PlaneBuzz

"In 1999, there was evidence of scale economies for connecting flights. Conditioning on other variables, the marginal cost of serving a connecting passenger on a long route was $18 less than that of a direct passenger, or roughly 12 percent of the average marginal cost.

The cost advantage of connecting flights disappeared in 2006. Conditioning on other cost shifters, the marginal cost of a connecting flight was $12 more expensive than that of a direct flight. The change is probably driven by the increasing fuel cost in the sample period. Since the fraction of fuel consumed at the takeoffs and landings could be as high as 40 percent, rising fuel costs offset the benefit of denser traffic created by connecting flights."

So says researchers Steven Berry at Yale and Panle Jia at M.I.T.

In a new working paper the two have published entitled, "Tracing the Woes: An Empirical Analysis of the Airline Industry, " they confirm that it used to be cheaper for an airline to place a passenger on a connecting flight -- rather than a direct one. But by 2006, that advantage had gone away. Why? One simple answer: the increasing cost of fuel.

According to the two researchers, "Channeling passengers through a hub airport allows carriers to increase the load factor. But it also requires extra fuel, both for the two extra landings and the longer distances passengers have to travel. The authors estimate that in 1999, the marginal cost of servicing a connecting passenger on a long route was $18, or about 12 percent, lower than that of servicing a direct passenger. That cost advantage disappeared in 2006, probably because fuel was more expensive. In 2006, servicing a connecting passenger cost $12 more and reported inflation-adjusted operating costs increased from 11.4 cents per available seat mile to 12.5 cents."

The authors estimate that by 2006 the legacy airlines were transporting 4 percent more passengers with 9 percent less revenue and 19 percent less in profit than in 1996. And, despite the bankruptcies and mergers in the early 2000s and the sharp downturn that followed 9/11, the average revenue-passenger-miles divided by the available-seat-miles of a flight, known as the load factor, rose from 71.2 percent to 79.7 percent from 1999 to 2006. It reached a record high of 80.5 percent in 2007.

There is a summary of the paper available for free here. The entire work is available for $5. Spend the money and buy it. It is well worth the read.

Posted by Holly at 4:51 PM | Permalink | Comments (0)

Now I know the rest of the story.

This week one of our friendly airline geeks on a list I am on sent out some disturbing pictures in which it appeared someone at United AIrlines decided to take a pressure washer to one of the airline's Boeing 767s -- knocking out windows and generally making a huge expensive mess.

But that wasn't a pressure washing. It was from fire hoses.

Kieran Daly wrote on his blog, Unusual Attitude this week that he was told that United took a Boeing 767-300, and gave it the full customer-facing treatment. New seats, interior fittings, and best of all,"Panasonic's all-singing, all-dancing in-flight entertainment." All of this was done at its Chicago maintenance base.

That's when all hell broke loose.

If you would like to read the official MX write-up of the damage, you can access it at Kieran's blog. It runs for pages and pages. And pages.

Posted by Holly at 5:18 PM | Permalink | Comments (0)

Poking our head around the damage from today's Wall Street activities, it was not a good day for the airline stocks, as almost every one of them ended lower for the day.

While the Dow Jones Industrials were down as much as 200 points earlier in the day, the Dow ended the day down 80.05 points, or 1.09% for the day.

However, the Dow Transports and the AMEX Airline Index both had a more miserable run of it. The AMEX Airline Index ended the day down a little more than 4%, closing at 16.43, while the Dow Jones Transportation Index ended down 4%, closing at 2602.06.

The top losers for the day included: AirTran, which lost 9%, closing at 3.27; Alaska, which lost 7%, closing at 22.27; JetBlue which lost 7%, closing at 4.26; US Airways, which lost 10%, closing at 3.30; Southwest Airlines, which dropped another 7%, closing at 6.07; and Continental, which ended the day down 6%, closing at 11.15.

Ugly day.

Posted by Holly at 3:59 PM | Permalink | Comments (0)

Ahhh, it's that time of week again. This week's issue of PlaneBusiness Banter is now posted. Subscribers can access this week's issue here.

Posted by Holly at 1:27 AM | Permalink | Comments (0)

Thanks for your feedback on the news concerning Southwest's move into Boston. I'll strip off names and summarize comments I've received via email later today.

But first -- let's talk about what has been going on of late concerning the NTSB and their investigation concerning the actions of the pilot in the crash of Pinnacle/Colgan/Continental Express Flight 3407 last week.

If you are like me, you probably did a double take when you read the the Wall Street Journal article yesterday in which the paper reported that "evidence suggests pilot error" as the likely cause of the crash. The New York Times then ran with a story that said that the "crew may have overreacted" after the auto pilot system pointed the plane's nose down to generate speed. No sources were named in either paper's reports.

While officially the NTSB has not publicly made such comments, the assumption would have to be made that someone on the inside of the investigation was feeding both news sources.

Enter a number of our pilot readers.

Here is a "Read Before Fly" announcement that was sent to Southwest Airlines' pilots yesterday. Sound familiar?

Last night more than one pilot sent me a copy. And they weren't all Southwest pilots. Apparently the notice was posted on the PPRUNE site, or at least that is what one American Airlines' pilot wrote me.

___________

Safety Alert 2009-01 - February 18, 2009

There is a potentially significant hazard concerning the ILS to runway 23 in BUF.

Information has been received indicating it is possible to obtain a significant nose pitch up, in some cases as much as 30 degrees, if the glide slope is allowed to capture before established on centerline. Pilots who are preparing to configure and land have the potential to experience abrupt pitch up, slow airspeed, and approach to stall if conditions present themselves in a certain manner.

This effect is the result of an earthen obstruction close enough to the ILS to affect the integrity of the glide slope signal. This has resulted in the issuance of an advisory given on ATIS which states that "the ILS Glide Slope for runway 23 is unusable beyond 5 degrees right of course." When attempting to intercept the runway 23 ILS from right traffic, the ILS glide slope indication may read full deflection down. Just prior to intercept it may then move up in such as manner as to enable approach mode to capture in such a way as to result in a nose up pitch and loss of airspeed. Southwest Airlines has issued a notice reading: "Until further notice, when executing the KBUF ILS/LOC Runway 23, DO NOT select Approach Mode until established on the localizer inbound."

This issue is being addressed on several levels in an attempt to address procedures, facilities, and communication regarding this matter. If you experience any issues related to this, please file an ASAP form and or call SWAPA Safety at SWAPA toll free 800-969-7972.

____________

Posted by Holly at 11:49 AM | Permalink | Comments (0)

It appears our flurry-ette of emails this afternoon was spot on.

An article posted just a few minutes ago on the Boston Globe's online site says that Southwest Airlines' CEO Gary Kelly told them in an "exclusive" interview that the airline plans to begin flying out of Logan International Airport by the fall with between eight and 12 daily departures.

Now go talk amongst yourselves about this.

I have my own thoughts. What are yours?

Posted by Holly at 8:52 PM | Permalink | Comments (1)

Posted by Holly at 4:17 PM | Permalink | Comments (0)

It's official. For those Allegiant fans out there, you know the airline talked on its recent earnings call about setting up a new base city. Last week Cranky Flier went public with his guess -- and his guess wasn't really much of a guess after the airport manager in Sioux Falls went public about it being Los Angeles. Duh.

So why was the airport manager in Sioux Falls talking about it anyway?

Because on Allegiant's website the airline had asked folks to guess what their new base city was going to be. The only information they were giving out last week is that the airline was going to start service out of the new base city to 12 destinations. And yes, one of those destinations just happened to be ....Sioux Falls.

Here are the 12 cities that Allegiant will begin operating to out of LAX:

1, Bellingham

2. Billings

3. Des Moines

4. Fargo

5. Grand Junction

6. McAllen

7. Medford

8. Missoula

9. Monterey

10. Sioux Falls

11. Springfield

12. Wichita

Hmmmm. This should be interesting.

Posted by Holly at 12:06 AM | Permalink | Comments (2)

I wrote this week in PBB that the last week or so has been one where we've been focused on the regional sector. First, we saw again how poorly most of the regionals performed in the recent DOT Airline Consumer Travel Report. Particularly Comair, Atlantic Southeast and American Eagle.

Then we had the less than positive numbers reported by the regional airline that used to outperform all the other regionals -- hands down. While SkyWest reported a profit for the fourth quarter last week -- the future looks murky for the regional powerhouse in terms of growth, as Delta AIr Lines continues to pull back on its contract flying. Even, as we learned in the airline's call, below contract minimums.

Top this off with Mesa's share free fall last week, in which shares of the airline dropped to 4 cents a share -- and Pinnacle suffered a crash involving its Colgan operation, and well, it was a week when the regionals were continually in the forefront, but not for very positive reasons.

Today the regional airline that has been consistently posting the strongest results in the sector for the last year or so, Republic Holdings, reported its earnings for the fourth quarter.

So how did the airline do?

The good news is the airline posted a profit. It also posted a 9.1% operating margin. Excellent. (Although that margin was 1.3 points lower than the fourth quarter of 2007).

The bad news is that this profit was much less than the one the airline reported for the same period in 2007, and that growth prospects are, well, you know.

Republic reported today that net income slipped 21.7% for the fourth quarter, to $18.9 million or $0.56 a share.

This compares to the fourth quarter of 2007, when the airline posted a profit of $24.27 million, or $0.65 per share.

However, on the positive side, the results were better than what analysts had forecast. Consensus had the airline coming in at around a $0.47 a share profit.

The company took delivery of eight new E175s during the fourth quarter, while it removed seven CRJ200s and the last two E135s from service. As of Dec. 31 Republic operated 221 aircraft, only two more than at the end of 2007.

Overall, in listening to the call, we were once more reminded of just how difficult it is to run a regional airline these days. There really is no script beyond 30 days, it seems, and your major partners are concerned with one thing -- trying to squeeze as much profit out of their operations as possible. If that means putting more pressure on their regional partners, then so be it. The same was true with Republic in the fourth quarter. And as utilization levels drop, costs are going to go up.In the case of Republic it also got hit with Frontier's bankruptcy this year. All of a sudden there were a lot of planes coming back to them -- what were they going to do with them? How much were the carrying costs going to be on these aircraft?

But having said all that -- the airline really did do an excellent job of navigating a rough quarter.

The problem now is -- what about 2009?

For those of you with really inquiring minds, you can read the public posting of the airline's earnings call transcript here.

Posted by Holly at 11:51 PM | Permalink | Comments (0)

Hi all. Whew. It's been a busy week or so for me. Tiring one too. As most of you know, earnings continue to roll out in the sector. Today we heard from Republic Holdings. I'll talk about their numbers in the next post.

In addition, yours truly flew home to the Worldwide Headquarters last week, and within 12 hours was sick as a dog. Head, eyes, ears, nose. Ugh. My head's still killing me today.

Yesterday morning it was clear something was not right as PlaneBusiness Banter subscribers went to pull this week's issue and saw the "tease" page for last week's issue. Duh.

Two of the reasons I had to come home this week are teeth-related. As in, dentist and orthodontist. Yes, it's those damn braces again.

So here I am, at the orthodontist's office, with wires sticking out of my mouth, newly tightened coils stretching across my front teeth, and an assistant hovering over me with pliers that looked like they came from Home Depot, and my phone goes off. Then it goes off again. Then it goes off again.

I immediately said to myself, "Self, what didn't I do before I left the house in a tizzy?" Self knew immediately. I had failed to update the front page of the main website with this week's issue information, and I had forgotten to update the "tease" page that subscribers see when they log in.

Wasn't much I could do about it at that point.

So I let the doctor and his assistant finish their torture and finally I was able to get up and call back to the office and walk David, our subscription manager, through what he needed to do. But not before a SLEW of subscribers had sent me notes of woe at being locked out from this week's issue.

Sorry. My fault.

But see, I was sick. That's my excuse.

Okay smart guys. I know. Some of you out there are saying, "So what's new?"

Anyway, this week I should be more visible here on the blog. Last week was spent working with a number of folks on our new PlaneBusiness.com site. And yes, you'll notice that we're starting to move the furniture around here on the PlaneBuzz page just a little bit as well. We're now a three column format -- not a two column one.

More tinkering to come.

Posted by Holly at 3:01 PM | Permalink | Comments (0)

Subscribers can access this week's issue of PlaneBusiness Banter here.

Posted by Holly at 10:17 AM | Permalink | Comments (0)

Hi guys. The last earnings-filled issue of PlaneBusiness Banter for the quarter will be posted this morning. We're going through the final editing process now.

Next week we'll be back on our usual weekend publishing schedule.

Surprise of the week? Vegas? What problems with Vegas? Who's having problems with Vegas? WestJet said in their call last week that they are still doing very well with their Las Vegas routes.

Go figure.

Be back here soon.

Posted by Holly at 8:08 AM | Permalink | Comments (0)

The industry suffered yet another crash last night, as a Continental commuter aircraft operated by Colgan Air apparently dove into a house shortly before it was scheduled to land in Buffalo. All 49 crew members and passengers on the aircraft were killed, as was one person who was in the house.

The aircraft involved was a Bombardier Q400.

Bloomberg reports this morning that the aircraft, registration number N200WQ, was ordered by Pinnacle Airlines in 2007 and handed over to the carrier’s Colgan Air unit on April 16 last year. Colgan was operating it on behalf of Continental Airlines, Inc.

Posted by Holly at 8:39 AM | Permalink | Comments (0)

Hello everyone. It's Friday the 13th.

I had a note yesterday from a reader who asked simply, "What are you doing?"

I don't think he was suggesting that I put a webcam on the blog, but I can understand his question, considering I haven't been around here much this week.

Well, here is what I have been doing.

MySQL, PHP, response templates, subscriber list merges.

Yes, we're getting down to crunch time on some major upgrades to our site, and because I have been so caught up with earnings as of late, this week was the week devoted to spending a lot of time on the website project.

And yes, you'll start to see a couple of changes here on PlaneBuzz as well. Woo hoo. We'll finally do something more than the out of the box template. I know. I don't know what's gotten into me either.

Must be the fact all our major banks in this country are probably insolvent.

Or something like that.

More in a bit.

Posted by Holly at 8:29 AM | Permalink | Comments (0)

This week's 70-plus page issue of PlaneBusiness Banter is now posted. Come and get it while it's hot. This week we take a closer look at the recent fourth quarter earnings results reported by JetBlue, AirTran and Alaska Air Group. Two of the three got a thumbs up from us for the quarter. Which two were they?

We'll also let you know which banks have the biggest exposure to ILFC.

We'll also talk about the case of the mysteriously missing Southwest Airlines' pilot TA.

All this, and more.

Subscribers you know the drill. You can access this week's issue here.

Aren't a subscriber? Tired of being laughed at because you don't know what's going on in the airline industry? Click here to become a subscriber. You'll instantly amaze your co-workers with you knowledge. And hey, you'll find out some of our secrets. Like -- how come some airline CEOs get PlaneBusiness Brownie Points and some don't? Or......Who was seen drinking down in the PlaneBusiness Double-Digit Losers Basement Friday night?

Send us a Valentine -- airline style. Subscribe to PlaneBusiness Banter.

Posted by Holly at 11:38 PM | Permalink | Comments (0)

Somehow I think there are a few of you out there who are. If you aren't, turn on "60 Minutes" on CBS.

Posted by Holly at 6:30 PM | Permalink | Comments (0)

Here's the link to the audio of the cockpit/tower communications.

Posted by Holly at 11:35 AM | Permalink | Comments (0)

Click here for the transcript of Flight 1549, which was released this morning by the Federal Aviation Administration.

Posted by Holly at 11:05 AM | Permalink | Comments (0)

I know. I know. I was AWOL Tuesday. I had a good excuse. I was recovering from writing 74 pages of copy in three days. I also was lucky enough to share my breakfast and his lunch with Terry Maxon, airline reporter for the Dallas Morning News. He and I commiserated about the sad state of the media business, airline union/management relations, the airline business in general, and well, just the sad state of the world in general. Heh.

Not really. It's always good to sit down and talk with Terry. He makes me laugh. After my marathon writing session this weekend (which was interrupted only by the Super Bowl), I needed a good laugh.

Terry and I agreed that this quarter's earnings calls for the airline industry, as a group, were one of the most mind-numbing that we could remember. Last week analyst Gary Chase with Barclays said it had been a "tiring" earnings season.

That was being kind.

Thank god for Allegiant's earnings call. That's all I can say.

As for the rest of the pack, it was a quarter to forget. For the most part. Enough tap dancing about how bad demand is, but you don't want to admit. Enough talk about hedging. Enough talk about liquidity. Enough talk about how well you would have done, if it hadn't been for ______________. (Fill in the blank.)

Or as Terry so eloquently put it in his Idle Thoughts for Friday last week, "After listening to all the airline earnings reports, I've decided that I'm rich, excluding special charges and one-time items."

Back to business in our next post.

Posted by Holly at 1:13 PM | Permalink | Comments (0)

This week's PlaneBusiness Banter -- all 70 plus pages of it -- can now be accessed here. Subscribers know the drill.

Me? I'm going for a long walk. If I hear the word "hedging" one more time, I'm going to scream.

Posted by Holly at 9:05 PM | Permalink | Comments (0)

Just a publishing note for PlaneBusiness Banter subscribers. This week's issue will be posted later today. Yep, it's one of those really extended issues -- with our usual full earnings call coverage.

in the meantime, continue to discuss the game last night amongst yourselves. It wasn't pretty was it? No, this one was more like a heavyweight fight. All the way to the end. Congrats to the Steelers. Kudos also to the Arizona Cardinals, who more than proved the point that they deserved a spot in the final dance.

More later folks. I've got to get back to work and get this week's issue out the door.

Posted by Holly at 8:49 AM | Permalink | Comments (0)