Monthly Archives: September 2009

PlaneBusiness Banter Now Posted

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Subscribers can access the latest issue of PlaneBusiness Banter here.

This week I talk a lot about The BeatLive Conference that I attended last week. No, not about what I talked about during the luncheon presentation – no, more about what everybody else talked about.

I’ll follow-up with another column in next week’s issue with more topics from the conference.

So what were some of those things we were talking about in Austin that those of us in the industry need to think about?

Well, I’m not giving all my secrets away. For that you can pay for a subscription!

But this week I concentrate on the industry problem that nobody likes to talk about — the aging mainframe IT structures that most of the major carriers are will working with, around, or in spite of.

It is ironic that this industry, which actually led the way in terms of computer technology in the ’80s, has now, for the most part, fallen hopelessly behind.

Speaking of — in regard to those airlines out there which are charging bag fees — can your internal system tell you how much in bag fees each flight on each route is generating?

Yeah, I thought so.

Other things we’re talking about this week are Morgan Stanley analyst’s Bill Greene’s research note of last week. In it, Bill explains how the ugly process of stock dilution takes place and how it distorts any “historical” analysis of airline stocks prices today.

But having said that, UBS analyst Kevin Crissey upgraded all the major airline stocks last week.

Meanwhile Fitch Ratings came out with their usual quarterly review of the industry. We talk about what they had to say about the usual suspects as well.

Former American Airlines CEO Bob Crandall was on Capitol Hill this last week — testifying on behalf of the proposed passenger rights bill. Yes, you read that correctly.

JAL/AMR? The nightmare continues. For both airlines. For different reasons.

All of this, including my latest trip report in which I experience something special in the air, and more, in this week’s issue of PlaneBusiness Banter.

I Now Remember Why I Hate MD-80s…

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It’s those damn seats.

I just flew on American this week to Austin and back. Short flights. Really short flights.

But even so, I was reminded of how positively uncomfortable those seats are on an MD-80. At least for someone who has had hip surgery. And hey, probably for everybody else as well.

Crowded, cramped, and a rather low seat placement with funky back support. That’s what it was like.

Ugh.

Of course the flight down to Austin was not helped at all by the fact that the airline refused to hook up the APU and the inside temperature of the aircraft had to be close to 90 degrees. Or more. My ability to put up with a hot aircraft at the gate is very limited to begin with, but this experience was brutal. Especially since, because no one wants to pay to check their bag on American, it seems that everyone drags aboard bags the size of small refrigerators and then tries to cram them in the overheads. This takes time. Lots and lots of time.

Made me think of that goofball Richard Simmons. Here I was, “Sweatin’ on an Oldie.”

Okay. I’ve re-upped my American AAdvantage miles account. Paltry as it is.

But you know what? It’s going to be a long time before I get on another one of those airplanes.

What can I say? Ever since I had that great education in “passenger space” and what makes a good airline seat and what doesn’t when I visited the Boeing Customer Experience Center with David Longridge and Kent Craver showing me the ropes (or rather all the different types of seating configurations) — I now know it’s not just seat pitch.

And boy — did that lesson come back to bite me in the butt yesterday.

Literally.

And TheBeat Goes On…

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Hello earthlings. How is everyone today?

I myself am just peachy. I returned yesterday from a nice two day jaunt to Austin, TX., where I was honored to have been asked to give the luncheon keynote presentation at TheBeat Live Conference.

If you are involved in corporate travel, if you need to interact with a GDS system on a regular basis, if corporate airline contracts make you dizzy with frustration, if the thought of migrating your airline’s computer system to a new version keeps you up at night — or any combination of the above — TheBeat should be required reading for you. (This link takes you to their blog, the publication is subscription only, just like PlaneBusiness Banter.

TheBeat was begun several years ago by Jay Campbell, who was a reporter for years with Business Travel News. Jay and I go way back. Waaaaay back.

The cool thing about Jay and David Jonas and Mary Ann McNulty and the rest of the gang who now work under the Promedia umbrella is that they have the same irreverent attitude towards this lovely and oh-so-entertaining industry as I do.

As a result, a gathering of Beat subscribers is very much like what a gathering of the PlaneBusiness Banter subscriber base would be. Lots of opinions, lots of in-your-face discussions, and a really worthwhile way to spend a couple of days.

So — what was the topic of my presentation this year? “Liquidity, Leverage and Labor.” I think that is pretty much self-explanatory.

What is one thing that I learned from attending this year’s conference? Amadeus is not sparing any expense as they greatly expand their presence in the United States. On a number of different levels.

Needless to say, the question of whether the GDS systems are worth it, are becoming irrelevant, or need to change into something completely different was a major topic both officially and unofficially.

The state of corporate contracts with airlines — a hot topic. The issue of just who is going to pay for the ever-escalating cost of “look to book” ratios in terms of accessing travel information online — a hot topic. The effect of individuals now being able to control their entire travel experience in the palm of their hand, thanks to the iPhone and more than 2000 travel-related applications available for that iPhone?

The general consensus is that we really haven’t even scratched the surface on how this is going to massively change the way travel is both managed and consumed.

Oh yes, which leads to another big area of change — control of travel and its expenses from a corporation perspective. Who has it, who is losing it, and who is taking it.

Oh and the procurement method of purchasing travel? If your company is still doing it — you need a new CFO. And if your CFO is the one in charge of authorizing travel, you need a new CEO.

More in this week’s PlaneBusiness Banter on the conference.

PlaneBusiness Banter Now Posted

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This week’s issue of PlaneBusiness Banter is now posted. Subscribers can access this week’s issue here.

What are we talking about this week?

Obviously we’re talking about the huge financial deal that American Airlines announced last week. We have all the details of the liquidity boost — but in my column this week I ask the question — why did the airline wait so long to go public with the deal? I think the answer is obvious — union/management politics.

And that is not a good thing for shareholders.

Southwest CEO Gary Kelly said Friday that it now looks like Southwest may post a profit for the year. 60 days ago that was not the case.

Oh, and all those headlines last week about Southwest targeting international destinations? Take a deep breath and a huge dose of reality.

Airline stocks had another good week last week, led by AMR, which picked up almost 30% on its liquidity news.

On the not-so-good news front, jet fuel prices were up last week as the crack spread jumped up almost 70%. Yikes.

Spirit got whacked by a record-breaking DOT fine last week. Just exactly did the airline do? Or not do?

And the der Fuhrer is back! This week’s Hitler YouTube parody takes on American Airlines’ management. Who’s next? United?

All this and more — in this week’s issue of PBB.

Big Liquidity News at American Airlines

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One can never have enough cash.

Especially not in these days and times.

Following this train of thought, today AMR, parent of American Airlines, announced that it has put together a deal that will bring $1.3 billion in additional liquidity to the airline. In addition, the company announced that it has negotiated a reduction in the airline’s credit card holdback total of nearly $300 million. Combined, this means an additional $1.6 billion in new liquidity by the end of they year.

According to analyst Gary Chase with Barclays, this announcement, combined with the airline’s revenue fundamentals means that, according to his estimates, the airline should end the year with about $4.3 billion in unrestricted cash or 22% of trailing revenue. Give or take.

As Gary also noted, he now expects the airline to have “ample cash to manage its upcoming debt maturities. Moreover, we suspect re-financing those maturities will now be facilitated by a stronger liquidity position.”

Gary also noted that the airline is expected to release its mid-quarter update tomorrow, which effectively is a pre-announcement of third quarter earnings.

Gary expects the airline to post a $0.75 loss for the quarter — which is right in line with consensus.

Big Operational News at American Airlines

Hand in hand with the news about the new cash filling the coffers over at American today, the airline also announced that it is further cutting back on its routes into Raleigh and St. Louis.

Those assets are being redistributed to Dallas, Chicago, Miami, and New York (both JFK and LGA) and Los Angeles.

For 2010, mainline and consolidated capacity are now expected to be up only 1% (after 3.8% and 7.5% mainline capacity reductions in 2008 and 2009 respectively). However, excluding this year’s impact of H1N1 and the 2010 launch of Chicago-Beijing, mainline capacity will be flat in 2010, versus 2009.

In a special JetWire sent to employees today, CEO Gerard Arpey said the following:

“The biggest growth will take place in Chicago, where we?ll add over 50 daily flights. Our Chicago customers will gain access to 12 new cities in the U.S., and three new international destinations. We are committed to making Chicago a major gateway to Asia, and are looking forward to the launch of our new service to Beijing in the spring. Other new AA destinations will include Honolulu, Anchorage, and Vancouver. Eagle will also offer new service to a number of cities, and customer service will be enhanced as Eagle deploys most of its 25 CRJ-700 aircraft – which will be reconfigured to offer a competitive First Class cabin – in the Chicago market. Eagle has also signed a  letter of intent with Bombardier to exercise options for the purchase of 22 additional CRJ-700s for delivery beginning in the middle of 2010. These new planes will complement the 126 aircraft (84 737s and 42 787s) American has ordered from Boeing. The new CRJs will be fully financed, with no impact on American’s cash balance.

In Miami, American and Eagle together will add 23 daily flights. Including changes that will take place by the end of 2009, Miami will serve four new domestic and three new international destinations. At DFW, overall capacity will increase modestly as 17 new daily departures at AA offset some Eagle CRJ flying that is being shifted to Chicago. Service to San Salvador will be reinstated after a two-year hiatus.

In New York, our JFK service will grow by seven flights a day and include six new destinations, three domestic and three international (Madrid, Manchester, U.K., and San Jose, Costa Rica). Two daily flights will also be added at LaGuardia Airport. In Los Angeles, American and Eagle will add two daily flights.

The growth at our hubs and Los Angeles will be offset by reductions in St. Louis and Raleigh/Durham. I realize these will be difficult changes for some of our colleagues at those stations. But as flying shifts from one part of the network to another, so will job opportunities, and we will work with our people in areas impacted by a decrease in flying to make new jobs available in the parts of the network that will be growing.”




PlaneBusiness Banter Now Posted

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We’re baaack!

This week’s issue of PlaneBusiness Banter is now posted. If you are a subscriber, you can access your issue here.

What are we talking about in this week’s issue?

American Airlines and JAL: I think this is the deal that has the traction. I think Delta’s just trying to make life difficult for American here. JAL needs cash, American wants the joint venture. Now the bigger question is — where will American get the cash? With JAL looking for at least $500 million and maybe more — this will be a costly little venture for the folks over on Amon Carter.

The FAA. Both Southwest and American had more altercations with the agency while we were on vacation. But the big question subscribers were asking me was: Did I think the FAA gave Southwest preferential treatment in allowing them more time to install authorized parts?

Airline stocks: It has been a blockbuster three-week period for airline stocks. (That’s what we get for leaving.) Will it continue? Analysts last week were falling all over themselves with positive comments. Hmmmm.

ILFC: We have the latest. Now it looks like AIG doesn’t want to sell the whole thing. That’s okay with ILFC CEO Steve Hazy who apparently is now looking at a partial deal. He’s going to start a rival company. Go Steve.

RBS: Another aircraft lessor is about to go up for sale. Another victim of government subsidies given to its parent company. This time? It was the U.K. government.

DOT Airline Consumer Travel Report for July: A great month. Lower capacity does wonders for operational integrity.

Was I too harsh on Southwest in my comments in the last issue concerning the failed attempt to grab Frontier? We talk about it.

And more.

NFL Network “Red Zone” Channel A Winner

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For the last three weeks I’ve faced the dilemma that many of you are familiar with. Because I no longer live in the NFL television coverage area of my favorite NFL team, the only other alternative (until now) has been to shell out big bucks for the DirecTV Sunday Ticket package.

The package offers every NFL game played — anywhere you live. As long as you are hooked up to DirecTV and pay the big bucks for the package itself.

Well, the first problem is that I don’t have DirecTV.

One of the best things about moving to the DFW area this year was the fact that I got to hook up with Verizon FIOS at the new Worldwide Headquarters.

But — this choice then complicated the watching options as football season neared.

Or so I thought.

What Verizon does have is NFL Network. I am not here to get into a long discussion about how this issue is all so very warped — with the NFL itself going up against DirecTV, which has exclusive rights to the NFL’s own “Sunday Ticket” package.

This is a very volatile and angry debate. Especially for those cable customers who have access to neither. Like our subscription manager who is forced to settle for Time-Warner over in Las Colinas. No NFL Network, no Sunday Ticket. But because of where his apartment is located — no satellite either.

No, that debate is for another day.

What I am here to do is to give the NFL Network’s new “Red Zone” channel a big thumbs up. For only $49.95, I now get full coverage of all NFL games played on Sundays. The coverage consists of the network bouncing back and forth between all the games being played — showing you the highlights only. Goal-line stands, runbacks, attempts to score, long down-the-field passes. Whatever.

After one half of football today — I simply love it. I have been able to watch my beloved New Orleans Saints run and pass all over the Detroit Lions. Drew Brees has never looked better. Oh, and yes, Reggie Bush has never looked worse. But that’s not anything new. What a bust he’s turned out to be.

I haven’t missed one major play from the game. I haven’t missed one major play from any other game either. But I don’t really care about those. But still — it’s cool to see them.

So for those of you who are in the same boat as I am — don’t think that the expensive DirecTV “Sunday Ticket” package is the only deal in town.

If you get NFL Network, check out the “Red Zone.”

It’s pretty cool.

Okay, I’m going back to work on this week’s issue of PlaneBusiness Banter.

And oh, yes, the second half of the Saints-Lions game. ;-)

September 11, 2009

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Eight years ago today we all awoke to the horrific events of September 11 as they began to unfold — events that began and ended with the destruction of four aircraft, the death of hundreds of innocent passengers, and many innocent airline crew members.

While the world takes a moment today to commemorate the events that happened that day in a much larger sense — as we have since that awful day, focus on our departed airline family members. Those crew members who just went to work on what was a beautiful day in the Northeast that day — but never came home.

We will never forget them.

This is our corner of the world. And as I see it, the courage and bravery of these crewmembers deserve our heartfelt acknowledgment. And remembrance.

American Airlines Flight 11, Boston to Los Angeles, crashed into the World Trade Center.

CREW: John Ogonowski, Dracut, Mass., Captain; Thomas McGuinness, Portsmouth, N.H., First Officer; Barbara Arestegui, flight attendant; Jeffrey Collman, flight attendant; Sara Low, flight attendant; Karen Martin, flight attendant; Kathleen Nicosia, flight attendant; Betty Ong, flight attendant; Jean Roger, flight attendant; Dianne Snyder, flight attendant; Madeline Sweeney, flight attendant.

United Airlines Flight 175, Boston to Los Angeles, crashed into the World Trade Center.

CREW: Victor J. Saracini, Lower Makefield Township, Pa., Captain; Michael Horrocks, First Officer; Amy Jarret, flight attendant; Al Marchand, flight attendant; Amy King, flight attendant; Kathryn Laborie, flight attendant; Michael Tarrou, flight attendant; Alicia Titus, flight attendant.

American Airlines Flight 77, Washington to Los Angeles, crashed into the Pentagon.

CREW: Charles Burlingame, Captain; David Charlebois, First Officer; Michele Heidenberger, flight attendant; Jennifer Lewis, flight attendant; Kenneth Lewis, flight attendant; and Renee May, flight attendant.

United Airlines Flight 93, Newark, N.J., to San Francisco, crashed in Shanksville, Pa.

CREW: Jason Dahl, Colorado, Captain; Leroy Homer, Marlton, N.J., First Officer; Sandy Bradshaw, flight attendant; CeeCee Lyles, flight attendant; Lorraine Bay, flight attendant; Wanda Green, flight attendant; Deborah Welsh, flight attendant.

May they all be at peace in a much better place.

Mindblowing Statistic of the Day: US Airways’ Pilot’s Legal Fees

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As many of you are aware, a number of pilots representing the group of pilots at US Airways which was originally with America West, or the “West” pilots as they are nornally referred to — entered into litigation last year against USAPA, the independent pilot union that was created as a result of the original ALPA merger seniority award. That organization was, and is, made up primarily of old US Airways’ pilots, or the “East” pilots as they are known.

The reason for the litigation — the seniority award.

As many of you also know, this spring, after months of intense legal wrangling, US District Court Judge Neil Wake had whittled down the case to one central issue: whether the union is fairly representing all the pilots at US Airways. The legal term is duty of fair representation, or DFR.

The verdict after all the screaming and teeth gnashing? The court found in favor of the former America West pilots. In other words, the court agreed that yes, the formula used for the award was fair, and that by dumping ALPA and setting up USAPA in an attempt to circumvent that award — that the union did indeed not represent all of its members fairly.

But as we all know — this decision, which cost both sides millions of dollars in legal fees, really brought very little closure to anything.

First, the braintrust at USAPA basically refuses to admit that this means it needs to back off and allow the original ALPA seniority award, which used a “blended” process, and not date-of-hire method, to be used as part of any collective bargaining agreement. So essentially there has still been no movement in terms of negotiating a new contract agreement for the pilots.

And second, there is the question of damages.

And no damages are more attention-getting than the legal fees that both sides have incurred since the start of this huge mess.

This week I continue to get caught up on all my email that came in over the last couple of weeks, and today I was reading the latest missive from Leonidas, the group that sued USAPA.

In their latest missive, the group tells its members that its legal team has submitted a request that their legal fees be paid by the union, or USAPA.

“In essence though, we are making a request for the reimbursement of all legal fees and non-taxable expenses spent while protecting the careers of our pilots and protecting the validity of “binding arbitration.” To do this, we are not asking for anything too novel in that we have requested that all members of the bargaining unit share in the expense. There is no division of East or West with regard to who would be forced to pay for this legal action. On the surface, this may seem unjust, but what must be considered is the superb return on investment for all US Airways pilots should this request be granted. If the plaintiffs prevail here, then the $1.8 million in total expenses would be repaid to our legal counsel, and the balance of contributions received thus far would remain in the Leonidas trust, standing by to protect the minority for many years to come, just as stated in our Leonidas LLC objectives which were published long ago; “’We will remain perpetually poised to aggressively defend our rights until such time when we are no longer threatened.”’

So just how much are we talking about?

As they said in their comments above, the legal fees for the America West pilot group now stand at about $1.8 million.

And the litigation is not over yet.

As the folks at Leonidas point out,

“Back to that return on investment for the victims (for simplicity sake, we will use a little “chainsaw” math in this analysis):

$1,821,000 Approximate West legal expenses

5200 Approximate number of pilots subject to USAPA
$350 Approximate pro-rata share of expenses

$1,260,700 Approximate East pilot share of expenses

3600 Approximate number of East pilots

1600 Approximate number of West pilots

$560,300 Approximate West pilot share of expenses

The net result is that the class of West pilots would receive $1,260,700 from the East pilots in return for their own contributions of only $560,300- an instant return on investment of 125% for the West pilots. We will acknowledge that this does not seem fair to those West pilots who have voluntarily funded our legal effort on the front end, but it would have the benefit of compelling those unwilling West beneficiaries of our legal campaign to finally contribute something nonetheless. Of course, true justice would be served by seeking these funds directly from the primary author of the entire USAPA saga; Lee Seham himself. That will be up to either the current USAPA leadership [unlikely], or perhaps a future and competent leadership team that will take over once Cleary and his team are removed and forever banished from union affairs.”

So while now the two sides continue to fight out the damages part of the ruling in court — let’s look again at how much money we’re talking about — just to pay off the legal fees for the America West-led group of plaintiffs. Almost $2 million bucks.

And I would add — how much is USAPA itself now on the hook for — in terms of its own legal fees it has racked up in defending this ridiculous stance of theirs?

But here’s the ironic part. All those expenses are having to be paid out of the general union dues pot — that same dues pot that is supposed to fund USAPA, which is supposed to represent all pilots at the airline. Yes, including the ex-America West guys.

I’ve said it before, and I have to say it again. The utter stupidity of this situation — on more than one front — continues to just flat out amaze me.

I’m not sure we’ve ever seen anything, in terms of scope, that rivals this situation in terms of sheer union leadership idiocy.

And for this industry — that’s saying something.

Here’s hoping that the pilots at US Airways elect new union leadership at USAPA that understands, at least, the concept of rational thinking. Or maybe ….. reasoned thinking. Or maybe just …..thinking. Period.