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Safety Program Stalled at 3 Airlines
FAA Chief Again Urges Carriers To Fix Conflicts
By
Sholnn Freeman
Washington Post
Wednesday, December 31, 2008
A program that allows pilots to voluntarily report safety
lapses without the fear of punishment has remained suspended
at three big airlines, even after a push this month by
acting FAA Administrator Robert A. Sturgell to get it back
on track.
Sturgell is trying to break an impasse between US Airways,
American Airlines and Delta Air Lines and their respective
pilots unions over rules that pilots say could expose them
to more disciplinary action. He sent letters this month to
union presidents and the carriers' chief executives urging
them to resolve their conflicts. On at least one letter,
Sturgell scribbled in the margin: "Get this done."
"Both sides need to compromise," Sturgell said in a recent
interview. "It's very hard to understand, from my
perspective, how a program that has been in place for a
decade or more, and providing benefits all along the way,
suddenly becomes not a good program."
Some congressmen also are demanding action to restart the
programs, known as Aviation Safety Action Programs, or ASAPs.
Earlier this week, pilots received a letter from Rep. John
L. Mica (Fla.), the ranking Republican on the House
Transportation and Infrastructure Committee, encouraging the
sides to reopen talks.
"The Aviation Safety Action Program is an invaluable tool in
protecting the flying public," he wrote. "In fact, every day
this matter remains unresolved places the safety of the
aviation passengers at risk."
One option floated this week in Washington involved
convening a meeting of union leaders and top airline
executives, possibly the chief executives themselves, as a
way to work through the impasse. Of the three airlines, only
US Airways has reported that it is in active talks with
pilots to restart the program.
Designed to encourage pilots and other airline employees to
voluntarily report safety concerns without the threat of
disciplinary action or punishment, American Airlines became
the first carrier to institute a safety action program in
1994. Since then the programs have grown to cover
dispatchers, flight attendants and air traffic controllers.
The FAA currently has 170 agreements in place with 70 air
carriers. So far this year, the industry has generated about
50,000 reports, the FAA says.
John Hansman, an aviation professor at the Massachusetts
Institute of Technology, said the programs have become
increasingly important to understanding aviation safety,
especially given the industry's low accident rate.
"We are actually in a period when the aviation system is
incredibly safe," Hansman said. "As a consequence we have to
look for what we call accident precursors -- identifying
things that are unsafe in the system before they cause
accidents."
Conflicts started to arise in recent years as attorneys and
safety officials started fighting over the complicated
language of the agreements. The pilots' attorneys say the
airlines appear to be seeking language that would give
airlines greater ability to reject reports.
Union officials have described the programs as priceless
because they uncover information that may have never come to
light. Some are small, like paperwork abnormalities or
training issues. Others draw greater concern such as a pilot
landing a plane or crossing a runway without proper
clearances.
Under FAA guidelines, inadvertent safety lapses are supposed
to be resolved though corrective action rather than through
punishment. Pilots say any changes in the agreements'
language could leave them exposed to greater risk of
disciplinary action.
Tom Westbrook, vice president of the Allied Pilots
Association, which represents the American Airline pilots,
said negotiations are at a stalemate.
"Nothing is going on," Westbrook said. "We have been making
statements in every forum we can to get word to them that we
are prepared to meet. If they'd agree to stop disciplining
pilots for safety events, then we'd sign the agreement."
On the other side, airlines say they are trying to block
changes sought by the pilots that they say would unfairly
expand pilot immunity.
"We want to achieve protections for our pilots for
unintentional acts and unintentional violations," said Billy
Nolen, manger of flight safety at American Airlines. "At the
same time we want to ensure accountability that if someone
commits a willful act, this program doesn't offer them
protections."
Disputes also have centered on the handling of individual
ASAP reports as well as personality conflicts between
individuals involved in the process, including FAA
personnel. At Delta, which suspended its program in 2006,
progress on new agreements for pilots has been slowed by the
carrier's recent merger with Northwest Airlines.
The controversies have forced the FAA into action, even
though the agency typically tries to stay clear of airline
labor disputes.
"This is a safety issue," Sturgell said. "It should not be
treated by anybody as a labor-management issue."
Can Obama Make Airlines, Unions Get Along?
TheStreet.com
Ted Reed
12/29/08 - 10:45 AM EST
CHARLOTTE, N.C. -- Labor issues will take center stage in
the airline industry in 2009, with conflicts simmering at
most major carriers.
The
world's two largest airlines will receive particularly keen
attention. Delta, a largely nonunion carrier that merged
with heavily unionized Northwest, could face a half-dozen
union representation elections in 2009, as the Association
of Flight Attendants and the International Association of
Machinists approach its various work groups.
At
American, which worked hand in hand with its unions to avoid
bankruptcy in 2003, cooperation has given way to antagonism.
Contracts with all three of the carrier's major unions
became amendable April 30, and the parties have requested
federal mediation in every case.
In
general, concessionary contracts -- signed during the series
of bankruptcies that followed the Sept. 11 terrorist attacks
-- are expiring or, in the case of United, will expire at
the end of 2009.
"I don't
think you will find any airline employee at any company
that's happy these days," says Joe Tiberi, spokesman for the
IAM, the largest airline union. "Since 2001, employees have
been forced to subsidize bad management decisions and
bankruptcies. Those contracts begin coming up for renewal in
2009, and employees expect to see a return on their
investment."
President-elect Barack Obama's victory could alter the tone
at the National Mediation Board, says Corey Caldwell,
spokeswoman for the Association of Flight Attendants.
The NMB
presides over a series of steps that must occur as airlines
and railroads negotiate contracts. A final stage is the
board's declaration of a 30-day cooling-off period, after
which unions are free to strike. "It seems that over the
past several years, mediators have been reluctant to get to
the (final) stage," Caldwell says. "The impact has been to
not bring pressure to the corporate side. The balance of
power needs to return to the process, which has worked in
the past."
As for
pilot negotiations, the rancorous relationship between
American and the Allied Pilots Association is, for the
moment, the hot spot in airline labor relations.
In the
latest of a series of unusually strident pronouncements, the
union has challenged the airline's application for joint
antitrust immunity with its trans-Atlantic partners and,
this month, withdrew from the Aviation Safety Action
Program. ASAP is a widely praised joint effort by pilots,
airlines and the Federal Aviation Administration to enhance
aviation safety by allowing pilots to report problems and
incidents without penalty.
The APA
charged that American used the program to discipline pilots
for inadvertent safety lapses, putting their jobs at risk,
The Associated Press reported. Subsequently, pilots at US
Airways dropped out. Pilots at Comair also dropped out this
year; Delta pilots had dropped out in 2006.
While the
unions acted independently, their efforts have created an
impression that safety is being used as a negotiating
tactic. "Using safety as a chip at the bargaining table is
unconscionable," acting FAA administrator Robert Sturgell
said recently, in a prepared statement. "These voluntary
reporting programs are crucial to safety, and it's
disappointing to see them cast aside at a time when they're
needed most."
At US
Airways, according to U.S. Airline Pilots Association
spokesman Scott Theuer, the airline has sought to dilute the
immunity provisions, continuing to maintain that a pilot who
reports an incident to ASAP can still be disciplined if a
second party -- such as another worker or an air traffic
controller -- reports the same incident.
Theuer
says the "dual-source reporting issue" has lingered for
years, threatening continuation of ASAP. "This has
absolutely nothing to do with negotiations," he says. "The
FAA's characterization that pilots are using safety as a
bargaining chip is offensive.
The
issues are generally similar at all the carriers that have
withdrawn, Theuer says: "We're all in the same boat:
Thousands upon thousands of pilots have reached this
conclusion. We want to be able to report minor mistakes
without fear of punishment."
USAPA, he
adds, "is working to establish new language that addresses
our concerns." In the meantime, USAPA encourages pilots to
use a parallel reporting system by reporting incidents to
NASA, which provides immunity in terms of FAA violations but
not in terms of company policies.
At Delta,
although pilots have recently been consumed by merger
negotiations, restoring ASAP is a high priority, says a
union spokeswoman. Pilots and the carrier "were unable to
come to agreement on processing issues, hence the program
was suspended," she says. "The union is looking forward to
reanimating very soon."
Aviation
consultant Robert Mann says the APA's withdrawal from ASAP
stands out because it "reflects a complete breakdown of
trust" between American and its work groups, partially as a
result of various management compensation efforts. "It's not
just pilots," he says. "It's every one of the groups."
In a
recent interview, Jeff Brundage, American's senior vice
president for human relations, said that being first in the
current round of pilot contract talks has worked to the
carrier's disadvantage.
"Historically, pilot contract talks have followed a
pattern," he says. "When a contract comes open, and someone
has gone before, you attempt to get to that higher standard.
But our pilots are the highest paid in the industry, and
there's no one else we can (compare) to." He says American
is seeking productivity improvements "so we can protect our
above-market pensions and benefits."
One
effect of the harsh tone at American has been to highlight
the contrast with Delta, which enjoys a generally favorable
relationship with its pilots. That relationship has made Lee
Moak, chairman of the Delta chapter of the Air Line Pilots
Association, the industry's most important labor leader. In
general, Moak's view is that a profitable airline leads to
better pilot careers.
At a
recent investor conference, Delta CEO Richard Anderson
proclaimed: "We have competitors that can't sit in the same
room with their pilots, and we did three collective
bargaining agreements in 2008." He referred to a failed
negotiating session a week earlier, when American pilots
walked out on company representatives.
JetBlue faces first union election
USA Today
December 19, 2008
By David Koenig, AP Airlines Writer
DALLAS — Since it began flying in 2000, JetBlue Airways has
operated free of labor unions as part of a strategy to keep
labor costs below those at highly unionized competitors.
That could change next month, however, when JetBlue pilots
begin voting on a proposal to form their own union to
bargain over wages, benefits and other issues.
Leaders of the organizing campaign hope to pattern their
group after the pilots' union at Southwest Airlines Co.,
which is ironic because JetBlue itself was patterned after
Southwest's low-fare model.
Southwest has enjoyed relative labor peace despite having
one of the highest percentages of union workers among U.S.
carriers. JetBlue pilots say they too want to avoid the kind
of bitter labor-management fighting common at other
airlines, and say they will be realistic about wages while
the recession cuts into demand for air travel.
JetBlue lost money for three straight years, turned a profit
last year, but lost $19 million through the first nine
months of 2008. It delayed delivery of 31 jets and no longer
expects to grow next year.
"I think we're below average in just about every measure of
compensation, but today is not the time to be asking for
money," says Bill Evans, a Boston-based pilot. "We know
we're facing a severe economic situation."
Mike Sorbie, another member of the organizing drive, said
union representation would help the pilots win better health
and retirement benefits and protect their seniority rights
in case JetBlue merges with another airline. Seniority
dictates which pilots get the best-paying assignments and
which ones lose their jobs first in a downturn like the one
now facing the industry. And when airlines merge, seniority
fights can get ugly.
Leaders of the JetBlue Pilots Association collected enough
signed cards from pilots favoring a union to force an
election, which will run from Jan. 6 until Feb. 3. The
pilots association says it is confident of winning.
The JetBlue group elected to form an independent union
rather than become part of the larger Air Line Pilots
Association, or ALPA. Many JetBlue pilots came from ALPA
carriers with hostile labor-management relations.
"We wanted to see if there was a model of success instead of
becoming discouraged by all the models of failure," Evans
said.
JetBlue opposes a union but declined to make an official
available for comment. In a statement, spokesman Todd Burke
said, "We believe a direct relationship with the company is
in the pilots' best interest."
Unions, with the power to bargain over wages and benefits,
have long been thought to increase costs at airlines. But
Anthony Sabino, a business and law professor at St. John's
University who has represented creditors in airline
bankruptcy cases, said a union would not have much clout
while the airline industry is losing billions.
In the current climate, "even a unionized work force doesn't
have much leverage," Sabino said. "When the boom cycle
returns it might be different, but right now the first order
of business for everybody at JetBlue — like everybody at all
the other carriers — is survival."
New York-based JetBlue has more than 1,900 pilots and a
total of about 11,500 employees, including nearly 3,000
part-timers.
In 2006, the International Association of Machinists and
Aerospace Workers tried to organize the company's baggage
handlers but failed to get enough workers to sign cards for
an election.
Pilots Evans and Sorbie said they decided to form an
independent union so it would be more in tune with JetBlue's
needs. But independent unions can be just as adversarial as
bigger ones such as ALPA.
At American, the independent Allied Pilots Association
regularly clashes with management. Pilots have tried to
strike and conduct sickouts. The two sides have made little
progress in two years of contract negotiations, leading the
union to take out billboards blasting the company.
Even at Southwest, it's not all hugs and kisses. Pilots and
other workers have picketed to protest slow contract
negotiations, and they worry that deals with Canadian and
Mexican airlines could threaten their jobs.
"We have our spats with management, but we can't get a
divorce; we're stuck with each other," said Carl Kuwitzky,
president of the Southwest Airlines Pilots' Association.
"The company has to succeed for our pilots to do well."
Kuwitzky said he was puzzled by JetBlue's opposition to
unions, noting that Southwest co-founder Herb Kelleher
helped set a conciliatory tone by recognizing the pilots'
union without forcing them to hold a federally sanctioned
election.
William Swelbar, a researcher at MIT and director of
Hawaiian Airlines parent Hawaiian Holdings Inc., said
JetBlue needs to remain flexible and avoid rigid work rules,
especially during an industry downturn.
If JetBlue and its pilots can do that, "there should be no
reason to believe that the carrier's labor-cost advantage
will be undermined by the pilots forming an in-house union,"
Swelbar said. "Southwest has proven this over the past three
decades."
PRESS RELEASE
Atlas, Polar Air Cargo Crewmembers Vote to Join Teamsters
Union
Group Of Nearly 900 Workers
Vote To Join Union By a 2-1 Margin
WASHINGTON, Dec 19, 2008 -- By a more than 2 to 1 margin,
nearly 900 crewmembers at Atlas Air, Inc. and Polar Air
Cargo Worldwide have voted to join the International
Brotherhood of Teamsters, said Jim Hoffa, Teamsters General
President.
"We are excited to welcome the Atlas and Polar flight
crewmembers to the Teamsters," Hoffa said. "Our Airline
Division, under the leadership of Capt. David Bourne, will
help negotiate a strong contract for the crewmembers. The
Teamsters will also provide accountable representation."
The crewmembers have been represented by an association, the
Air Line Pilots Association (ALPA), but the association does
not have the focus, strength and cargo experience of the
Teamsters to represent their interests.
"Now, the Atlas and Polar crewmembers will receive strong
Teamster representation and they will have an independent
local union backed by the 1.4 million member Teamsters,"
Bourne said. "The Teamsters have the necessary resources to
help our newest members achieve a more secure future."
The Teamsters will also allow the crewmembers more
decision-making power through their Teamster local union for
the issues that matter most to them.
Crewmembers voted by telephone and over the Internet since
November 19, and the votes were tallied today. The election
was administered by the National Mediation Board.
The Teamsters Airline Division represents more than 40,000
workers in the aviation industry in every craft and class.
Founded in 1903, the International Brotherhood of Teamsters
represents 1.4 million hardworking men and women in the
United States, Canada and Puerto Rico.
SOURCE: International Brotherhood of Teamsters
US Airways Pilots Halt Voluntary Data-Sharing Program
The
Wall Street Journal
DECEMBER 15, 2008, 8:23 P.M. ET
By ANDY PASZTOR
LOS
ANGELES – In the latest setback for pilot-airline
cooperation on safety initiatives, US Airways became the
third mainline U.S. airline to discontinue voluntary
programs for reporting operational incidents.
Following similar disputes affecting Delta Air Lines Inc.
and AMR Corp.'s American Airlines, the collapse of the US
Airways program underscores the difficulties of pursuing
voluntary data-sharing in the face of the airline industry's
rancorous labor-management relations. The move not only does
away with a powerful tool for the airline and its pilots to
spot all types of budding safety hazards, it also could slow
the spread of such voluntary incident-reporting systems at
some foreign carriers, safety experts say.
The US Airways program, which had been active for more than
10 years, ran into trouble over pilot complaints that the
company was seeking to use voluntary reports to punish
individual pilots. The pilot union said the program was
scheduled to lapse in early 2008, but had been extended
repeatedly by pilot representatives "in an attempt to
reconcile disagreements" over immunity provisions. Pilot
union leaders of American and Delta had basically the same
complaints when those long-standing voluntary data-sharing
programs were allowed to lapse.
The Federal Aviation Administration views such programs as
the cornerstone of proactive safety monitoring and
enforcement. Under the concept, pilots report in-flight
mistakes, incipient safety threats and other subtle problems
before they create accidents. Then pilot representatives,
airline officials and federal regulators jointly analyze the
incident, assess the dangers and recommend safety fixes to
prevent a repeat. With some exceptions, pilots expect to
avoid punishment for making mistakes.
Senior FAA officials for years have touted such voluntary
programs as one of the big reasons for steadily dropping
accident rates in the U.S. and elsewhere.
The labor-management flare-ups come at a time when "data
collection systems are fragile" and "safety systems don't
belong on the bargaining table," said William Voss,
president of the non-profit Flight Safety Foundation, at a
recent industry safety conference. Other air-safety experts
have argued that with traditional safety enforcement
strategies stalling, voluntary data-sharing and compliance
are the keys to further improvements.
The FAA, for example, is hoping to persuade mechanics and
air-traffic controllers to step up voluntary reporting
programs. Longer term, the agency's safety agenda envisions
private pilots, engine manufacturers and even helicopter
manufacturers voluntarily feeding data into a centralized
safety data base.
One potential bright spot, according to pilots and industry
officials, is that the merger of Delta and Northwest
Airlines is expected to produce an ambitious voluntary
data-sharing program. Despite the recent problems,
Continental Airlines and its pilots recently agreed to
reauthorize their voluntary incident-reporting system.
Court Order
Delays Auction of Landing Slots at Airports
The
New York Times
Published: December 8, 2008
By MATTHEW L. WALD
WASHINGTON — A court order on Monday delayed a Bush
administration plan to auction landing slots at the three
major airports in the New York region, pushing the proposal
into the Obama administration, where it may die.
The
Court of Appeals for the District of Columbia granted a stay
on Monday, in a case brought by the Port Authority of New
York and New Jersey, pending arguments on whether the
Federal Aviation Administration has the legal authority to
auction the slots. The first auction was scheduled for Jan.
12, eight days before the Bush administration ends.
Elected
officials in New York were mostly against the idea;
presumably they will get a better hearing from the Obama
White House than they did from the Bush administration.
Senator
Charles E. Schumer, a leading opponent of the proposal,
said, “This decision should buy enough time for the next
administration and Congress to put slot auctions on the
shelf for good, and then craft a new, workable plan to
reduce flight delays and give New York’s airspace and
airports the upgrade they need and deserve.”
The
Federal Aviation Administration has capped the number of
flights at Kennedy International, La Guardia and Newark
Liberty Airports, and was looking for a way to redistribute
the available takeoff and landing slots, to preserve
competition and make the best use of a limited commodity —
the right to land at these airports. Its idea was to seize
some slots from large airlines — it had not said how many —
and redistribute them to the highest bidders, for a 10-year
period.
The
Port Authority said in a prepared statement that auctions
“would invariably drive up ticket prices for passengers,
without alleviating delay.”
“We are
confident that upon full review, the court will agree that
the administration does not have the authority to conduct an
auction, and we look forward to working with the next
administration to develop real, long-term solutions to
improve air travel,” the statement said.
Sarah
Echols, a spokeswoman for the Department of Transportation,
said: “Today’s court decision is bad news for travelers
seeking a better flying experience in and out of the New
York region. We are committed to our goal of protecting
travelers, giving passengers more options and improving the
air travel experience, and will continue to assess our
options to provide relief.”
Full-fare fliers get extra perks, even in coach
The Dallas Morning News
Sunday, December 7, 2008
By TERRY MAXON
One of the more vexing problems for airlines has been the
$800 business traveler sitting in coach next to the $75
leisure traveler – same seats, same service and vastly
different fares.
But the recent spate of new charges and fees is giving
airlines a chance to better differentiate what that
high-dollar traveler enjoys from what the bottom-dollar
traveler gets.
By exempting full-fare passengers and elite members of
frequent-flier programs from the new fees, the airlines are
making it better to pay more – even if it is only through
the absence of pain newly created for the bargain flier.
American Airlines Inc. executive Dan Garton says that the
goal is to give every customer some things in common, such
as safe flights, on-time arrivals, clean facilities and
airplanes, and courteous and professional service.
But beyond that, American would like to charge the low-fare
customers – often leisure travelers – for a lot of things
they previously got at no extra cost and give its best
customers more services and extra perks for free, he said.
For example, American and other airlines have implemented
charges this year for checked bags – typically $15 for the
first bag and $25 for the second bag. But full-fare
customers in the coach section, passengers in first class
and business class, and premium members of their
frequent-flier programs don't pay those fees.
Carriers in many cases are waiving other fees for the best
customers, such as for phone reservations, frequent-flier
ticket fees and other items that once carried no extra
charge.
Mr. Garton, American's executive vice president of
marketing, said the Fort Worth-based airline is studying how
to expand that differentiation to better reward the best
customers – the lifeblood of airline profitability.
"There are features and products that we would like to go
over and beyond that for people who either pay us more fares
or fly us more often, in most cases both," said Mr. Garton.
What does that mean for the elite customers?
"Our objective is to provide some enhanced level of
experience from 'cradle to grave,' from the beginning to the
end of their experience with us," Mr. Garton said.
"So if they call our reservations centers, their calls are
handled in a prioritized fashion; when they arrive at the
airport, PriorityAAccess [special lanes at the airport]
gives them a different queue at the ticket counter, at
security and even to get on the airplane."
One issue is how to give that best customer in coach a
better experience.
Many airlines, including American, try to set aside enough
of their best seats – the aisle and window seats toward the
front of the cabin – to hand out to last-minute,
higher-priced travelers. Others have begun charging for the
best coach seats.
Mr. Garton said American has studied implementing similar
charges and perhaps waiving the fee for full-fare and elite
customers.
Getting the best seats "is still viewed to be one of the
benefits of being a frequent flier or premium customer. So
we would have to think very carefully about how you'd handle
the revenue-generating aspects of this," Mr. Garton said.
Airlines have undergone perhaps the most radical repricing
of their basic services in the industry's history in 2008,
driven by a jet fuel emergency.
As the spot price of jet fuel soared from under $2 a gallon
in early 2007 to over $4 in mid-2008, airlines scrambled to
boost fares and generate enough revenue to cover those
costs.
United Airlines Inc. arguably kicked off the fee-raising
spree when it announced Feb. 4 that it would charge $25 for
the second checked bag on domestic flights. American raised
the ante May 21 when it announced a $15 fee for the first
checked bag.
Most major U.S. carriers matched American, meaning that a
two-bag traveler without special status would pay $80 more
for a round trip in the United States.
Fees here to stay
With the U.S. airline industry posting enormous losses
through Sept. 30, airlines began looking at all parts of
their operations to find ways to raise money, from charging
$2 for soft drinks (US Airways Inc.) to selling blankets and
pillows for $7 (JetBlue Airways Corp.).
Having tasted the drug of ancillary revenue, airlines aren't
likely to go back. We're talking big money – billions of
dollars a year.
Speaking at a Credit Suisse conference last week, United
Airlines officials estimated that new fees and charges will
bring the airline an extra $1.2 billion in revenue in 2009:
$250 million from the new bag fees, $600 million for
ticketing charges, $250 million from "upselling" seats for
premium seating in coach or upgrading to first or business
class and $100 million from selling extra frequent-flier
miles and offering baggage delivery service outside the
airplane trip.
"The new products are designed to improve the customer
experience while giving customers more flexibility, choice
and control," said Kathryn A. Mikells, United's chief
financial officer. "But they're obviously also designed to
add to our bottom line."
United's "award accelerator" is a good indication of how
airlines are doing things now that weren't on the agenda
before. Under the program, the carrier allows a
frequent-flier member to pay a fee to get more miles.
For example, a United passenger could pay $9 more on a
316-mile Cleveland-Chicago flight to double the number of
frequent flier miles earned or $19 to triple the miles.
The award accelerator is already bringing in about $2
million a month, United says.
Doug Parker, chairman and chief executive of US Airways,
worried aloud at the Credit Suisse conference that airlines
will backtrack on all these new fees and charges, to the
industry's detriment.
The extra charges that US Airways has implemented are adding
$400 million to $500 million a year to the carrier's
revenue, Mr. Parker said. But the new fees are also helping
make the airline run better, he said.
Customers are checking 20 percent fewer bags, and US
Airways, as a result, is handling bags better and faster, he
said.
"It's not just about the money," he said. "It's helping us
all run a better operation."
Unpopular
While most airlines like the new fees and charges, the costs
are proving less popular with passengers, as traveler
surveys have shown.
Tim Zagat, co-founder and chief executive of Zagat Survey,
said the airlines' decision to charge separately for
services travelers formerly got for free is contributing to
the low regard many customers have for airlines.
"I think à la carte pricing stinks," he said. "I think it's
showing up in the financials. I think it's showing up in the
comments we get. I think it's showing up in the ratings. I
think people think airlines, with few exceptions, don't
treat them very nicely."
Mr. Zagat said there's a link between Southwest Airlines
Co.'s good ratings on such issues as luggage and value and
its policy not to charge many fees. It should eventually pay
off for Southwest, "one of the few airlines that people
really like," he said.
At Credit Suisse, Southwest chairman and chief executive
Gary Kelly said "time will tell" whether the Dallas-based
carrier will pick up more passengers and revenue by not
charging fees.
"It has to," he said, "and if it doesn't, then I would argue
that we probably will have to change that."
IBM Global Business Services found in a recent survey that
70 percent of travelers generally thought fares were
reasonable, and 50 percent accepted fuel surcharges.
However, "a very high percent of people were concerned about
paying for baggage," said Bruce Speechley, partner and
hospitality and leisure practice leader for the IBM unit.
Mr. Speechley said that as basic airline travel has become
more like mass transit, passengers should not expect much
beyond basic transportation.
"You don't expect being fed and watered and all these things
on Greyhound or a train," Mr. Speechley said. "If you want
them on a plane, then à la carte pricing is probably best
for you and helps them keep down the price of the fares."
Thanks to Fuel
Crisis, Airlines Weather Storm
Fuel Crisis May Have Helped Airlines Prepare for Economic
Meltdown
By LISA STARK and JENNA MUCHA
WASHINGTON, Dec. 7, 2008
When travelers find themselves on packed planes this holiday
season, it could lead them to believe that business is
booming for the airlines.
But holiday travel is actually off 10 percent this year, a
sign not only of the troubled economy but also that there
could be more turbulence ahead.
Overall, U.S. airlines predict they may lose between $4
billion and $6 billion this year.
"We are starting to hear some reports of advanced bookings
being off significantly, and that of course, is a very
ominous sign for what we could be looking at in 2009," John
Meenan of the Air Transport Association said.
Despite the troubled economy, the airlines are actually in
better shape than some other industries, though.
Last summer, when fuel prices soared to record highs,
airline carriers were forced to lay off workers, keep planes
grounded and slash flights to save money. All the trimming
actually helped them, when the economy suddenly went south
and they had already made extreme adjustments.
"They traded a fuel crisis for an economic crisis, and if
they hadn't cut seats out of the system, they'd be
scrambling to do so right now," said Rick Seaney, the CEO of
FareCompare.com.
So in this ailing economy, the airlines won't be following
in the steps of other businesses reaching bankruptcy.
Travelers can rest assured the airlines won't emulate the
automakers and at this point don't seem to be at risk of
more bankruptcies. They won't parade up to Capitol Hill to
ask for a federal handout.
"The cost of oil removed their strongest argument for asking
for aid. They can't go up and say, Mr. Chairman, my costs
have gone up 87,000 percent, because their costs have come
down," said David Field, U.S. editor of Airline Business
Magazine.
However, airlines didn't just make cuts, they added things
passengers weren't accustomed to. They added fees for
everything from checked bags, to a can of Coke -- all to
help cover the rising fuel bills.
Now fuel prices are down, but the fees haven't been
eliminated.
Airline Fees 'Are Forever'
"Fees are like diamonds, they are forever. I don't think
fees will go away," Field said.
The fees are bringing in hundreds of millions of dollars and
airlines say it's money they can't afford to give up.
Airlines are watching lucrative business travel drop as
companies are cutting back on travel expenses. Leisure
customers flying to vacation destinations are also staying
home.
"I think the airlines are terrified of softening demand. I
think it's the one thing they didn't count on," Seaney said.
For passengers, the tough economic times can mean good
deals, since airlines are now slashing ticket prices to try
to entice more business.
Extra airline fees add up
for travelers
Southwest, US Airways charges reflect choices fliers now
face
The News Tribune - Tacoma, WA
December 7th, 2008
JOHN GILLIE
Holiday fliers, take heed. You may find the familiar phrase,
“My, how you’ve grown,” doesn’t apply just to your towheaded
nephew this year.
That same phrase, uttered with more alarm and less
wonderment, easily describes the fat package of fees most of
the nation’s airlines are imposing on their customers.
Born of escalating fuel prices and nurtured by a declining
economy, those fees, hidden in the fine print on airlines’
Web sites, can easily add 20 to 50 percent or more to the
price of a trip for those who are unaware of their
existence.
Infrequent fliers whose last trip to the airport was in 2007
will find a whole new world awaiting them from the time they
reserve their flight until the time they claim their luggage
after the return flight.
Those fees of $5 here and $20 there add up to big numbers
for cash-strapped airlines.
Delta Air Lines, which held out for months from joining
other major carriers with a $15 fee for the first checked
bag, recently announced it was imposing that fee. The
incentive? An estimated $500 million in additional revenue.
“The increase in bags being carried on board Delta aircraft
this year tells us that customers are not differentiating
Delta as the only major airline not charging for a first
checked bag,” said Steve Gorman, the airline’s chief
operating officer in announcing the new fees early last
month.
Many passengers simply are unaware of the new fees or don’t
see them as a deterrent to travel on their favorite carrier.
“We were unaware of those extra fees until we got to the
airport,” said Amber Young of Las Vegas after she checked in
recently at Sea-Tac Airport. “The baggage charges weren’t a
consideration,” said Young, who checked two bags. “But they
may be in the future. We just picked the lowest fare.”
The new fees have not only added costs to flying, but
they’ve also made the hitherto simple task of finding the
least-expensive fare between home and a distant destination
an exercise worthy of a CPA.
Simply entering the date and destination in a travel Web
site might still give you the lowest cost for a ticket, but
it won’t necessarily give you the lowest total cost.
Consider this example.
We’re comparing nonstop flights between Sea-Tac and Phoenix
leaving in the morning of Dec. 22 and returning the evening
of the 27. The airfares were the least expensive available
at midweek on each of two airlines’ Web sites for nonstop
flights at comparable times of day.
We’re using two airlines at the opposite ends of the fee
spectrum, Southwest Airlines and US Airways.
Southwest has taken a well-advertised “no fees’ approach,
not charging for the first two checked bags, for
refreshments, curbside check-in, phone reservations or many
of the other services for which other carriers are now
charging extra.
US Airways has pioneered what it calls “a la carte” pricing,
posting charges for check-in luggage, refreshments and even
coffee served aboard. US Airways is even contemplating
selling pillows and blankets, following the example of
JetBlue Airways.
Each airline claims its approach is superior, US Airways
because it charges customers for just the services they use,
not those they don’t.
In announcing a list of new fees, US Airways President Scott
Kirby said the airline needed to find new revenue sources.
“We simply must adapt to the current environment and
transform our business by generating new sources of revenue
and adding fees to better offset our costs. The ‘pay for
what you choose and use’ model ensures that only the
customers that want such services bear those costs. While
new and different, this model ensures that competitive and
affordable travel remains intact across our system,” he
said.
COMPARING PRICES
Southwest claims certain services should be part of the
airfare package, not extras.
For the sake of this comparison, let’s assume you’re loaded
up with luggage full of Christmas presents, two bags. Let’s
also assume that you like to sit on the aisle near the front
of the plane for a quick exit on landing. We’ll also say you
check your bags at the curb instead of inside at the
counter. While you’re aboard for the three-hour flights, you
drink a soda and eat a snack each way.
So here’s how it works out:
US AIRWAYS
Basic fare: $417.
Two checked bags: $40 each way for a total of $80.
Curbside check-in at each airport: $4.
Aisle seat near the front: $5 each way for a total of $10.
Drink and snack: $7 each way for a total of $14.
Grand total: $525.
SOUTHWEST AIRLINES
Basic fare: $512.
Two checked bags: $0.
Curbside check-in: $0.
Aisle seat near the front: $0 if you check in early.
Drink and snack: $0.
Grand total: $512.
Under those circumstances, US Airways’ $95 advantage turns
into a $13 disadvantage compared with low-fee Southwest.
But wait. Change a few details, and the advantage shifts
back to US Airways.
For instance, say you’re satisfied with an aisle seat
farther back in the plane. You can reserve those at no
charge on US Airways, while at Southwest you’ll just have to
take your chances because Southwest doesn’t reserve seats.
You could also roll you bags inside, forgo the snack and
check only a single bag.
COMPARING SERVICE
That reduces US Airways’ total to $451, a price advantage
over Southwest of $61.
Though both airlines will get you from Seattle to Phoenix,
their services aren’t identical. Southwest, for instance,
doesn’t have assigned seats, though it has refined its
system for queuing up passengers on a first-come,
first-serve basis. It has also added what it calls “Business
Select” fares which, among other things, puts you in the
front part of the line to grab seats after you enter the
plane. Business Select fares also include frequent-flier
benefits, a free alcoholic drink and other amenities, all
for an extra charge.
Southwest offers free soft drinks and small snacks, services
for which US Airways charges, but it doesn’t offer meals,
even for extra bucks.
And while Southwest has free checked baggage service, it
doesn’t exchange bags with other carriers, so if you’ve
booked a trip that includes multiple carriers along with
Southwest, you’ll have to reclaim your bags at a midpoint in
you trip and check them in with the other carrier. US
Airways and most other major carriers will transfer the bags
to your next airline for you.
Dallas-based Southwest offers free phone reservations, but
its least-expensive fares, called “Ding” fares, are only
available on the Web, not through telephone agents.
Southwest planes are all-coach. US Airways offers first
class at a considerable bump in price.
WEIGHING ALL FACTORS
Seating can be a critical issue for some travelers.
Sally and J. Michael Shaffer picked Midwest Airlines for
their trip from Kansas City to Seattle and back over rival
Southwest because they could pick seats with better legroom
on Midwest. Sally Shaffer has had knee and hip replacement
surgery, so the seat configuration is of prime importance on
a flight of more than three hours.
“I can remember when they didn’t have any of the fees they
have now and they served fine meals,” she said, “but if the
extra money goes toward making sure the airline is safe and
reliable, it’s worth the extra cost.”
Southwest, the nation’s original and largest “low-fare”
carrier has an enviable reputation for on-time flights and
few customer complaints, but while US Airways in the past
struggled with several holiday baggage handling meltdowns,
it has improved its performance markedly.
It behooves air travelers looking to keep their costs of
travel low to consider not only the ticket cost but the
plethora of extra fees that airlines are rolling out.
Eight rules for avoiding sky-high travel costs
1. Plan ahead: Many airline and travel service sites now
offer “low-fare calendars” that show fare levels to your
destination a few days or weeks surrounding your target
arrival date. If you’re flexible, you can save 50 percent or
more on a coach airfare by picking the least-traveled days
with the lowest fares.
On the site for SeaTac’s Alaska Airlines, for instance, the
airline’s low-fare calendar shows the lowest price for a
two-day trip to Los Angeles leaving Jan. 4 and returning
Jan. 6 is $390 including taxes. Move the trip one day later
with a departure on Jan. 5 and return on the Jan. 7, and the
fare drops to $159 with taxes.
If you’re not sure the fare you’re booking is a good buy,
consult MSN’s Farecast. Farecast tells you based on historic
data if the fare is lower or higher than normal and advises
you whether to buy now or wait until the fares drop further.
2. Book tickets on the airlines’ Web sites: Other travel
sites add small fees usually $5 to $8 to the price of a
ticket to book a flight. The same goes for travel agents.
Some travelers, however, think the extra advice and service
they receive from in-person and Internet travel agencies is
worth the extra cost.
Phone reservations on all airlines but Southwest incur an
extra fee ranging from $10 to $35. The same fees often apply
as well at the airport for a person-to-person purchase.
3. Don’t change your nonrefundable ticket once you’ve booked
it: Most of the major airlines charge $150 for those
changes. Southwest will change your ticket for nothing.
Alaska charges $75 as does its West Coast competitor Virgin
America. International change fees are even dearer, $250 in
some cases.
4. Travel light: Most of the major airlines including
longtime holdout Delta, now charge for all checked luggage.
Fees typically are $15 for the first bag and $25 for the
second. And that’s each way. Southwest has no extra fees for
the first two checked bags. Alaska, JetBlue, Virgin America
and Sun Country have no fees for the first checked bag but
charge for the second.
Alaska spokeswoman Marianne Lindsey said the SeaTac-based
carrier has no plans to implement a charge for the first
checked bag.
“We’re sticking with our policy,” she said. The airline
makes exceptions for its customers within the state of
Alaska. There, the airline hauls three checked bags for
nothing.
“We’re the bus up there, so people bring everything with
them,” she said.
No airline imposes fees for carry-on luggage, but remember
you can’t carry on liquids or gels in excess of 3 ounces for
security reasons.
Weigh any bags you suspect might be over the 50-pound
threshold for overweight charges, and redistribute the load
to other bags or eliminate some items. Overweight bag
charges range as high as $360, though they typically are $50
to $100 each way.
5. If you’re checking bags, do so at the counter though the
charge for curbside check-in at the airlines that charge is
relatively nominal, typically $2.
6. Use airlines that allow you to pick your seats in advance
at no charge: About 40 percent of U.S. carriers now charge
more for certain desirable seats, exit rows, aisle or window
seats near the front of the plane, for instance.
Those charges range from $5 to $109 depending on the length
of the flight, the airline and the configuration of the
seats. Some airlines such JetBlue and United offer seats
with more legroom for the extra fee.
If you’re buying your seat just a few days before the
flight, you might find that airlines without seat selection
fees have only a few less desirable seats left. Then the
extra $20 may seem worth the expense if your other choice is
a middle seat on a coast-to-coast flight.
7. Skip the snack and the beverage: Buy your own at the
airport store, or fly with an airline that still features
free refreshments. You can buy a beverage at airport stores
beyond security and take them aboard, but you won’t get ice
and the price could be close to the cost the airlines
charge. Remember, too, that some airlines such as Alaska,
have converted airborne sales to credit cards only. If you
want that snack pack, you’ll have to haul out your Visa
card.
8. Fly Continental if you expect a free meal on a long
flight: The Houston-based airline is the only one of the
major carriers that still provides coach passengers free
meals on long flights. All the rest either offer no meals,
like Southwest and AirTran, or charge prices ranging from $3
to $11 for food ranging from elaborate packs of crackers and
cheeses to warm hamburgers and pasta. Don’t count having the
selection you want available. Airlines estimate the need and
put aboard only the amount they think they can sell. If
you’ve boarded with a planeload of vegetarians, don’t count
on their having a Garden Burger when flight attendants reach
you in 32B.
U.S. Carriers Eye Profits Thanks to Capacity
Cuts, Oil Drop
Aviation Week
Dec 7, 2008
By Adrian Schofield
The deepening recession is curtailing air travel, but not
enough to deflate U.S. airlines' confidence that a return to
profitability is just around the corner. The industry's
determination to slash capacity should allow carriers to
prosper in 2009 even as other U.S. sectors face a bleak
future.
Fleet reductions of a scale rarely seen before have been
made in the last few months, and they have the potential to
cause a long-term shift in airline industry dynamics. The
cuts are achieving the streamlining that industry
consolidation could not deliver - the number of aircraft
that have been parked is "the equivalent of one very large
airline going out of business," notes American Airlines Vice
President for Corporate Development Beverly Goulet.
Plummeting fuel costs, of course, are helping even more. Oil
prices are now about half what they were at their peak
earlier this year, and this is having a huge effect on
costs. At current oil prices, American would pay as much as
$3.5 billion less for fuel in 2009 than it did this year.
Delta Air Lines says it would pay about $5 billion less, and
United Airlines estimates a $3 billion drop.
This combination of shrinking capacity and lower fuel prices
should offset declining demand caused by the wider economic
malaise, and analysts believe only a depression of
catastrophic proportions can prevent a profitable 2009 for
legacy carriers (AW&ST Oct. 27, p. 32). "You probably
couldn't find a better time for a recession" in the history
of the airline industry, says JetBlue Senior Vice President
Mark Powers.
All of this is new to the airlines, which typically suffer
as much, if not more, than most sectors during downturns.
The airline industry finds itself "running counter-cyclical"
to the rest of the economy, US Airways CEO Doug Parker
notes. Airlines will probably "have a better 2009 than 2008,
and this is different from what other industries are
seeing." Delta President Ed Bastian says the financial
outlook for airlines "is more positive than negative" even
though the wider economic outlook has worsened.
Executives admit that good luck played a large role in
preparing the industry for the economic downturn. Airlines
basically "made the right decisions for the wrong reasons,"
Continental Airlines Senior Vice President Gerry Laderman
says. Carriers were very much in reactive mode when they
announced capacity cuts, which were designed to make
carriers leaner in the face of high oil prices. But oil
prices receded before the reductions took effect, and
airlines were left with trimmed-down capacity just in time
for the next crisis - recession and falling demand.
United CFO Kathryn Mikells now says the record high oil
prices that just months ago seemed insurmountable "were
actually good for the industry." Such an opinion would have
been regarded as heresy when oil was above $130 a barrel,
but Mikells says the oil spike forced airlines to take a
hard look at capacity. Now, the recent falloff in prices "is
poised to be a real catalyst for profitability," she
believes.
One of the big questions for next year will be whether
airlines retain their new-found belief in capacity
discipline. Executives claim reductions are not just a
temporary reaction, and if this holds true then the U.S.
industry has the potential to put itself on a much firmer
footing no matter what the economy does.
"Even if we wanted to bring capacity back, we couldn't,"
JetBlue's Powers says, because orders for new aircraft have
been deferred and aircraft have been sold. A succession of
capacity cuts during the last year - more than 10%
industrywide - show that airlines are prepared to hold the
line. Mikells notes that airlines are "really sticking to
their guns" on capacity cuts. AirTran CEO Robert Fornaro
thinks this capacity discipline will last at least through
2009.
Of course, the situation isn't entirely rosy for the
airlines. Most U.S. carriers reported a significant demand
drop in November, the largest sign yet that the recession is
finally hitting air travel. Also, oil prices are now so low
that many fuel hedges are actually becoming a significant
cost drag. However, Delta provides a good example of how
these negative effects are being offset by capacity and fuel
trends.
Delta is seeing the same demand weakness as its competitors,
Bastian says. In its first estimate for the combined
Delta/Northwest operation in 2009, the carrier plans a
year-on-year domestic capacity reduction of 8%-10%. This is
on top of extensive reductions already made this year -
Delta's capacity will be down 12% by the end of this
quarter. So the overall two-year cut will be around 20%.
At the same time, Delta's fuel costs could halve next year,
if the forward curve prediction of $50/barrel for oil holds
true. So, with its streamlined capacity, the carrier would
have to see demand shrink by 20% to fall below breakeven.
And a demand drop of that magnitude would be unprecedented,
exceeding even the post-9/11 decline. Impossible? No. But
unlikely.
US Airways' Parker agrees that 2009 looks promising, and he
notes that most analysts see the industry "snapping back to
profitability." However, he believes strongly that this is
not enough, and that the industry should be looking further
ahead to try and break out of the boom-and-bust cyclicality
that has traditionally plagued airlines.
The current situation "is exciting, but the real question is
what we do beyond that," Parker says. He notes that even in
up-cycles, airlines have underperformed financially compared
with other sectors. Changing this dynamic should be the
goal, he says. "We could use this as an opportunity to take
our industry to real economic returns like other businesses,
or we can do as we've always done in the past and settle for
much less."
Airlines often have the notion that "profitability is good
enough," but "I think we can do better," says Parker. He
believes conditions will be right over the next few years to
achieve a real change. First, further consolidation is
required. Progress has been made, but "the industry is still
too fragmented."
More must also be done on the labor front. Management needs
to do a better job of convincing unions that contracts
"should be able to make it through all cycles," Parker says.
At the moment, too many carriers concede pay raises "at the
first whiff of profitability," and then "at the first whiff
of losses they ask for them back."
On the pricing front, airlines "give away more of our
product than other industries do." This tendency has been
changing with a drive to "unbundle" many passenger fees, and
this trend must continue, Parker notes.
Finally, airlines must change their strategic approach.
Traditionally, carriers have focused too much on their
performance versus each other rather than against other
businesses. This has led to a focus on "beating each other
up . . . rather than getting real returns." And beating each
other up has not worked, because the major airlines have
proven that "we don't go away, and find a way to stay
around." Carriers should stop trying to drive competitors
out of business to win, and instead take steps to make the
industry stronger, Parker says.
American, Delta no longer in FAA
safety program
By DAVID KOENIG
The
Associated Press
DALLAS December 5, 2008 (AP)
The
nation's two largest airlines have dropped out of a federal
safety program that was designed to encourage voluntary
reporting of pilot errors before they resulted in crashes.
Delta
Air Lines Inc. and American Airlines quit the Aviation
Safety Action Program, or ASAP, which allows pilots to admit
mistakes without fear of being punished.
The
acting chief of the Federal Aviation Administration said it
was "disheartening" to see the programs end, which a leading
safety expert blamed on lack of trust between labor and
management.
American
had taken part for 14 years, and its program was used as a
model at other carriers in the U.S. and abroad.
The
pilots' union at American, the Allied Pilots Association,
charged that American was using the program to discipline
captains for inadvertent safety lapses, putting their jobs
at risk. The union sought language to strengthen job
protections for pilots who reported errors.
"We will
not accept any process that labels our pilots as reckless,
and discipline for inadvertent safety events must stop,"
union official Kevin Cornwell said at the time.
Tim
Wagner, a spokesman for AMR Corp.'s American Airlines, said
Friday the company preferred not to change provisions of the
program but that the union balked and refused to extend the
agreement. He said a self-reporting system from NASA is
still in place.
Wagner
said ASAP doesn't have the day-to-day safety impact of such
things as inspections and maintenance, "but it allows us to
look at situations that have happened and make changes. We
would love to see it renewed."
A
similar dispute led Delta Air Lines Inc., the nation's
largest carrier, to end its ASAP program in 2006, and
subsidiary Comair also recently dropped out. Pilots at Delta
and Comair are represented by the Air Line Pilots
Association.
William
R. Voss, president of the Flight Safety Foundation in
Alexandria, Va., said Friday that ASAP is vital to maintain
the improvement in airline safety over the past several
years.
"These
programs catch little problems before they become big
problems," he said.
While
the pilots' reports are confidential, Voss, a former FAA
official, said ASAP helped identify certain runway
configurations that can be confusing, which was a factor
cited in the 2006 crash of a Comair jet in Kentucky. The
accident killed 49 people.
Voss
said he didn't want to blame the unions or the airlines for
the demise of the programs, but attributed it to
deteriorating labor-management relations in the industry.
Pilots oppose airport
auction
Atlanta Business Chronicle
Friday, December 5, 2008
by J. Scott Trubey, Staff writer
A federal government plan to auction off valuable takeoff
and landing slots to curb congestion at New York City
airports doesn’t fly with Delta Air Lines Inc. pilots.
The pilots have joined the growing chorus of lawmakers and
industry officials opposed to the controversial plan to take
up to 10 percent of airlines’ takeoff and landing times,
which would be auctioned off to the highest bidders.
The U.S. Department of Transportation says the auctions
would help alleviate air congestion in the Big Apple by
effectively instituting market-based pricing of landing and
takeoff times during peak periods. In other words, carriers
would pay more to fly in times of high demand and would pay
more to use smaller aircraft, which occupy the same air and
taxiway space as larger jets.
In September, only half of all flights from New York-area
airports took off on time, compared with an average of 70
percent at other major U.S. airports.
The airlines say they schedule flights when their customers
want to fly and improvements are needed to air traffic
control systems and scheduling. The airlines see auctions as
an encroachment of governmental power that could raise fares
and cost small cities air service and some front-line
airline employees — such as pilots, flight attendants and
gate agents — their jobs.
“We like to say that what they’re proposing is auctioning
off our jobs,” said Dino Atsalis, a Delta pilot and chairman
of the Legislative Affairs Committee of the Delta Air Line
Pilots Master Executive Council.
Analysts for Morgan Stanley wrote that the auctions will
have “negative repercussions” for the airlines because it
would “suggest” carriers don’t own the slots, which airlines
have used as assets to obtain financing. Carriers also could
lose some access to the airports and have the value of their
New York operations eroded by new entrants.
Allowing other carriers — particularly oil-rich or
government-subsidized foreign airlines — to bid against
cash-strapped U.S. airlines for the slots could have severe
ramifications for domestic carriers already reeling from the
economic and fuel shock of the past year, airline analysts
have said.
Half of all passengers into New York area airports arrive on
narrow body planes and many come from cities whose airports
can’t support larger jets, Atsalis said.
“But overall, it will affect everybody,” Atsalis said. Jobs
could be cut and destinations could be eliminated or see
reduced service.
On Dec. 9, the DOT and the Federal Aviation Administration
will identify how many takeoff and landing times they intend
to offer at auction Jan. 12.
The slots, the FAA says, are not the property of the
airlines, and additional runways and upgraded air traffic
control systems are either years away or not in the budget
and improvements are needed now.
The General Accounting Office, however, has said the FAA
does not have legal grounds to conduct the auctions, as it
would amount to a new fee and can be approved only by
Congress.
Pilots for Atlanta-based Delta (NYSE: DAL), Continental
Airlines Inc. (NYSE: CAL), US Airways Group Inc. (NYSE: LCC)
and JetBlue Airways Corp. (Nasdaq: JBLU) have joined with
their companies to protest the auctions. The Port Authority
of New York and New Jersey, which operates the airports, and
the airlines’ trade group, the Air Transport Association of
America (ATA) has filed a motion with the U.S. Court of
Appeals to stay the auction. The ATA is challenging the
government’s authority to conduct the auction.
They are joined in opposition by many in Congress —
including the New York and New Jersey delegations — and the
governors of both states.
“Originally proposed under the guise of congestion reduction
and now advanced under the guise of ‘enhancing competition,’
the [FAA]’s continued pursuit of an illegal ivory tower
scheme to confiscate and auction carriers’ slots is nothing
but a new tax on U.S. consumers,” Delta spokeswoman Susan
Chana Elliott said in a prepared statement.
The auction would occur just eight days before
President-elect Barack Obama is inaugurated and the airlines
want a stay until the new administration is in place. Though
the president-elect has not directly commented on slot
auctions, many ranking Democrats in Congress oppose them.
There are about 1,000 Delta pilots based out of LaGuardia,
John F. Kennedy International and Newark Liberty
International airports, Atsalis said, and hundreds more fly
for Delta partners. More than 7,600 Delta employees have
contacted their congressional representatives to protest the
measure, airline officials said.
Atsalis said an auction could peel 20 takeoff and landing
times away from Delta at Kennedy alone.
U.S. Sen. Johnny Isakson, R-Ga., is among many in Congress
to voice his opposition to the auctions to Transportation
Secretary Mary Peters.
Isakson is among a cadre of senators who want an amendment
banning the auction inserted into any bill that might be
passed during the lame-duck session before year’s end.
Auctions, he said, amount to taking the airlines’ property.
“The odds are the results [of the auction] would be bad,”
Isakson said, echoing the warnings of the airlines that the
plan could cost jobs and some small cities their air
service.
Isakson was not optimistic that a ban on the auctions could
pass Congress before it adjourns next week. The issue might
not be addressed until the 111th Congress is sworn in Jan.
6.
Airlines ready for fewer travelers in 2009
The Philadelphia Inquirer
By Linda Loyd
Fri, Dec. 5, 2008
The airlines expect to have fewer customers in 2009, and
they seem well-positioned to deal with that.
Hammered first this year by staggering fuel costs and now
experiencing a reduction in passenger demand, the major
carriers are preparing to downsize even more next year to
regain profitability.
A formula of dramatically lower fuel prices and capacity
adjusted downward because fewer people are traveling in a
brutal economy should result in a better bottom line in
2009.
Thus, industry executives are almost upbeat about the coming
year, making them rare creatures in the world of commerce
these days.
Airlines had their own tsunami - staggering fuel prices -
earlier in the summer. They reacted aggressively, by
slashing flying capacity - seats and flights - by 10 percent
industrywide. Those actions serve now to mitigate the effect
of a decline in passenger travel because of a different
crisis: a recession.
With oil now below $50 a barrel, U.S. carriers say they
believe they can counter a significant drop-off in demand
and still come out better than when crude peaked at $147 in
July.
Airlines say they stand ready to shed more flights and
seats, either by curtailing schedules or flying smaller
planes, if passenger demand weakens further.
"We remain optimistic on 2009 for the airline industry as a
whole," analyst Bob McAdoo at Avondale Partners L.L.C. said
in a research note two days ago. "If a weaker economy
continues to reduce both oil prices and passenger revenues,
the benefits of lower oil prices should more than offset
reduced revenues," he said.
Twelve airline executives, speaking at a Credit Suisse
investors conference in New York this week, said the earlier
cuts in flying and fuel-inefficient airplanes helped blunt
the effect of Wall Street's meltdown and a tumbling economy
that is discouraging travel.
In contrast to other industries, such as housing and autos,
airlines are expecting a better year ahead, said US Airways
Group Inc. chief executive officer Doug Parker. "For
airlines at least, 2009 looks better than 2008," he said.
Airlines not only cut flying, but also changed their pricing
models to include ancillary fees and charges for everything
from checked bags to soft drinks that "will have material
impact on airlines' ability to generate higher
profitability," Parker said. "Most analysts are now
projecting you're going to see profitability for the
industry next year."
Parker said bookings for January look better than in
November, which "was very soft. December looks better than
November, and January looks better than December."
US Airways reported a nearly 7 percent decrease in passenger
traffic for November. Southwest Airlines Co. said traffic
was down 8 percent. American Airlines said its traffic fell
14.5 percent in November compared with November 2007.
"We have seen business travel softening in certain markets,"
Parker told the investors conference, "presumably because of
what is going on here in New York with the financial
industry. Leisure bookings are staying almost surprisingly
robust."
Southwest's CEO Gary Kelly said the Dallas low-fare carrier
planned "significant" changes in its flight schedule in
January.
"We are going into our daily flight schedule and pulling out
trips that are not popular and not profitable," Kelly said.
"Obviously we are concerned about the economy. We need to
get our flight schedule adjusted to lower demand. Our plan
is to not grow the fleet in 2009."
Delta Air Lines Inc., which merged recently with Northwest
Airlines Corp., said it would trim domestic flying 8 percent
to 10 percent in 2009, and cut international capacity 3
percent to 5 percent.
US Airways expects to shrink flights and seats 6 percent to
8 percent next year, but does not anticipate reducing
capacity more than that.
United Airlines said it would lay off nearly 1,200 workers
in January as part of a previously announced plan to
eliminate 7,000 jobs.
United is also closing repair stations at Philadelphia
International Airport, LaGuardia Airport and Newark
International Airport on Jan. 11.
"We announced those maintenance facility closings on Oct.
21," said United spokeswoman Megan McCarthy. About 30
mechanics work at United's repair station at Philadelphia
International.
"Most of the work that is performed at Philadelphia will
move to other airports throughout United's system," she
said.
United announced in October that it expected to shrink
capacity 8 percent to 9 percent in 2009. "These difficult
but necessary decisions are all part of United's work to
remain competitive in this extremely difficult economic
environment," McCarthy said.
Associated Press
Sector Snap: Falling
oil helps airline shares
Associated Press, 12.05.08, 02:57 PM EST
Friday marked the fourth day in a row that airline shares
have risen, as oil prices fell to a four-year low.
Airline shares fell on Monday but have generally climbed
since then. Friday, crude oil dipped as low as $40.81 per
barrel, and was trading at $41.20 by early afternoon.
Oil prices fell the most after the Labor Department reported
a half million people had lost their jobs in November. So
while airlines should benefit from a drop in the price for
jet fuel, their single largest expense, they stand to be
hurt by falling demand from formerly big-spending business
travelers, and tourists.
Some airline analysts have said that airline shares should
have risen much more than they have, considering the drop in
fuel prices.
"Clearly the market is saying demand will be very poor in
2009," UBS analyst Kevin Crissey wrote in a note distributed
Friday morning.
Using American Airlines and
US Airways Group Inc. as proxies for the industry, Crissey
calculated that revenue per available seat mile would have
to drop 12 percent to 15 percent - about the same as the
worst year after the Sept. 11, 2001 terrorist attacks. US
Airways revenue per available seat mile would have to drop
an additional 10 percent in 2009 to reach those levels. "We
view such an outcome as unlikely," he wrote, adding, "We
believe the stocks are undervalued."
In afternoon trading, American parent AMR Corp. rose 98
cents, or 11.2 percent, to $9.77. Delta Air Lines Inc.
advanced $1.19, or 13.4 percent, to $10.07, United Airlines
parent UAL Corp. soared $1.42, or 13.6 percent, to $11.85,
and Continental Airlines Inc. rose $1, or 6.5 percent, to
$16.48, and US Airways was up 82 cents, or 12.3 percent, to
$7.47.
Among discounters, Southwest Airlines Co. jumped 23 cents to
$8.66, and JetBlue Airways Corp. rose 18 cents to $5.62.
AIRLINE STOCKS
Airlines advance as
oil drops 25% for the week
By Matt Andrejczak, MarketWatch
Dec. 5, 2008
SAN FRANCISCO (MarketWatch)
-- Major U.S. airline stocks surged Friday as the price of
crude oil fell to its lowest level in four years.
Delta Air Lines, United Airlines parent UAL Corp. and US
Airways led the charge as oil prices plunged 25% for the
week.
Delta Air Lines jumped 17% to $10.36. UAL surged 13% to
$11.76. US Air popped 12% to $7.47.
The broad advance came even after the Labor Department said
the U.S. racked up its worst monthly job losses in 34 years.
Overall, the Amex Airline Index closed up 9% at 22.45
points. For the week, the index gained 9% compared with a 2%
loss for the Dow Jones Industrial Average.
Crude oil for January delivery ended down $2.85, or 6.5%, at
$40.81 a barrel on the New York Mercantile Exchange, the
lowest closing level since December 2004. Oil lost 25%
during the week, the largest drop since the week ended Jan.
18, 1991.
Another big mover Friday was Ryanair Holdings, Europe's
largest low-cost airline. Its shares rose 10% after it was
said to be closer to acquiring rival Aer Lingus Group.
Ryanair sweetened its bid to 1.40 euro a share, a 20%
premium to the Friday closing price. The offer values Aer
Lingus at around 748 million euros.
In other developments affecting the airline sector, Boeing
Co. may delay the first deliveries of its new 787 Dreamliner
at least six more months, according to media reports. It
would mark the fifth time the aerospace giant has been
forced to extend the flagship commercial jet's rollout
schedule.
US Airways CEO: Demand
may improve in January
By The Associated Press
Thursday, December 04, 2008
MINNEAPOLIS - Demand for airline seats at US Airways is
getting better rather than worse but the outlook is still
hazy, the airline’s chairman and chief executive said
Tuesday.
At the Credit Suisse Global Airlines Conference in New York,
an analyst asked Doug Parker how demand was shaping up.
Airlines — and their investors — have been worried because
many companies have cut back on corporate travel at the end
of the year to save money.
Parker said January “looks better than certainly November
did. November was very soft. December looks better than
November, and January looks better than December.” Parker
stressed that it’s early yet, and hard to tell how January
bookings will really shape up.
Parker also said that a $15 fee for the first checked bag
has caused a 20 percent dropoff in the number of bags
checked by travelers on his airline. He said that, in turn,
has helped it improve baggage handling performance by more
than 20 percent. The fee also makes up the bulk of $400
million to $500 million in revenue for extra services.
“It’s generating real economic value, but it’s not just
about the money. What’s also happening is it’s helping us
all to run better operations,” Parker said.
US Airways Group Inc. shares rose 88 cents, or 17 percent,
to $6 in Tuesday’s trading. The airline’s largest hub is in
Charlotte, N.C.
Judge refuses to block
US Airways layoff policy
November 24, 2008 - 5:36PM
By Howard Fischer, Capitol Media Services
A federal judge has refused to block US Airways from laying
off pilots from the old America West Airlines ahead of those
hired by the original East Coast airline.
U.S. District Judge Neil Wake concluded that his court has
no jurisdiction over the airline - at least, not until it
exhausts other appeals.
But Wake, in his 24-page ruling, said he would not force the
airline to keep the America West pilots on the payroll even
if he had the legal authority. He said doing so would
unfairly interfere with the business operations of the
merged airline.
For example, he said, one of the purposes of the merger was
to allow the reduction of some flights that had been flown
by America West. He said if the company cannot shed itself
of the pilots who were flying those flights - or at least
the least senior of those America West pilots - it might be
forced to continue paying them for doing no work.
Wake said that if the airline eventually wins the lawsuit,
forcing it to alter its business plan now would result in a
"grave and unjustifiable cost."
But Wake said that if the pilots win, they can be
compensated retroactively for lost wages.
Calls to the lead attorney for the America West pilots were
not immediately returned.
Central to the battle is the announced merger of the two
airlines more than three years ago. Each airline had its own
seniority plan for its pilots.
A federal arbitrator, after hearing arguments from unions
representing both groups of pilots, subsequently imposed an
integrated seniority schedule.
That was based not only on total seniority - the US Airways
pilots had been around longer - but the fact that America
West was the stronger of the two airlines and that its
pilots, despite their shorter employment history, deserved
special consideration.
Since that time, though, the more numerous original US
Airways pilots - referred to in the lawsuit as the East
pilots - formed a new union and sought to repudiate that
agreement.
The airline itself has been doing layoffs, which, according
to the lawsuit, have disproportionately hit the "West"
pilots because the cutbacks in flights have been more from
the old America West routes.
Attorneys for the West pilots want any pilots who were on
furlough when the merger was announced to be the last hired
or the first laid off.
More to the point, they asked Wake to block layoffs of any
West pilot before the merged airline has shed itself of any
of those who were rehired since the merger.
And it wants future furloughs to be based on the
arbitrator's order that spells out the seniority and bumping
rights of both the East and West pilots.
Ahead of the bell: Calyon
upgrades airlines
Tuesday October 28, 8:26 am ET
Calyon's Neidl upgrades rating on airline stocks, cites
steep drop in oil prices
ATLANTA (AP) -- Stocks of major network carriers got an
upgrade Tuesday from a Calyon Securities airline analyst,
who cited dramatically falling oil prices and the deep
capacity cuts implemented to support ticket prices and
revenue.
Analyst Ray Neidl said in a research note that his firm
raised its ratings for major network carriers to "Add" from
"Neutral."
Neidl said the firm also was raising its earnings per share
estimates based on new, lower oil price assumptions.
The firm remains cautious on airlines' outlook in the
short-term due to the uncertain economy and volatile markets
and oil prices.
The research note said the airlines have shown discipline in
cutting capacity, and the firm believes that carriers have
the ability and would be willing to take further actions if
demand falls more sharply than currently forecast.
"We expect these actions will provide further pricing
traction for the carriers," the note said. "Since new market
development will be largely curtailed, this large cost item
should be eliminated for the duration of the economic
slowdown."
The note said as the economic downturn continues and
airlines move into the slower winter season, the firm
believes that if airline stocks soften further, that would
make them even more attractive to purchase.
"It is difficult to predict short-term stock price movements
in such a volatile market for both equities and oil prices,
but we recommend investors establish and add to positions on
price weakness," the note said.
In premarket trading AMR Corp., parent of American Airlines,
rose 50 cents, or 5.8 percent, to $9.10. Continental
Airlines gained $1.05, or 7.3 percent, at $15.49. Delta Air
Lines added 33 cents, or 4.3 percent, at $7.99. Northwest
Airlines rose 8 cents to $9.10. UAL Corp., parent of United
Airlines, gained 70 cents, to 6.1 percent, at $12.10. US
Airways added 39 cents, or 5.5 percent, at $7.54. JetBlue
rose 36 cents, or 8.1 percent, at $4.82. Southwest Airlines
lost 6 cents at $10.60.
Major airlines upgraded on
oil prices, capacity cuts
By Christopher Hinton
Last update: 8:54 a.m. EDT Oct. 28, 2008
NEW YORK (MarketWatch) --
Calyon Securities on Tuesday raised its rating for the major
airline carriers to add from neutral, citing the dramatic
drop in oil prices and deep capacity cuts. The major
carriers are AMR Corp., Continental, Northwest, Delta, UAL
Corp., US Airways, and Alaska Air. The research firm raised
its rating despite the weakening economy since carriers have
aggressively increased their cash positions, helping them
weather the economic downturn without bankruptcies. It also
puts them in a good position to take advantage of a "likely"
spring recovery, Calyon said. However, economic pressure
could further soften stock prices over the winter, the firm
said.
UAL, Delta Fuel-Hedge Losses May
Herald Profits for Airlines
By Mary Jane Credeur
Oct. 27 (Bloomberg) -- UAL Corp.'s United Airlines, Delta
Air Lines Inc. and Southwest Airlines Co. all posted
quarterly losses in part because of charges tied to jet-fuel
contracts they bought in advance. Investors say that's good
news.
The Bloomberg U.S. Airlines Index is up 8.2 percent since
carriers began reporting earnings Oct. 15, while the
Standard & Poor's 500 Index has fallen 3.4 percent. After
tumbling fuel prices caused deficits because of airlines'
hedges, Wall Street is betting that lower energy costs
herald profits next year.
``Long-term value investors who have basically avoided
airlines for decades are looking at taking stakes,'' said
Michael Derchin, an analyst at FTN Midwest Research
Securities in New York. ``The common wisdom going into a
recession is that the last group to do well would be
airlines. But I'm modeling profits for all of them'' in
2009.
The 10 biggest U.S. carriers lost a combined $2.52 billion
in the third quarter, partly because of writedowns in the
value of hedges. Jet fuel surged to a record $4.36 a gallon
in July, then plunged 52 percent to $2.18 on Oct. 24.
``It's remarkable how much has changed in such a short
period,'' Doug Parker, chief executive officer of US Airways
Group Inc., said on a conference call on Oct. 23, when the
airline posted an $865 million net loss that included
writedowns for fuel hedges.
US Airways jumped 32 percent in New York trading this
quarter through Oct. 24, the second-biggest advance among 14
airlines in the Bloomberg index behind UAL's 36 percent. The
S&P 500 plummeted 25 percent in the same period.
`Nobody Knows'
The largest U.S. carriers announced 26,000 job cuts and the
grounding of 460 jets as fuel was rising, trimming costs to
help them weather any travel slowdown from the credit
crunch. The drop in fuel prices further strengthens their
ability to halt losses.
``Most airlines can make a profit at jet-fuel prices at
these levels,'' said John Armbrust, an aviation fuel
consultant in Palm Beach Gardens, Florida. ``The question
is, do prices stay where they are? Nobody knows.''
Without last quarter's fuel-hedge charges, Southwest,
Northwest Airlines Corp. and Alaska Air Group Inc. all said
they would have made money. Marking down the value of fuel
hedges snapped Southwest's 17-year quarterly profit streak.
The 10 carriers had an operating loss of about $870 million,
narrower than analyst Derchin's estimated $1 billion. He
projects about $5 billion in profits for the group next
year.
They'll probably be ``break-even, maybe better'' this
quarter, he said. Through nine months, the collective
operating loss was $2.86 billion, based on airlines'
reports.
Carriers including Southwest, US Airways and AirTran
Holdings Inc. said they may defer additional fuel-hedging
contracts until oil prices stabilize.
`Free Fall'
``In the last three weeks alone, oil's down $40'' per
barrel, AirTran CEO Bob Fornaro said in an Oct. 23
interview. ``The market really is in a free fall.''
Fidelity Management & Research is among the investors adding
to airline holdings last quarter, boosting its stake in
Continental Airlines Inc. to 15 million shares, or almost 14
percent. The world's largest mutual-fund company previously
held 4.8 percent.
The risks for airline stocks include the possibility that
the weakening global economy will decimate demand, as well
as the prospect of another jump in fuel prices, said Kevin
Crissey, an analyst at UBS Securities in New York.
Still, Crissey also projects profits for the U.S. industry
next year. He cited the carriers' cuts in domestic capacity
of 10 percent to 15 percent and said oil is unlikely to
return to its $147-a-barrel peak.
Offering fewer flights gives airlines more pricing power.
Passenger unit revenue, a measure of fares and fees, jumped
by 8 percent or more for most carriers last quarter, and
Delta is among the airlines saying they expect similar gains
in the current period.
``The perception is that the airlines are in more trouble
than they actually are,'' Crissey said in an interview.
``Investors love the capacity argument. If it was just a
fuel price drop, that'd be more shaky. But together, it's a
much more compelling argument.''
With fuel costs lower,
airlines say they can stand less demand
10:16 PM CDT on Sunday, October 26, 2008
By TERRY MAXON
After all they've been through, airlines are saying they can
withstand a little drop in demand – or a big drop, if it
comes to that.
Delta president Ed Bastian says, 'A significant decrease in
demand is in some ways easier to work with than $150 oil.'
The reason? The big fall in energy prices means that they'll
have billions of dollars more left in their pockets in the
fourth quarter and next year than they had – until very
recently – been expecting.
"Given the magnitude of the oil decline, it would take a
truly unprecedented decline in demand to overcome the impact
of oil," US Airways Group Inc. president Scott Kirby said
last week.
As major U.S. carriers have taken turns talking about their
dismal third-quarter losses – $2.5 billion for the 10
largest carriers – they've also expressed optimism they'll
weather any economic downturn.
Speaking to analysts last Thursday, Mr. Kirby pointed out
that each $1 decrease in the price of a barrel of oil
translates into $35 million of savings a year for US
Airways. And oil has declined by more than $80 a barrel
since hitting a high over $147 in July.
Using some complicated math, Mr. Kirby said industry revenue
would have to decline 22 percent to offset the savings from
cheaper jet fuel and capacity cuts taken by airlines in 2008
or planned for 2009.
"And with the exception of 9/11, nothing like that has
happened in the history of the airline industry," Mr. Kirby
said.
Industry executives have told Wall Street that they're
seeing only slight drops in passenger demand so far,
although they're planning for the worst.
"Looking into 2009, we expect to experience a decline in
demand given the current economic crisis and are developing
plans with a number of different scenarios," Delta Air Lines
Inc. president and chief financial officer Ed Bastian told
analysts on an Oct. 16 conference call.
"But a significant decrease in demand is in some ways easier
to work with than $150 oil was this past summer," he added.
In many ways, the airline industry has been like an area hit
by a hurricane – the winds have died down, but the damage is
still being cleaned up.
Through the first nine months of 2008, the 10 largest U.S.
carriers reported net losses of $20 billion, compared to
$6.5 billion in profits in 2007. The 2008 losses were
inflated, however, as several airlines wrote down "goodwill"
they had been carrying on their balance sheets.
On an operating basis excluding the goodwill write-offs,
those 10 carriers lost $2.6 billion through Sept. 30,
compared with an operating profit of $5.5 billion in the
first nine months of 2007 – an $8.1 billion reversal.
Blame it all, and then some, on fuel. The 10 carriers have
paid $12.9 billion more for fuel in 2008 than in 2007.
Through Sept. 30, fuel made up nearly 35 percent of all
expenses, compared to less than 27 percent a year earlier.
In the third quarter alone, those airlines spent $14 billion
on fuel, up $5.8 billion from the 2007 period. Six of the 10
carriers spent more than 40 percent of their operating
budgets on fuel, led by AirTran Airways Inc.'s 50.6 percent.
However, assuming that oil prices don't make another U-turn
and head upward, airlines expect to get a big relative break
on energy spending in coming quarters. Industry analysts are
quickly rewriting their earnings estimates to reflect the
improving picture.
Only a few months ago, a number of analysts were muttering
aloud about the potential for bankruptcies and debating
about who would crater first. The talk now is more about how
much capacity the industry needs to support a down economy,
not whether the airlines will run out of money this year or
next.
Typical is airline analyst Jamie Baker of J.P. Morgan Chase,
who said in a research note last week that cheaper fuel is a
bigger deal than lower demand.
"We are exponentially more comfortable with airline credit
quality across the board ... in the current rapidly
weakening demand but much lower oil and significantly lower
capacity environment vs. our view six months ago when oil
was on its way to $150, demand trends remained uncertain,
and the industry was much bigger," Mr. Baker wrote.
"In other words, we are happy to trade demand trend downside
for a 50 percent cut in fuel prices, a scenario that is
inherently much more easily navigated by airline management
teams," he said.
Capacity cuts, fuel price
fall to help US airlines: UBS
Fri Oct 24, 2008 2:38pm EDT
Oct 24 (Reuters) - The
combination of capacity cuts and a decline in fuel prices
will help U.S. airlines weather a slack in demand, said a
UBS analyst, who raised his price targets on three airlines,
including US Airways Group.
However, airlines should boost liquidity through capital
raises as debt levels remain too high, analyst Kevin Crissey
said.
"The balance sheets of most US airlines look as if they've
just come out of a recession, rather than going into one,"
the analyst said. "There is nothing to say fuel can't
reverse course quickly and leave the airlines short on cash
again."
Oil dropped more than $4 a barrel on Friday as gloom about a
global economic downturn sapping fuel demand took the steam
out of an OPEC agreement to cut output.
On Thursday, US Airways, AirTran Holdings, JetBlue Airways
and Alaska Air Group reported quarterly losses, linking
their results to a historic spike in fuel prices in the
third quarter.
Crissey, who expects travel demand to likely be very weak
soon, raised his price targets on US Airways, AirTran and
Alaska.
Separately, Credit Suisse raised its price target on US
Airways to $13 from $10.
"Fourth-quarter 2008 revenue should be ok for the industry,
but our thesis is that 2009 likely proves more challenging,"
analyst D.McKenzie wrote in a note to clients.
Shares of US Airways jumped more than 12 percent to $8.03 in
afternoon trade on the New York Stock Exchange.
US
Airways Group, Inc. Secures $950 Million in Financing and
Liquidity Commitments
TEMPE, Ariz.--(BUSINESS WIRE)--
October 23, 2008
US Airways Group,
Inc. (NYSE: LCC) announced today that as part of a
comprehensive liquidity program launched in mid August, the
Company has raised approximately $950 million of financing
and near-term liquidity commitments. On October 20, 2008 the
Company closed on $800 million of these transactions with
$400 million of proceeds used to prepay the Company's $1.6
billion bank debt facility. In exchange for this prepayment,
the unrestricted cash covenant contained in the loan
agreement for the bank debt facility has been reduced from
$1.25 billion to $850 million. The loan agreement's term
remains the same at seven years with substantially all of
the principal amount payable at maturity in March 2014. The
remaining proceeds from these financing transactions,
approximately $370 million after payment of certain bank and
other service fees, increase the Company's total cash
position and will be used for general corporate purposes.
The remaining $150 million of liquidity commitments are
expected to close during the fourth quarter, with cash
benefits realized through 2009.
"Today's
announcement confirms that US Airways' financial footing is
solid," said Chairman and CEO Doug Parker. "As a result of
these financings our total cash position relative to annual
revenues ranks solidly among the highest of the largest US
carriers. Most notably, we were able to complete this
financing in the midst of unprecedented global financial
unrest, which is a testament to the confidence our investors
and business partners have in the people of US Airways. We
are extremely appreciative of their support, and we intend
to reward their commitment to us by continuing to run a
great operation and returning our airline to profitability
in the years ahead."
The Company
estimates that 2009 expenses will increase by approximately
$90 million due to costs related to these transactions, of
which approximately $65 million is non-cash.
Chief Financial
Officer Derek Kerr added, "Combined with our August equity
offering which generated $179 million, and other financings
completed during the quarter, US Airways has raised or
secured approximately $1.2 billion in cash and payment
deferrals since we released our second quarter financial
results."
US Airways beat earning estimates by $0.19, reports
Revs in-line
BRIEFING.COM
October 23, 2008
LCC Reports Q3 (Sep) loss of $2.35 per share,
excluding charges, $0.19 better than the First Call
consensus of ($2.54); revenues rose 7.4% year/year to $3.26
bln vs. the $3.26 bln consensus. Mainline passenger revenue
per available seat mile in Q3 was 11.32 cents, up 4.4% over
the same period last year. The company announced separately
today, it has significantly improved its liquidity position
and raised approximately $950 mln of financing and near-term
liquidity commitments. "Today's announcement confirms that
US Airways' financial footing is solid," said Chairman and
CEO Doug Parker. "As a result of these financings our total
cash position relative to annual revenues ranks solidly
among the highest of the largest US carriers. Most notably,
we were able to complete this financing in the midst of
unprecedented global financial unrest, which is a testament
to the confidence our investors and business partners have
in the people of US Airways... The industry is also moving
to a more profitable a la carte pricing model of its product
and services with US Airways at the forefront of that
change. We expect these new a la carte pricing initiatives
to contribute between $400-500 mln in revenue during 2009."
AIRLINE STOCKS
Airlines fire up after oil hits 14-month
low
By Christopher Hinton, MarketWatch
Last update: 4:39 p.m. EDT Oct. 16, 2008
(MarketWatch) -- Oil dipped
to its lowest point in more than a year on Thursday,
bringing about sharp gains in shares of the so-called legacy
carriers that had appeared to be sinking this summer beneath
the weight of record-high fuel costs.
The Amex Airline Index surged
21% to finish at 21.64 points with all of its 14 components
trading higher. The benchmark index has climbed about 71%
since hitting bottom in July when the price of oil reached
$147 a barrel. More recently, crude oil for November
delivery fell $4.69 to finish at $69.85 a barrel in
electronic trading on Globex, ending below its 2007 average
price of $72 a barrel, a year when most airlines were
posting profits. Early last year the airline index peaked at
66.92, but prospects for a return to such lofty highs look
bleak these days as the economy weakens toward an economic
recession. The crisis in the credit markets has taken its
toll on airline sales, and in August, the number of
passengers flying declined for the first time since 2003.
Now carriers that were
cutting back on seat capacity to trim costs in the wake of
record-high jet fuel prices are focused on reducing capacity
to deal with an anticipated decline in passenger numbers.
Again, analysts are saying those airlines with the most
flexibility in their fleet management will fare best.
Leading the pack Thursday
were shares of United parent company UAL Corp., up 40% to
close at $10.30; US Airways added 28.2% to $6.78; Delta Air
Lines rose 18.8% to end at $8.84; and American Airlines
parent AMR Corp. jumped 23% to $10.80.
Also climbing was Southwest.
The Dallas carrier swung to a third-quarter loss after
falling oil prices penalized its fuel hedging program, but
on an adjusted basis Southwest posted a profit ahead of the
Wall Street consensus. Shares of Southwest rose 8% to close
at $12.49.
Meanwhile, the world's No. 5
airline, Continental, swung to a third-quarter loss from a
year-earlier profit. Despite 8.8% higher revenue, 62% higher
fuel prices and the impact of Hurricane Ike hammered
results. Continental shares rose 22.7% to finish at $15.75.
AP
Sector Snap: Airlines mostly up as oil
drops
Wednesday October 15, 2:38 pm ET
Airline stocks trade mostly higher amid broader market
sell-off as oil dips below $75 a barrel
NEW YORK (AP) -- Shares of major U.S. airlines rose in
trading Wednesday amid a sharply lower broader market, as
the price of oil reached its lowest point in 13 months.
Also Wednesday, American Airlines
parent AMR Corp. and Delta Air Lines Inc. reported
third-quarter earnings. AMR reported an operating loss that
was roughly inline with Wall Street expectations, while
Delta Air Lines missed analysts' forecasts.
But investors were squarely focused on
oil prices. Light, sweet crude for November delivery fell
$2.95 to $75.68 a barrel on the New York Mercantile Exchange
after earlier sliding to $74.57, the lowest trading level
since Sept. 5 of last year.
Oil prices have now plummeted 48 percent since a July 11
record.
In afternoon trading, Delta rose 34 cents, or 5 percent, to
$7.69. AMR gained 14 cents, or 2 percent, to $8.93.
Northwest Airlines Corp. added 24 cents, or 3 percent, to
$9.11. United parent UAL Corp. rose 25 cents, or 4 percent,
to $7.38.
Among airline stocks losing steam was Southwest Airlines
Co., which declined 24 cents, or 2 percent, to $12.08. The
carrier is set to report earnings Thursday.
TheStreet.com
US Airways' CEO: Merger Saved Jobs
10/14/08 - 04:27 PM EDT
Ted Reed
CHARLOTTE, N.C. -- Three years after the merger between US
Airways and America West, it seems clear the deal was an
overall success.
Still, the inability to reach an agreement on pilot
seniority stands out as a glaring shortcoming.
Without a merger, "neither the
standalone US Airways nor the standalone America West could
have managed through," said CEO Doug Parker, in a recent
interview. "Both these airlines would be nonexistent had
they not merged. But merged, we saved 35,000 jobs."
At the same time, "pilot seniority is not something we
contemplated we'd still be dealing with three years later",
Parker admitted.
The bitter seniority conflict follows an arbitrator's ruling
that was deemed unacceptable by most pilots from the former
US Airways. It has been accompanied by an April election
that ousted the Air Line Pilots Association after 57 years,
and a series of lawsuits.
On the positive side, "our pilots are keeping this between
themselves," Parker said. "We've had no customers see this
affect them in the last three years. People read about it,
but it hasn't affected our operations one bit."
Meanwhile, Charlotte and Philadelphia, the two hubs operated
by the former US Airways, have been the strongest links in
the new carrier. They have suffered minimal capacity
reduction despite cuts of about 25% in Las Vegas and 10% in
Phoenix, which has come as the industry moves to reduce
total capacity by an unprecedented 10% in response to higher
fuel prices.
"Charlotte has proven to be more resilient than other parts
of the country," Parker said, even taking into account the
merger of Wachovia, Charlotte's second-largest employer,
into Wells Fargo.
"US Airways' position in Charlotte is not dependent on
Wachovia being as big as it is here," Parker said.
"Charlotte is much bigger and stronger than that."
Philadelphia, long a trouble spot for
the airline, has improved. In terms of departures within 14
minutes of the scheduled time, US Airways' Philadelphia
operation showed a 25-point improvement, to 76.5%, from the
first half of 2007 to the first half of 2008. "The
turnaround in US Airways has been stunning within itself,"
Parker said. "The turnaround in Philadelphia is even more
dramatic."
US Airways emerged from bankruptcy in September 2005 after a
merger with America West. The new company quickly began to
make money due to capacity declines throughout the industry
and strong demand.
The merger's success led Parker to pursue both Delta and
UAL. Those efforts failed, although some speculate that UAL,
the parent of United, might become interested were US
Airways to resolve its pilot seniority issues. Meanwhile,
Delta plans to combine with Northwest.
For its part, the US Airline Pilots Association, which
replaced ALPA at US Airways, recently marked the third
anniversary of the tie-up, saying in prepared statement that
"the airline is entangled in labor disputes, lawsuits and
customer service issues, and management so far seems
incapable of getting the merger completed."
As for merging pilot groups, said USAPA president Stephen
Bradford, "What the Delta and Northwest managements did in
just a couple of months, US Airways management hasn't been
able to do in over three years."
Aviation consultant George Hamlin says the carrier could
gain efficiencies if pilot lists and contracts are merged.
But, if unresolved, the pilot conflict could encumber US
Airways to the extent that it comes to resemble Eastern
Airlines in its final days, Hamlin says.
"If you put parochial interests first, last and only, you
could destroy your employer," he says. "But so far, you have
to count this as a success, because the airline is still
here."
TheStreet.com
For Airlines, Demand Matters More Than
Earnings
Monday October 13, 2:30 pm ET
By Ted Reed, TheStreet.com Staff Reporter
If the world economy is going to be smaller going forward,
the U.S. airline industry was ahead of the curve.
Carriers have downsized dramatically since the summer travel
season ended, preparing for a world of $140-a-barrel oil.
They have eliminated older aircraft and marginal routes that
account for about 10% of nationwide capacity, and they have
implemented fees that are expected to add hundreds of
millions in annual revenue for the major carriers.
Since then, oil prices have fallen steeply, setting the
stage for what many people see as a profitable 2009. The
wild card is whether the financial market turmoil will
impact demand, but so far industry cuts appears to have
offset any impact from a potential decline in travel.
With airline earnings reports set to begin this week,
observers will be closely watching for news on future
booking trends.
AMR and Delta will report on Wednesday, while Continental
and Southwest will report on Thursday.
At US Airways, "bookings remain solid and we're not having
any trouble filling up airlines," CEO Doug Parker said in a
recent interview. "But you can't help but be concerned."
UAL, the parent of United Airlines, moved to cut fall and
winter capacity, a decision that was "very timely, largely
driven by high oil prices but just before the financial
crisis had arrived," CEO Glenn Tilton told ATW Online last
week. United cut capacity by 16%.
Tilton said United has not seen any significant drop in
passengers during the current quarter, although there is
"some softening" in forward bookings for next year.
Without question, some airlines will pay a price for
fuel-hedging bets they made when oil traded at higher
prices. Last month, United said its third-quarter earnings
will include $544 million in losses from fuel-hedging
contracts. Alaska Air said last week that it expects a
"significant" third-quarter loss due to special items
including a $220 million mark-to-market loss on fuel hedges.
Still, as American CEO Gerard Arpey said in July during a
third-quarter earnings call, falling oil prices "would be a
high-class problem to have."
Parker, meanwhile, notes that passengers are less likely to
check luggage or consume drinks when a charge is involved.
For instance, in September, the number of checked bags on US
Airways fell by 25%. "We've stumbled onto a better product,"
he says.
Many airline analysts are optimistic about 2009. In a recent
report, Avondale Partners analyst Bob McAdoo writes that
investors worry that demand is slowing, but he says the
double-digit capacity cuts should more than cover any
shortfall.
"Based on recent conversations with various airline
management teams, we believe the sharp stock market selloff
and current overall economic weakness are not materially
slowing demand for air travel," McAdoo wrote last week. "New
bookings in the past seven days are neither meaningfully
different than in recent weeks nor different from booking
patterns last year."
Standard and Poor's analyst Jim Corridore has doubts. He
recently reiterated a hold on American, raising his 12-month
target price to $8 from $6. "For '09, we think the recent
sharp drop in oil prices will lead to significantly lower
losses than we were earlier expecting, although we remain
wary of the impact of the global financial crisis on air
travel demand next year," Corridore wrote.
However, JP Morgan analyst Jamie Baker wrote in a recent
report that even were demand to fall considerably, "we are
having a tough time modeling losses." Baker said airline
shares are trading far below their value, saying: "Nothing
we've experienced comes close to explaining a recent $5
share price for United, considering we expect it to earn
something similar (untaxed) in 2009." JP Morgan has a
financial relationship with United that includes acting as a
market maker.
AP
Barclays says airlines
earnings set to improve
Thursday October 2,
1:17 pm ET
Barclays analyst sees
smaller losses or profits for airlines as capacity and fuel
costs fall
MINNEAPOLIS (AP) -- The outlook
for airlines is improving, with lower fuel prices and fewer
seats setting carriers up for a better 2009, Barclays
Capital analyst Gary Chase wrote on Thursday.
Chase forecast much smaller
losses for 2008 and 2009 across the sector versus his
previous expectation, and he predicted profits for
Continental Airlines Inc. and Alaska Air Group this fiscal
year, instead of losses.
Spooked by fuel prices which spiked over the summer,
airlines have been cutting the number of flights, hoping to
raise prices. They are still doing that, even though fuel
prices have retreated.
"The new lease on life afforded the industry by a dramatic
reduction in jet fuel prices should give investors the time
to benefit from this phenomenon," Chase wrote. He said his
top picks are United Airlines parent UAL Corp., as well as
Delta Air Lines Inc. and Northwest Airlines Corp. (which are
hoping to combine by the end of this year), "but we believe
the whole sector looks very compelling right now."
He left his ratings on the stocks unchanged. But for
Continental, he now predicts 2008 profit of 25 cents per
share, versus a previous call for a loss of $2.04 per share,
and 2009 profit of $1.50 per share instead of a loss of
$3.70.
The analyst still expects AirTran Holdings Inc. to lose
money this year, but he now expects a 2009 profit of 25
cents per share instead of a loss of 85 cents.
Chase wrote that the results are being driven by the
reductions in flying capacity by the airlines. He wrote that
he expects domestic capacity to fall almost 12 percent in
the fourth quarter of 2008.
"We continue to believe the industry will remain disciplined
on capacity and will execute on announced capacity
reductions," he wrote.
In Thursday afternoon trading, shares of most airlines fell
with the broader market. AMR Corp. lost 20 cents at $10.96.
Continental fell 10 cents to $17.50. Southwest gave up 27
cents at $13.93. JetBlue dropped 23 cents, or 4.6 percent,
to $4.82. Delta lost 56 cents, or 6.6 percent, at $7.99, and
Northwest fell 84 cents, or 8 percent, to $9.66.
A couple of carriers posted slim gains. UAL added 11 cents
at $9.63, and US Airways rose 10 cents to $7.10.
Union: Lingering talks in airlines' merger causing
confusion, morale problems
Oct 02, 2008
Beaver County Times -
McClatchy-Tribune Information Services
Three years after the merger of US Airways and the former
America West Airlines in September 2005, the combined
carrier's two largest labor groups still remain without
joint contracts. One of the labor groups believes that has
taken its toll on the carrier's performance.
"Our situation causes confusion, inefficiencies and severe
morale problems that carry over into the airline's
operation," said Stephen Bradford, president of the US
Airline Pilots Association, which represents US Airways'
5,300 pilots.
"We see these inefficiencies day after day, and at times,
they create passenger delays and prevent the company from
achieving its potential," Bradford said.
USAPA spokesman James Ray pointed to federal statistics that
show US Airways ranked second-to-last (worst) in customer
complaints during the first half of the year among the
nation's 19 largest carriers.
That has been at least in part because of the fact that
pilots from the former US Airways, or East unit, make $17 an
hour less than those from the former America West, or West
unit, Ray said.
"We do the same job as they do, but we don't get the same
pay. I don't care what line of work you're in, whether
you're flipping burgers or flying an airplane, it's human
nature. It affects your performance. It's demoralizing," Ray
said.
US Airways spokesman Morgan Durrant said contract
negotiations with the carrier's pilots and flight attendants
continue. Pilot talks were stalled for months while the
group wrangled over a combined seniority list and then
ultimately voted to scrap its former union, the Air Line
Pilots Association, in favor of USAPA this spring. Lingering
resentment and lawsuits between the East and West pilots
remain unresolved.
Still, Durrant disagreed that the lack of joint contracts
has adversely affected the carrier's performance, citing
improvements in on-time performance and baggage handling.
Federal statistics show US Airways has ranked in the top 10
in on-time performance for the last nine months reported and
in the top 10 in baggage handling for the last five months.
"We have made dramatic improvements. I think the (high rate
of) customer complaints are driven by a perception that is
lagging reality," Durrant said.
US Airways Pilots Mark
Three Years Of Failure To Complete Merger
Wed, 01 Oct '08
The Aero-News Network
Joining With America West Announced September 27, 2005.
September 27 marked three full years in which US Airways
management has failed to complete their merger between the
old US Air, and America West. Today, the airline is
entangled in labor disputes... lawsuits... customer service
issues... and public perception as a nickel-and-dime outfit,
willing to sell its soul for a $15 service fee.
Adding its chorus to the chaos is the US Airline Pilots
Association... formed earlier this year when US Airways
pilots (that is, pilots from the old US Air operation) voted
to remove the Air Line Pilots Association as their
collective bargaining agent, saying ALPA had done little to
represent their interests in early joint contract talks.
As ANN reported, a federal arbitrator presented a seniority
formula in June 2007 that based pilot ratings on aircraft
type, with pilots ranked by seniority within each group
based on their time at their respective airline, and how
many aircraft of that type are within the combined US
Airways fleet. Under the proposal, the top 517 pilots came
from US Airways... but the trouble began when talking about
first officer rankings, which US Air pilots said favored
their younger counterparts coming from America West.
As a result, today US Airways pilots still work under
different Collective Bargaining Agreements left over from
their former airlines... each having a different set of work
rules and pay rates. They are not permitted to fly each
other’s aircraft, or intermix crews.
While neither side is willing to budge from its stance (and,
indeed, USAPA faces discord within itself, from former
America West pilots) USAPA President Stephen Bradford says
management is to blame for the current crisis.
"What the Delta and Northwest managements did in just a
couple of months, US Airways Management hasn’t been able to
do in over three years," Bradford states. "Management’s
inability to complete the merger of US Airways and America
West, coupled with their apparent focus on short term,
quick-return management philosophies, is costing our Company
in a big way."
According to USAPA figures, for the first six months of 2008
US Airways ranks a dismal 18th out of 19 on the Department
of Transportation's consumer complaint list... a "sobering
change" from the airline’s top rankings in years prior to
the merger.
"Our situation causes confusion, inefficiencies and severe
morale problems that carry over into the airline’s
operation. No wonder we have to charge our passengers for
water," said Bradford. "We see these inefficiencies day
after day and at times they create passenger delays and
prevent the Company from achieving its potential."
USAPA states merging US Airways and America West into a
single airline, with a single Pilot Collective Bargaining
Agreement, would allow management to capture synergies that
would benefit US Airways’ passengers, investors and
employees alike and go a long way towards positioning the
airline for a secure future.
Airlines rattle former GOP allies
By CHRIS FRATES | 10/1/08 5:06 AM EDT
Politico.com
The airline industry hit some unexpected turbulence last
summer when its push of a Democratic-backed proposal to rein
in oil speculators so infuriated some Republicans that they
threatened to slap their longtime allies with unwanted
regulations.
One of those saber-rattling Republicans was Rep. John B.
Shadegg, a longtime airline advocate whose Phoenix-based
district includes the US Airways headquarters.
“I said, ‘Wait a minute. I’m not just your errand boy here,
where you come in and say you want something, [and] I do it
because it’s you,’” Shadegg said. “‘You guys have a history
of coming in and saying small [government], low tax, less
regulation, and therefore we have an agreed agenda.’”
Shadegg was outraged by what he saw as the industry’s
hypocrisy, saying he made the flippant threat to illustrate
how inconsistent it was that airlines, which for years had
asked him to fight regulation, were now asking him to
support more controls on another industry.
Airlines are just the latest industry to get snagged in
Capitol Hill’s bitterly partisan election-year battles. Some
of Washington’s most influential business groups are
struggling with how to navigate a Democratic-controlled
Congress without alienating their longtime Republican
boosters — and the drive for a $700 billion financial rescue
package is just the latest example.
Winning over Democrats has not come easily for business
lobbyists, particularly after years of being viewed as the
Republicans’ best buddies. In this Congress, business has
carried the flag on Republican issues that don’t affect its
industries, said a chief of staff for a House Democrat.
His advice: “Don’t be carrying the Republicans’ water on
crap. The CEO of Pfizer or Abbott or whatever should not
give a sh-- about the marginal tax rate, and the estate tax
ought not matter to them. When you’re doing that, you’re
representing a party — and the minority party to boot — and
you’re not representing your interest.”
Business Roundtable President John Castellani explained it
this way: “Overall, it’s a very challenging climate because
the politics of the election season have really overwhelmed
the ability to get the kinds of things done that we need to
be competitive.”
The airlines, working to control escalating fuel prices,
tried to minimize partisan fallout by crafting a plan to
regulate oil speculators and increase domestic supply. With
Democrats behind reining in oil speculators and Republicans
favoring more oil drilling, airlines thought they had
straddled the aisle.
They were wrong.
Some Republicans and business insiders saw the airlines
making a deal of convenience. The move, they said, helped
airlines on two levels: It gave them a boogeyman to explain
away rising ticket prices and, they hoped, earn a
political chit that they could cash in with Democrats the
next time they had union problems.
Shadegg and some of his fellow Republicans were
flabbergasted that their longtime allies had the temerity to
expect their support for a position they had no hand in
crafting.
Not to mention that some Republicans felt that the lobbying
campaign the airlines unleashed — complete with e-mails to
frequent fliers, on-hold messages on reservation lines and
even in-flight magazine columns penned by chief executives —
dealt almost exclusively with oil speculation and said
little about increased drilling.
“What really caught a lot of Republicans off guard was not
necessarily that the airlines would take the position that
they took on speculation, but the aggressiveness and grass
roots that they put behind it,” said a House Republican
leadership aide.
“We never saw near the effort put into an initiative that
they put into speculation.”
How the campaign was handled, the aide said, is “fairly
well-burnt into people’s memories. They’re not likely to be
forgotten.”
The airlines decided in June at an Air Transport Association
board meeting to push Congress to rein in oil speculators
and increase domestic supply, a solution the group thought
took a bipartisan tack, said ATA President Jim May. The
proposal was not drawn up to curry favor with the Democrats
on labor issues but as an answer to a looming business
problem.
“Since no one else was pushing the impact of speculation,
that became the focus of our activity on the Hill,” May
said. “We got into it for a simple reason: We were going to
go bankrupt from $147-a-barrel oil.”
As the summer wore on and gas prices continued to climb, “it
became abundantly clear that ‘Drill, baby, drill’ was going
to become the mantra of House Republicans,” May said. “It
became clear that we had a far more partisan atmosphere.”
Speculating is when investors buy or sell oil for a fixed
price over a certain time period, betting that the price
they negotiate will be a better deal than what they can get
in the future.
Airlines believe that massive cash infusions from
speculation accelerate the oil market’s volatility. The
financial services industry, whose firms make many of the
trades, argues that the airlines have made oil speculators
straw men.
“Gas prices are set by the law of supply and demand,” said
Scott Talbott, senior vice president of government affairs
at the Financial Services Roundtable. “Congress should focus
on a comprehensive, fact-based energy plan that focuses on
increasing supply and decreasing demand.”
“Speculators have no more effect on the price of oil any
more than the weather man has control over the weather,” he
added.
Still, the airlines’ position hasn’t won them much love from
some of their usual business allies. A financial services
lobbyist called the industry’s campaign “reckless.”
“The airlines needlessly picked fights within the business
community and with a political party,” the lobbyist said.
The business community, the House Democratic chief of staff
said, would be well-served to take a page out of the
pharmaceutical industry’s revamped playbook. The
Pharmaceutical Research and Manufacturers of America
championed the Democratic charge last year for increased
health care coverage for children.
“If PhRMA can make that kind of move, then a lot of other
sectors and industries that had a less bad reputation, they
have less distance to cover,” he said.
And Democrats aren’t alone in believing that the business
community’s veneer of nonpartisanship is nothing but a fancy
paint job.
The business community, said one of its lobbyists, is
“bitching because they’ve been partisan themselves for
years, and now that things look like they are changing,
they’re trying to figure out what to do next.”
Airlines' New Fees May Mean 2009 Profits
09/25/08 - 10:48 AM EDT
Ted Reed
CHARLOTTE, N.C. -- People may complain about airlines
charging fees for bags and other extras, but they are paying
them anyway, to the tune of hundreds of millions of dollars
annually.
Combined with unprecedented capacity cuts, the new charges
could help to turn the industry profitable in 2009. UAL for
instance, says new fees will likely boost next year's
revenue by $750 million. US Airways expects a revenue gain
of $400 million to $500 million.
"These fees do seem to work," Brad Tilden, CFO of Alaska
said at a Calyon-sponsored investor conference last week.
"A lot of times you see a $50 fare increase, then you look
back at the end of the quarter and the average ticket price
didn't go up at all," Tilden said. By contrast, he said,
projected revenue from the fees actually materialize.
US Airways President Scott Kirby said fees result not only
in new revenue, but also in operational benefits. "We've
seen huge improvement in baggage numbers from having 10%
fewer bags go through the system," he said.
Baggage handling has historically been a challenge for
airlines, which are expected to transfer thousands of bags
between aircraft in narrow time windows at hub airports. Not
only is it time consuming, but "it's where we fail the
most," Kirby said. Those failures are costly, leading to
re-accommodations, deliveries beyond the airport and lost
bag claims.
So far, US Airways is the only carrier to charge for drinks
-- $2 for soda, juice and bottled water and $1 for coffee.
As a result of the charges, which began Aug. 1, "the cabin
environment is much calmer and more efficient," Kirby said.
In the past, because drinks were free, nearly every
passenger had one. Now, carts no longer clog the aisles.
Restroom lines have diminished. Less trash is left onboard.
And it's no longer necessary to cater the aircraft every
time it's on the ground.
Furthermore, "we've seen no market share impact," Kirby
said. "We've looked at this closely."
AMR's American Airlines unit, which introduced the concept
of a first-bag charge in May, has now been vindicated by
widespread adoption of bag fees.
Three weeks later, UAL's United followed American, but the
delay had allowed time for speculation that the charge might
have to be rescinded if no one else implemented fees. "Four
of our major competitors have now matched that fee, which I
believe validates that decision," said AMR Treasurer Beverly
Goulet.
Still, neither Southwest nor Delta has matched the move.
Southwest, which carries the most passengers of any airline,
touts its lack of fees in its advertising.
Delta, meanwhile, is poised to become the world's biggest
carrier by revenue passenger miles pending approval of its
planned merger with Northwest. (A report Thursday said
shareholders of Delta and Northwest are likely to vote in
favor of the deal.)
"While we're always keeping an eye on what's happening in
the market, Delta customers can still check a first bag for
free," said Delta spokeswoman Betsy Talton.
Ahead
of the Bell: UBS upgrades airline sector
Monday September 15, 8:59
am ET
UBS analyst upgrades rebounding airline sector, saying
stocks have more room to rise
MINNEAPOLIS (AP) -- UBS airline analyst Kevin Crissey sees
smoother air ahead for airlines, and he upgraded several
carriers Monday morning.
Crissey acknowledged that air travel demand will continue to
be weak, but said airline shares could gain value anyway.
They've already rebounded as oil prices have fallen, but
Crissey thinks they could rise further as companies top
conservative Wall Street earnings estimates.
"The impact of the lower fuel prices is significant and
results in much better (earnings per share) than our prior
estimates," he wrote in a note to clients.
He also said October has proved to be the best month for
airline shares in the past.
The upgrades to "Buy" from "Neutral" included AirTran
Holdings Inc., American Airlines parent AMR Corp.,
Continental Airlines Inc., Delta Air Lines Inc., Northwest
Airlines Corp., United Airlines parent UAL Corp., and US
Airways Group Inc. He also bumped JetBlue Airways Corp. to
"Neutral" from "Sell."
Southwest Airlines Co. and Alaska Air Group Inc. retained
"Neutral" ratings.
Oil prices continued to fall on Monday, dipping below $97 a
barrel after U.S. oil operations sustained minimal damage
from Hurricane Ike. Fuel has become the biggest expense at
most airlines so their share prices had fallen as oil prices
rose.
Shares of US Airways rise on upgrade
Friday September 12, 7:04
pm ET
US Airways rises on upgrade to 'Outperform'; analyst sees
boost from competitors' cutbacks
NEW YORK (AP) -- A Credit Suisse analyst upgraded shares of
U.S. Airways Group Inc. to "Outperform" from "Neutral" on
Friday, suggesting a rival's flight cutbacks on competitive
routes should help the carrier.
Shares rose 36 cents, or 4.8 percent, to end at $7.88. Oil
prices, which rose 31 cents to settle at $101.18 a barrel,
after briefly below $100 for the first time in five months,
also helped shares of major airlines. The Amex Airline Index
rose 1.7 percent to 25.21.
Analyst Daniel McKenzie predicts capacity reductions by
Southwest Airlines Co. should help US Airways boost revenue
by expanding in some key markets. He raised his earnings
forecast for the company and said that analysts' consensus
expectations are "too pessimistic."
Also, the analyst noted that previous concerns on the Tempe,
Ariz., company's long-term liquidity have lessened. He said
that while demand might fall a bit in the coming months, it
likely won't be as severe a drop as analysts expect.
Credit Suisse raises US airlines sector
Fri Sep 12, 2008 11:23am
EDT
Sept 12 (Reuters) - Credit Suisse upgraded the U.S. airlines
sector to "market weight" from "underweight," saying there
is good opportunity in the sector as the stocks have already
priced in a weak revenue outlook and higher crude prices.
"If investors do the math on the weak economic backdrop,
demand looking ahead, and the collapse in crude prices, the
equation yields profit," said the brokerage, which raised
its rating on U.S. Airways Group Inc.
Though there is a "modest" fall in demand, there is no sign
of a collapse as in the previous downturns, it added.
"Demand overall is poised to remain intact for the next
several months which means revenue should prove better than
most expect," Credit Suisse said.
Credit Suisse upgraded U.S. Airways Group to "outperform"
from "neutral," and said "previous concerns over LCC's
longer-term liquidity outlook dissipate."
Airlines get a small boost on
falling oil prices
4:50 p.m. EDT Sept.
5, 2008
Weaker U.S. economic data temper investor enthusiasm
By Christopher Hinton, MarketWatch
Despite a weaker economy, airline industry revenue per
available seat mile, or RASM, is expected to surge starting
in late September, said J.P. Morgan analyst Jamie Baker in a
Friday note to investors.
"With fuel prices at manageable levels, demand trends are
expected to retake center stage. Starting in September, we
expect system mainline RASM to exceed 10%, remaining there
until well into 2009," Baker said.
"While airline shares tend to seasonally find traction
starting in November or December, we suggest positions
instead be established before the release of September
demand data," Baker said.
Airlines have been raising prices on airfare and adding new
fees. On Friday, Continental (CAL:Continental Airlines Inc
said it would start charging $15 for the first checked bag
for certain customers who buy economy-class tickets.
The fee will go into effect Oct. 7 but won't apply to
EliteAccess customers, OnePass Elite and SkyTeam Elite
members, customers traveling on full-fare economy class
tickets, or military personnel and their families traveling
on official orders, the airline said.
Late Thursday, Northwest Airlines said its total August
traffic rose 1.9% to 7.27 billion revenue passenger miles
from a year ago. A revenue passenger mile equals one
passenger flown one mile.
However, Delta reported its August traffic fell 0.5% to
11.84 billion revenue passenger miles from 11.91 billion
last year.
Sector Snap: Airline shares higher
Friday September 5, 1:57
pm ET
ATLANTA (AP) -- Airline shares were mostly higher Friday
afternoon as oil prices continued to fall.
Light, sweet crude for October delivery fell $1.66 to
$106.24 a barrel in afternoon trading on the New York
Mercantile Exchange. It dropped as low as $105.13 during the
session, its lowest trading level since early April.
The Amex Airline Index rose nearly 2 percent, with 13 of 14
component stocks higher.
JP Morgan analyst Jamie Baker said in a research note
Thursday that with fuel prices at manageable levels, demand
trends are expected to be a key issue as airlines try to
return to profitability.
Baker pointed out the jet fuel prices are now around $3.20 a
barrel, down from $4.20 a barrel when oil hit $147 a barrel
earlier this summer. While that amounts to annualized cost
savings of $13 billion for the industry, Baker said
collective fuel costs are still about $13 billion above 2007
levels.
Shares of AMR Corp., parent of American Airlines, rose 31
cents, or 2.8 percent, to $11.09, while shares of UAL Corp.,
parent of United Airlines, gained 52 cents, or 4.4 percent,
to $12.44. Shares of Delta Air Lines Inc. added 25 cents, or
2.8 percent, at $9.21, while shares of Northwest Airlines
Corp. rose 15 cents to $11.11.
Continental Airlines Inc. shares gained 7 cents at $18.02.
The carrier said it will join other airlines in charging $15
for the first piece of checked luggage.
Shares of US Airways Group Inc. rose 25 cents, or 3.3
percent, to $7.90.
Among low-cost carriers, shares of Southwest Airlines Co.
rose 3 cents to $15.64, while shares of AirTran Holdings
Inc., parent of AirTran Airways, rose 8 cents, or 2.9
percent, to $2.86. Shares of JetBlue Airways Corp. fell 5
cents to $6.13.
Airport traffic soars again
Thursday, August 28, 2008
(Dayton Business Journal) -The Dayton International Airport
saw a 4.8 percent increase in passengers for the month of
July, from the same time last year.
Year-to-date passenger traffic at the airport is up 3.5
percent.
July’s increase continues consecutive passenger growth,
dating back to February 2006.
AirTran Airways was the busiest carrier with 31,845
enplanements, a 18.5 percent increase fro July 2007. US
Airways followed with 22,697 enplanements, a 12 percent
increase from last July. Delta Airlines dropped 0.5 percent
to finish at 22,385.
Of the top 100 airports in country, Dayton International
Airport ranks almost in the middle of the pack in ticket
prices.
That Dayton airport slid in at No. 43 this year, with an
average fare of $337 per passenger in the first quarter,
according to U.S. Bureau of Transportation Statistics.
That’s a 2.9 percent drop from 2001, when the average was
$347. But it is a 3 percent hike from the first quarter in
2007, when the average was $327.
|
US Airways
announces plans to start service from
Philadelphia to Tel Aviv in 2009
August 19, 2008
NEW YORK
(Associated Press) - US Airways announced
Tuesday plans to operate nonstop service between
its Philadelphia hub and Tel Aviv, Israel, as
the carrier moves to expand its international
service.
The service,
which is set to begin in July 2009 with the
first tickets sold early next month, is in
response to strong demand, said Michelle Mohr, a
spokeswoman for US Airways.
"What's being cut
is unprofitable flying in light of ultra high
fuel costs," she said. "With Philadelphia-to-Tel
Aviv we've known the demand is there. We've
talked about adding this for quite some time."
The service is
subject to approval by the U.S. Department of
Transportation and Israeli government.
Shares of US
Airways fell $1.35, or 15 percent, to $7.64
Tuesday.
|
By Dan
Reed,
USA TODAY
8/21/0
In early
July, U.S. airline stocks were so
battered you could buy one share
each of five big airlines for less
than the cost of checking a single
bag.
With oil
prices then approaching $150 a barrel
and air travel demand sinking, Wall
Street's view was that most of the USA's
airlines were destined for bankruptcy
reorganization — some for liquidation —
when their cash ran out within 18
months. One or two, the thinking went,
would be toast by spring.
Now the
summer season's end is approaching with
an eight-day Labor Day travel period for
which the airlines' trade association
forecasts a sobering 6% drop in demand
from a year ago. Yet conventional wisdom
about airlines' survivability is
changing rapidly, thanks in large
measure to a $30-plus drop in the price
of a barrel of oil.
Don't get
too excited yet — airlines' financial
health is notoriously volatile. But a
combination of factors could help most,
maybe even all, of the USA's big
airlines dodge the bankruptcy filings
and liquidations so widely predicted
only a few weeks ago.
Over the
last five months airlines have laid in
deep capacity cuts, boosted fare prices
by unprecedented amounts, and begun
generating lots of new revenue by
charging fees for services that used to
be included with the ticket price.
They've also refinanced debt, sold
assets, and issued new stock to build up
extra cash in hopes of surviving long
enough for one or more of their
competitors to fail — an event that
presumably would greatly improve the
surviving carriers' health overnight.
Airlines, however, may not have to wait
for one of their number to fail in order
to get healthy financially.
Oil prices,
which triggered the crisis in the first
place, have fallen even faster over the
last five weeks than they rose during
the first half of this year. Since
peaking above $147 a barrel on July 11,
oil has fallen to $115. That's the
fastest, most dramatic decline in
history.
And though
most carriers still can't turn a profit
at existing jet fuel prices, they're
getting close to the break-even point.
Another $10
to $15 drop in the price per barrel,
which some oil experts now say is
possible, will have most of them back in
the black. Analysts at both Morgan
Stanley and JPMorgan Chase even are
suggesting that the haggard industry
could be profitable in 2009.
As a result,
investors are jumping back into airline
stocks. The AMEX Airline index has
almost doubled, to 23.67, after
bottoming out at 12.66 on July 15.
Shares of UAL, United's parent, have
risen nearly 350% in five weeks, while
shares of Continenta and AMR, American's
parent, have gone up about 150%.
Morgan
Stanley's William Greene calls the drop
in oil prices a "game-changing event"
and says investors now are beginning to
focus on airlines' improved liquidity
and their surprising access to the
capital markets.
Oil price
retreat is a relief
JPMorgan
analysts Jamie Baker and Mark Streeter
told investors in an Aug. 12 report that
the "industry today is a significantly
different one than that which gave us
pause last March."
It's not
just because jet fuel prices have fallen
by more than $1 a gallon from their
early summer peak, though that change by
itself will save the industry more than
$13 billion annually. The carriers'
recent capacity cuts, decisions to
ground old, fuel-inefficient planes and
to boost revenue via higher fares, and
the imposition of new and larger fees
are likely to be long-lasting changes,
Baker and Streeter wrote.
That means
that instead of focusing on "the
potential magnitude of the fuel-induced
cash burn, capital and liquidity
options, and who might disappear, and
when," as Baker and Streeter did during
the first half of this year, they now
are "assessing who might first return to
annual profitability, and when."
The JPMorgan
duo now project that the USA's seven
so-called legacy carriers — conventional
network carriers whose histories extend
decades back into the era when airlines
were deregulated in 1978 — will end 2009
with about $20.3 billion in liquidity.
Previously they had expected American,
United, Del, Continental, Northwest, US
Airway and Alaska to end 2009 with a
total of just $12.4 billion in cash and
short-term investments.
Worries
about Frontier
Still on the
critical list: Denver-based Frontier,
the USA's 11th-largest airline.
That
struggling low-cost carrier entered
Chapter 11 bankruptcy in April to avoid
having the credit card processing
company that handles its credit
transactions soak up the majority of its
dwindling cash pile as protection
against the carrier's possible collapse.
To stay
aloft, Frontier this month received the
first $30 million of what could become a
$75 million loan from several of its
largest shareholders. It will get that
extra $45 million only if management can
win contract concessions from workers
who already are at or near the bottom in
industry pay. Further complicating the
survival picture, Frontier is caught in
a squeeze at its home base. Denver is
both a United hub and a major growth
market for mighty Southwest, the
juggernaut discounter that hasn't
reported a quarterly loss since 1991.
Still, with
the exception of Frontier and perhaps
one or two other very small or
undercapitalized carriers, the talk of
airline liquidations in the near future
was "overblown" even before oil prices
pitched downward last month, says Roger
King, a veteran airline debt analyst at
CreditSights. Yes, he says, airlines
face some monumental financial issues,
including oil prices that remain higher
than they ever were before this year.
"But people
need to realize that these big airlines
have big resources," King says. "They
have horrible income statements and
balance sheets. But they have what I
call inertia."
Mining
rich revenue streams
Millions of
travelers remain steadfastly loyal to
their airlines, King says, don't seem to
be fazed much by rapidly rising fares,
and will continue flying almost no
matter what. That means airlines will
continue to have large, predictable
streams of revenue that will be highly
valued by lenders and creditors, even
when revenue doesn't cover operating
costs. Those lenders and creditors would
rather keep airlines flying and
generating cash than repossess
collateralized assets such as airplanes
that would be idled for months, or even
permanently, by a repossession.
"Airlines
also can pull all these hidden assets
out of every little nook and cranny and
sell them to keep going," King says.
He points to
the experience of Pan American World
Airways, which lost money for more than
20 years before finally shutting down in
1991. Pan Am managed to stay in business
all those years by slowly selling or
refinancing all sorts of assets and
subsidiaries, including its aircraft,
many of its international routes, its
landmark headquarters building in
Manhattan, its inventory of spare parts,
and even a subsidiary that did the
turnaround processing on the Space
Shuttle under contract to NASA.
"Small
carriers may not be able to do that, but
these really big airlines have
tremendous underestimated staying
ability," King says. "People talk about
bankruptcy and liquidation, but they
don't understand how deep these big
airlines' resources really are."
That's not
to say that U.S. airlines suddenly have
become pictures of financial health.
They have not.
The
highest-scoring U.S. carrier among 32
conventional network airlines from
around the globe recently ranked by
Aviation Week & Space Technology
magazine in regards to its financial
health was, somewhat surprisingly,
Alaska Airlines. Aviation Week's
team of aviation financial consultants
and analysts considered carriers'
liquidity, fuel costs, earnings
performance, asset utilization,
operating profile and overall financial
health. The latter included
debt-to-equity ratios, cash balances,
access to capital, operating margins and
cash flow. Alaska's score was 56.
Top-rated Singapore Airlines scored 93.
Southwest,
the only U.S. carrier with an "A" credit
rating, ranked fifth among 28 discount
carriers from around the world, and
second among all U.S. carriers, behind
Alaska. But as highly regarded as
Southwest is in the USA for its
consistent profits, its score of 54 was
only a little better than average and
good enough only for the 20thposition
among the total of 60 carriers ranked by
Aviation Week.
"The health
of the industry remains in question,"
says Calyon airline analyst Ray Neidl, a
member of Aviation Week's team of
advisers.
Lower
cash reserves
Lower fuel
prices and the carriers' recent dramatic
operational and financial maneuverings
have helped ease the crisis, but it has
not entirely passed.
Delta and US
Airways are moving close to what Neidl
calls the bankruptcy/liquidation danger
zone based on their cash and short-term
investments at the end of June as a
percentage of their revenue over the
previous 12 months. The danger zone, he
says, is a ratio of 10% or less. Delta's
cash-to-revenue ratio on June 30 was
16.1%, while U.S. Airways' was 17.4%.
Both are addressing that issue.
Balance
sheets expected to improve
Delta, where
operating costs and performance have
improved significantly as a result of
its bankruptcy reorganization, should
see its ratio rise above 20% upon
completion of its pending merger with
Northwest, which has a cash-to-revenue
ratio of 24.5%. US Airways last week
issued $179 million of new shares to
shore up its balance sheet.
United,
though, remains the closest to Neidl's
danger zone, with a 14.1% ratio of cash
to revenue. That ratio will rise a few
points after United picked up $600
million in cash in July by renegotiating
its affinity credit card deal with Chase
Bank. Neidl's also concerned that
United's projected cash burn for the
coming winter will be larger than at
most other airlines.
Yet the
outlook is not as bad as it was just
over a month ago when oil was $147 a
barrel and jet fuel was over $4 a gallon
on the spot market.
Amazingly,
after all they've been through,
"airlines still have the ability to
raise cash" by issuing stock,
negotiating new lines of credit and
selling assets, he says.
And they
appear able to generate still more
revenue.
"All 10 of
the large, publicly traded U.S. carriers
should be able to make it through this
year without defaults (on their loan
agreements and covenants), even in a
weak economic environment with high fuel
costs," he says. |
US Airways conducts
soda-cost comparison
Dawn Gilbertson
The Arizona Republic
Aug. 16, 2008
US
Airways, which has taken plenty of flak for charging
$2 for a can of soda, did a little cola comparison
shopping to help put things in perspective.
The
Tempe airline priced the per-ounce price of soda at
10 other service businesses and found its charge
smack in the middle at 17 cents per ounce.
At
the high end, according to the results published in
its employee newsletter, was Irish carrier Aer
Lingus, at 68 cents per ounce, or $7.48 per serving.
Next
up was the Ritz-Carlton at 50 cents per ounce,
followed by Scandinavian Airlines at 41 cents.
The
least expensive in its informal fizz survey:
Wal-Mart at 2 cents, followed by Subway and Circle
K, each at 8 cents per ounce.
Sky
Harbor International Airport came in at 13 cents an
ounce.
Left
out was the steal US Airways employees get at the
company store in Tempe: 50 cents a can, or 4.2 cents
per ounce
US Airways to sell 19M shares to Merrill Lynch
US Airways to sell 19M shares in public offering to Merrill
Lynch, valued at $173.1M
August 14
TEMPE,
Ariz. (AP) -- US Airways Group Inc. said Thursday investment
bank Merrill Lynch & Co. will buy 19 million shares of its
common stock in a public offering.
At Wednesday's closing price of $9.11, that implies US Airways
would net $173.1 million from the sale.
US Airways said it plans to use the proceeds for general
corporate purposes. The company said it asked the New York Stock
Exchange to halt trading of its shares to allow distribution of
the new shares, and will issue a statement when trading resumes.
As of July 16, US Airways had approximately 92.2 million shares
of common stock outstanding, according to a filing last month
with the Securities and Exchange Commission.
Shares of US Airways gained 35 cents, or 3.8 percent, to $9.46
before trading was halted.
|
US Airways ranks first for on-time performance in
first half, second in June
The Business Journal of the Greater Triad Area
August 5
US
Airways Group Inc. says the U.S.
Department of Transportation has ranked it the top
carrier in on-time performance among the 10 largest
airlines during the first half of 2008.
For the first six months of the year, 79.4 percent
of US Airways' flights arrived within 14 minutes of
their arrival time. During the month of June, US
Airways ranked second with 76.3 percent of flights
meeting the on-time criteria.
"Our first-place ranking amongst the largest
airlines for on-time performance for the first half
of 2008 validates the remarkable turnaround our
airline has achieved over the past year," said Scott
Kirby, president of US Airways. "Our customers tell
us that getting to their destination on time is very
important, and our 35,000 employees are doing their
part to make sure that happens."
US Airways pays $50 to employees in months when its
on-time performance makes the top three among the 10
largest U.S. airlines. June marks the seventh
consecutive month for the bonus with a total of $12
million awarded since December.
Overall, U.S. airline performance showed an
improvement this June compared with the same month a
year ago, but timeliness slipped compared with May,
the U.S. Department of Transportation reported.
Tempe-based US Airways operates 3,500 flights per
day to more than 230 destinations in the United
States, Canada, Europe, the Caribbean and Latin
America.
US Airways cleans up
bag-handling mess
Customer complaints
and baggage-claim wait times have been drastically
reduced.
By
Linda Loyd
Inquirer Staff Writer
Aug. 3, 2008
Two years ago,
getting a checked bag from a US Airways flight
in Philadelphia was a nightmare.
Passengers
routinely waited an hour or more at baggage
claim. Last summer, lines of international
passengers from Europe and the Caribbean with
bags to be rechecked to connecting flights
snaked back into the U.S. Customs area, causing
gridlock, missed flights and flared tempers.
Today, US Airways
is solidly on its way to fixing the mess.
The 45- to
60-minute wait at baggage claim at Philadelphia
International Airport has been cut to 25 minutes
or less from the time a plane hits the gate.
After years of
complaints about delayed, lost or damaged bags,
the airline cut in half its mishandled-bag
reports in Philadelphia for the three months
ended June 30 - 19 bags per 1,000 passengers,
compared with 39 a year earlier, according to
the U.S. Department of Transportation.
Nationwide, its baggage handling improved to
above average from below average.
Passengers
picking up luggage last week said the bags
arrived on carousels much faster than they used
to.
"This was the
quickest I've seen it," said Carmen Ferullo of
Philadelphia, arriving on a 7:10 p.m. flight
from Buffalo. "It took me six minutes to walk
here. The bag was on the belt. Most of the time
it's a 15- to 20-minute delay from when the
plane lands."
Jeff Gordon and
his wife, Cindy, of Southampton, Bucks County,
flew home from Los Angeles and waited 10
minutes. "This was definitely much improved,"
said Gordon, who flies 25,000 miles a year on US
Airways. "In the past I've waited two hours, or
they lost my luggage coming back just from a
simple flight from Boston. This is a very
favorable experience. I've seen improvement."
City Director of
Aviation Charles J. Isdell said he didn't get
angry letters or e-mails about baggage anymore.
"That used to be a pretty regular part of my
life."
The Inquirer in
October 2006 detailed US Airways' chronic
baggage problems in an article showing that
demoralized workers, decrepit equipment, and
revolving-door management had crippled the
baggage-handling system.
It was no small
concern for either US Airways or the region. The
airline carries two-thirds of passengers at the
airport, which is one of the airline's largest
hubs.
After the report,
US Airways spent more than $20 million on
everything from new baggage equipment to more
airport service workers and managers.
And it began to
attack the other part of the mishandled-baggage
problem: chronic delays in flight departures and
arrivals. When flights don't leave or arrive on
time, luggage often gets lost or waylaid between
planes.
In September, the
airline brought in a new chief operating
officer, Robert Isom, a Northwest Airlines
veteran and most recently chief restructuring
officer at GMAC L.L.C., to turn around the worst
on-time-performance record among major airlines.
So far, it's
working: US Airways went from worst among the
seven largest U.S. carriers in on-time
performance in the first six months of last year
to best this year, federal data show.
Isom hired Bob
Ciminelli, who had run American's operations at
New York's LaGuardia Airport, to be US Airways'
vice president of operations at Philadelphia
International. He is responsible for getting
23,000 bags on and off planes each day and
making sure the 451 departures leave on time
from 87 gates.
Gentle-mannered
and quiet-spoken, Ciminelli is employing
strategies that worked at LaGuardia.
"I don't profess
to be a miracle worker, but I hold people
accountable," Ciminelli said in his airport
office. "What was lacking here was
accountability, direction. People needed to
know, 'Where do you want us to go?' They needed
someone to lead the way."
To reduce the
international-baggage backlog, US Airways asked
British Airways to swap ticket counters, which
gave US Airways more behind-the-scenes
bag-recheck capability. British Airways has two
daily international flights; US Airways has 34.
US Airways worked
with the airport to build a new
baggage-screening area in the international
terminal, with four additional screening
machines for rechecking bags. More than half of
US Airways' returning international passengers
recheck bags to connecting flights.
US Airways in the
fall will build a $6.5 million conveyor-belt
"bridge" from International Arrivals in Terminal
A-West to the new bag-screening machines in
Terminal A-East.
One of
Ciminelli's first moves was to change baggage
handling so that suitcases for connecting
flights are transferred by runners directly,
instead of being mixed with local bags and
cargo.
The runners' only
job is to meet flights and take bags to
connecting planes. A separate team of ground
workers takes local bags, cargo and mail.
In addition, 30
ramp-information display screens have been
installed at a cost of $2.2 million at gates
outside Terminals B and C for baggage handlers
and ramp workers to have more accurate
information about an airplane's destination and
departure time. The electronic display boards
have countdown clocks so ground workers know how
much time they have to load a flight.
Ciminelli said
those two things - changing how handlers move
luggage and installing ramp information - were
the "main reason" for reduced domestic-luggage
complaints.
It probably
didn't hurt that the airline also began
rewarding employees with cash when it gets good
performance marks or even customer praise.
Ciminelli and
another recent hire in Philadelphia, senior vice
president Suzanne Boda, have latitude to make
financial, hiring and operational decisions
without getting prior approval from headquarters
in Tempe, Ariz. Boda oversees international,
cargo and East Coast operations.
After he took
office in January, Mayor Nutter told top US
Airways officials he wanted to see improvement
in the airline's performance and, in particular,
a better summer operation "because that's when
we have had service problems in the past,"
Isdell said.
Since that
meeting, Ciminelli and his team have met every
Friday with city aviation officials and
Transportation Security Administration, Homeland
Security, and Customs and Border Protection
representatives to talk about summer plans.
"We've been able
to work through a lot of issues," Ciminelli
said.
His strategy for
getting planes out on time is to focus on the
"first bank" of 20 to 25 morning flights between
6 and 9 a.m. The premise: If the first flights
depart on time, the rest should fall in place.
At noon Monday to
Friday, he meets with his directors,
aircraft-maintenance personnel, and
representatives of the flight attendants,
pilots, vendors, and people who fuel and clean
the aircraft - "anyone who could impact our
departure," Ciminelli said.
"We review any
delay. We tear it apart - what happened,"
Ciminelli said. "I'm not there to beat anybody
up. The intent is to understand what happened,
and what we could have done to avoid or minimize
it."
He credits the
noon meetings with a "dramatic improvement" in
on-time departures of morning flights. The group
also talks about the prior day's international
flights. On Mondays, they talk about the
Saturday and Sunday flights.
US Airways'
managers spot-check baggage arrivals, do safety
and performance checks of ground workers on the
ramp, and monitor the 20 to 25 early-morning
flights.
"If the manager's
flight incurs a delay, he or she is asked to
come to the noon meeting to share what
happened," Ciminelli said. "A little
accountability and direction, you put all that
into the formula. It's working."
US Airways added
200 baggage handlers last year, raising the
total to 1,250. It tripled the number of
managers overseeing airport service from 30 to
90.
The airline
bought new ground service equipment - tractors,
tugs and carts. There's new sorting equipment
for bags that are checked at ticket counters,
and new software that reads bar codes on baggage
tags so they are dumped on a conveyor belt to
the proper flights.
In the fall, the
airline also began offering financial incentives
to employees. US Airways gives $50 to each of
its 35,600 employees every month the airline
finishes in the top three among the largest
airlines in on-time performance, baggage
handling or customer complaints, based on
Department of Transportation data.
The airline also
rewards employees who get compliments from
customers or managers, and holds drawings each
quarter to give away $265,000 in cash, including
ten $10,000 checks and other $1,000 and $250
awards.
"We have come a
long way, but we still have a long way to go,"
said Ciminelli, noting that while Philadelphia
had 17 mishandled bags in July per 1,000
passengers, LaGuardia and Phoenix had six bag
complaints each.
Indeed, there are
still bag snafus. Jackie Baldwin of Villas,
N.J., flew on US Airways to Washington's Reagan
National Airport last Sunday. Her checked bag
never made it.
"I still have no
idea where my bag is," she said Tuesday, upon
returning to Philadelphia with a borrowed
suitcase. "It's funny now, but it wasn't at the
time." Baldwin planned to file a lost-bag claim
with customer services.
|
CLT keeping most flights
US AIRWAYS CEO: With a strong base of business travelers, the
city's hub has the ‘ability to cover the cost of fuel.'
By
Jefferson George
Charlotte Observer
Aug.
01, 2008
Thanks to a big chunk of business travelers and a smooth-running
hub airport, Charlotte will see only a few flight cuts this fall
as US Airways slashes service nationwide to offset high fuel
costs, the airline's top executive said Thursday.
“Charlotte has been one of the real jewels of the US Airways
system,” said Doug Parker, the company's chairman and chief
executive, during a meeting with editors at the Observer. “In
good times, we do well. In bad times like this, we do less badly
than other places.”
Surging oil prices this year have forced smaller airlines to
file for bankruptcy and larger ones to reinvent themselves.
Along with cutting flights and amenities, airlines are charging
fees for services that used to be free. For instance, after
eliminating free pretzels and pay movies on planes in recent
weeks, US Airways will start charging for soft drinks and coffee
today.
While Charlotte travelers will pay the same fees as anyone else,
the lack of flight cuts could ease concerns in a region where US
Airways dominates traffic, with nearly 90 percent of passenger
flights at Charlotte/Douglas International Airport. Of the
airport's roughly 670 daily departures, US Airways has more than
580, and local business leaders often tout the hub as key to
attracting and retaining companies.
Nationwide, US Airways plans to reduce seats for sale by about
8percent this fall and make similar cuts in 2009.
The biggest cuts will come in markets with heavy leisure traffic
and typically lower fares, such as Phoenix and Las Vegas. The
latter is expected to lose a fourth of its flights.
“Our Charlotte hub doesn't have that type of customer,” Parker
said. “It's a much stronger type of customer in terms of
business traffic. … You have more ability to cover the cost of
fuel.”
So far this year, he said, the only routes dropped were recent
additions with little business, such as Sacramento, Calif., and
Panama City, Fla. The airline says it plans to cut 1 percent to
2 percent of Charlotte flights this fall, but has not said which
those will be.
It's hard to project future flight cuts beyond the next few
months, Parker said.
“If oil prices keep rising, who knows?” Parker said. “But as of
right now, Charlotte is holding up nicely.”
Fuel prices take toll
Despite a dip from more than $147 a barrel in June to about $124
Thursday, oil prices are almost double what they were a year
ago, when many airlines had healthy cash reserves and were
expanding.
Since then, carriers such as Skybus, ATA and Aloha have filed
for bankruptcy protection and stopped flying. Other airlines
have scaled back service, with Midwest Airlines pulling out of
Charlotte and AirTran dropping routes. Several major airlines
also plan to reduce service in Charlotte this fall.
US Airways expects to pay $2 billion more for fuel this year
than in 2007, Parker said, and analysts have said that US
Airways could lose $1 billion this year. The carrier's profit
last year was $427 million.
But US Airways has enough cash and has made enough changes that
it can keep flying well into next year, Parker said, when the
industry could be profitable overall after the sweeping flight
cuts take effect.
Those cuts are necessary, Parker said, because competition among
carriers prevents them from immediately passing on higher fuel
costs to customers. Eventually, though, airfares will rise, he
said.
“The very low fares that people are used to using to get around
the country are probably going to be going away,” Parker said.
Union criticizes new fees
Then there are fees for services once covered by fares, such as
bag check, selection of certain prime seats and non-alcoholic
beverages on flights.
Parker defended the “a la carte pricing” as reasonable, since it
gives customers the option of paying for services instead of
folding costs into ticket prices charged to everyone.
“The rules of our game have changed so much, we have to change
the plays,” he said. “You'd be hard-pressed to find another
business where somebody gives you a free Coke as part of the
product.”
Not all US Airways employees agree. In a statement titled “US
Airways Aircraft Turn Into Flying Vending Machines,” the
airline's flight attendants union said Thursday that it opposes
the decision to charge $2 for soft drinks and $1 for coffee and
hot tea, citing a “lack of proper planning and poor notification
to passengers.”
“This model resorts to a nickel and dime approach to the
airlines' most valuable asset – the passengers,” said Mike
Flores, president of the US Airways chapter of the Association
of Flight Attendants, in the statement. “Flight attendants are
trained and certified safety professionals, not cashiers to be
used in management's futile attempt to bolster US Airways'
bottom line.”
The airline has nearly 36,000 employees, including nearly 6,000
based in Charlotte.
Travelers also have slammed US Airways on the fees, which,
Parker said, are intended to stem losses from fuel costs. “We
are fighting for nickels and dimes,” he said, “because we're
losing so much money. We're all struggling for survival at this
point.”
Sector Snap: Airlines stocks soar on sliding oil
Airline shares climb with broader market rise and falling oil
prices
DALLAS (AP) --
Airline stocks soared Tuesday on another drop in oil prices,
which offered hope that jet fuel prices could also ease.
Oil prices
and airline stocks have been on opposite ends of a teeter-totter
-- when one goes up, the other goes down.
That pattern held on
Tuesday, when oil prices sank to their lowest level in seven
weeks, battered by fear that high prices are curbing the world's
demand for energy.
Light, sweet
crude for September delivery fell $2.54 to settle at $122.19 a
barrel on the New York Mercantile Exchange.
AirTran
Holdings Inc., the parent of AirTran Airways, gained 53 cents,
or 19.6 percent, to close at $3.23, even after the company
reported a wider loss than expected for the second quarter.
Shares of
American Airlines parent AMR Corp. were up $1.48, or 18.5
percent, to $9.48; Delta Air Lines Inc. shares gained $1.01, or
14.6 percent, to $7.91; and United parent UAL Corp. jumped
$1.50, or 21.4 percent, to $8.51.
Continental
Airlines Inc. shares rose $2.29, or 19.2 percent, to $14.21;
Northwest Airlines Corp. shares added $1.25, or 15 percent, to
$9.60; US Airways Group Inc. gained 68 cents, or 16.3 percent,
at $4.85; and JetBlue Airways Corp. shares rose 38 cents, or 7.8
percent, to $5.28.
Southwest Airlines Co. shares rose 74 cents, or 4.9 percent, to
$15.76. Southwest is the best protected from higher fuel costs
because of options it holds to lock in lower prices, so a fall
in oil prices helps other carriers more.
Despite high oil prices and cost cutting ...
US Airways CEO: We'll get through the turmoil
By Linda Loyd
Inquirer Staff Writer
Jul. 20, 2008
Doug Parker is in a desperate situation, and he's not afraid to admit it: Oil at $130 a barrel and higher will turn his US Airways, and all airlines, into a dramatically different industry.
But the CEO is not giving up, and he has a message for anybody predicting his airline's downfall:
"If there are other airlines whose strategies are based on US Airways going away, they'd better find a different strategy. We are going to be fine, and we are going to get through this. We can compete as well as anyone."
If that's not clear enough: "There is no imminent risk. We have thankfully done a good job of generating cash and saving it," Parker said.
Parker, 46, was in Philadelphia Friday and met with the Inquirer's Editorial Board before flying to headquarters in Tempe, Ariz.
He acknowledged his industry is in a fight for survival. All major U.S. airlines are losing billions to soaring fuel, wiping out profits, and forcing aggressive cost cuts and flights.
"These are desperate times for the airline industry," Parker said.
Airlines are so desperate about oil that 12 CEOs signed an open letter to their customers recently, enlisting them to pressure Congress to reform the oil markets and regulate market speculation.
"You can call it desperate, but it's working," said Parker, who lobbied lawmakers on Capitol Hill last week to stop "speculators" from driving up the cost of oil.
He said members of Congress were receptive and want to fix the problem, although there is debate over how to do it.
If oil prices don't go lower, here's what Parker said travelers and airlines can expect:
Airlines will start collecting $650 to $700 per passenger for a ticket. Planes will fly primarily to big cities, and not a lot of small communities. There will be many fewer flights. Air travel will be a throwback to the era before deregulation. Flying will be a luxury.
"It will have a huge impact upon our economy and upon the way Americans live. It's going to be that severe," said Parker, who had been CEO of America West, which in 2005 merged with US Airways.
"I've worked in the airline business 22 years. This is by far the worst economic crisis this industry has faced."
Just one year ago, US Airways was concentrating on baggage problems and on-time performance of flights in Philadelphia and elsewhere. But those operational problems, which have greatly improved, he said, pale when compared with what oil is doing to airline economics.
Some analysts suggest US Airways, the smallest of the major U.S. carriers, is one of the most vulnerable to go out of business if oil stays at current levels.
Parker somberly disagreed.
"We're not going to have a cataclysmic liquidation of a big-six carrier, as some suggest," he said. "The industry will work it out, and there will still be six of us, but six smaller airlines."
When US Airways reports second-quarter earnings on Tuesday, analysts will be watching closely the carrier's liquidity - cash- and how its plans to conserve in the traditionally slower fall and winter months after Labor Day.
US Airways had a profit of $400 million last year, and is projected by Wall Street to lose $1 billion this year. The airline says an average roundtrip flight now costs $299 just for fuel per passenger.
"We have a strong cash position," said Parker, noting the airline has about $2.8 billion in restricted and unrestricted cash. "We are working on a number of financings, nothing we can talk about just yet. We are not overly concerned about the cash position for the coming year."
But if fuel stays at current levels or higher, "everybody should worry about their cash position. We are working to raise as much financing as we can."
A big proponent of consolidation, Parker said he's still interested in merging with another airline, but thinks mergers and acquisitions are dead in the current economic climate and until after the election.
"I'm still interested. The industry would be better served if it was less fragmented. But we are fine on a stand-alone basis," he added. "US Airways does not need a merge to be a viable airline."
Parker sought a merger with Delta, and later United. In April, Delta said it would merge with Northwest, and in June United said it would form an alliance with Continental. Parker says, for now, US Airways will go it alone.
Parker said he's encouraged that the industry as a whole has cut 10 percent more flights, and next year will likely cut another 10 percent. "But that's not enough, if oil stays where it is," he said.
The airline will trim 1,700 jobs and cut seating capacity on domestic flights 6 percent to 8 percent in the fourth quarter, and another 7 to 9 percent in 2009.
Parker did not specify what more US Airways might do to cut expenses. He noted that 25 percent of flights from Las Vegas have been trimmed, and 10 percent in Phoenix, while Philadelphia will lose just 2 percent to 3 percent starting in October.
Philadelphia will remain a crown jewel in US Airways' network, which is 80 percent domestic flights, and 20 percent international.
"It is our international gateway. We'd like to expand that," Parker said. The airline hopes to add three international flights next summer, including to Tel Aviv.
"Philadelphia is by far the largest market we serve" and generates the most revenues. "It's hard right now to project the future, but whatever the future is for US Airways, Philadelphia is going to be extremely important, critical," he said.
In a world where oil is $150 a barrel, US Airways will serve primarily business-travel markets, he said. "You could envision where you don't have as many spokes [flights] out of Philadelphia to smaller communities. Right now we haven't reached that point."
"We've made the cuts that we believe we'll have to make for 2009. Relative to other markets, Philadelphia holds up well."
The changes will start this fall. The airline has a menu of new charges and fees, everything from $2 for sodas to $15 for a checked bag on tickets booked after July 9. US Airways also is getting rid of in-flight movies on domestic flights to save on fuel costs because the entertainment systems weigh 500 pounds.
Parker said there's not been a dropoff in ticket sales or pushback from passengers, but the true test will come this fall and winter after the busy summer vacation period.
"As we start adding fees, we may lose some customers," Parker said. "We are watching that closely. We are encouraged that most of these fares have been matched by other carriers."
But higher fares and fewer flights will be noticeable to people making holiday travel plans. "It's coming," he said.
"Most of us are hopeful oil prices will fall, but if that doesn't happen, the industry will continue to shrink in size, fewer flights and fewer markets - but US Airways will be here."
Betsy Snyder, equity analyst at Standard & Poor's, does not foresee liquidation of any large airlines this year. "But 2009 is a different situation."
US Airways has a smaller route structure than some of the others, "so that might put it more in jeopardy," Snyder said. It has more of a domestic routes than some competitors.
US Airways' debt maturities are relatively small over the next few years. That is a strong point compared with some competitors. Last year, US Airways refinanced debt and stretched out maturities.
Snyder said she expected all airlines to cut more capacity and jobs, and hike fares and fees.
"It's a grim outlook for all the airlines, not just US Airways. Even Southwest, at some point, is going to be affected if their fuel hedges run out. Nobody expected that fuel prices would be at these levels." |
UAL, US
Airways Lead
Surge in
Airlines
Ted Reed
07/22/08
CHARLOTTE,
N.C. --
Airline
shares
rocketed
higher
Tuesday,
even before
US Airways
CEO Doug
Parker said
the industry
could be
profitable
in 2009.
Conventional
wisdom has
it that
airlines
will lose
$10 billion
this year
and keep
losing money
next year.
Parker said
that assumes
the industry
cannot solve
the problem
of rising
fuel costs.
But, by his
account: "We
are going to
get this
fixed as an
industry.
What's
already
being done
may be
enough to
get the
industry
profitable
in 2009," he
said, on an
earnings
conference
call.
US Airways
shares
surged 59%
during the
session,
closing at
$4.27.
UAL, the
parent of
United
Airlines,
soared 69%
to $8.41.
AMR rose
37% to
$9.25, and
Delta
advanced 18%
to $7.71.
The Amex
Airline
Index closed
at 20.82, up
22%. Earlier
this month,
it hit an
all-time low
of 12.66.
The gains
reflected a
variety of
factors.
Fuel costs
have fallen
recently,
and crude
dropped
again
Tuesday in
New York.
Airlines are
chopping
capacity,
and that
theoretically
will let
them raise
fares. While
visibility
for the fall
is limited,
advance
bookings
have not
fallen off a
cliff and in
most cases
are ahead of
last year's
pace. So
far, six
airlines
have
reported
second-quarter
earnings,
and all of
them have
beaten
estimates.
Also, newly
introduced
fees, for
checking
bags and
other
services,
are
projected to
raise
hundreds of
millions of
dollars
annually.
Meanwhile,
carriers are
raising cash
through
their
agreements
with
credit card
issuers.
United
reports $2.7 billion loss, stock up 50%
Parent of No. 2 airline stock soars despite losses caused by
high fuel prices, severance-related
downsizing charges.
By Aaron Smith
July 22, 2008
NEW YORK (CNNMoney.com) -- United Airlines
parent UAL Corp. stock soared after it
reported a second-quarter net loss of $2.7
billion Tuesday due to the soaring price of
fuel and announced thousands of new job
cuts.
UAL Corp. said its loss of $21.47 per share
stemmed from $2.6 billion in previously
recorded accounting charges, including a
$2.3 billion special charge for "goodwill
impairment."
Excluding these charges, the parent of the
nation's second-largest airline reported a
loss of $151 million for the quarter, or
$1.19 per share.
But that was better than the loss of $2.05
per share that analysts surveyed by
Thomson/First Call had expected on that
basis.
United said operating revenue totaled $5.37
billion, falling just short of the $5.40
billion analysts had expected.
"Our industry continues to be challenged,
perhaps as never before, by fuel prices that
continue to march higher," United Chief
Executive Glenn Tilton said in a webcast
with analysts. "We're taking the difficult
but imperative action of cutting jobs
throughout the company."
Jack Brace, chief financial officer, said
United plans to cut 7,000 jobs, or 12% of
its total workforce, by the end of 2009,
much larger than the previously announced
cuts of approximately 1,500 jobs. Brace also
said the airline will eliminate 100 of its
least fuel-efficient airplanes from its
fleet.
John Tague, chief operating officer, said
United will also eliminate its least
fuel-efficient routes, aiming for a 13%
capacity reduction by the end of 2009.
"At current fuel prices, the economics of
certain routes just don't make sense right
now," said Tague. "Routes that cannot
withstand the pressure of elevated fuel
costs will be eliminated."
Other airlines struggling with rising fuel
prices also posted quarterly losses Tuesday.
But airline stocks rose as the results were
not as bad as analysts had feared. UAL
Corp., the airline that announced the job
cuts, soared about 50%, US Airways jumped
25% and JetBlue climbed more than 17% in the
morning.
US Airways, the nation's No. 6 carrier,
reported a narrower second-quarter loss than
had been forecast on revenue that came
roughly within expectations.
The airline posted a net loss of $101
million, or $1.11 per share. Analysts had
expected a loss of $1.29 per share.
Excluding charges, the net loss was $567
million, or $6.16 per share, the company
said.
The carrier reported total operating revenue
of $3.25 billion, versus Wall Street's
projections for sales of $3.27 billion.
JetBlue Airways booked a net loss of $7
million, or a loss of 3 cents a share, as
operating revenue surged 17.7% to $859
million.
Analysts had projected a loss of 7 cents per
share on revenue of $856 million.
Rising fuel prices are squeezing the
money-losing airline industry, which is in
its worse state since the fallout
immediately following the terrorist attacks
of Sept. 11, 2001.
Sales gains "are clearly not keeping pace
with the extraordinary increase in the price
of jet fuel," JetBlue Chief Executive Dave
Barger said in a statement.
US Airways Chief Executive Doug Parker
echoed that view. Losses "reflect the
unprecedented rise in fuel prices that are
impacting our industry," he said.
The Air Transport Association expects fuel
costs to jump to $61.2 billion this year, up
nearly 50% from $41.2 billion in 2007.
Airlines have also increased fares, added
fees to services that once came for free,
cut thousands of jobs and reduced capacity
by eliminating their least fuel-efficient
flights.
The Amex Airline Index has plunged 50% so
far this year.
How
US Airways Vaulted to First Place
Airline Is Now Tops In On-Time Arrivals
100 New Mechanics
|
THE MIDDLE SEAT
By SCOTT MCCARTNEY
|
|
|
July 22, 2008
Last year, US Airways was the
worst among major airlines in on-time
performance. So far this year, it's No. 1.
The turnaround has been
dramatic, especially considering that much
of the airline's service is in the Northeast
where air-traffic congestion has been
particularly brutal. But even at the
nation's worst airports, US Airways Group
Inc. has run more or less on-time. At New
York's La Guardia Airport, for example,
nearly 79% of all US Airways flights arrived
on-time in May, compared with an abysmal 57%
for AMR Corp.'s American Airlines and
58% for UAL Corp.'s United Airlines,
according to the U.S. Department of
Transportation.
How can one airline with big
congested hubs run on-time while other major
carriers stumble? US Airways rallied its
work force to focus on one goal -- getting
planes pushed back from the gate on-time --
and began offering financial incentives to
workers for better service.
The airline is spending about
$50 million to fix its operation, upgrading
equipment and software, fixing computer
problems that resulted from its merger with
America West Airlines, hiring new management
and airport workers, reworking how planes
and crews are scheduled, and building a
crucial new baggage-screening area in
Philadelphia.
Some simple things have
helped, like installing new electronic
displays beside gates so airport ground
workers have better information about an
airplane's destination and departure time.
US Airways also changed how baggage handlers
move connecting luggage, with runners taking
suitcases directly to connecting flights
instead of dumping them in a central sorting
area and hoping they get out to the proper
aircraft.
The airline made a big push
to fill all open mechanics positions at its
two biggest hubs, Philadelphia and Phoenix,
adding more than 100 workers before the
summer travel rush began. As a result,
broken things on airplanes -- such as light
bulbs and seats -- that were customer
annoyances have been more aggressively
repaired. US Airways has a list of those
kinds of problems that workers joking called
NEF -- Never-Ever Fixed. That list has been
reduced by half.
But the biggest change has
been the airlines' push to inspire workers
to deliver better service. "Airlines, or
really any organization, need a rallying
cry, especially one that has been the worst
of the worst for so long," said Robert Isom,
the airline's chief operating officer.
The US Airways experience
this year shows that airline problems aren't
all the result of airport congestion,
antiquated air-traffic control operations
and summertime thunderstorms. Even under
adverse conditions, airlines can run on-time
if they are well-run. Travel woes today
often result from weak airline leadership,
disheartened and angry work forces, and poor
coordination and communications inside
companies.
What US Airways has done is
reminiscent of the turnaround at
Continental Airlines Inc. engineered by
Gordon Bethune in the mid-1990s. In fact,
many of the tactics are similar. US Airways
pays $50 monthly bonuses to all employees
when the airline achieves operational goals.
(Mr. Bethune's Continental paid on-time
bonuses in separate checks monthly.) US
Airways offers hefty financial rewards to
employees who generate customer compliments,
holding quarterly drawings of favorable
comments for $262,500 in cash prices,
including 10 $10,000 checks. (Continental
gave away cars in an annual drawing of
employees with perfect attendance.)
Customers
have noticed the difference. Jack Malcolm,
owner of a sales training and coaching firm,
flew from San Diego to Phoenix last month on
US Airways "and was very pleasantly
surprised to find myself on a clean new
airplane with happy staff. I've usually
avoided US Air because those items have been
in short supply."
Of course, not all problems
at the airline have been solved. Peter
Arakelian sat for more than five hours on a
US Airways flight operated by a regional
partner that was scheduled from La Guardia
to Raleigh-Durham last month. After more
than two hours waiting to take off, the
regional jet had to taxi back to refuel,
losing its place in line to depart. After
more than two hours of additional waiting,
some passengers asked to get off the flight
and the captain at first refused, then
canceled the trip.
"Keeping folks on a plane for
5½ hours is just inhumane. It's horrible,"
said Mr. Arakelian, who works for a
biotechnology company. Still, he travels
frequently on US Airways and has noticed
improvement. "Overall, service has been good
recently," he said. (US Airways said it is
trying to get its regional partners to
improve operations as well.)
Mr. Isom, an airline veteran
and a turnaround specialist who had been
chief restructuring officer at GMAC LLC, was
hired in September 2007 to help get US
Airways out of its mess. He arrived to find
a work force still struggling with the 2005
merger of US Airways and America West.
Employees were frustrated with an unfamiliar
reservations and passenger-processing
system. Maintenance computer systems from
the two airlines didn't talk to each other
well, making it easy to lose track of spare
parts. "Let's face it, there was a lot of
finger-pointing," said Mr. Isom.
After last summer's debacle,
US Airways did move to cut flights to build
more cushion into its schedule, slimming
down in the peak hours and holding a couple
more planes back to use as spares. More
minutes were added to some trips to more
realistically reflect airport delays and
congestion. Scheduling was changed for
pilots and flight attendants so that the
crews handling the last trip of the night
into a city weren't first out in the
morning. Often they delayed the first
departure the next morning because of
federal crew rest minimums, and then those
airplanes ran late all day long.
The airline employed
consultants to analyze operational problems
and ended up beefing up management and
ground staff in Philadelphia, creating a
"satellite headquarters" with senior
officials who could authorize spending, make
hiring decisions and change key operations
without asking permission from the company's
Phoenix headquarters.
US Airways found that
different departments had different goals in
terms of airplane departures -- some thought
getting planes pushed back from the gate no
later than 30 minutes after scheduled
departure time was OK, for example. Mr. Isom
installed one company rallying cry: D-zero
-- every departure at or before its
scheduled time.
One major baggage snag in
Philadelphia that was causing problems
across the country was fixed. US Airways
lost space in its international terminal and
couldn't get luggage rescreened efficiently
when passengers rechecked it on connecting
flights after clearing Customs. Slow
screening meant delayed flights, and lost
luggage.
"Our numbers were abysmal,"
says Suzanne Boda, a Northwest Airlines
Corp. veteran who joined US Airways in
January as senior vice president for the
East Coast.
This year, the airport worked
with the Philadelphia airport to construct a
new bag-sorting and screening area in the
international terminal. Mishandled baggage
in Philadelphia has been reduced by more
than 60%, enabling the entire airline to run
better, says Bob Ciminelli, vice president
of the Philadelphia operation, who joined in
January from American.
With things going better, US
Airways is moving back to cost-savings moves
to "optimize" its schedule, taking some of
the cushion out of the schedule that was
dropped in last year, because the airline
thinks it's no longer needed.
The airline is still at the
bottom of the industry in customer
complaints filed with the DOT. Mr. Isom
thinks that's the result of major policy
changes at US Airways that fuel complaints,
such as adding fees for checked baggage,
reducing mileage paid to frequent fliers for
short flights or charging $2 for soda. In
addition, complaints typically lag in
turnaround.
"We've done a good job of
training our customers to complain because
we've given them lots of reasons to
complain," he said. Eventually, the airline
hopes better service reduces complaints.
|
From Worst to
First
Major airlines in on-time
reliability
2007
2008
Southwest
US Airways
Delta
Alaska
Air Tran
Delta
Continental
Southwest
Alaska
AirTran
United
JetBlue
JetBlue
Continental
Northwest
Northwest
American
United
US Airways
American
Source: U.S. Department of
Transportation. 2008 rankings based
on first five months of the year. |
Airlines
results better than expected
so far
Writedowns aside, airline
results had happy surprises,
but what about next week?
Friday July 18
MINNEAPOLIS (AP) -- Not
counting those
billion-dollar losses,
last week wasn't so bad
for airlines.
American Airlines, Delta
Air Lines, and
Continental Airlines
reported losing a total
of almost $2.5 billion
during their most recent
quarters. But most of
the red ink was for
accounting charges --
$1.2 billion each at
American and Delta --
not for operating
losses.
Delta Air Lines Inc.
reported a $137 million
operating profit, while
AMR Corp.'s American
lost $284 million on its
operations -- less than
analysts expected.
Continental Airlines
Inc.'s operating loss
was roughly half what
analysts forecast.
Between the financial
results and falling oil
prices, share prices for
all three rose sharply
for the week.
Not that times are good.
Airlines have been
helped by the busy
summer travel schedule,
and many of their big
capacity cuts will not
take effect until the
fall. That is when
investors will really
begin to see whether the
strategy of higher fares
plus fewer seats equals
better profits, or at
least smaller losses.
Vicki Bryan, a debt
analyst at Gimme Credit,
wrote in a note on
Friday that AMR is
looking at strategies to
make it profitable even
with oil at $130 a
barrel. West Texas crude
settled at $128.88 on
Friday.
"Unfortunately, oil
already has tested
limits close to $150 and
prices have popped up
$10 and more in a day,"
Bryan wrote. "While we
don't expect oil to
remain at these levels
forever, we do expect
two years of operating
losses ahead for AMR.
That's a long time to
fight off bankruptcy."
In the week ahead, UAL
Corp.'s United Airlines
and US Airways Group
Inc. report earnings on
Tuesday, Northwest
Airlines Corp. reports
on Wednesday and
Southwest Airlines
reports on Thursday. |
|
Airlines to
begin
selling ads
on boarding
Passes
By Joshua
Freed, AP
Business
Writer
Several
major
airlines
will sell
ads on
boarding
passes
printed at
home
Jully 15
M INNEAPOLIS
(AP) --
Luggage?
Got it.
Boarding
pass?
Check.
Ads on
boarding
pass to
help
beleaguered
airline
industry
pay for
expensive
fuel?
Check.
Several
major
airlines
will
begin
displaying
ads on
boarding
passes
for
customers
who
check in
from
home.
Customers
can
print
the
boarding
passes
without
ads if
they
want.
Sojern
Inc.,
which is
selling
the ads,
said
Delta
Air
Lines
Inc.
would
begin
using
the ads
on
Tuesday
for
flights
to Las
Vegas
and on
all
other
domestic
destinations
soon
afterward.
AMR
Corp.'s
American
Airlines,
Northwest
Airlines,
US
Airways
Group
Inc.,
Continental
Airlines
Inc. and
UAL
Corp.'s
United
Airlines
have
signed
up and
will
begin
using
the ads
in the
months
ahead,
Sojern
said.
The
airlines
own a
minority
stake in
Sojern
and will
split
revenue
from the
ads.
None of
the
parties
would
say how
much
they
expect
to make.
But Al
Lenza,
the vice
president
of
distribution
and
e-commerce
at
Northwest
Airlines
Corp.,
said 40
percent
of his
airline's
check-ins
happen
at its
Web
site,
adding
up to as
many as
30
million
customers
a year.
"I think
this is
going to
be
responsible
for many
millions
of
dollars
for each
airline,"
he said.
The
boarding-pass
ads are
only the
latest
effort
by
airlines
to raise
cash to
help
offset
soaring
fuel
costs.
Many
have
already
cut
jobs,
reduced
capacity
and
hiked
fees on
customers,
including
charging
for a
second
checked
bag.
Travelers
who
check in
from a
home
computer
will see
their
boarding
pass
along
with
information
for
their
destination
including
weather,
restaurants,
and
attractions
in the
city to
which
they're
flying.
Sojern
said it
will
limit
the
boarding
pass to
one
printed
page,
the same
as
current
ad-free
boarding
passes.
The
company
will not
tailor
the ads
to
individual
customers
yet, but
it may
do that
in the
future,
said
Gordon
Whitten,
the
company's
founder
and
chief
executive.
He said
Sojern
has been
in
contact
with
other
airlines
about
selling
the
boarding
pass
ads.
The
airlines
said
they
have
worked
to make
sure
they do
not
annoy
customers
with the
ads.
Josh
Weiss,
managing
director
for
Delta's
Web site
and
self-service,
said
that is
why they
included
the
option
to not
print
the ads
and made
sure the
boarding
pass
will
load
quickly
on
customers'
computers.
Sojern's
board
includes
Jeffrey
Katz,
former
CEO of
travel
booking
Web site
Orbitz
Inc.,
who is
also a
Northwest
director. |
|
US Airways
Still Seeking the Right Deal
ByTed Reed
TheStreet.com Staff Reporter
July
10
CHARLOTTE, N.C. -- In
the end, the airline
that kicked off the
current round of
industry consolidation
found that it didn't
quite get to where it
needed to be.
As a result, US
Airways CEO Doug Parker, an inveterate dealmaker, likely
has more tie-ups to at
least try to get done.
For the moment, though,
US Airways remains, as
one-time CEO Stephen
Wolf said in 2001, "an
in-between airline,"
with neither low costs
nor a global network,
creating an uncertain
future. For his part,
Wolf tried and failed to
merge with UAL's United Airlines.
Parker sought mergers
with both Delta and United, and perhaps with
others, as well.
But in April, Delta said
it would merge with
Northwest. And in June, United
and Continental said they would join in both the Star Alliance and a domestic
partnership, increasing
the pressure on US
Airways.
Long limited in
international routes, US
Airways has enhanced its
global access through
its Star membership and
a code-share with
United. The next
challenge for US
Airways, as it is for
every airline, is to
negotiate the fuel-price
crisis. Winners and
losers will emerge, but
the outcome for US
Airways' isn't clear.
"US Airways still lacks
critical mass, so I
wouldn't be surprised if
they look at an asset
acquisition," says
industry consultant
George Hamlin of Airline
Capital Associates.
"Without acquiring
something, either a full
partner or significant
assets, the road will
get harder."
In 2005, US Airways and
America West completed
the first major airline
merger since AMR acquired TWA in 2001. The 2005 deal combined two faltering regional carriers
into a national airline
that, at least in its
initial year, was
successful beyond
anyone's expectations.
Then the progress
stalled.
The current round of
dealmaking left only
American and US Airways
unaligned among the big
six carriers, with no
indication they might
get together. "They are
looking at each other,
but I'm not sure it's
fondly at this point,"
says Hamlin.
Though grouped with
legacy carriers, US
Airways remains an
in-between hybrid that
combined low-fare
America West with US
Airways. Unlike the five
bigger legacy carriers,
it lacks a dominant hub
with high levels of
origin and destination
passengers, strong
international traffic
flows or adequate
infrastructure.
Instead, it has the
infrastructure required
for a superior hub in
Charlotte, high numbers
of local passengers in
Phoenix, and strong
international traffic
flows in Philadelphia.
To aviation consultant
Jim Feltman of Mesirow
Financial Consulting,
the first question is
whether the Continental
and United alliance
turns out as envisioned.
"Code-shares and
alliances have come and
gone in the past, so
don't think it's a
foregone conclusion that
it is destined to work,"
he says.
If it does, US Airways
could be left out,
excluded from its
partners'
antitrust-immunized
discussions of fares and
schedules. But other
possibilities also loom.
The immunized alliance
could be expanded to
include US Airways, or
US Airways might
choose to leave
Star.
Last month, US Airways
addressed both options,
saying "our longstanding
code-share relationship
with United remains
intact, as does our
status as a Star
Alliance member
carrier." The airline
noted that it has had no
discussions concerning a
code-share or other
relationship with
Continental.
Looking further ahead,
US Airways could seek to
merge again or to
acquire assets. A
merger, in Feltman's
view, might combine the
carrier with Alaska,
which dominates Seattle,
a burgeoning gateway to
Asia. Or, if a legacy
carrier were to face
failure, it might be
forced to sell
international assets.
Much less attractive is
the possibility that no
expansion opportunities
emerge, forcing US
Airways to become a
seller. "Rather than
become marginalized,
they could sell what
they've got and
distribute the
proceeds," says Hamlin,
who points out that
assets such as slots at
New York's LaGuardia and
Washington's Reagan and
a Charlotte hub will
have value to other
carriers.
"If US Airways can't
find some way to grow,
they are probably going
to contract," Hamlin
says. "Then you would
want to do it in an
orderly fashion to
maximize returns." |
|
Airline CEOs Beg Customers To Push Congress
On Speculation
Ian Talley, of Dow Jones Newswires
July 09,
2008
WASHINGTON (Dow Jones)- Expecting to lose an
estimated $10 billion this year because of
skyrocketing fuel costs, chief executives of
the country's biggest airlines Wednesday
resorted to begging their customers to press
Congress for tougher regulation of energy
markets.
The top CEOs of U.S. firms such as AMR
Corp.'s American Airlines, Delta Air Lines
Inc., Continental Airlines Inc. and US
Airways Group Inc want their customers to
press Congress to rein in speculation, which
they say could contribute between $30 and
$60 a barrel to current oil prices trading
near $140.
The pleas come as Congress considers a raft
of legislation aimed at limiting
speculation, particularly from institutional
investors such as pension funds, banks and
hedge funds.
"For airlines, ultra-expensive fuel means
thousands of lost jobs and severe reductions
in air service to both large and small
communities," the CEOs wrote in a letter
forwarded to Dow Jones Newswires from a
customer of AirTran Holdings Inc.
"This pain can be alleviated, and that is
why we are taking the extraordinary step of
writing this joint letter to our customers,"
the letter read.
While many oil analysts say that fundamental
factors such as increased demand from Asia
and the Middle East, falling output from
non-OPEC countries and geopolitical tensions
threatening supply are the primary drivers
of record high oil, gasoline, jet fuel and
diesel prices, others say speculation in the
markets is to blame.
Testifying before a Senate committee
investigating the role of energy futures
trading in fueling skyrocketing oil prices
last month, the head of the Air Transport
Association, James May, said the U.S.
airline industry would spend $60 billion on
fuel, $20 billion more than last year.
U.S. airlines "are on the brink of financial
disaster - and some would say - about to
implode," May said. "High fuel prices are
the sole reason," he added.
"More than 14,000 airline jobs have been cut
so far this year, and that it is just the
tip of the iceberg," the industry official
said. "It is not unrealistic to think that
by cutting capacity, more than 200
communities could lose all commercial air
service by the end of next year."
The airlines blame much of the high fuel
costs on "excessive" speculation in the
market.
The airline executives said the percentage
of oil contracts traded by speculators has
jumped to 66% from 21% two decades ago.
"Speculators buy up large amounts of oil and
then sell it to each other again and again,"
the airlines said. "A barrel of oil may
trade 20-plus times before it is delivered
and used; the price goes up with each trade
and consumers pick up the final tab, " they
added.
The letter posts a link to a Web site called
SOS: Stop Oil Speculation, and calls for
creating speculation limits along the lines
of those established by the Nymex Holdings
Inc.'s (NMX) New York Mercantile Exchange
for all of markets where energy is traded.
While some echanges such as the Nymex have
speculation limits in place, others, such as
IntercontinentalExchange's ICE Futures
Europe, only have accountability limits that
aren't as strict as speculation limits. Some
banks have exemptions from speculation
limits, allowing nearly unlimited
speculative swaps and other over-the-counter
trades.
The airlines group also called for
regulation of swaps trading, and bringing
foreign exchanges under the same regulations
as Nymex.
Other firms that signed the letter include
Southwest Airlines Inc., JetBlue Airways
Corp., Northwest Airlines Corp., and UAL
Corp.'s United Airlines.
On-time arrivals
increase at Charlotte/Douglas
Charlotte
Business Journal
July 7, 2008
Nearly 84
percent of the flights at
Charlotte/Douglas International Airport
landed on time in May, according to the
U.S. Department of Transportation.
US Airways
Group Inc., which
operates its largest hub at
Charlotte/Douglas, had an on-time
arrival rate of nearly 84 percent
nationwide in May. That placed the
Arizona-based carrier in third place
among the 10 largest airlines in the
United States.
US Airways
continues on-time trend
Pittsburgh Business Times
Monday, July 7, 2008
US
Airways Group Inc. is continuing its
trend of on-time arrivals.
The
U.S. Department of Transportation's May
Air Travel Consumer Report shows the Tempe, Ariz.-based
carrier ranked third among major domestic carriers for
on-time performance, with 83.6 percent. It was the sixth
consecutive month US Airways has scored a top-three
finish among the country's 10 largest airlines in
on-time performance. It also tied the company's on-time
performance record high score, set in November 2005.
Pittsburgh International Airport had an
on-time arrival rate of 81.3 percent, and an on-time
departure rate of 84.4 percent. That puts it ahead of
Philadelphia International which had a
75.1 percent on time arrival rate in May and a 79.1
percent departure rate.
Cleveland-Hopkins International had an
80.5 percent on-time arrival rate and an 84.9 percent
on-time departure rate.
Hawaiian Airlines and
Pinnacle Airlines topped the list, but
Delta Air Lines Inc. was the leader among
the major carriers.
US Airways had a mishandled-bag ratio of 3.86 reports
per 1,000 passengers, down from 4.20 reports per 1,000
passengers in April.
The airline ranked ninth in the customer-complaint
rankings among the 10 largest domestic airlines. US
Airways logged 1.94 complaints per 100,000 enplanements.
Delta Air Lines had the most complaints.
US Airways carries the largest number of passengers in
and out of Pittsburgh.
US
Airways, Northwest Can Suspend China Trips on Fuel
By John Hughes
July 3 (Bloomberg) --
US Airways Group Inc. and Northwest Airlines
Corp., seeking to pare capacity because of rising fuel
costs, won U.S. permission to suspend some China flights
without losing rights to fly there later.
US Airways can begin its new Philadelphia-Beijing
flights March 25, 2010, one year later than planned, the
U.S. Transportation Department said.
Northwest can suspend the daily U.S.-Guangzhou cargo
flights it was operating, the agency said.
The U.S. denied seven carriers' request for blanket
authority to suspend international routes, saying it
will decide requests individually. US Airways,
Northwest, AMR Corp.'s American, UAL Corp.'s United,
Delta Air Lines Inc., Continental Airlines
Inc. and Alaska Air Group Inc. made the request.
U.S. airlines are collectively cutting 20,000 jobs and
parking 430 planes to shrink operations after jet-fuel
prices doubled in
the past year. Carriers need U.S. approval to cut
limited-entry international routes or they risk losing
those flights to rivals when the economy improves.
US Airways, which last year won permission for its first
China flight, requested the one-year delay in May. The
Tempe, Arizona-based carrier said fuel costs made the
flight ``uneconomic'' during 2009.
Eagan, Minnesota-based Northwest, which said in April it
would suspend Guangzhou all-cargo flights this month,
had sought permission to resume the service ``as
warranted by fuel and economic conditions'' any time
through March 25, 2011.
The seven carriers sought waiver authority last month
without saying how many international routes they may
trim or for how long. The agency said it rejected the
blanket waiver because each limited-entry market is
different.
Centurion Air Cargo, a closely held cargo carrier based
in Miami, was rejected in its bid to delay new service
to Mexico, with the department saying it had four times
previously granted extensions.
Pilots expect seniority
list by Nov. 20
July 2,
2008
Pilots from
Northwest Airlines and Delta Air Lines are
expected to have a blended seniority list by
Nov. 20, the Northwest pilots union said in a
Wednesday update.
The two pilot groups
will have about 30 days -- from Tuesday through
Aug. 8 -- to negotiate a seniority list. If they
don't reach an accord through bargaining, then
unresolved issues will be turned over to three
arbitrators.
Northwest and
Delta pilots negotiated a four-year deal with
Delta management last week that includes annual
raises of 4 to 5 percent for both pilot groups.
When the merger is consummated, Northwest pilots
also would get raises -- an average of 9.5
percent for experienced captains -- to bring
them up to Delta levels.
At the time the
labor deal was forged, the two pilot groups
reached agreement on the process for resolving
their seniority differences. A binding seniority
list would be issued by Nov. 20.
Typically, pilot
seniority conflicts are hashed out over one to
three years. But Delta management has pushed for
an expedited process and the Northwest and Delta
pilot groups want to avoid a protracted pilot
conflict like the one that has grown out of the
US Airways and America West merger in 2005.
|
Airline passengers blame bad service,
not prices
South Florida Business Journal
Travelers
are pointing to deteriorating customer service,
rather than high fares and added charges, for their
unhappiness with airlines, according to the latest
survey by J.D. Power and Associates.
The study found overall satisfaction
for the airline industry has declined to its lowest
level in three years.
For a fourth consecutive year,
JetBlue Airways ranked highest overall and also
ranked highest in the low-cost carrier segment for a
third consecutive year. It performed well in six of
seven customer satisfaction measures: aircraft;
boarding/deplaning/baggage; check-in; cost and fees;
flight crew and in-flight services.
Southwest Airlines Co. ranked second
in the low-cost category, scoring a 3 in overall
satisfaction compared with JetBlue's 5, but it
received a 5 score for flight
reservations/scheduling, 4 for check-in and 3 for
aircraft interior. AirTran Airways and Frontier
Airways both received an overall score of 2.
Miramar-based Spirit Airlines was not includin
the survey.
Traditional carrier rankings were led
by Alaska Airlines and Continental Airlines. Alaska
received high marks in five of seven measures --
aircraft; boarding/deplaning/baggage; check-in;
flight crew and reservations -- while Continental
performed well in the cost and fees measure.
Delta Air Lines came in third,
followed by Air Canada, American Airlines, US
Airways, Northwest Airlines and United Airlines.
The study found that satisfaction
with "people" factors -- including knowledge,
courtesy and helpfulness of reservation and gate
agents, check-in staff and flight crew -- has
declined dramatically since 2007, and is the leading
contributing factor to the overall decline in
customer satisfaction with airlines in 2008. The
decrease in satisfaction with people factors is more
than twice as large as the decline in satisfaction
with price factors, J.D. Power said.
"Across the airline experience --
from check-in to the flight to deplaning --
passengers are being affected by the ramifications
of carriers making staff cutbacks, and have
expressed that performance and attitudes of airline
staff are suffering," said Sam Thanawalla, director
of the global hospitality and travel practice at
J.D. Power.
"In this unstable industry
environment, it is critical that airlines invest in
their employees as a means to enhance the customer
experience, as there is a strong connection between
employee satisfaction and customer satisfaction,"
Thanawalla said. "Those airlines that focus on
keeping their employees informed and motivated will
be better able to change negative consumer sentiment
and truly differentiate themselves." |
ATW
Daily News
Delta,
Northwest pilots reach tentative agreement on joint contract
by
Aaron Karp
June 25
Delta Air Lines and Northwest
Airlines pilots reached a tentative agreement yesterday with
DL management on a joint contract, a major milestone in the
carriers' planned merger.
The pilot groups had been
unable to reach agreement prior to the DL-NWA merger
announcement despite multiple negotiating sessions. But the
Delta pilots MEC said in a statement yesterday that the two
groups have reached an accord on a joint contract, "the
first important step in the process of combining two pilot
groups with long, proud histories into the largest unified
pilot group in the world."
It said the agreement was the
result of "almost around the clock" negotiating sessions in
New York over the past week. Both carriers' pilot MECs will
be given a detailed briefing in separate sessions later this
week. If the leadership councils approve the deal, it will
go to both groups' full pilot membership for ratification.
No details of the accord were released.
"We are pleased that the
Delta and Northwest pilot groups have reached a tentative
agreement and have outlined a process for seniority
integration that will allow us to move forward with a
unified pilot group," DL CEO Richard Anderson said.
"Achieving a joint contract and combined seniority list in
advance of the closing of the merger is something that has
never been done in this industry."
Wednesday's Winners & Losers: U.S. Airway
June 24
Tempe,
Ariz.-based U.S. Airways was up 13%
to $2.77 as oil prices fell to two-week lows. In addition, the
company resumed labor talks with its pilots' union. Likewise,
fellow airlines Northwest and
Delta also gained Wednesday. Late
Tuesday, pilots of both carriers
tentatively agreed to the companies'
proposed merger. Northwest was up 4.3% at $6.18, and
Delta was up 2.3% at $5.38.
| |
Air Transport Association Calls on Congress to Address Fuel Price Crisis
Cites Crippling Effects on the U.S. Economy and Environmental Investments
June 24
WASHINGTON, June 24 /PRNewswire-USNewswire/ -- The Air Transport Association of America (ATA), the industry trade organization for the leading U.S. airlines, today testified before the Senate Committee on Commerce, Science and Transportation to outline its continued, proactive efforts to further reduce the industry’s greenhouse gas (GHG) emissions while identifying the severe economic consequences of the current “fuel price crisis.”
ATA Executive Vice President and Chief Operating Officer John M. Meenan presented statistics demonstrating that the airline industry represents just 2 percent of all domestic GHG emissions, as compared to 25 percent for the balance of the transportation sector. He testified that the investments the airlines have made that have resulted in the industry’s outstanding environmental track record are being threatened by the historically high cost of jet fuel. Meenan urged Congress to craft policies that will help solve the problem, pointing out the severe consequences of inaction.
Meenan told the committee that the industry continues to build on its impressive record of improving fuel efficiency and reducing its GHG output despite the high costs of jet fuel. U.S. airlines improved fuel efficiency by 110 percent between 1978 and 2007, resulting in 2.5 billion metric tons of carbon dioxide savings - roughly equivalent to taking 18.7 million cars off the road each of those years. Further, U.S. carriers burned almost 3 percent less fuel in 2007 than in 2000, but carried 20 percent more passengers and cargo on a revenue ton mile basis.
According to ATA, fuel prices now average 30 to 50 percent of airline operating expenses, costing $41.2 billion in 2007, and these costs are projected to grow to $62 billion in 2008. These costs significantly threaten the U.S. airline industry’s growth and ability to invest in fuel efficiency improvements, a sign of dire consequences for the United States.
“The nation’s airlines expect to lose in the range of $10 billion this year - a loss on par with the worst year in this industry’s history,” said Meenan. “High fuel prices are the sole reason.”
In addition to its fuel efficiency improvements, statistics show that the growth of the U.S. economy is strongly influenced by the growth of the commercial aviation industry. Annually, the commercial aviation industry drives $1.1 trillion in economic activity, contributing 5.2 percent of U.S gross economic output. The Bureau of Transportation Statistics recently assessed that in 2006, 5.3 percent of the total value of international merchandise trade was shipped by air and that air shipments accounted for 32.4 percent of the value of all exports, more than any other transportation sector.
“This nation’s economy is inextricably linked to the viability of its air transportation system. If the airlines continue to spiral downward, so will the economy,” said Meenan. “Aviation contributes $690 billion to the U.S. GDP - that’s 10 million new jobs.”
Meenan repeated the ATA call for Congress to take action to support U.S. airlines’ ongoing commitment to the environment. Congress should modernize the aging air traffic control system, reinvigorate environmental aeronautics R&D programs and spur further commercial development of alternative jet fuels. Meenan stressed the importance of immediately addressing the fuel price crisis at this critical juncture.
“Unlike the temporary revenue hits from 9/11 and other one-time demand shocks, the airlines now are facing a massive structural cost increase,” said Meenan. “Not even Chapter 11 can lower the price of fuel. More than 14,000 airline jobs have been cut so far this year, and that is just the tip of the iceberg. Scores of communities stand to lose all scheduled air service by early next year. More airlines - in addition to the nine that have already filed for bankruptcy or stopped operating - may simply shut down.”
|
|
|
|
US
Airways,
pilots
union
launch
talks
June
24
Charlotte
Business
Journal
The US
Airline
Pilots
Association,
which
represents
pilots
at
US
Airways
Group
Inc.,
has
initiated
contract
talks
with the
carrier's
management.
Negotiations
broke
off 10
months
ago
because
of the
disparate
pay and
working
conditions
between
US
Airways
pilots
and
those of
America
West
Airlines.
US
Airways
and
America
West
merged
in
September
2005,
with the
combined
carrier
taking
the US
Airways
name.
However,
the
merged
companies
havn’t
yet
resolved
an
impasse
over its
pilots’
labor
agreement.
“We
believe
it’s
time for
management
to
complete
the job
it
started
three
years
ago and
conclude
the
merger
of US
Airways
and
America
West,”
says
Steve
Bradford,
USAPA
president.
“Although
we are
hopeful,
we will
wait and
see what
management
does --
not what
they
say.”
In
April,
pilots
at US
Airways
approved
a
measure
to leave
the Air
Line
Pilots
Association
and form
a
separate
union.
Of the
5,238
eligible
voters,
2,723
pilots
cast
their
ballots
in favor
of
joining
the US
Airline
Pilots
Association,
which is
based in
Charlotte.
Arizona-based
US Air
operates
its
largest
hub at
Charlotte/Douglas
International
Airport.
The
carrier
operates
3,500
flights
per day
to about
230
destinations
in the
Americas
and
Europe.
AirTran adds more
flights
June 23
Orlando Business
Journal
AirTran
Airways
announced June 23 it
will add nonstop
flights between
Baltimore-Washington
International
Thurgood Marshall
Airport and San Juan
Luis Munoz Marin
International
Airport beginning
Dec. 20.
The low-fare
airline, a
subsidiary of
Orlando-based
AirTran Holdings also
will offer a second
daily flight between
Orlando and San Juan
beginning Nov. 2,
and a second daily
flight between
Atlanta and San Juan
starting Dec. 18.
The fourth busiest
carrier at
Orlando
International
Airport
offers more than 700
flights to 58
destinations in the
United States.
AirTran, which has
300 employees, plans
to build a new $7
million,
16,000-square-foot
operations and data
center at the
Orlando airport,
where it will add
121 new jobs at an
average salary of
$45,000.
US Airways, Air China in
code-share pact
Philadelphia Business Journal
June 23
US Airways Group Inc.
has entered into a code-sharing
agreement with
Air China.
The deal allows the carriers to
coordinate their flight
schedules and reservation
systems.
Code-share flights will be
available for purchase beginning
Wednesday.
US Airways will put its code on
connecting flights to Shanghai
through Air China's Beijing hub.
Conversely, Air China will put
its code on US Airways flights
from Los Angeles and San
Francisco to Phoenix, Las Vegas,
Charlotte, N.C., Philadelphia
and Pittsburgh.
Arizona-based US Airways, the
dominant carrier at Philadelphia
International Airport, has 3,500
daily flights to more than 230
destinations in the United
States, Canada, Europe, the
Caribbean and Latin America. The
airline recently pushed back the
rollout of its previously
announced Philadelphia to
Beijing route from 2009 to 2010
because of fuel costs.
Air China owns 224 Boeing and
Airbus aircraft. The carrier
operates 243 routes to 28
countries.
Continental, United to Link in
Star Alliance
By
Ted Reed
06/19/08
Continental and UAL
say they will become partners, linking their networks as Continental leaves the Skyteam global alliance to join United in the Star group.
The move represents an effort to capture some efficiences after Continental backed out of merger talks with United in April. It means Continental will leave both Skyteam, where it had been allied with Deltaand Northwest, and a code-share alliance with the two carriers.
The planned combination of Delta and Northwest, which is awaiting regulatory approval, could have left Continental as a sort of junior partner in both groupings.
Now Continental will bring its prized Newark hub to Star, where the principal shortcoming has been a near-vacuum at Newark and New York Kennedy, the two international airports in the world's largest travel market. Despite its vast international network, United, a founding Star member, has lacked a strong New York presence.
Additionally, the deal offers a counter to the expanded range of a combined Delta and Northwest, which creates a broad international route system encompassing the trans-Atlantic, Asia-Pacific and Latin America. The deal "allows most of what would be merger economics without the business integration risks such as fleet, systems, real estate and work force," says aviation consultant Robert Mann.
Continental CEO Larry Kellner and United CEO Glenn Tilton were meeting in Chicago Thursday afternoon to sign a framework agreement outlining the alliance and cooperation principles between their carriers.
"In a network business, there is significant value gained from linking with larger networks to provide truly national coverage and expanded global reach, and exploring new ways to reduce costs and improve efficiencies," Kellner said in a prepared statemenT
"Following the decision by Continental not to merge, we suggested to Continental that an alliance partnership with ourselves and the Star Alliance would be compelling and allow us to achieve many of the benefits of a merger. We've developed a solid working relationship with the Continental team and we're very pleased to invite them into Star as our new partners."
The carriers say they, along with other Star members, plan to establish joint ventures in the trans-Atlantic, Latin America and Pacific region. They would seek antitrust immunity from the U.S. Transportation Department.
Initially, Continental will ask the department to allow it to join United -- along with Lufthansa, Air Canada and six other carriers -- in an immunized trans-Atlantic alliance where members pool revenue and jointly set schedules and fares. The venture would be competitive "with the proposed joint venture involving certain SkyTeam members that was recently granted antitrust immunity," Continental and United said.
The two carriers also plan domestic code-sharing, which does not require antitrust immunity. They would offer each others' passengers access to frequent flier programs and airport lounges, and would share facilities, information technology and procurement.
Continental's plans require regulatory approvals, as well as the termination of existing contracts with SkyTeam members. A principal contractual restriction, Continental said, would not end until nine months after the closing of the proposed Delta and Northwest merger.
Shares in Continental gained 16% to $15.59, while United rose 24% to $8.11. Several other airlines also showed double-digit percentage increases as oil prices fell.
Since Star was created in 1997, alliances have played an increasingly important role in the airline industry. They now account for roughly 60% of worldwide capacity, and helped to enable the Delta and Northwest merger.
Mann said the new combination puts AMR at a disadvantage and also marginalizes US Airways, "particularly from a corporate travel buyer's perspective."
However US Airways, which had also discussed a merger with United, said Thursday that "our longstanding code-share relationship with United remains intact, as does our status as a Star Alliance member carrier." So far, it said, there have been no discussions of a code-share or other relationship with Continental.
Continental's move from Skyteam to Star also underscores the intense rivalries between alliances.
In a recent release, for instance, Oneworld, which includes American and British Airways, noted that it is "the airline grouping with the best financial track record." Over the past three years, Oneworld said, members' combined net profits totaled $8.8 billion, while SkyTeam members lost $6.9 billion and Star members lost $10.1 billion.
Lehman Gets Bullish on Airlines
(NWA, UAUA, LCC, JBLU, AMR, more...
June 5,
2008
The beaten-up airline sector is
higher today after Lehman Brothers turned bullish on the group.
The firm said the major changes in the sector, to combat record
oil prices, increases the investment attractiveness. Analyst
Gary Chase said, "the unprecedented nature of this restructuring
could bring with it considerable opportunity."
Chase upgraded Northwest Airlines and UAL Corp. from Equal
Weight to Overweight and adjusted his price targets to $10 and
$16, respectively.
Chase maintained his Equal-Weight rating on US Airways, but
lowered his price target from $6 to $4. He maintained his
Overweight rating on JetBlue, but lowered his price target from
$6.00 to $5.50. He also maintained his Equal-Weight rating and
adjusted his price target on AMR from $8.50 to $9.
Chase maintained his Overweight rating and $9 price target on
Delta, maintained his Equal Weight rating and $3.50 price target
on AirTran Holdings. He also maintained his Underweight and $13
price target on Continental Airlines, maintained his
Equal-Weight and $11 target on Southwest Airlines and
Equal-Weight rating and $17 price target on Alaska Air.
A number of airlines stocks are significantly higher today;
Northwest is up 13%, UAL is up 11%, US Airways is up 10%, AMR is
up 6%, and Delta is up 11.
US
Airways traffic up in May
Charlotte Business
Journal
June 5, 2008
US Airways Group Inc. is
packing more passengers onto its planes: Its traffic
edged 0.3 percent higher last month.
Traffic increased to 5.58 billion revenue
passenger miles from 5.57 billion in May 2007. A
revenue passenger mile equates to one paying
passenger flown 1 mile.
The Tempe, Ariz.-based airline, which operates
its largest hub at Charlotte/Douglas International
Airport, cut its capacity slightly to 6.825 billion
available seat miles from 6.83 billion a year
earlier.
US Airways' load factor, a measure of occupancy,
increased 0.3 percentage points to 81.8 percent.
So far this year, the carrier's traffic is down
0.5 percent, to 25.9 billion revenue passenger
miles. US Airways has cut capacity 1.5 percent to
32.39 billion available seat miles, while occupancy
is up 0.9 of a percentage point to 80 percent.
US Airways third in on-time performance
Charlotte
Business Journal
June 4, 2008
US Airways Group Inc. is continuing its hot streak in
on-time arrivals.
The U.S. Department of Transportation's April report card shows the Tempe,
Ariz.-based carrier ranked third among major domestic carriers for on-time
performance, with 81.3 percent. It was the fifth consecutive month US Airways
has scored a top-three finish among the country's 10 largest airlines in on-time
performance.
Southwest Airlines Co. and Alaska Airlines topped the list, but US Airways was
the leader among the six network carriers. The other five -- American Airlines,
Continental Airlines Inc., Delta Air Lines Inc., Northwest Airlines Corp. and
United Airlines -- held the lowest rankings for the month of April.
As a result of the top-three ranking in on-time performance, each US Airways
employee will receive a $50 bonus for the fifth straight month.
US Airways, which operates its largest hub at Charlotte/Douglas International
Airport, also posted improvements in baggage handling. The airline ranked sixth
among the major carriers but posted its best performance since America West
Airlines merged with US Airways nearly three years ago.
US Airways (NYSE:LCC) had a mishandled-bag ratio of 4.20 reports per 1,000
passengers. Its previous best performance was 5.69 in May 2006.
The airline continues to struggle in the customer-complaint rankings, ranking
ninth among the 10 largest domestic airlines. The carrier logged 2.51 complaints
per 100,000 enplanements, with 107 complaints received directly by the
Transportation Department. United Airlines had the most complaints.
Fuel not a
dealbreaker as UAL/USAir talks flounder
By John Crawley
May 30, 2008
WASHINGTON (Reuters) - The challenge
of skyrocketing fuel costs was not a dealbreaker in failed merger
talks between United Airlines parent UAL Corp. and US Airways Group Inc., and in fact had been a force pushing them together.
The two airlines gave no specific
reasons for ending their discussions on Friday, but sources have
said labor integration costs and other expenses associated with
consolidation played a large role in the outcome.
"The price of oil was not a stumbling
block in this," said one person familiar with the ill-fated
discussions. "That was a motivating factor."
United Chief Executive Glenn Tilton
told employees the talks would not yield a proposal due to "issues"
that could "significantly dilute" the financial benefits of a
tie-up.
United and US Airways officials would
not comment beyond separate statements from Tilton and his US
Airways counterpart, Doug Parker.
But people familiar with the talks
over the past month and industry experts painted a fuller picture of
challenges faced by the two companies had they decided on a common
future.
"These mergers take cash. There's
always alleged synergies down the road but they need cash now for
severance payments, to get out of leases," said Roger King, an
analyst with CreditSights Inc. "No one can afford to make the
investments in those things now."
For instance, a source with knowledge
of the negotiations said the contract for a majority of US Airways
pilots would get much more expensive in a merger. In addition, there
would be extra costs associated with aircraft orders at US Airways,
not all of them financed.
For United, the company could have
faced significant costs, including those related to credit
agreements with lenders, if a merger were to occur.
"These were large issues," the source
said.
Another source said the two sides
were never on the verge of reaching an agreement, although the talks
at one stage were described as very advanced.
While sources said fuel prices did
not scuttle the talks, King guessed the two would have merged had
crude prices been where they were four months ago -- $90.
Tilton and Parker were under pressure
to decide by early June to ensure a Bush administration review of
any merger by Justice Department antitrust enforcers. The
administration, considered business friendly, leaves office in
January.
Both CEOs have been strong proponents
of consolidation as a remedy for crippling industry-wide cost
pressures caused by crude oil prices hovering near $130 a barrel.
Some analysts have begun to warn of possible airline bankruptcies in
2009.
Shares of US Airways and United have
plummeted in the past year and the two lost more than $750 million
combined in the first quarter.
On Thursday, Fitch Ratings cut US
Airways bond ratings further into junk and downgraded United debt.
Fitch constructed a bleak scenario for the industry but said United
had some room to maneuver in any "deep industry downturn" while US
Airways has "limited flexibility" to raise additional cash.
Fitch analysts believe mergers could
"lay the groundwork" for "more rational" decision making on the
capacity cuts industry experts believe are necessary to overcome
high fuel prices and cash flow problems.
While United pilots sit on the
company's board and opposed a US Airways deal, sources said
management believed the challenge with the union was not
insurmountable. The same opinion held for US Airways pilots.
Jay Heppner, a spokesman for the
United chapter of the Air Line Pilots Association (ALPA), said in an
interview the pilots were satisfied with Tilton's decision.
"We're confident United has the
ability and resources to go it alone," Heppner said. "We looked at
the financials and we didn't see it being a good mix. We just assume
they saw the same risk," Heppner said of United management and the
board.
US Airways expands Charlotte routes
Charlotte
Business Journal
June 3,
2008
US Airways Group Inc. is launching two new transcontinental
routes from Charlotte/Douglas International Airport, its largest hub.
The daily flights are to Tucson, Ariz., and Sacramento, Calif.
Flights to Tucson depart Charlotte at 6:15 p.m. and arrive at 7:23 p.m. Service
from Tucson to Charlotte leaves at 11:30 p.m. and arrives at 6:12 a.m.
Flights to Sacramento depart Charlotte at 8:20 p.m. and arrive at 10:40 p.m.
Return flights leave Sacramento at 10:30 p.m. and arrive at 6:10 a.m.
In addition, US Airways has restarted its seasonal, daily service from Charlotte
to Portland, Ore.
Flights leave Charlotte at 6:10 p.m. and arrive at 8:33 p.m. Return service
leaves Portland at 10:30 p.m. and arrives at 6:21 a.m.
Arizona-based US Airways (NYSE:LCC) operates 3,500 flights per day to 230
destinations in the United States, Canada, Europe, the Caribbean and Latin
America.
US Airways ranks last among airlines for customer satisfaction
Charlotte
Business Journal
May
20, 2008
US Airways Group Inc. ranks last in a recent
customer-satisfaction survey of airlines.
According to the annual American Customer Satisfaction Index by the University
of Michigan, the carrier's satisfaction score dropped to 54 out of a possible
100. US Airways had a score of 61 last year.
And the airline it may soon merge with --
United Airlines (NASDAQ:UAUA) --
ranked second to last on the list of carriers.
Overall, customers gave airlines the worst grades since 2001 as the industry's
scores fell for the third straight year.
Dallas-based
Southwest Airlines Co. (NYSE:LUV) had the best ranking on
the list for the 15th consecutive year. It scored a 79, up from 76 last year.
US Airways operates its largest hub at Charlotte/Douglas International Airport.
The Arizona-based (NYSE:LCC) carrier operates 3,800 flights per day to about 230
destinations in the Americas and Europe.
US Airways pilots
union disapproves of possible United combo
By
Chris Kahn, AP Business Writer
May 16
US Airways pilots
union says United may not be the best partner because of its recent losses
PHOENIX (AP)
-- If US Airways and United Airlines decide to combine, they'll bring along a
number of reluctant employee groups that would rather remain separate.
US Airways pilots
on Friday joined a chorus of criticism about a possible tie-up. The US Airline
Pilots Association said United parent UAL Corp. is financially weak, and that
mixing the carriers is a bad idea. Chicago-based UAL lost $537 million in the
first quarter.
“With mounting
losses, and a dismal balance sheet, UAL may not be the best dance partner for
USAirways," USAPA President Stephen Bradford said in a statement.
United pilots are
equally resistant to pairing with Tempe, Ariz.-based US Airways Group Inc. Steve
Wallach, a union leader for United pilots, has said that US Airways gives poor
customer service and its previous deal with America West created a "toxic stew"
within its pilot ranks.
Flight
attendants, mechanics and fleet service workers at both carriers also have come
out against plans for a combined operation.
Airline chiefs
Doug Parker of US Airways and Glenn Tilton of United Airlines have both praised
airline consolidation in general as the best way to deal with soaring fuel
prices. By joining forces, airlines can cut redundant routes, increase demand
for the remaining seats, and keep fares high.
But the
International Association of Machinists and Aerospace Workers is lobbying for a
different strategy.
Spokesman Joseph
Tiberi said consolidation won't put an end to the high fuel prices that squeezed
profit out of the industry. Instead, the machinists union has called for a
return of airline regulation.
For example,
Tiberi said, the government should limit carriers from starting price wars with
heavily discounted fares.
"This is an
industry where the free market has obviously failed," he said. "An airline can't
pay $100 to deliver a product to a customer, and then sell it for $75 and expect
to make any kind of profit. It doesn't make sense."
Airline
consultant Robert Mann said it's nice -- but not necessary -- for combining
companies to have the blessing of employees. However, employee participation
could become important if the carriers look to third parties to pay for the
combination.
"Those third
parties would want to know that there are willing participants in the deal,"
Mann said.
Delta Air Lines
Inc. and Northwest Airlines Corp. initially sought the blessing of their pilots
unions before announcing plans to join in April. Delta pilots eventually agreed,
but Northwest pilots have opposed a deal.
US Airways shares
were up 18 cents to $7.80 and UAL shares were down 57 cents to $13.81 in Friday
trading.
US Airways fleet-service workers ratify contract
Sacramento Business Journal
May 16, 2008
Fleet-service employees at
US Airways Group Inc. have ratified a single contract that
brings all the airline's ramp and baggage employees into one labor agreement.
The latest contract with about 7,700 ramp and baggage employees is valid through
2011.
US Airways and
America West Airlines merged in September 2005, with the
combined carrier taking the US Airways name. However, the merged companies had
been unable to agree on joint labor contracts for various groups of employees.
The carrier hasn't yet resolved an impasse over its pilots' labor agreement.
The airline has now ratified contracts with all of its 11,000 workers
represented by the
International Association of Machinists and
Aerospace Workers.
In April, US Airways said mechanics from the former America West had ratified an
agreement that moved all the carrier's maintenance employees to one labor
contract. The agreement covered 3,300 employees represented by the union.
US Airways (NYSE: LCC) carried nearly 600,000 passengers to or from
Sacramento International Airport in
2007, making it the No. 3 carrier in the market, behind
Southwest and United. The carrier operates 3,800 flights per day
to about 230 destinations in the United States, Canada, Europe, the Caribbean
and Latin America.
Airline
shares climb on positive economic news
By
Christopher Hinton,
MarketWatch
May 14, 2008
NEW YORK (MarketWatch) -- Airline
shares gained ground Wednesday following new reports that the U.S. economy may
not contract as much as originally thought.
The Amex Airline Index rose 2.6% to
end at 22.8 points with all but two of its 14 components trading higher.
In this morning's Wall Street Journal,
the newspaper reported a shrinking number of economists think the U.S. is
approaching a recession, and cite improvements in the stock and credit markets.
Leading the way were the network
carriers, hardest hit by investor concern of a economic slowdown and high fuel.
American Airlines parent AMR Corp. rose 5.4% to $9.11, Continental Airlines Inc.
added 4.3% to $18.38; and U.S. Airways US Airways Group Inc. climbed 3.9% to
close at $7.25.
"The economy looking like we're
dodging a bullet, bookings are looking good, capacity is certainly coming down,
and we may have another merger announced soon...these are all positive signs,
aid Michael Derchin, analyst with FTN Midwest.
Following Delta Air Lines Continental
Airlines Inc. and Northwest's announcement of a merger last month, Wall Street
now expects a similar deal between United Airlines parent UAL Corp. and
USAirways
The Delta pilots' union on Wednesday
said its members have voted in favor of contract changes expected to facilitate
a combination between the airline and Northwest.
"We are pleased with the Delta pilots'
decision to ratify a modification to their current contract, marking an
important step towards combining our two great airlines," said Delta Chief
Executive Richard Anderson. "We remain committed to working with the ALPA
leadership of both the Delta and Northwest pilots to reach a joint pilot
agreement before the closing of the merger."
Share of Delta jumped 7.5% to $7.95,
while shares of Northwest jumped 7.7% to $9.21.
Late Tuesday, Northwest Airlines said
its chief executive of regional airlines, Neal Cohen, would be leaving the
company on June 16 as the carrier prepares for its merger with Delta Air Lines.
Cohen, 48, played a leading role in
Northwest's restructuring efforts as chief financial officer. He was moved to
his present position in June, 2007.
Meanwhile, crude for June delivery
fell $1.58 to $124.22 a barrel on the New York Mercantile Exchange.
Among low-cost carriers, Air Midwest
became the latest casualty in the retreating airline industry.
Mesa
Air Group Inc. which operates Air Midwest, said record-high fuel prices,
low demand and a difficult operating environment were to blame for the
discontinuation of service. Air Midwest's routes served 27 cities throughout the
U.S.
Shares of Mesa declined 12.8% to 64
cents.
And finally, Fitch Ratings on
Wednesday downgraded the issuer default rating of JetBlue Airways Corp. (JBLU
jetblue airways corp to B- from B because of higher fuel costs and a weakened
revenue outlook.
See full story.
JetBlue shares ended up 1.7% at $4.82.
Exec
confident of US Airways stand-alone prospects
June
18
WASHINGTON (Reuters) - The president of
US Airways Group Inc.is confident about the carrier's stand-alone
prospects and does not foresee a merger in the near term.
Scott Kirby also told CNBC in an
interview that major carriers are all but done with big cost cutting
initiatives as they struggle to offset skyrocketing fuel prices.
US Airways failed in May to strike a
merger deal with UAL Corp. unit United Airlines, raising concern
among some experts about US Airways' future. The company has shed
nearly 80 percent of its share value this year and traded down 7.6
percent on Wednesday at $3.01. Its market capitalization has slumped
to roughly $275 million.
Despite its deteriorating situation
on Wall Street, Kirby said: "I feel great about US Airways'
stand-alone prospects."
Airlines continue
to battle fuel costs
Job cuts,
additional fees among possibilities
June 19
DALLAS
(Associated Press) - Airlines executives are continuing to cut jobs and consider
new fees on passengers as they battle high fuel prices that could result in
record losses for the nation's carriers.
Executives from United Airlines gave more details on plans to shed up to 1,600
salaried jobs at an investors' conference in New York on Wednesday.
Chief Financial Officer Jake Brace said United will also cut union jobs -
pilots, flight attendants and mechanics - once the airline draws up a
scaled-back flying schedule for fall and winter.
Delta Air Lines Inc. said it would cut domestic capacity another 3 percent later
this year, on top of a previously announced 10 percent reduction.
Continental Airlines Inc., which boasts about still serving meals in coach, is
studying whether it will join the chorus of carriers charging to check a first
bag, according to its CEO.
The lone profitable big carrier so far this year, Southwest Airlines Co., still
expects to grow modestly through next year - but that's not a sure thing.
"If we have to slow our growth to zero next year, we're obviously prepared to do
that," Southwest chief executive Gary Kelly said at the investors' conference.
The common threat hanging over all the carriers is the cost of fuel, which has
risen for years and nearly doubled in the past 12 months.
On Tuesday, the Air Transport Association, a trade group for the big airlines,
warned that the industry could lose a record $13 billion this year.
Forecasts like that have renewed talk that big airlines could face bankruptcy by
early next year unless fuel prices fall or fares rise sharply.
Delta provided a speck of encouraging news Wednesday, saying it expects to post
a second-quarter profit, excluding one-time items. Delta lost $6.4 billion in
the first quarter, although $6.1 billion was an accounting charge to write down
the value of its assets. (AMR said Wednesday it would take a writedown but
didn't give a figure.)
Carriers have responded to high oil prices by raising fares nearly two dozen
times this year and increasing fees for everything from toting pets on board to
changing itineraries.
American took "a little bit of flack" for imposing a $15 fee on the first
checked bag, said Gerard Arpey, the CEO of American and parent AMR Corp. But
United and US Airways matched it, and Continental is considering it too,
although Continental CEO Lawrence Kellner said he worries about boarding delays
as customers try to stuff more in their carry-ons.
For now, Arpey said, fares and fees aren't high enough to cover American's
annual fuel bill, which figures to be $7.5 billion higher this year than in
2002.
"If we're going to have an airline business, and I'm pretty sure we are, our
customers must ultimately compensate us for the costs that we incur flying them
around the United States and the world," Arpey said.
Airline cuts, gas woes making Vegas tougher ticket
Airline cuts, high gas prices making Las Vegas tougher to get to and more
expensive
June 18
NEW YORK
(Associated Press) - Sin City is facing hard times.
Soaring fuel
prices are forcing airlines to cut flights and jack up fares to this desert
oasis. Road trips have become luxury travel with gasoline costing more than $4 a
gallon.
And tourists who
do make it to Las Vegas are spending less, leading casinos to offer deals just
to keep them in their resorts.
"The overall
economic uncertainty this country is facing ... makes the outlook for the next
several months very murky," said Gary Thompson, spokesman for Harrah's
Entertainment Inc., owner of seven Las Vegas casinos.
US Airways Group
Inc. announced last week that it was cutting nearly half its Las Vegas flights
as part of companywide belt-tightening. That will leave 74 US Airways flights
per day by the end of the year, down from a peak of 141 in September 2007.
The result is
more than 8,000 fewer seats available per day, compared to the 2007 peak,
according to data from the Clark County Department of Aviation. US Airways was
the second-largest carrier to Las Vegas behind Southwest Airlines.
"We've seen
airlines increase and decrease service periodically. Clearly, never to this
extent all at once," said Alan Feldman, a spokesman for MGM Mirage Inc., which
owns 10 casinos on the Las Vegas Strip and plans to open CityCenter next year.
The flight cuts
are another hit in what is shaping up to be a rough year for Las Vegas casinos.
Casino officials and industry analysts say the slump is a result of economic
complaints felt around the country _ rising gas and food prices, home
foreclosures and general uncertainty.
"As far as
filling the rooms, the lack of airline service I think is going to have an
impact on the entire community," Thompson said.
Nightly room
prices were down 4 percent in Las Vegas compared to one year ago and gambling
revenue was down 3.7 percent, according to data through April from the Las Vegas
Convention & Visitors Authority. Total airline passengers through April were
down 1.8 percent and traffic from California was down 4.8 percent.
Feldman said MGM
Mirage has put together programs to entice visitors, wooing them with package
deals, free nights and vouchers for show tickets and food.
With the airline
industry expected to lose $2.3 billion this year, airline industry analyst
Robert Mann said it may be up to big casinos to subsidize travel into Vegas, by
land and by air.
"There's such an
interest among hoteliers for arrivals that you may see more charter flying going
back into Las Vegas," he said.
But the gambling
industry in Las Vegas and Atlantic City is bracing for a hit this year, too.
Nevada will see
revenues dip this year and next year, to $12.4 billion in 2009 compared to $12.8
billion in 2007, according to a forecast of worldwide gambling released
Wednesday by PricewaterhouseCoopers LLP.
The financial
consulting company said it expects Nevada to rebound in 2010 and see gambling
revenue grow to $14.8 billion in 2012.
"It's going to
take a little while for the market to right itself, but I do think that that's
what will happen," Feldman said.
US
Airways Group CEO buys 197,000 shares
US
Airways Group Chief Executive Douglas W. Parker buys 197,000 shares of stock
June 18,
2008
NEW YORK
(Associated Press) - The chairman and chief executive of US Airways Group Inc.
bought 197,000 shares of common stock, according to a Securities and Exchange
Commission filing Tuesday.
In a Form 4 filed
with the SEC, Douglas W. Parker reported he bought the shares for $2.77 to $2.80
apiece Monday.
Insiders file
Form 4s with the SEC to report transactions in their companies' shares. Open
market purchases and sales must be reported within two business days of the
transaction.
US
Airlines Curtail International Growth As Fuel Costs Rise
By Ann
Keeton
Dow Jones Newswires
June 17,
2008
CHICAGO -(Dow
Jones)- For the past two years, the U.S. airline industry has turned a profit,
in large part due to strong growth on international routes, where big carriers
don't face competition from low-cost airlines.
But the sudden
jump in jet-fuel prices - up a whopping 80% from last year - along with weaker
world-wide growth in passenger traffic, is forcing airlines not only to cut
domestic capacity, but to scrap plans for adding international routes.
Airlines are
scrambling to raise ticket prices and add fees to boost revenue, but the Air
Transport Association, the U.S. trade group, estimates the industry could lose
$10 billion this year. That is similar to the industry's biggest-ever annual
loss following the devastating terrorist attacks on the U.S. in 2001.
Jean-Cyril
Spinetta, chief executive of Air France KLM, said at a recent conference that
"this is much worse than 9-11. That was a shock. This is a fundamental
structural challenge and could last a lot longer." He expects global air
passenger traffic to be flat or even to shrink this year, down from an earlier
forecast for 2008 traffic growth of more than 5%.
"The classic
response to a demand downturn is for airlines to cut fares," said analyst Andrew
Fitchie at Collins Stewart in London. But "the high price of oil means airlines
are unprofitable at already high load factors - the only solution is to cut
capacity and raise fares, which is likely to burn off demand."
Analysts have
said the U.S. airline industry needs to cut seat capacity by 20% to stem heavy
losses this year and avoid possible bankruptcies in 2009.
On the
international front, airlines have been touting opportunities to reach growing
markets in China and India. The new Open Skies treaty, put in place this year
between the U.S. and E.U., allows for many more transatlantic flights.
But major
airlines, including AMR Corp.'s American Airlines, Delta Air Lines Inc. , United
Airlines, a unit of UAL Corp. , US Airways Group Inc., Continental Airlines Inc
and Northwest Airlines Corp., this week asked the U.S. Department of
Transportation to let them defer service for two years on routes to China and
other destinations, where they fought hard to win service rights. With the high
cost of jet fuel, "All U.S. airlines are being forced to re-evaluate the flights
they offer to avert financial catastrophe," the airlines said in a letter to the
DOT.
Amid a downturn
in the U.S. financial-services industry, American said it will drop recently
added flights to London's Stansted airport.
Northwest
Airlines said Tuesday it won't begin flying a cargo route to Guangzou, China,
scheduled to start in July, citing prohibitive fuel costs.
When the busy
summer travel season is over, most big U.S. airlines have said they will make
substantial cuts in their schedules. In particular, they are looking at
grounding older, less fuel-efficient aircraft, trimming service to smaller,
less-traveled cities, and cutting staff.
Foreign airlines,
too, are facing higher fuel prices, but many are in better competitive shape
than those in the U.S.
"While U.S.
network carriers have worked through six tough years to enjoy a short period of
modest profitability, our major international competitors have enjoyed relative
prosperity and taken the opportunity to strengthen their businesses with
significant investment in products and services," Glenn Tilton, chief executive
of United Airlines, told shareholders at the company's annual meeting last week.
Further, he said, many foreign carriers "have also benefited in the short-term
from the positive impact of a weak dollar on the price they pay for fuel."
Some foreign
carriers, including Emirates Air and British Airways PLC's new OpenSkies
subsidiary, are planning to expand service to the U.S. in 2008.
Earlier this
year, U.S. carriers were hoping that consolidation would strengthen the
industry. But, given the cost of mergers, those talks have ended. Just one deal,
between Delta and Northwest, is still on the table and is expected to close by
the end of the year, once it gets government approval.
With mergers
apparently out the window, airline alliances appear to be the best way for
carriers to add revenue at a low cost. Using code-sharing agreements, airlines
can sell each others' tickets and share other services without formally merging.
Global alliances are widely used because cross-border airline mergers are
prohibited by international law.
Low-cost leader
Southwest Airlines Corp., now the biggest domestic passenger carrier in the
U.S., has said it wasn't interested in finding a merger partner. But the
airline, which remains profitable due to significant hedging of fuel costs, is
seeking to expand service outside the U.S., through an alliance with an airline
which already serves those markets.
USAirways to slash jobs, fleet
Airline says it will cut 1,700 jobs, ground up to 8% of its planes and charge
$15 for checked baggage.
June 12, 2008
TEMPE, Ariz. (AP) -- US Airways says it plans to cut domestic capacity, shrink
the size of its fleet, slash 1,700 jobs and charge passengers to check their
first bag.
Fliers will now pay $15 to stow just one bag in the cargo hold. US Airways will
be the third major carrier to add such a charge.
The free drinks in coach are on their way out too. Passengers in the back will
soon be charged $2 per nonalcoholic drink starting Aug. 1.
Tempe, Ariz.-based US Airways plans to cut domestic mainline capacity 6% to 8%
in the fourth quarter. It is also returning 10 planes, canceling leases on two
more and planning to park more through 2010.
Aggressive measures for US Airways
Flight cuts, new passenger fees expected soon; layoffs possible
Dawn Gilbertson
The Arizona Republic
Jun. 12, 2008
US Airways will join the parade of
fuel-frantic airlines as early as today and announce new
passenger fees, flight cuts, potential layoffs and other
cost-cutting moves.
The airline's board of directors is meeting to consider options
to offset an estimated $2 billion-a-year higher fuel bill, Chief
Executive Officer Doug Parker told shareholders Wednesday at the
airline's annual meeting in Tempe.
On the fee front, company insiders say the airline, the first to
charge for meals several years ago, is likely to be the first
major airline to charge for soft drinks.
It is also expected to follow American Airlines' lead on
charging for even one checked bag.
American's $15 fee for the first bag begins next week, just a
short time after most major airlines started charging $25 for
the second checked bag.
"I think we'll be aggressive on those fronts," President Scott
Kirby said of the industry's move to a la carte pricing.
The impact on passengers will be significant in Phoenix, where
US Airways is the busiest carrier, with more than 300 daily
departures from Sky Harbor International Airport.
US Airways officials declined to offer specifics but said the
entire business has been under examination as the industry deals
with a financial crisis far worse than the fallout after 9/11.
"Suffice it to say everything is certainly on the table right
now," Kirby said after the shareholder meeting.
Oil prices that have more than doubled in the past year are a
big problem for the industry and "one we're going to need to
address," Parker said. "A $2 billion hole is a rather large hole
to dig out of."
Kirby said US Airways' flight cuts and the number of affected
employees won't be of the magnitude of recent downsizings
announced by United, Continental and American.
Each said it planned to cut seat capacity in the United States
by double-digit percentages.
Continental said it was eliminating 3,000 positions; United,
1,500; and American, an undetermined number in the thousands.
To date, US Airways has announced cuts of only 2 to 4 percent in
U.S. seat capacity in the second half of the year.
"There's less opportunity for us than others," Kirby said.
The biggest reason: The airline is restricted on how much it can
cut back flying under labor agreements made after the US
Airways/America West merger.
They dictate a minimum fleet size and flight hours for pilots
and flight attendants.
It also can't just park planes like other carriers, because many
of its planes are leased.
Another factor, Kirby said: US Airways has been cutting
duplicate and unprofitable flights since the US Airways/America
West merger three years ago.
More flight cuts are definitely on the way, though, and the
upshot for passengers is higher fares.
"Two to 4 percent (the capacity cuts already announced) is
probably not enough," Kirby said.
With oil prices spiking from roughly $60 a barrel a year ago to
Wednesday's high of $138, the airline now spends an average $299
per passenger round trip on fuel alone, executives said
Wednesday.
That compares with $151 in 2007 and $70 in 2000.
And that's only for fuel, which even at current prices still
represents less than half the airline's costs.
To break even, US Airways said it needs to get $650 to $700 per
passenger from a combination of higher fares and fees.
The airline is nowhere close to that figure.
'Telling number'
"That's a telling number for why we and the rest of the industry
have to radically restructure," Kirby said.
He conceded ticket demand will go down as airlines shrink and
fares rise dramatically, but he said, "The industry net would be
better off."
US Airways shareholder Evelyn Davis, a corporate gadfly
well-known to CEOs around the country for her annual meeting
antics, pressed Parker about the efforts to get some oil-price
relief from Congress, such as through government subsidies.
He told her he was in Washington last week to discuss the issue
but doesn't see subsidies on the horizon.
"I don't think that's where Congress is going," he said.
Should Airline Stocks Be Bought
Ted Reed
06/10/08
CHARLOTTE,
N.C. -- Last
week's increase in oil prices put a scare in the airline industry and raised new
questions about buying the shares of publicly traded carriers.
Because
share
prices in the notoriously cyclical industry have scraped along at the bottom of
the cycle since April, some experts sense a buying opportunity. On the other
hand, share prices are linked inexorably to oil prices, which have gyrated
wildly in recent days.
CreditSights analyst Roger King recommends investors continue to avoid the
sector. "To play a lower oil price scenario, just short the commodity," he wrote
recently. "Don't go long airlines and inherit all the idiosyncratic industry
issues."
Lehman Brothers analyst Gary Chase wrote in a recent research report that
"bankruptcy risk is significant" for the entire sector. Still, "for that very
reason, however, we believe significant changes must, and ultimately will,
happen."
Chase says he sees "plenty of risks to this call," most notably the chance of a
sharp spike in oil prices. He wrote the report with oil prices around $125 a
barrel.
"What airlines should be doing is betting on the worst," said Joe Leonard,
recently
retired
as chairman of AirTran, in a recent interview. "That's generally what works out
in the airline business."
Leonard says a capacity cut of 15% to 20% is needed, which seems to be where the
industry is headed.
Capacity reductions offer two substantial benefits: more control over pricing
and removal of aircraft that aren't fuel-efficient. And say this for airlines --
carriers rarely hesitate to follow a competitor's lead.
Last week, UAL's UAUA United said it will cut
17% to 18% from mainline domestic capacity by 2009, while Continental said it
will decrease capacity by 11%.
Earlier, AMR's American and DeltaL announced
10% cuts.
Low-cost carriers, meanwhile, will stop growing or slow growth. In the fourth
quarter, for instance,
JetBlue will
have the first quarter of negative growth in its history. Only
Southwest
plans to expand in the fourth quarter, at a rate of about 1.4%.
For the entire industry, the Air Transport Association projects capacity will
decline by 2.8% this year, with cuts between 6.6% and 7% in September, October
and November.
CreditSights' King cautions that because most capacity drops won't take place
until after the summer travel season, "investors won't know [their]
financial effects
until the end of January, seven months from now."
Meanwhile, shares in all carriers trade near historically low levels. The Amex
Airline Index, which hit its all-time low of 17.87 in May, was at 18.92 Monday.
Until this year, the nadir was 25.83 in March 2003.
The prices of five years ago reflected the industry's initial inability to cope
with the economic slowdown that accompanied the Sept. 11 attacks. A series of
bankruptcies began in 2002, when US Airways
filed. It emerged in 2003, only to declare insolvency again in 2004. At
one point, four of the six legacy carriers operated under bankruptcy protection.
"This is a pretty scary period we are going into right now, much worse than
9/11," Leonard says. "That was an event where we knew the outcome, assuming
there wasn't a second event. This is a continuum."
Lehman's Chase agrees the situation is worse this time. "The industry's better
financial position, along with government aid and other factors, in the post
9/11 period allowed for a slower restructuring and adjustment process than we
now envision," he writes.
Chase recommends Delta, United, JetBlue and Northwest. Lehman Brothers holds at
least 1% of the shares of each company, and trades regularly in all of them.
Meanwhile, FTN Midwest Securities analyst Mike Derchin says "the shakeout caused
by $125 oil is a Darwinian struggle of survival of the fittest." This year, a
half dozen smaller carriers have shut down, he notes, and the industry could
lose about $4 billion. But "2009 is forecast to be a turnaround year, with the
airlines rebounding," he says.
Derchin recommends Southwest, AirTran and Alaska.
June 10,
2008
US Airways Presentation at the 2008 Merrill
Lynch Global Transportation Conference to Be Webcast
TEMPE, Ariz.--(BUSINESS
WIRE)--US Airways Group) President Scott Kirby will present at the
Merrill Lynch Global Transportation Conference on June 18. Kirby’s presentation
will be webcast live at 2:00 p.m. EDT at
www.usairways.com. To access the
presentation, click on About US // Investor Relations //
Webcasts/Presentations/Updates.
An archive of the webcast will be available on the company’s Web site through
July 18. Listeners to the webcast will need a current version of MediaPlayer or
RealPlayer software and at least a 28.8 kbps connection to the Internet.
US Airways
is the fifth largest domestic airline employing more than 36,000 aviation
professionals worldwide. US Airways, US Airways Shuttle and US Airways Express
operate approximately 3,500 flights per day and serve more than 230 communities
in the U.S., Canada, Europe, the Caribbean and Latin America. US Airways is a
member of the Star Alliance network, which offers our customers 18,000 daily
flights to 965 destinations in 162 countries worldwide. This press release and
additional information on US Airways can be found at
www.usairways.com
US
Airways: No Immediate Plans To Cut More 737s From Fleet
By
Shara Tibken
June 06,
2008
(DOW JONES
NEWSWIRE) US Airways Group Inc.- the last holdout in the industry's efforts to
rid itself of one type of fuel-guzzling planes - said it has no immediate plans
to cut more Boeing Co. (BA) 737 models from its fleet.
Flight Global's
aviation blog said Friday that US Airways - the No. 7 airline by passenger
traffic - is the last big player to use the less fuel-efficient Boeing 737-300,
-400 and -500 models. "They are not only too old, too slow and too small to make
money, but in today's fuel-price environment, they're just too thirsty," the
blog said.
US Airways, which
leases 95% of its planes, announced plans in April to return six Boeing 737-300
aircraft upon lease expiration in 2008 and early 2009, but said it doesn't have
immediate plans to remove all 81 of its 737-300 and 737-400 aircraft from its
fleet.
"(Getting rid of
737s) depends on the lease agreements we have in place," said Philip Gee, a
spokesperson for US Airways. "It's not always as simple as just returning a
plan. A lot of it depends on the lessor."
US Airways shares
were recently down 28 cents, or 6.3%, at $4.14.
JPMorgan analyst
Jamie Baker said US Airways' pilots' contract prevents it from shrinking its
fleet as much as other airlines.
"US Airways is
more dependent on 737 classics than either Continental or United are," he added.
"Also - on the subject of downsizing - there are comparatively few contractual
impediments for United and Continental in reducing their fleet. However, in the
case of US Air, their pilot contract does stipulate a minimum fleet size to
which the company is already fairly close."
Gee said the
fleet can only shrink to 332 aircraft. "To make things more complicated, 19 of
those planes, which are Embraer 190s, don't count against the 332 minimum
number, so technically, we could go to 313," he said.
US Airways said
it currently has a fleet of 357 aircraft, with 41 737-300s and 40 400s - 23% of
its fleet. The company currently has no plans to lease newer- generation 737s
but signed a contract last June to acquire 92 Airbus models. US Airways
currently has 205 Airbus planes in its fleet and 19 Embraer 190 models.
On Thursday,
Continental Airlines Inc. - the No. 4 carrier - announced plans to retire 67 of
its Boeing 737-300s and -500s, leaving it with no -300s by the end of 2009.
"Continental's
greatest hedge against rising fuel is its fuel-efficient fleet, " said
Continental spokesperson Julie King. "We are 35% more fuel efficient than we
were 10 years ago. That's even going to get better because what we're doing is
accelerating the retirement of the older, less efficient 737 classics and
getting rid of a total of 73 of those."
On Wednesday, UAL
Corp.'s United Airlines unit - the No. 2 airline - reported plans to remove a
total of 100 aircraft from its mainline fleet, including all 94 of its Boeing
737s.
Northwest, US Air Face Pressure to Match Bigger Cuts
By Mary Jane
Credeur
June 6
(Bloomberg) --
Northwest Airlines Corp.
and
US Airways Group Inc.,the smallest U.S. full-fare carriers, face more pressure to shrink their
fleets after this week's cuts by
United Airlines and
Continental Airlines Inc.
Northwest's 5
percent reduction in U.S. seating capacity announced in April and US Airways'
planned 4 percent trim are less than half the size of those at
American Airlines,
United,
Delta Air Lines Inc.
and Continental, the biggest U.S. carriers.
United's moves
reflect how far airlines will go to stem industrywide losses that may reach $7.2
billion in 2008 as fuel bills soar. The
UAL Corp.
unit said June 4 it will pare U.S. seating capacity by as much as 18 percent by
the end of 2009, the deepest pullback so far, and ground 15 percent of its jets.
``United's cuts
were extremely bold. It sets a new bar,''
Michael Derchin,
an analyst at FTN Midwest Research Securities in New York, said in an interview.
``We almost have to see more cuts'' from carriers such as Northwest and US
Airways, he said.
Domestic seating
will decline by 11 percent or more at Delta, Continental and American, the
world's largest airline. Analysts say Northwest and US Airways will have to find
more savings after the past year's 92 percent surge in the price of
jet fuel,
the industry's largest expense.
``The ones that
haven't made the same order of magnitude of cuts as United and Continental
really need to reassess,'' said
Daniel Kasper,
a managing director of consulting firm LECG Corp. in Cambridge, Massachusetts.
``Northwest could come back in light of this and have further cuts. And US
Airways hasn't said much yet on their plans.''
`Right Level'
Northwest is
reviewing fuel costs and ``examining whether it has the right level of capacity
in the market,'' spokeswoman
Tammy Lee
said. Eagan, Minnesota-based Northwest agreed in April to be bought by Delta in
an
all-stock deal
that would surpass American as the biggest airline.
US Airways
spokeswoman
Andrea Rader
wouldn't comment on any plans for additional reductions by the Tempe,
Arizona-based company, which holds its annual
shareholders
meeting on June 11.
``With oil at
$130 a barrel, we obviously look at everything,'' Rader said.
US Airways is the
second-worst performer this year in the
Bloomberg U.S. Airlines Index,
dropping 72 percent compared with 76 percent for Chicago-based United, the
biggest loser. Northwest tumbled 49 percent, compared with a decline of 34
percent for the 14 carriers in the index.
Stocks Fall, Fuel
Rises
The index fell
6.3 percent
today as
jet fuel for immediate
delivery in New York Harbor jumped 7.4 percent, the most since
September 2005.
Northwest and US
Airways both posted losses in the past two quarters. They are the fifth- and
seventh-largest U.S. carriers by traffic.
Southwest Airlines Co., the biggest discounter,
is No. 6 and has only slowed its expansion, not contracted.
Continental said
yesterday it would cut 3,000 jobs and park 67 more jets, or 18 percent of its
fleet, amid a ``crisis'' in the industry, as Chief Executive Officer
Larry Kellner put it. The Houston-based carrier
has pared growth plans three times in 2008.
A day earlier,
United said it would ground 70 planes, cut 1,100 jobs and shut its low-cost Ted
subsidiary.
Airlines are
counting on being able to raise ticket prices by thinning the number of
available seats. Carriers have increased fares 13 times in 2008, with some
nonstop routes more than tripling in the past year, travel Web site
Bestfares.com said this week. Airlines also
save expenses by dropping routes that produce little or no profit.
10%, or Nothing?
Seating-capacity
reductions of 10 percent at Northwest and US Airways wouldn't be ``out of the
question,'' said
George Hamlin, managing director of consulting
firm Airline Capital Associates in Fairfax, Virginia.
``Ten percent is
certainly a big step in the right direction,'' Hamlin said. ``When the other
airlines are finally taking the bit between their teeth and doing something, it
will be hard not to follow along.''
Soleil Securities
Corp. analyst
James M. Higgins took the opposite view, saying
cutbacks in flying by United and Continental may pare enough U.S. seating
capacity that smaller carriers don't need to follow suit.
``If other
airlines reduce capacity, that improves the unit revenue dynamic for everyone''
by allowing higher ticket prices, Higgins, who is based in Solebury,
Pennsylvania, said in an e- mail interview.
Airlines Take Big Steps In Bid To Restore Financial Health
By Ann Keeton, Dow Jones Newswires
June 04, 2008
Wall Street is picking up hopeful signals that the
beleaguered U.S. airline industry, where skyrocketing fuel prices have hit hard
on the bottom line, could be paving the way for financial recovery.
On Wednesday, UAL Corp. (UAUA) unit United Airlines, the second-largest U.S.
carrier by passenger traffic, announced plans to eliminate a substantial chunk
of unprofitable business this fall. The announcement follows similar moves by
competitors in recent weeks and shows that airlines are taking difficult steps
to confront what many say are unprecedented challenges for the industry.
With the price of jet fuel up 80% from a year ago and demand expected to slip
amid the economic slowdown, analysts have said that the airline industry needs
to cut U.S. seat capacity by about 20% to remain profitable in 2008 and 2009, as
it has been for the past two years. Airlines had hoped to downsize through
industry mergers, but momentum on that front has slowed with the crippling cost
of fuel.
Analyst Daniel Mckenzie at Credit Suisse said Wednesday said that United's plan
to reduce its fleet by 100 aircraft, or 22% "is a large step towards regaining
sustainable profitability." While not all airlines have done enough to trim
capacity, "the collective capacity cuts already on the way lead us to conclude
the industry will continue to have meaningful pricing power into 2009," he
added.
Shares of UAL gained 7.2% to finish Wednesday's session at $9.14, after gaining
as much as 12% during the session and leading a broader rally for airline
stocks. Shares of American Airlines parent AMR Corp. (AMR), which announced its
own capacity reduction plan recently, jumped nearly 9% before finishing the
session up 0.8% at $7.38.
Mckenzie upgraded UAL shares to outperform from neutral, with a $16 price
target, writing in a report that "UAL has a few tough quarters ahead of it," but
shares are "likely to be significantly higher six-to-12 months from now." He
noted the Chicago airline can raise about $720 million in much-needed cash
through the planned aircraft sale
The rapid surge in fuel prices has pushed several airlines into bankruptcy, and
a few completely out of business, in recent months. That has sparked concern
that large carriers, many of which have already gone through bankruptcy
restructurings earlier in the decade, could be forced to follow suit by early
next year.
UAL Chief Executive Glenn Tilton said Wednesday that the current environment "
demands that we and the industry act decisively and responsibly." UAL said that
the fuel-price surge has created a $3 billion challenge, and that the latest
actions will help overcome that challenge by 2009 provided other carriers take
similar steps.
American Airlines, the world's largest carrier by passenger traffic, was the
first to announce major capacity cuts last month. The Fort Worth, Texas, airline
plans to reduce seat capacity by 11% to 12% in the fourth quarter of this year.
Delta Air Lines Inc. (DAL), which has agreed to merge with Northwest Airlines
Corp. (NWA), has announced it will make a 10% cut in capacity. On Tuesday,
Delta's top finance official told shareholders additional capacity cuts are
likely in the fall.
Northwest and Continental Airlines Inc. (CAL) need to cut more service, McKenzie
said, but he thinks the industry is building fare-pricing power. "The industry
needs to raise average fares 15% to 25% to be profitable with crude oil trading
at $125," Mckenzie wrote.
U.S. airlines have successfully implemented several fare hikes this year, with
the average price of tickets going up about 16%. Airlines have also increased
charges for a range of services - such as checking in bags - that were
previously considered part of the ticket price, as well as identifying new ways
to extract revenue from passengers.
But analyst Ray Neidl at Calyon Securities said Wednesday that Delta executives
told analysts this week that the airline won't add a charge for the first
checked bag. "That may cause other airlines to withdraw proposed changes to
their respective baggage policies," he said.
Americans take 41 million fewer flights, survey shows
May 30, 2008
WASHINGTON (AP)
-- Nearly half of American air travelers would fly more if it were easier, and
more than one-fourth
said they skipped at least one air trip in the past 12 months because of the
hassles involved, according to an industry survey.
The Travel Industry Association, which commissioned the survey
released Thursday, estimated that the 41 million forgone trips cost the travel
industry $18.1 billion -- including $9.4 billion to airlines, $5.6 billion to
hotels and $3.1 billion -- and it cost federal, state and local authorities $4.2
billion in taxes in the past 12 months.
When 28 percent of air travelers avoided an average of 1.3 trips
each, that resulted in 29 million leisure trips and 12 million business trips
not being taken, the researchers estimated.
The survey results did not address whether travelers chose
alternate transportation to pursue any of the journeys they didn't take by
plane. The association estimated overall travel industry revenue at $740
billion.
Roger Dow, president and CEO of the Washington, D.C.-based
association, said the research "should be a wake-up call to America's policy
leaders that the time for meaningful air system reform is now."
"The air travel crisis has hit a tipping point -- more than 100,000
travelers each day are voting with their wallets by choosing to avoid trips,"
Dow said in a statement.
That's a big blow to airlines, many of which are losing money as
the industry struggles with soaring fuel costs. Carriers have raised fares,
added fees, cut capacity and scaled back expansion plans, and some small
airlines have declared bankruptcy, while Delta Air Lines Inc. and Northwest
Airlines Corp. announced plans to combine in an effort to reduce costs.
In all, 44 percent of the 1,003 air travelers surveyed by phone
from May 6 to May 13 said they would take more air trips each year if airport
hassles could be reduced or eliminated. The survey, conducted by Peter D. Hart
Research Associates Inc. and The Winston Group, had a margin of sampling error
of plus or minus 3 percentage points.
People who flew more than five times in the past 12 months were
more likely to describe air travel as frustrating, at 52 percent, compared with
33 percent of infrequent travelers, defined as people who flew one or two round
trips in 12 months, according to the survey.
More than half
of respondents said either efficiency or reliability is getting worse, 60
percent said the system is deteriorating, and 56 percent said flying is the
"bad" or "worst" part of travel -- though 62 percent said air travel security is
improving.
United Said to Have Ended Talks With US Airways
By
MICHELINE
MAYNARD and
ANDREW
ROSS SORKIN
May
30, 2008
United
Airlines told
US Airways
on Thursday that it had decided not to continue talks on a
possible merger, people with direct knowledge of the
situation said.
The chief executive at US Airways, W. Douglas Parker, was
told of United’s decision during a meeting with its chief
executive,
Glenn F.
Tilton.
The airlines are expected to announce Friday that the
discussions have ended, these people said late Thursday.
They spoke on condition of anonymity.
Both airlines plan to cite the difficulty and expense of
combining various labor contracts, particularly agreements
covering pilots, these people said.
A spokeswoman for United, Jean Medina, declined to comment,
as did a spokesman for US Airways.
United’s decision not to pursue the merger marks the second
time in a month that it has failed to reach a deal with
another major airline, only this time it was the company
that spurned the idea. The board of
Continental Airlines decided on April 27 not to
continue discussions with United, saying that a deal was not
in the airline’s best interest. United has held talks since
then with Continental about a marketing agreement.
Mr. Tilton and Mr. Parker have been the leaders among
airline industry executives in calling for consolidation,
saying that it is inevitable given the stiff competitive
challenges.
Airlines have been hit this year by steep increases in the
price of jet fuel, which has risen 82.5 percent in 12
months. Several carriers have announced plans to eliminate
routes and retire aircraft to cut costs and to raise fares.
United, which spent three years under bankruptcy protection
in this decade, lost $537 million in the first quarter, and
said it would announce a series of cost-cutting steps. Some
analysts thought the moves might be unveiled this week, but
Ms. Medina said no announcement was planned.
United’s board raised concerns about the potential merger
during a meeting on May 15. In addition, the airline faced
the likelihood that at least two directors, representing the
Air Line
Pilots Association and the
International Association of Machinists and Aerospace
Workers, would vote against the merger.
Without unanimous board support, it might have been
difficult for the airline to find lenders who were willing
to back the deal, people with direct knowledge of the
situation said Thursday.
Those unions, as well as the
Association of Flight Attendants, might have also
lobbied against the agreement in Washington.
The breakdown of the United-US Airways talks means that
Delta and
Northwest
are likely to be the only major airlines that merge before
the end of the Bush administration. The two carriers
announced an agreement on April 14 that is being reviewed by
the Justice Department. Delta and Northwest say they hope to
receive regulatory approval before the end of 2008.
This week bankers, lawyers and other advisers to United, the
second-largest traditional airline behind American, and US
Airways, the sixth-largest, said the work on the merger had
been postponed while Mr. Tilton pondered whether the
negotiations should continue.
The delay frustrated some executives at US Airways, who were
eager to proceed with discussions so that the agreement
might be reviewed before a new president takes office.
Both airlines had agreed that there could be value in the
combination, but never completed the details, such as the
location of the airline’s headquarters, which executive
would run it and the compensation that shareholders would
receive.
Last week, Standard & Poor’s Ratings Services placed both
airlines on credit watch with negative implications, meaning
that the agency was likely to cut the airlines’ debt
ratings.
On Thursday,
Fitch
Ratings also changed its outlook for both
airlines to negative from stable and cut its rating on US
Airways.
Winging It: Rising satisfaction with airport? Look to US
Airways' improvements
By Tom
Belden
May 26, 2008
The
folks who run Philadelphia International Airport were
overjoyed last week when J.D. Powers & Associates announced
that the airport ranked first in its 2008 survey of overall
satisfaction among large airports. The rest of us, me
included, were simply stunned.
The
airport moved up five spots from last year and did
especially well in terminal facilities and baggage claim.
(See the results at
www.jdpower.com.)
On
philly.com, where reader comments aren't screened for good
taste or common sense, some people alleged that the airport
bought off the rating service. Most simply said words to the
effect of "What? Are you crazy? Don't you know Philadelphia
has the world's worst airport?"
I
wondered if one airline's or airport's employees or friends
could skew the Internet survey with heavy voting.
But
talking to Jim Gaz, the company's senior director of travel
and entertainment, I learned how difficult and unlikely that
would be.
J.D.
Power has more than a million households in its online
database. To do airline and airport rankings, it carefully
screens for people who have traveled in the last month and
asks what carriers and air routes they have used in the last
year. Among those who had used large airports, 868 had come
through Philadelphia, a healthy sample size.
The
Philly group took an average of four leisure trips and five
business trips in the previous 12 months, which makes them
more-frequent fliers than most people and comparable to all
the travelers surveyed.
To be
clear, the results show customers aren't particularly happy
with any of the nation's 19 biggest airports. And there is
not much difference between the scores for No. 1 and No. 19.
Philadelphia had 690 on a 1,000-point scale, followed by Las
Vegas and Orlando at 688. Minneapolis/St. Paul finished last
in the big-airport group, with a score of 647.
Medium-sized airports with 10 million to 30 million
passengers a year, and small ones with fewer than 10
million, had scores that were only slightly better.
Even
so, how did Philadelphia climb so many rungs in a year?
Perhaps the weather was better here, reducing flight delays.
In
fact, the most logical reason is the obvious one: US Airways
really did improve its operation.
US
Airways' executives, 2,000 miles away in Arizona, realized
sometime in 2007 - two years after taking charge - that they
needed better management and more resources at their key
international hub, where they carry two-thirds of the
customers. The airline trimmed its flight schedule, which
helped its own and overall airport on-time performance.
Compared with a year ago, the number of lost or damaged bags
has gone down, along with complaints filed with the U.S.
Department of Transportation.
Likewise, the number of horror stories reported to me on the
blog or in separate e-mails and phone calls dropped sharply,
starting last fall. There's virtually no comment on the J.D.
Power rankings on our blog (http://go.philly.com/wing),
which tends to be the province of frequent business
travelers. There's no way to know how often those commenting
on the initial news actually use the airport.
In
the last year or two, I have flown to, from or through hubs
in Atlanta, Baltimore, Cincinnati, Chicago Midway and
O'Hare, Dallas Love Field and Dallas/Fort Worth, Houston
Hobby and Intercontinental, Las Vegas, Newark, Philadelphia
and Phoenix. In past years, I have used all of the 19
largest airports, and 25 of the 41 medium-sized and small
airports.
My
opinion of each airport was influenced by how smoothly I was
able to get in or out or change planes, a measure affected
by the weather as much as anything else. The only
discernible difference in the service at the airports
recently was how employees of my airline behaved.
I
have the best impressions of airports with newer terminals,
which tend to have wide concourses, high ceilings and lots
of natural light coming through large windows or skylights.
That makes it all the more notable that US Airways improved
in Philadelphia, with a basic terminal layout designed 40
years ago.
Survey: Passengers call airline service 'dismal'
Survey finds US
airline customers more unhappy about service than at any
time since 2001
May
20, 2008
NEW YORK (Associated
Press) - Passengers are more dissatisfied with airlines'
customer service than they have been in years at a time when
carriers are charging more and more for tickets and
services.
An annual
survey being released Tuesday by the University of Michigan
found customers giving airlines the worst grades since 2001,
with the industry's overall scores dropping for the third
straight year.
United
Airlines and US Airways Group Inc., which are in talks to
potentially combine into a single carrier, finished
next-to-last and last, respectively, in the university's
American Customer Satisfaction Index.
Continental
Airlines Inc. and US Airways Group Inc. registered the
biggest declines from 2007, both experiencing double-digit
percentage drops.
A familiar
bright spot in the results was Southwest Airlines Co., which
led the industry in passenger satisfaction for the 15th
consecutive year.
While
unhappiness with airlines is nothing new, this year's survey
produced "really dismal numbers," said Claes Fornell, a
University of Michigan business professor and director of
the research center that compiled the data.
"There's no
other industry anywhere that has so many basic mishaps in
terms of not delivering the basics," he said. "They're
supposed to deliver passengers with their luggage to a
particular destination within a certain timeframe, and they
frequently fail to do that."
Asked why
scores have worsened so significantly, he said airlines'
management has to be blamed despite some factors beyond
their control such as higher jet-fuel costs and congested
airports.
But
passengers also are not blameless, according to Fornell.
"They buy
primarily on price, and very little else," he said. "The
result of that is very low service and a business model of
cost-cutting that really leaves no one happy, certainly not
the businesses, the shareholders or the flying public."
About
26,000 people responded to the survey during the first
quarter of this year, rating their level of satisfaction as
customers of companies in a variety of industries, including
airlines. An American Customer Satisfaction Index, on a
scale of 1 to 100, was created based on the responses to
questions about overall satisfaction, intention to be a
repeat customer and perception of quality, value and
expectations.
The index
for the airline industry as a whole fell to 62 from 63 last
year, barely above its historical low of 61 in 2001.
Southwest led the way with an index of 79, up from 76 last
year.
"We're
always excited and thrilled that we can offer some of the
best customer service in the industry," Southwest
spokeswoman Christi Day said.
After
Southwest came a huge drop in customer satisfaction, with
scores of 62 at AMR Corp.'s American Airlines and
Continental. Delta Air Lines Inc. scored 60, and Northwest
Airlines Corp. slipped to 57 from 61 in 2007. US Airways'
score dropped to 54 from 61 a year ago, taking over the
bottom spot from United, whose score held at 56.
Tempe,
Ariz.-based, US Airways acknowledged its need to improve.
"While we
still have work to do, we're confident that the investments
we're making in reliability, convenience and appearance are
making a positive impact," spokesman Morgan Durrant said. He
noted that the carrier had the best on-time performance of
the 10 largest airlines in first-quarter statistics compiled
by the U.S. Department of Transportation.
A
spokeswoman for Chicago-based United, Robin Urbanski, said
the carrier also recognized it has more work to do and is
"working hard to fix the basics and provide a more
consistent level of service."
Fornell
said it is worrisome that the four big airlines looking to
consolidate _ Delta with Northwest, as agreed to last month,
and United and US Airways _ are at the bottom of the
industry in customer satisfaction.
"When it
comes to mergers, combining two negatives doesn't make a
positive," he said.
US Airways spent nearly $429,000 lobbying in 1Q
US
Airways spent nearly $429,000 lobbying on aviation funding,
other issues in 1st quarter
May
20, 2008
NEW YORK
(Associated Press) - US Airways Group spent nearly $429,000
in the first quarter to lobby on federal aviation funding
and other issues, according to a disclosure form.
The airline
lobbied on legislation dealing with funding for the Federal
Aviation Administration, homeland security matters,
insurance issues and more, according to the form posted
online April 21 by the House clerk's office.
Tempe,
Ariz.-based US Airways spent more than $1.1 million to lobby
the federal government in 2007.
The general
aviation industry and commercial airlines disagree over how
much each should have to pay for upgrading the nation's air
traffic control system and other aviation programs. Congress
has approved a temporary measure to continue FAA funding
through June, but the larger issue of reauthorizing the
agency is unresolved.
The House
passed a bill in September that would have increased the jet
fuel tax for noncommercial planes, the aviation gasoline tax
and the cap on fees airports charge passengers for capital
improvements. Commercial airlines and the Bush
administration say the bill does not fairly link fees to
system use, but the aircraft owners' association and other
general aviation groups oppose user fees.
The Senate
was working on similar legislation, but debate fizzled out
May 6 after most Republicans said they were barred from
freely offering amendments and blocked an effort to move it
forward _ a vote that could doom |