sunday, September 26, 2010

A Delta Airlines Airbus A330-323E landing on r... Warning: A Foul Outlook for Holiday Airfares
SEPTEMBER 26, 2010
Edited by

It's not even Halloween yet, but discount airlines may just be the Grinch for holiday travelers this year.

Virgin America, jetBlue Airways and AirTran Airways are pricing some markets significantly higher than their bigger, typically more-expensive competitors, expecting robust demand and limited airline capacity will lead to full planes at full fares.

And despite the struggling economy, airline executives seem to think that all the Whos down in Whoville will buy tickets regardless of price.

Demand for air travel has increased recently, and airlines haven't added much capacity back after the recession.

AirTran was higher priced than its rival Delta Air Lines on many markets from Atlanta to beach destinations for the holidays. From Atlanta to Montego Bay in Jamaica nonstop, AirTran priced a Thanksgiving itinerary at $708, while Delta's was $538.

Big airlines haven't raced to match the higher prices of discounters because they have more seats to sell and may not have as much confidence that the economy is strong enough to support full-fare pricing on most all seats in premium destinations.

Some tips on finding affordable fares this holiday season:
Buy early: Demand will likely be stronger than supply this year, so prices will rise as seats sell. There are still some good prices out there.

Be flexible: Avoiding peak days can save you hundreds of dollars. Consider the Saturday before or Tuesday after Thanksgiving, for example. And the cheapest days of all can be the holiday days.

Shop around: Check websites that search fares across multiple airlines, like Travelocity, Expedia and Orbitz, and sites that search more aggressively, like Kayak. Don't forget that Southwest fares are only available from the airline.

Find a cheaper beach: If it's a vacation you want, look at multiple destinations. The Caribbean may be selling stronger than Florida or Mexico, for example.

—Scott McCartney The Wall Street Journal

Enhanced by Zemanta

Saturday, September 25, 2010

' Bluer Skies Ahead

JetBlue shares have been flying low, despite the airline industry's gains this year. That will change as more investors notice the carrier's unappreciated virtues.

JETBLUE AIRWAYS became one of its industry's biggest success stories a decade ago by offering domestic leisure fliers cheap fares, new planes and amenities such as leather seats, ample legroom, individual TVs and satellite radio.

Like upstarts elsewhere, New York-based JetBlue (ticker: JBLU) expanded too rapidly, took on too much debt and was battered by competition and the 2008-2009 travel recession. In the five years through 2009, it had a cumulative loss. Its shares, which peaked at 31 in 2003, now trade below 6 and are largely ignored by Wall Street.

The carrier has lured travelers by offering leather seats, more legroom, individual TVs and satellite radio.

But the airline is winning back some investors, who have noticed its rising profits, moderating expansion strategy, growing appeal to business travelers and widening alliances with foreign airlines, stemming from its dominant positions at two international gateways, Boston's Logan airport and New York's JFK. JetBlue also has a sizable presence in Florida and California.

JetBlue has the U.S. industry's youngest planes, with an average age of four years, a relatively low cost structure, a strong reputation for service and motivated non-union workers (despite the well-publicized incident this summer involving a disgruntled flight attendant, who quit, grabbed a beer and then slid down an emergency slide).

"THE COMPANY IS IN THE MIDST of a profits turnaround," says Michael Linenberg, Deutsche Bank's airline analyst. JetBlue is expected to earn about 45 cents a share this year, 60 cents in 2011 and possibly close to $1 in 2012. Linenberg carries a price target of 8, while a more bullish Glenn Engel of Bank of America/Merrill Lynch sees the stock doubling to $12. Tangible book value is almost $4.50 a share. JetBlue's market value is $2 billion.

In a client note, Engel wrote that JetBlue's profits could be powered by "growing international feeder traffic, increased market share in Boston and competitive retreats by legacy carriers in Latin America." JetBlue has partnerships with such airlines as El Al and Aer Lingus, as well as a strong link with Germany's Lufthansa, its largest shareholder. It even has a marketing agreement with rival American Airlines, a unit of AMR (AMR).

JetBlue executives couldn't be reached for comment.

The carrier's recent shift to the mainstream Sabre reservation system will make it easier to attract business travelers, many of whom like its comfortable Airbus A320 jets. JetBlue's coach seats have 34 inches between rows, versus 31 to 32 inches on most big carriers. Fliers can get "Even More Legroom" seats, 38 inches apart, for as little as $10 above the average one-way fare, now a reasonable $139. However, JetBlue is unlikely to become a business favorite because of its limited roster of U.S. destinations, relatively few flights on some popular routes and focus on JFK, which is poison for many business travelers. They prefer New York's La Guardia, which is closer to Manhattan.

JetBlue shares haven't gained much altitude this year, compared with those of some bigger rivals, but that's likely to change.

Linenberg says that JetBlue's stock has been overshadowed by airlines "more leveraged to the global economic recovery." It's up 4% in 2010, while UAL (UAUA), United Airlines's parent, is up 73% and US Airways (LCC) has soared 82%. UAL is to merge around Oct. 1 with Continental Airlines (CAL), which has risen 31% this year.

Linenberg adds that the factors that hurt major carriers during the downturn, notably exposure to business fliers and international routes, are helping them as corporate travel picks up and as overseas travelers again fill planes' lucrative business-class sections. JetBlue, in contrast, still depends heavily on leisure travelers, and its route system is entirely domestic, save for some Caribbean and Latin American destinations.

JetBlue has a higher price/earnings ratio than Delta (DAL), USAir and UAL, based on projected 2011 profits. JetBlue trades for 10 times projected 2011 profits, against a P/E around four for many majors. The big U.S. carriers have more financial and operational leverage than JetBlue and thus attract more hot-money investors.

The Bottom Line
JetBlue shares have trailed those of some rivals this year. But bulls on the stock see it rising at least 33% in a year.

Domestic airline capacity fell about 10% from 2008 through this year, as carriers retired older planes and redeployed others to more profitable overseas routes. This will benefit JetBlue, which can fill that void with its expanding fleet, now 153 planes. For an airline, JetBlue has a good balance sheet, but it's still leveraged with more than $1 billion of cash against $3 billion of debt. It has committed to spend $4.5 billion through 2018 on 113 new aircraft, although it wants to fund capital expenditures with retained profits, rather than borrowings.

"If there has been a core change in the domestic airline industry where capacity is significantly reduced and the pricing structure has improved, this is one of the best ways to play it, and for a long time," says Ross Margolies, head of Stelliam Capital, a New York investment firm and JetBlue holder. In fact, JetBlue may be that rare airline that maintains altitude for years to come.

Enhanced by Zemanta

Friday, September 24, 2010

American Airlines logo American Airlines closes the doors on KC overhaul base today


The Kansas City Star soaring in the early 1970s, the aircraft overhaul base at Kansas City International Airport employed nearly 6,000 people. But like a plane losing altitude, that job figure fell through the decades: 4,900 ... 3,500 ... 2,600 ... 1,000 ... 450. Today that number hits zero for American Airlines, ending five decades of commercial aviation maintenance that provided good-paying jobs for generations of workers.

There will be no ceremonial goodbyes, just cleaning up and removing belongings for the 50 salaried employees and 400 union workers left. Many workers remain bitter about the circumstances that led to the shutdown and the transfer of work to other bases."If there's one word to describe the feeling, 'indignation' sums it up, “said Ron Harp, an American maintenance facilities mechanic who was hired in 1977. Harp and others are grateful that the massive base got a few extra years of life when American bought TWA out of bankruptcy in 2001. But they still weren’t in a mood this week to wax nostalgic about the base's history."This facility had the best resources and assets at its peak," Harp said."But a lot of its capabilities and work processes have been stripped away through the years to what we're down to now."My thoughts run the gamut, but it's basically a sad day."Like the workers, Kansas City, which owns the base, is left to pick up the pieces. City aviation and economic development officials say they are confident that the base will continue to draw tenants and create jobs.

Three companies currently occupy parts of the complex. But the presence of American -- and the days of an airline filling the 7million-square-foot base -- will be over. Previously, American said it regretted the cutbacks of the maintenance operations -- the Kansas City base and five smaller operations at other airports. Gordon Clark, president of Transport Workers Union Local 530, said workers had already marked the closing. At one recent event, about 3,000 former TWA employees and current American workers gathered at Wheeler Downtown Airport's TWA Museum. They noted the end of an era that began in 1956 when TWA began leasing the base and moved its maintenance work there in its heyday in the 1960s and 1970s, TWA was Kansas City's biggest private employer, with the overhaul base regarded as the crown jewel of the airline’s local operations.

TWA's mechanics developed a reputation as being among the best in the airline industry, a legacy that continued under American’s ownership."If you told someone you worked at TWA, they knew you had a good job," said Gerald Randall, a retired TWA mechanic who was with the airline when it opened the Kansas City maintenance base."It was good wages and good benefits. I was able to send my daughter to K-State, and she didn't have any debt when she graduated."Series of setbacks But deregulation, hijackings, fuel-cost spikes, and other ups and downs took their toll on TWA and other airlines in the 1980s and 1990s.Amid all of TWA's turmoil, the Kansas City overhaul base endured, still employing about 2,600 people at the time of American's takeover in 2001.

But the Sept. 11, 2001, terror attacks dealt another blow to the airline industry, and the hopes and plans of the city and American weren't enough to save the base. Two years ago, American said it was moving a big portion of maintenance work from Kansas City to its main facility in Tulsa, Okla., cutting Kansas City’s work force of about 1,000 in half. And last October, American announced that it would shut down the Kansas City base. About half of American's 400 mechanics and related union workers in Kansas City will transfer to other American maintenance facilities in St. Louis, Tulsa and Dallas. That includes Harp, 52, who will move to Dallas to work there while his self-employed wife remains in Kansas City."It's splitting my family up, so I guess we'll see each other when we can, “he said "Maintaining two residences is a big burden, expense-wise."The remaining 200 workers are retiring, and that includes M.E. Johnson, 59.

Johnson, an aviation mechanic who was hired in 1974, said he was hoping to make it to age 62 or 65 before retiring."It's kind of a burden in that regard," he said. "But I was able to take advantage of a retraining program that was offered, and I plan to get into a business of my own."Despite American's actions that have eliminated their jobs in Kansas City, Johnson and Harp said they knew American had to endure many challenges. And they indicated that Kansas City workers understood that without American’s intervention, TWA would have been liquidated in 2001."I'm really happy American Airlines gave us nine years," Johnson said. "It was enough time to raise my kids and get them into college."

Johnson was one of thousands of American or former TWA workers at the base who could make such a claim."Over the years, the overhaul base has been a tremendous asset for the Kansas City economy," said Bob Marcuse, president and CEO of the Kansas City Area Economic Development Council. "It provided great jobs for thousands of people and created a wonderful set of work skills."Looking ahead. But Marcusse said that though much of the base was empty even before American's departure, he is optimistic about its future."What's interesting to me is that the facility is starting to reinvent itself," he said.

"The (Kansas City) Aviation Department is recognizing it has a unique asset, and they are finding ways to find new tenants."Three other companies now occupy parts of the maintenance complex: Smith Electric Vehicles, Jet Midwest and Frontier Airlines. Mark VanLoh, director of the Aviation Department, said that "the fact that American ended up staying as long as they did was in itself a success" and meant that city efforts such as a favorable lease and bonds to renovate the complex were worthwhile.VanLoh also said the city's efforts to market the base to others have paid off, though the new tenants haven't brought a lot of jobs yet.

Smith Electric Vehicles is producing commercial, battery-powered vans at the facility, even though the company says it's a temporary site. Marcusse said: "If the base can serve as a launching site for Smith Electric, it can become a unique industrial incubator for other businesses as well.

With the equipment that's available there, it could be a wonderful space for many companies, not necessarily one big employer, like with TWA or American Airlines."The base also will house some aircraft maintenance business even with American's pullout. Jet Midwest, a little-known locally based company, took some space at the base this year. A buyer and seller of aircraft parts and entire planes, Jet Midwest hopes to expand its maintenance capabilities in the coming months.

Jet Midwest CEO Patrick Kraus said his aircraft repair station, Jet Midwest Technik, is ahead of schedule, obtaining a federal operating certificate this month. The company as a whole expects to have nearly 60 employees byte end of October and remains on track to have 100 workers or more by year's end. Over the next several years, Jet Midwest hopes to grow enough to occupy more than 1 million square feet of the maintenance complex and employ several hundred people. Last month, Frontier Airlines also moved some of its maintenance work out of Denver to the Kansas City overhaul base. VanLoh said the airline was leasing two narrow-body hangars from the city."I recently saw four Frontier planes parked in the hangars, and I thought that was awesome," he said.

Frontier, now owned by Indianapolis-based Republic Airways Holdings, did not return calls about the new operations and hasn't given the city a specific employment figure. However, some city officials have indicated that Frontier might be employing more than 100 people in its maintenance operations here.VanLoh said he continues to speak with businesses about moving or starting operations at the overhaul base. However, the city still needs to spend money to upgrade the facility, including modernizing its utility and wastewater treatment plant. The city had to return millions of dollars in bonds that were issued to upgrade the overhaul base when American was the tenant. That means less money for upgrades, VanLoh said, but it remains a priority given the age of the overhaul base."That's the one thing we hear when we walk people through the base," he said.

"That's why we need to get some of these repairs done, so we can make it an even more attractive facility."VanLoh and economic development officials are looking to the maintenance base’s future. But Clark, the mechanics union leader in Kansas City who most likely will transfer to work for American in Dallas, said the end of American’s and TWA's run at the base remains surreal."You spend your whole life working in a facility like this, and you see the other casualties happening in the airline industry," said Clark, who was hired by TWA in 1986. "You just never think it's going to happen to you. I just never thought we'd be facing a time like this."

Overhaul base through the years 1956: Operations begin at the massive new Trans World Airlines overhaul basin Platte County.

1970: The base is the biggest commercial aircraft maintenance facility in the world, with nearly 6,000 workers.

1986: Corporate raider Carl Icahn becomes TWA chairman, and the carrier begins a long and eventually fatal decline.

1990: About 4,900 work at the maintenance base.

2000: Despite the fact that TWA required two bankruptcy reorganizations in the 1990s, Kansas City voters approve a bond issue to renovate and upgrade the base.

2001: American Airlines agrees to buy TWA out of bankruptcy and saves 3,500jobs in Kansas City, including the 2,600 at the base.

2003: American agrees to keep operating part of the overhaul base, which is down to about 2,000 workers.

2005: Kansas City OKs a new lease giving American incentives to upgrade the base. American has to keep at least 700 of the base's current 1,600employees to keep the incentives.

August 2008: Union officials are told that two-thirds of the base's 900 workers could be gone by early 2009 as American decides to shift more maintenance work to Tulsa.

October 2009: American announces the base will close by September 2010, eliminating the 500 jobs remaining.

January 2010: The Kansas City Council OKs Jet Midwest's use of three buildings as the city tries to get other businesses into the base.Aug. 21: Farewell ceremony for current and former TWA and American baseworkers.

Sept. 6: Union says 200 of 400 remaining union workers are expected to transfer to other bases, with most of the rest retiring.

To reach Randolph Heaster, call 816-234-4746 or send e-mail

Enhanced by Zemanta

Monday, September 20, 2010

jetBlue Airways JetBlue: Company’s Image Won’t Suffer Long-Term Hit From Slater’s Slide
Sep. 20 2010 - 5:05 pm


JetBlue Airways has long suggested that its employees help it stand out. That was certainly the case Aug. 9 when flight attendant Steven Slater open deployed the emergency slide and left the plane.

JetBlue has said very little about the former employee’s tarmac tantrum but Marty St. George, the company’s SVP-marketing and commercial strategy, opened up a bit during a visit to Forbes today.

While the airline conducts a “real investigation” into the actual events that day—let’s stay tuned—St. George says he is surprised that so many people in the press and on social networks view Slater, who is no longer employed by the company, as a “folk hero” with many fans on Facebook. “I’ve been around slides when they blow and it’s a violent process. On that side of the airplane, the right side of the airplane where the slide came out, if a crew member had been hit by that slide it could have been a serious issue,” says St. George.

The company, which built a reputation on customer service, has weathered image blows before. In early 2007 it took a hit when nine planes were stranded on a tarmac for more than six hours each during an ice storm.

Like storms, most of these issues blow over. “My philosophy on reputation is that it’s a like piggy bank. You continue to make deposits in the piggy bank or withdrawals from the piggy bank,” says St. George. “Yeah, we had a tough experience in early 2007. We had to take some withdrawals from the piggy bank in reputation.”

What about the Slater incident? There may be some withdrawals. But, says St. George, there will be no long-term damage to JetBlue’s reputation. “I think customers recognize that these things happen,” says he. “We’re not happy it happened—we wish it had never happened–but from a reputation perspective, we feel very confident that there’s no long-term damage to our reputation.”

It will be interesting to see how this continues to play out.

Enhanced by Zemanta