On Jammed Jets, Sardines Turn on One Another

The New York Times
By JAD MOUAWAD and MARTHA C. WHITE | The New York Times –  5 hours ago


Flying coach can be a bruising experience these days.

Rory Rowland said he was rudely rebuffed after he asked the person in front of him not to recline his seat on a red-eye flight. When he later got up to use the bathroom, and the other passenger had fallen asleep, “I hip-checked his seat like you wouldn’t believe,” Mr. Rowland, a speaker and consultant, said, then feigned innocence when the enraged passenger complained to a flight attendant.

With air travelers increasingly feeling like packed sardines, flying has become a contact sport, nowhere more than over the reclined seat.

Now, it is only getting worse, as airlines re-examine every millimeter of the cabin.

Over the last two decades, the space between seats —  hardly roomy before —  has fallen about 10 percent, from 34 inches to somewhere between 30 and 32 inches. Today, some airlines are pushing it even further, leaving only a knee-crunching 28 inches.

To gain a little more space, airlines are turning to a new generation of seats that use lighter materials and less padding, moving the magazine pocket above the tray table and even reducing or eliminating the recline in seats. Some are even reducing the number of galleys and bathrooms.

Southwest, the nation’s largest domestic carrier, is installing seats with less cushion and thinner materials —  a svelte model known in the business as “slim-line.” It also is reducing the maximum recline to two inches from three. These new seats allow Southwest to add another row, or six seats, to every flight —  and add $200 million a year in newfound revenue.

“In today’s environment, the goal is to fit as many seats in the cabin as possible,” said Tom Plant, the general manager for seating products at B/E Aerospace, one of the top airplane seat makers. “We would all like more space on an aircraft, but we all like a competitive ticket price.”

Some carriers are taking the smush to new heights.

Spirit Airlines, for instance, uses seats on some flights with the backrest permanently set back three inches. Call it, as Spirit does, “prereclined.”

The low-cost airline started installing the seats in 2010, squeezing passengers into an industry low of 28 inches. While the Airbus A320 typically accommodates 150 passengers in coach, Spirit can pack 178.

And that is a good thing, Spirit says.

“Customers appreciate the fact that there is no longer interference from the seat in front of you moving up and down throughout the flight,” said Misty Pinson, a spokeswoman for Spirit.

Rick Seaney, the chief executive of FareCompare.com, said the airline business had changed in recent years, after airlines parked older planes and started flying with fewer empty seats. In the past five years, he said, carriers had cut capacity —  the number of seats they fly —  about 12 percent.

“The flip side is they can’t afford not to fill up their seats,” Mr. Seaney said. “This is a massive sea change.”

With so little space to haggle over, passengers have developed their own techniques for handling the crowded conditions.

“They jam their knee into the back of your seat as hard as they can, and they’ll do it repeatedly to see if they can get a reaction,” said Mick Brekke, a businessman who flies for work a few times a month. “That’s happened to me more than once, and that usually settles down after they realize I’m not going to put it back up.”

The passengers Mr. Brekke has encountered are not even the most extreme: Some have taken to using seat-jamming devices, known as knee guards, that prevent a seat in front from reclining. Airlines ban them, but they work, users say.

Smaller seats are not the only reason passengers feel more constricted these days. Travelers are also getting bigger. In the last four decades, the average American gained a little more than 20 pounds and his or her waist expanded about 2.5 inches, according to the Centers for Disease Control and Prevention. The dimensions of airplanes, however, have not changed and neither has the average width of a coach seat, which is 17 to 18 inches.

As the cabins grow more crowded, airlines say they are thinking only of their customers, trying to keep costs down. Jude Bricker, the senior vice president for planning at Allegiant, said the airline’s nonreclining seats have fewer moving parts and so require less maintenance, which means lower costs. This allows the airline to keep its fares low, he said.

“We are continually reminded from customers and their behavior that what they want most is convenient service with a low fare,” Mr. Bricker said.

Several budget carriers in Europe have also adopted stiff seats, including Ryanair and EasyJet. Air France, for its domestic flights, which never take more than an hour, has installed nonreclining seats where the magazine pocket has been moved above the tray table to provide more space in the critical area around the knees.

For passengers willing to pay more, of course, airlines offer more room. Business class remains an ultracompetitive market with constant innovation and comfortable amenities, like seats that recline fully. Airlines are also increasingly offering several rows of coach seats with more legroom —  also at an extra price.

Still, the squeeze is on for most passengers in coach. On a flight from Washington to Frankfurt last year, Odysseas Papadimitriou, the chief executive of WalletHub.com, a personal finance social network, was challenged by a tall passenger seated behind him when he reclined his seat. “He was like, ‘Hey, watch it, buddy. I don’t fit here with you reclining the seat,’ ”  he said.

Mr. Papadimitriou called the flight attendant to mediate the dispute and eventually tilted his seat back, but the price he paid to recline was a fitful night’s sleep, as the other passenger grumbled and pushed against the back of his seat for the rest of the flight.

There are ways of resolving conflicts other than bumping into other passengers, as Mr. Rowland, the speaker and consultant, found.

“I lean forward and tap them on the shoulder and say, ‘I’ll buy you a drink if you don’t push your seat back,’ ”  Mr. Rowland said. “It’s made flying very pleasant.”
_________________________________________________________________________http://www.nytimes.com/2013/12/23/business/on-jammed-jets-sa
rdines-turn-on-one-another.html

Airlines: No in-flight calls. Period. Published: Wednesday, 18 Dec 2013 | 1:03 PM ET By: Robert Ferris | Special to CNBC.com   While the Federal Communication Commission reconsiders its longtime ban on in-flight-phone calls, Delta Air Lines says its own policy will remain as it is: no, no and no. And after it previously considered allowing in-flight calls, JetBlue has also decided to prohibit them. The FCC is considering a proposal to step aside and let airlines determine their own policies on using electronic devices in the air. In an apparent attempt to test public opinion, the commission issued an open invitation to anyone willing to comment on the matter. (Read more: 'Inattentive parents' top list of worst fliers) Delta CEO Richard Anderson responded with a statement Wednesday, saying both his company's customers and crews are still cold on the idea of passengers chatting away into phones on flights. Which electronics are banned in flight? CNBC's Phil LeBeau breaks down the FAA rules: Anything with a cell signal is still banned, but e-readers, among other devices, will be allowed. "In fact, a clear majority of customers who responded to a 2012 survey said they felt the ability to make voice calls on-board would detract from—not enhance—their experience," he said. "Delta employees, particularly our in-flight crews, have told us definitively that they are not in favor of voice calls on-board." However, should the FCC overturn the ban, Delta said it will compromise by allowing passengers to text, email, or use their phones in other ways. Just so long as they do so silently. JetBlue representative Morgan Johnston cited similar customer feedback to support its decision to forbid in-flight calls. "We've heard from many customers, and the majority have shared that they do not want voice or video calls allowed on board," Johnston said in an email to CNBC. "We do not allow customers to use VOIP onboard, and have no plans on installing the cellular transponders that would allow cellular calls." United Airlines gave CNBC a statement less final, saying the company is "evaluating the views of our customers and crew members on in-flight calling, and at this time we don't intend to permit use of cellphones."

American Air Is a Sleeper Stock if US Airways/America West Is a Precedent

BY Ted Reed |  12/12/13 - 05:59 AM EST

CHARLOTTE, N.C. (TheStreet) -- The new American Airlines (AAL_) went public Monday with a half dozen analysts recommending it. 

New American may not meet the classic definition of being a sleeper stock, one that is likely to achieve unexpected success. Rather, it is a sleeper because of the promise that could be unleashed by having the America West management team take over American's vast route network, and perhaps because of all the lessons learned from previous mergers including the 2005 America West/US Airways combination.

"AAL shares appear to be trading as if this is a typical merger: we believe there is more to the story," wrote Imperial Capital analyst Bob McAdoo in a report issued Monday. McAdoo said he expects schedule changes visible as early as January will show the new management's impact.

In a previous report, McAdoo said the America West team could find $1 billion worth of revenue gains by eliminating unprofitable flying, which would buttress the value of the remaining seats.
Additionally, JP Morgan analyst Jamie Baker wrote Monday that "the earnings power of new American appears sorely underappreciated by the equity market, in our view." Baker has a $37 target price and has put the shares on the firm's "analyst focus list."

So expectations are high for the shares. New American traded for the first time on Monday morning at $23.95, after a one-for-one exchange with shares of US Airways, which traded as LCC. American shares closed Wednesday at $25.99, up $1.11 on a day when shares in every other major airline were down.

When the same management team, headed by CEO Doug Parker, President Scott Kirby and Chief Financial Officer Derek Kerr took over at US Airways in 2005, they quickly made improvements, primarily capacity cuts. In the first quarter as a merged company, revenue per available seat mile on the US Airways routes improved by 27.7%, a very high number. So Wall Street has faith in the team.
On Monday, CRT Capital analyst Mike Derchin initiated coverage with a buy rating and a target price of $31; he called AAL "one of our favorite ideas."

Derchin said equity distributions over the next 120 days should create buying opportunities. He said labor goodwill, a strong cash positioned and a strengthened OneWorld alliance, due to the addition of the US Airways destinations, will all benefit the shares.

"The main risk is now merger integration," Derchin wrote. "We believe management knows from personal experience and recent industry successes and failures how to get it right."

In an interview Monday, Terri Pope, US Airways/American vice president for Charlotte Douglas International Airport, said she has managed through four mergers at US Airways. "I've seen planning in the last 24 months that I had never seen in those four mergers," Pope told reporters on Monday. One lesson, she said, is that "it's not about how fast you make it happen, but that you make it happen the right way."

The point is that not only has the airline industry learned from the closely watched mergers over the past decade, but also that throughout its management ranks US Airways has people with broad experience in overseeing mergers. That was not the case at Delta (DAL_) or United (UAL_), which both stumbled in completing their mergers.

In his note, Baker wrote that new American's EBITDAR margins already rival Delta's and exceed United's" and we expect AAL to widen its lead going forward." Of the three, he said, Delta presents the least risk, with "little being asked of management besides staying the course, (while) United still requires heavy lifting, (yet) shares already trade at a premium following management assurances to do better.

"This leaves AAL, with a management team that has tackled integration in the past and is starting from a base of profitability already rivaling DAL's," Baker wrote. Like McAdoo, he warned that emergence from bankruptcy, accompanied by equity distributions, can lead to selling pressure.
Delta, he said, lost 18% of its value in the first month after emerging from bankruptcy, while United lost 10%.

Wolfe Research analyst Hunter Keay also said he sees favorable comparisons with United and Delta. In a recent report, Keay wrote that new American's "large discount to Delta and United is simply too much."

Keay also suggested "that the AAL merger integration risks are overblown (because) labor is large mollified entering the process and hard knocks IT experience from US Airways' prior merger (same executives, same reservations systems) should yield valuable lessons learned." He has a $39 price target and calls AAL his top pick.

Written by Ted Reed in Charlotte, N.C.
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US Airways Can Find $1B in Revenue Gains at AMR, Analyst Says

BY Ted Reed | 12/02/13 - 06:45 AM EST

Stock quotes in this article: AAMRQ, LCC 

                

CHARLOTTE, N.C. (TheStreet) -- American Airlines has cut costs by $1 billion in bankruptcy, and now the US Airways  (LCC_) management team is likely to find another $1 billion in financial gains from cutting unprofitable routes and better matching aircraft to routes, a veteran airline analyst said.

"This transaction is as much about fixing AMR as it is about normal merger integration," Imperial Capital analyst Bob McAdoo wrote in a recent report. McAdoo said he sees "well over $1 billion in opportunities to improve AMR's revenue generation potential and financial profitability, simply by shifting priorities and assets.

"AMR Corp. has been a chronic underachiever, particularly in generating revenue," he wrote. "AMR has struggled to generate revenue despite having its hubs arguably in some of the largest and most attractive U.S. cities and also having the largest U.S. carrier presence at London's Heathrow Airport, arguably the most important international airport in the world."

Shares in existing US Airways group and AMR Corp. are scheduled to cease trading on Friday. Dec. 6. On Monday, Dec. 9, AAL shares will begin trading. Existing LCC shares will be converted on a one-for-one basis to AAL shares. LCC shares closed Friday at $23.48, up 74% year to date. McAdoo has an outperform rating on the shares and a $36 target price.

In his report, McAdoo listed three key areas where he believes revenue per available seat mile (RASM) gains can be easily achieved.

On JFK-LAX, the largest U.S. market in terms of revenue, American loses $70 million annually, McAdoo estimated. While its competitors all operate narrow-body aircraft, American flies three-class Boeing 767 nine times a day. Those 767s have fewer seats than competitive aircraft, meaning higher costs per seat mile -- 44% higher costs per seat mile to generate only 7% more revenue than Virgin American, McAdoo wrote. The solution? American already plans to replace the 767s with Airbus A321s.

On JFK-Heathrow, American suffers from "its quantity of slots and its ego-driven tendency to virtually always fly each London flight with its largest B777 aircraft, (and) finds itself unable to always profitably operate to each of its hubs." Furthermore, American's hub in Chicago competes with its hub in Dallas and Los Angeles for London traffic, with the Chicago one-stop undercutting the non-stops. The solution? Cut flights.

On various domestic routes, for instance Chicago-La Crosse, Wis., American uses uneconomic 44-seat aircraft to fly four to five times daily, with the flights only two-thirds full. By contrast, McAdoo wrote, Delta (DAL_) flies Minneapolis-La Crosse three times a day with a 48-seat aircraft and generates far higher RASM.

In a 2005 merger, the America West management team led by Doug Parker took over at US Airways following a bankruptcy. In the first quarter as a merged company, revenue per available seat mile on the US Airways routes improved by 27.7%. Much of the improvement reflected capacity reductions. McAdoo said he believes the America West management team, little changed from 2005, will make similar improvements at American.

"Arriving from the much smaller America West Airlines in 2005, the (team) promptly delivered industry-leading margins at then bankrupt US Airways, a company three times the size of America West," McAdoo wrote. "The team, then and we assume now, has a determination to eliminate flying that could not be made profitable.