Tuesday, August 30, 2011

Delta LaGuardia Growth Bid Spurs Southwest to Demand More Slots for Rivals

By Mary Jane Credeur - Aug 30, 2011 1:11 PM MT

Southwest Airlines Co. (LUV) and other carriers objected to Delta Air Lines Inc. (DAL)’s efforts to expand at New York’s LaGuardia airport through a proposed swap of takeoff and landing slots with US Airways Group Inc. (LCC)

The accord between Delta and US Airways calls for divesting 48 slots to smaller rivals, about 30 percent fewer than a previous plan that those two carriers walked away from last year. Dallas-based Southwest said in a filing that there is “no justification for such smaller divestitures.”

The Department of Transportation should “seriously consider even larger carve-outs in light of the severe -- and permanent -- negative impact that the proposed transaction will have on competition,” Southwest said in a regulatory filing posted today on the agency website.

JetBlue Airways Corp. (JBLU) and Virgin America Inc. also filed objections. The Airports Council International trade group based in Washington urged regulators to deny the proposal from Atlanta-based Delta and Tempe, Arizona-based US Airways, saying it would strip local airport authorities of control of their facilities.

Last month U.S. regulators tentatively approved the deal, which would give Delta 132 more slot pairs at LaGuardia and control of about half the flights there. In exchange, US Airways would get 42 pairs at Washington Reagan National Airport.

LaGuardia and National are so congested that they are under flight restrictions, meaning carriers must trade slots in order to grow.

To contact the reporter on this story: Mary Jane Credeur in Atlanta at mcredeur@bloomberg.net.
American expects new 737 engines in 2018

Dallas Business Journal - by By Matt Joyce , Staff Writer
Date: Tuesday, August 30, 2011, 11:38am CDT

Boeing sees ‘overwhelming demand’ for 737 model with new engines
American Airlines said  Tuesday, that it expects to start flying Boeing 737s with a redesigned engine in 2018.

The announcement from American (NYSE: AMR) followed a vote by the Boeing Co. Boeing Co.

Boeing names new 737 model: 737 MAX

In July, American Airlines announced plans to acquire 460 new aircraft from Boeing (NYSE: BA) and Airbus. The Fort Worth-based airline said the plan would give it the youngest and most fuel-efficient fleet in the industry.
American said it plans to acquire a total of 200 aircraft from the 737 family, with options for another 100. That includes taking delivery of 100 aircraft from Boeing’s current 737 family starting in 2013.
Starting in 2018, American expects to be a launch customer for Boeing's re-engined 737. American said the new engine enhance its fuel-efficiency gains.

American’s commitment to the plan was contingent on the Boeing board’s approval of the 737 engine re-design.
American has not detailed the financial arrangements of the acquisition, but said it will benefit from about $13 billion of “committed financing from the manufacturers through lease transactions that will help maximize balance sheet flexibility and reduce risk.”

Sunday, August 21, 2011

American: Large Order Ensures Job Security

By Darren Shannon
Aviation Week, a division of The McGraw-Hill Companies

American Airlines’ senior management believes last month’s order for at least 460 Airbus and Boeing narrowbodies not only affirms the airline’s commitment to sustained profitability, but also the job security of its employees.

The narrowbody order (Aviation Daily, July 21) is part of a wider fleet revival plan that simplifies the domestic fleet from four types to two families of aircraft, adds Boeing 777-300ERs in 2012 and 2013, and introduces at least 42 (and as many as 100) 787s from 2014. American’s parent company is also divesting its interest in regional affiliate American Eagle Airlines to allow the mainline carrier greater flexibility in contracting feeder services across its network.

American’s restructuring initiative, dubbed Flight 2020, also focuses the carrier’s efforts on five cornerstone markets—Chicago, Dallas, Los Angeles, Miami and New York—while integrating its long-haul operations with partners such as Japan Airlines and Europe’s International Aviation Group.

“We are protecting jobs and salaries,” explains Senior VP of Human Relations Jeff Brundage during a series of interviews with American executives. “This plan makes us a competitive, profitable airline.”

A key facet of American’s narrowbody order is an innate flexibility that allows it to adapt to shifts in demand. Not only do the first 230 aircraft arrive between 2013 and 2017 on lease, they also give the airline various integration options, be it a one-for-one swap out with the MD-80s primarily targeted in the first wave of retirements, a one-for-two replacement ratio or even a simple addition to the fleet.

Those initial deliveries also are on 10-year leases, which give American the choice of culling aircraft or extending their revenue service depending on demand. And as each of the leased aircraft come straight from the manufacturing line, American is provided with a “maintenance honeymoon” for the first several years of operation with no commitment to retain them into old age.

As an added bonus, notes one executive, this lease deal could also rotate out a large number of aircraft from American’s fleet in the mid 2020s just as Airbus and Boeing unveil clean-sheet narrowbodies, giving it an even greater advantage over competitors than the re-engined component of its recent order.

Airbus’s A320NEOs (new engine option) and a re-engined 737 that should be formally unveiled in the coming months form the second part of American’s narrowbody order, again giving it fleet flexibility.

The airline is keen to note, though, that its narrowbody order is not an expansion plan, and that the core intent is to quickly revive its aging single aisle fleet into the most fuel efficient in the U.S. “Reducing unit costs is important to us,” says Managing Director of Corporate Planning Vasu Raja.

This goal requires a large number of annual deliveries, and American is preparing to take up to 55 aircraft in some years. But as Raja notes, American has experienced such rates before, notably in the 1980s and 90s when the MD-80s and 757s (along with the retired fleet of Airbus A300-600s) now scheduled for replacement were introduced to the airline’s fleet.

There are still some elements to American’s fleet upgrade that need to be finalized, including union backing. Under current terms, American’s pilots are not authorized to operate the Airbus narrowbodies (and some of the 737s) nor the 777-300ERs and 787s as their current contract does not stipulate pay rates for these aircraft.

Pilot pay rates is one of the reasons the 787 deal from 2008 (Aviation Daily, Oct. 16, 2008) remains a memorandum of understanding, as the aircraft has the weight characteristics of one type currently provided for in the pilots contract but the range of another. By contrast, the Airbus and Boeing narrowbodies contained in the recent order and the 777-300ERs are similar to aircraft already contained in the contract, which executives say allows the carrier to place firm orders for these fleets.

American’s pilot and maintenance unions are currently in negotiations with the carrier, and expectations that a solution will be reached are high. For one, says management, the fleet plan shows the company’s commitment to remain in the top tier of world carriers, and in turn a commitment to its employees that the airline has a vision for the future. “There is a journey ahead of us, but it is not a road that is so twisted that we can’t get there,” says Brundage.

Copyright © 2011 Aviation Week, a division of The McGraw-Hill Companies.

Sunday, August 14, 2011

Sept. 11 changed everything about air travel, now more of a grind for passengers and industry
Scott Mayerowitz, AP Airlines Writer, On Sunday August 14, 2011, 3:31 pm

Five-year-old Frank Allocco is 37,000 feet above America, face pressed against the window.
"Cool," he says to his 6-year-old sister. "Francesca, look."

It's their first flight. They ignore a Harry Potter DVD and video games. Instead, there are rivers, mountains and tiny cars below.

Francesca chimes in: "Wow, Frank, look at that cloud."

For Frank and Francesca, soaring high above the country is magical. The kids from Park Ridge, Ill., are treated like stars. A flight attendant gives them wing pins. Mom and dad snap photos.

For most of us, though, the romance of flight is long gone -- lost to Sept. 11, 2001, and hard-set memories of jets crashing into buildings.

We remember what it was like before. Keeping all our clothes on at security. Getting hot meals for free -- even if we complained about the taste. Leg room.

Today, we feel beaten down even before reaching our seats. Shoes must be removed and all but the tiniest amounts of liquids surrendered at security checkpoints. Loved ones can no longer kiss passengers goodbye at the gate. And airlines, which have struggled ever since the day terrorists used airplanes as missiles, are adding fees, squeezing in passengers and cutting amenities to survive.

In interviews conducted during a week flying around the country -- nine flights totaling 8,414 miles -- many passengers expressed anger with air travel, which they said left them feeling like second-class citizens. Generally, the terrorism fears that prompted most of the changes were a distant afterthought.

"Anytime I walk into an airport, I feel like a victim," said Lexa Shafer, of Norman, Okla. "I'm sorry that we have to live this way because of bad guys."

Despite the aggravations, America's skies are busier than ever. Airlines carried 720 million passengers last year, up from 666 million in the year before the attacks.

There was little concern about terrorism even on a flight that was almost identical -- same route, airline, plane type and departure time -- to United Airlines Flight 93, which crashed in a Pennsylvania field on Sept. 11 after passengers fought the terrorists for control.
Instead, passengers were jockeying for position at the gate as if they were waiting for the doors to open on a day-after-Thanksgiving sale. They glanced at each other's tickets and mumbled complaints when somebody boarded before they were supposed to.
"Passengers have lost civility," said Karen McNeilly, of Gold Hill, Ore.

And it's not just the boarding process that would make Emily Post cringe.

On a flight to Houston, an oversized man stole a window seat. Why? Because in his assigned seat he would have spilled into the aisle. The rightful occupant couldn't really object since the seat-stealer was already firmly planted, tray table down, Burger King cup out.

It's easier now for passengers to get annoyed with each other. We're simply getting packed in more tightly by airlines that are reining in costs more than they ever did before the terror attacks.

A decade ago, an average of 72 percent of seats per flight were occupied. Today, 82 percent are. Passengers once had a shot at an empty middle seat. Now that rarely happens. Airlines have added rows, meaning less leg room. Smaller, regional planes now carry a quarter of all passengers, twice that of a decade ago.

"It is a dismal experience that you simply put up with because you have to get from point A to point B. It used to be the part of the trip you looked forward to," said Virgin America CEO David Cush. "As an industry, we've found a way to beat that joy of flying out of people."

In another effort to balance their books, airlines have added fees for once-free services. Last year, $8.1 billion in fees were collected, more than three times the $2.5 billion collected before the attacks, adjusted for inflation.

Checked-luggage fees accounted for $3.4 billion of the 2010 total. Without them, major airlines would have lost money last year rather than reporting a combined $2.6 billion in profits.

It's no wonder that for shorter trips, Americans now avoid flying. New inter-city buses have popped up and Amtrak now carries 37 percent more riders than a decade ago. Buses and trains don't have the security checkpoints that make it necessary for air passengers to arrive at the airport about an hour before domestic flights and two hours in advance for trips out of the U.S.

The days of arriving minutes before a flight are a distant memory, and lines are inconsistent. While one Transportation Security Administration checkpoint took four minutes to clear, another involved a 27-minute wait.

Frequent fliers know the ever-changing set of security rules. Most others don't.

Some people worry about radiation-emitting, modesty-eroding full-body scanners, although their use is still sporadic.

At Newark Liberty International Airport, the machines were shut down during the Monday morning rush. In Fort Lauderdale, Fla., two lanes were open. One had a full-body scanner. One didn't. Passengers could pick.

"I'm not really convinced that any of this security is doing anything other than making people feel safe," said Matthew Von Kluge, of Chicago. He was wearing a shirt created by his former boss, fashion designer Vivienne Westwood, saying: "I am not a terrorist. Please don't arrest me."

Diane Dragg, of Norman, Okla., said: "I'd rather do it than be blown up."

Not everything has been bad for fliers. Many planes now have individual TVs and Wi-Fi. Kiosks and websites make checking in easier. And with travelers arriving earlier and earlier at the airport, there are better shops and restaurants.

It's been harder for airlines to find a silver lining. They're out $54.5 billion in the U.S. over the last decade, having lost money in seven of the past 10 years.

At least 33 airlines have filed for bankruptcy protection, including Delta, Northwest, United and US Airways. Some, including ATA and Aloha, stopped flying.

It's not just Sept. 11 that hurt airlines, which were hit hard by spikes in oil prices and a drop in travel during the recession. But after the terror attacks, just getting passengers to fly again was a challenge.

In the first year, traffic fell nearly 8 percent. It took three years to return.

"People were just scared to fly," said F. Robert van der Linden, a curator at the National Air and Space Museum.

To keep planes in the sky, airlines burned through their cash reserves and borrowed heavily, said Jim Corridore, an airline analyst with Standard & Poor's. Fares were dropped to unprofitable levels to lure back passengers.

It worked, but vacationers now expect rock-bottom prices. Airfares today are 20 percent lower than they were on 9/11, when adjusted for inflation.

Airlines now operate on razor-thin margins, with fewer employees.

More than a quarter of the industry's 620,000 full-time jobs pre-9/11 were eliminated. Those that remain are less lucrative: The average pay for a pilot with 10 years of experience is now $145,000, down 13 percent when adjusted for inflation.
For passengers, the real legacy of the attacks might not just be more invasive security checks, new fees or other things we never had to worry about before -- like whether the name on our ticket precisely matches the name on our driver's license. It might just be losing our ability to relax in the skies.

Though children like Frank and Francesca can still feel the joy of flying, Ethan Estes of Louisville, Ky., could well speak for most adults.

"If the airline does everything perfect," he said, "the trip is just bearable."

Scott Mayerowitz can be reached at http://twitter.com/GlobeTrotScott