Category Archives: Airplanes and Airports

Record Earnings for Airlines, but Challenges Remain in Dallas / Ft. Worth

By: Seth Miller / Published July 27, 2015

delta-airbus-airbus-a319-114-at-lax-2009_13103Even as the US airlines report record profits for Q2 2015 – mostly based on a significant drop in fuel prices – there are signs of weakness in certain aspects of their operations. For the “Big Three” network carriers, the pressure on yield has shown itself to be relatively concentrated across the group. For Delta Air Lines the three most challenging cities in the quarter were Dallas / Ft. Worth, Chicago and Orlando. For United Airlines it was Dallas / Ft. Worth, Chicago and Houston (pinched at the high end by a 30% drop in corporate Oil & Gas revenue and at the low end by a significant expansion from Spirit Airlines). American Airlines saw similar challenges at DFW, though it suggests that performance at Chicago was above average for the quarter.

RELATED: United Posts Record Profits But Strong Headwinds Remain

The new Southwest livery on Heart Two. Image: Courtesy of Southwest Airlines

The new Southwest livery on Heart Two. Image: Courtesy of Southwest Airlines

And then, there’s Southwest Airlines. The carrier reported record profits for the quarter, just like the other three airlines. And it has significant operations in many of the same cities. Chicago and Houston are hubs, and Orlando has 40 non-stop destinations available. And unlike  the other three carriers, Southwest is seeing a tremendous uptick in performance at Dallas. CEO Gary Kelly described the performance at Love Field as “remarkably strong, surpassing system average margins and returns.” So, why the difference?

image

Yes, the other carriers have average numbers higher than Southwest’s for yield and PRASM but they all cited softness at Dallas as dragging down their numbers while Southwest says it is above its averages at Love Field. It is easy to attribute the strong performance to Southwest’s near-monopoly position at Love Field. The carrier operated as many as 166 daily flights in Q2 and will be up to 180 in Q3; it controls 18 of the 20 gates and has strongly resisted efforts from others to access those gates. And, yes, this is the first year where the carrier has been able to fly longer segments out of Love Field during a Q2 as the Wright Amendment has finally been retired. But is that the whole story? Not really.

During the American earnings call executives noted that there were definitely yield pressures at DFW thanks to increased capacity and competition from across town, but also that it is the ULCCs where the strongest competition is showing. In this case that mostly means Spirit Air.

Image: Courtesy of Spirit Airlines

Image: Courtesy of Spirit Airlines

Spirit operates to 24 destinations non-stop from DFW and, while that’s a fraction of the coverage American or Southwest can provide, it turns out to be enough that it is pressuring yields for the others. American’s President Scott Kirby stated outright that “customers care about price; we’ve won back some market share which we lost by not being cost competitive.” Later in the call it was noted that the company is matching the ULCCs and LCCs in significantly more markets than it was a year ago. For the other carriers there are similar pressures. In 2011 when Spirit showed up at DFW it was mostly ignored. That is no longer the case today.

And so, despite carrying well more than half the traffic in the Dallas Metroplex region, American is feeling significant pressure from the smaller players. Spirit is a quarter the size of Southwest in Dallas and one twentieth the size of American, yet it can still dictate some pricing and capacity decisions.


IMGP2946Seth Miller is an AirwaysNews.com contributor specialized in Loyalty Marketing, Connectivity and Passenger Experience and will drop everything if he gets an opportunity to go flying. Bit by the travel bug 30 years ago, Seth flies ~200,000 miles annually. Follow him on twitter at @WandrMe, or his site at The Wandering Aramean blog.


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DFW Airport Battles for the International Saddle

By: Alex McIntyre / Published July 23, 2015

On June 2, American Airlines officially operated its first international Boeing 787 Dreamliner flight, departing from its DFW hub for Beijing (PEK). Two days later, it deployed its new Dreamliners on two more international routes, flying to Shanghai (PVG) and Buenos Aires (EZE), again from DFW.

Photo courtesy of Ian PetchenikThe airline wasted little time in putting its Boeing 787’s to use internationally, deploying them only about a month after testing the aircraft out with trips to and from Chicago O’Hare (ORD). Sean Donohue, CEO of DFW Airport, lauded the move, celebrating its impact on the area: “The [flights open] markets for business to tourism for the entire region,” he said in May. He estimates just the Beijing addition alone will drive $200 million in economic activity, reflecting the significance vibrant air service can offer.

Donohue’s comments exemplify DFW’s broader push to augment its international traffic after lagging behind other similarly-sized airports for decades. Dallas-Fort Worth International Airport ranks third in the nation in total passenger traffic, but falls tenth in examining just international activity. Over the past several years, DFW has deepened its relationship with its primary tenant, American Airlines, while simultaneously forging new relationships with foreign airlines, luring the likes of Qatar, Emirates, and Etihad to the airport. Additionally, the airport works to upgauge existing service, convincing Qantas to operate its flight to Sydney (SYD) with an Airbus A380 and to forego the Boeing 747.

dfw-american-airlines-ops-tower-view-4-term-c_27269DFW’s aggressive pursuit of international traffic at least partially stems from the freeing of Dallas Love Field (DAL), its competitor down the street. A federal law known as the Wright Amendment formerly limited non-stop commercial flights from Love Field mainly to contiguous states ever since the inception of DFW Airport, making DFW the far more attractive option for longer domestic journeys. However, October 13, 2014 marked the sunset of those restrictions, turning the competitive edge to Love Field, a more centrally located and more convenient airport to use.

Love Field houses only twenty gates, a number which DFW easily dwarfs with its five terminals and well over 100 gates. However, DFW realized that the freedom to fly domestically at Love threatened to capture some slice of its passengers. Unlike the airlines, which maintain incentives to limit capacity to maximize profit, individual airports strive to continually add capacity given the available space. Each additional passenger that steps through the terminals represents more revenue and generally more profit for an airport, from direct sources such as the Passenger Facility Charge (PFC) imposed on every flier, to more indirect streams, like potential concession usage and parking fees.

Although DFW and Love Field interact competitively on domestic routes, federal law continues to prohibit international flights from Love. DFW’s continually expanding international presence capitalizes on a market in which Love Field will never hold a leg. More than likely DFW figures that some domestic traffic trickling over to Love Field is inevitable, so it intends to add more traffic to the system by looking abroad. Its international craze almost certainly reflects a competitive response to the events across town as the two airports compete for local passengers in the same market.

Its most formidable competitor in this market lies a bit further south: Houston George Bush Intercontinental Airport (IAH). In terms of international business Houston, seeing approximately 2.5 million international visitors, widely outpaced DFW, running behind with only 1.7 million. The intensifying battle between DFW and IAH demonstrates the need for a two-pronged approach, one which fosters good relations with the airport’s dominant airline as well as foreign carriers. Travelers primarily choose airlines, not airports, so working cooperatively with airlines functions as a key ingredient to an airport’s success.

A view from American's DFW operations tower. Image courtesy of AirwaysNewsDFW, due to its location in the Southern region of the United States, traditionally derives much of its international traffic from Latin America. This played to the strengths of American Airlines, which focuses internationally on this area while United and Delta primarily prefer to look toward Asia and Europe. But holes remained for passengers wishing to travel to other parts of the world – unacceptable for an airport of this size. Without the ability to effect American’s business model, DFW opted to fill these gaps by convincing foreign airlines to offer service from their hubs to Dallas.

Donohue has set aside a sum of $50 million to dangle as incentives to coax new foreign carriers to the airport. These substantially reinforce DFW’s efforts to garner new service, and in four years it has dotted eighteen new destinations. This strategy works well, but still leaves some room for improvement, as foreign carriers’ interests lie only in flying to their hubs. To truly feed international travel, DFW needs American – specifically, its codeshares and joint ventures with these airlines.

DFW also relies on American spreading its wings into new parts of the world, which American has attempted more aggressively in China, even with these routes historically losing money. American proclaimed its commitment to these Chinese routes, with CEO Doug Parker considering them important “investments” in a “strategically important” part of the globe.

For its part, DFW has invested heavily in improving the passenger experience, a more relevant component to those making a trip of tremendous length. Back in 2005, DFW embarked on this mission by opening Terminal D, a state-of-the-art facility glittering with shiny hallways and easily accessible customs facilities mainly directed to supporting international flights. For passengers connecting to other parts of the United States, DFW is currently undertaking a renovation of existing terminals, which appear quite dated tracing back to the 1970′s. A more attractive airport leaves a stronger impression with customers, who might become return business if only for a brief connection.

DFW also encourages new service by minimizing its cost per enplaned passenger (CPE), an industry metric that measures the average costs to an airline imposed by each passenger for operating at an airport. DFW’s cost per enplanement routinely falls below that of other large airports; in 2013, DFW reported a $7.20 CPE, while many of its peers were over $10, some far more so. When spread over a large number of passengers, a low CPE can make many otherwise unprofitable routes viable.

DFW’s international blitz has landed it the designation of the fastest growing airport in terms of international traffic. With other competitive threats lurking nearby, in addition to the continual duel with its peer airports nationwide, DFW envisions burgeoning international capacity as the way to the saddle in Texas and the key to preserving prominence nationally.

PHOTO GALLERY: Dallas / Ft. Worth International Airport, DFW, Terminal Photos, Planespotting, & History – Texas,


Photo May 25, 0 53 04Alex McIntyre joined AirwaysNews.com to more heavily pursue his relentless passion for the airline industry. He lives in Dallas, Texas, growing up in the shadows of two major airlines’ headquarters and in a vibrant aviation-minded city. Alex attends Emory University in Atlanta, Georgia, double-majoring in business and political science.


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Raising The Roof: Boeing Reveals Progress on New 777X Composite Wing Center

Story and Photos by Chris Sloan from Everett / Published July 20, 2015

BOEING MEDIA DAYS 2015 - COMPOSITE WING CENTER-9The commencement of the first assembly of Boeing’s next generation of its eponymous 777X is set to begin in less than 2 years from now. The largest twin-engined aircraft and longest airliner ever produced, the 777-9X and its stable-mate, the 777-8X will be carried aloft by an all new carbon fiber reinforced polymer (CRFP) wing. At 235 feet, 6 inches long, this enormous composite wing unfurls the longest wingspan ever manufactured by Boeing. This gargantuan assemblage handily exceeds the 747-8’s 224 feet, 7 inches foot wingspan and its predecessor 777-300ER/200LR’s wingspan of 199 feet, 11 inches. Only the Airbus A380’s wingspan, measuring at 261 feet, 1 inch exceeds the wing-span of the 777X. The 777X’s wing is so enormous in fact that the last 24 feet of wingtips will fold to accommodate current gates and taxiways. This feature was originally conceived for the first generation Boeing 777 as an option, but given the enormous scale of the 777X, the folding wing will be standard on both new ‘X’ models.

A model of the original Boeing 777 with the never adopted folding wing option.

A model of the original Boeing 777 with the never adopted folding wing option.

Epic Wing. Epic Numbers.

Mark Gosnold, Boeing Construction Project Manager shows off the behemoth Composite Wing Center to journalists in Everett.

Mark Gosnold, Boeing Construction Project Manager shows off the behemoth Composite Wing Center to journalists in Everett.

To accommodate the fabrication of such a massive wing, Boeing broke ground last October on the Composite Wing Center (CWC) in Everett. Boeing is investing over $1 billion in the facility, but this wasn’t a sure thing, at least in Everett. Construction began less than a year after a machinist’s labor vote guaranteed final assembly of the 777X in Washington State. Located on the north side of the main final assembly building, the new 1.2 million-square-foot facility is unsurprisingly a facility of epic proportions. In less than 6 months since groundbreaking, the skeleton and super-structure are rising at an impressive pace. During a tour and briefing of the under construction factory, Mark Gosnold, Boeing Construction Project Manager who is leading the build of the Composite Wing Center proudly rattled off superlative after superlative.

  • The 1,250 feet long, 950 wide, and 100 feet high Composite Wing Center boasts a steel superstructure that will have a 450-foot span free of obstructing columns – an open work area more than 100 feet wider than any of the assembly bays in the final assembly line.
  • 17 full-size construction cranes are located on-site
  • 1,050 employees, increasing to 1,200 people are working in 2 shifts from 5:30AM to 2:00am.
  • The erection of the building and its systems are expected to account for approximately 3.5 million man-hours of labor.
  • When complete, the CWC will have consumed 33,000 tons of steel, 480 miles of electrical cable, 80,000 linear feet of process piping, and 160 yards equaling 170,000 tons of concrete.
  • Due to its size and location in seismically active Washington State, the CVC’s pilings of up to 8 feet in diameter are being driven up to 100 feet into the ground.
  • The CVC covers 27 acres of land, partially cleared by the demolition of older structures.

Warming up the Ovens

Three gigantic ovens called autoclaves (with a diameter of 28 feet and a length of 120 feet) will be used to “bake” the carbon fiber forming the wing’s composite skins. Once complete, the enormous wings will be wheeled on dollies over to the 777X Final Assembly Line where the skins and spars are also being built. The first of these autoclaves, each tipping the scales at 1.2 million pounds and measuring 120 feet long, has already arrived from nearby Paine Field, -ahead of its scheduled arrival in September. Even though their fabrication place at Paine Field is less than 2 miles away, it will take up to 5 days to move the autoclaves to the new CWC. The building is due to be completed less than a year from now in May 2016. One has to wonder if wing will fabrication will begin prior to the building’s completion, much like Boeing’s famed Incredibles did with the 747 nearly 50 years ago.

The site of the CWC is seen behind the Final Assembly Hall.  Image provided by: Boeing

The site of the CWC is seen behind the Final Assembly Hall. (Photo Credits: Boeing)

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An aerial view shows the building is quickly getting a roof over its head. (Photo Credits: Boeing)

RELATED: Minding the Gap: Boeing Readies the Transition into the 777X Program with an Enhanced 777-300ER

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The Airbus A350 XWB Visits Delta in Atlanta

By: Benjamin Bearup / Published July 15, 2015

Airbus A350 continues gaining momentum. After its presentation during the Paris Air Show and the delivery to Vietnam Airlines -its second worldwide operator- last month, the airliner has now arrived to the United States as part of its tour in the Americas.

RELATED: Vietnam Airlines Takes Delivery of its First Airbus A350 XWB

RELATED: Airbus Kicks Off A350 XWB Americas Tour

Monday afternoon, an Airbus A350-900 (F-WWCF, MSN 002), touched down in Atlanta wherein it will be presented to Delta Air Lines, who ordered 25 A350XWB aircraft as part of their major widebody order placed in 2014.

RELATED: Delta Snubs Boeing Again with Airbus Widebody Aircraft Order

After landing in Atlanta Monday, the aircraft was brought to a Delta Technical Operations Center (Tech Ops) hangar where the aircraft is being made available to Delta employees during its three-day visit.

A rendering of Delta's A350.  Image Courtesy of Airbus

A rendering of Delta’s A350. Image Courtesy of Airbus

Delta is scheduled to receive their first A350-900 in the second quarter of 2017, with five more to follow during this year. This will line Delta up as the second American carrier to receive the A350 shortly after American Airlines. Neither airline will be the first to operate the A350 in the United States however. Qatar Airways will have that distinction on January 1st, 2016 on the Doha – Philadelphia route. Brazilian carrier TAM will follow shortly after, offering daily flights from Sao Paulo to Miami in March.

Two Delta employees examine the A350. Photo Courtesy: Benjamin Bearup/ AirwaysNews

Two Delta employees examine the A350. Photo Courtesy: Benjamin Bearup/ AirwaysNews

For Delta, having the A350 in Atlanta offers an invaluable experience to hundreds of employees visiting the aircraft. Michael Thomas, Delta Corporate Communications said “We got a lot of value today from entry into service teams getting a good chance to really see the aircraft up close and personal. We had everything from ground support equipment teams all the way through engineering, and Tech Ops teams who are going to maintain the engines and cabin.”

When talking about the importance of the A350 visiting Atlanta, Thomas assured that “Atlanta is the home base of Delta Airlines. This is where our headquarters is, this is where the bulk of the people who did the real heavy lifting to bring this airplane into our fleet are.”

Delta employees slowly trickled in throughout our visit to view the next generation aircraft throughout our visit. An employee seemed to echo the consensus of the crowd: “It’s a beautiful airplane. Our customers and our flight crews are going to love it.”

Delta says it is too early to tell how the interior of their A350 will be configured, however, the airline has an ample opportunity to revolutionize its long-haul product. Once Delta takes delivery of the first aircraft, it will likely undergo through proving flights so that crews may learn the ins and outs of the aircraft.

The A350 is part of a multi-million dollar revamp of Delta’s long haul fleet that will welcome the 25 A350-900 and 25 A330-900neo aircraft. The A350-900 will predominantly be flown on Pacific routes to the Asian theater according to Delta, replacing its aging Boeing 747-400 fleet, given the suitability of this next-generation aircraft for ultra-long haul routes.

While Detroit and Minneapolis hubs will have deployed most of Delta’s A350 fleet, the airline did not rule out the possibility of Atlanta hosting several A350-900 routes. The A330neos will predominantly be used on Atlantic routes and medium haul international routes.

 

 

Prior to the first delivery, Airbus and launch customer Qatar Airways previewed the first production A350 to the world. The Qatar A350 instantly received rave reviews from around the industry. Qatar Airways took delivery of the first production A350 on December 22nd of 2014 as a new era in commercial aviation began. Since then, Qatar has taken delivery of four A350 aircraft, with a fifth coming shortly. The A350 had a notable entry into service due to the lack of problems the program and launch customer Qatar Airways faced, though initial production and deliveries have lagged behind expectation. Qatar quickly achieved a 99% dispatch rate with the A350 upon entry into service.

On June 30th, Vietnam Airlines became the second carrier to take delivery of the A350. The carrier wasted no time putting the A350 into service with the first proving flight occurring just three days after delivery. The third scheduled operator and European launch customer of the A350 is Finnair with 19 A350-900 aircraft on order. Their first aircraft is painted and preparing for test flights in Toulouse, France with delivery scheduled in September.

RELATED: On-Board Qatar’s A350 XWB Media Flight

RELATED: Qatar Airways Takes Delivery of World’s First Airbus A350 XWB

So far, the A350 Americas tour has visited three out of eight cities scheduled. The first stop was in Brazil, where the aircraft visited TAM and Azul Linhas Aereas Brasileiras, both A350 customers. Also, the aircraft made a visit to Colombia for the first time to visit Avianca -another Latin American customer.

A350-Test-Flight-13In Colombia, the aircraft performed a fly-by over Medellin during the F-Air Colombia 2015, and underwent autoland tests at El Dorado International Airport taking advantage of Bogota’s high altitude. Frank Chapman, Airbus Experimental Test Pilot, ran the A350 through 13 touch-and-go landings to prove the autoland features at 8,500 feet. By completing these tests, the airliner may opt now for an autoland certification up to 9,200 feet -an upgrade from the current 7,000 feet certification.

A350 in Delta in Atlanta Photo Courtesy: Benjamin Bearup/ AirwaysNews

A350 in Delta in Atlanta
Photo Courtesy: Benjamin Bearup/ AirwaysNews

After its visit to Delta Air lines, the A350 will fly to Newark and Chicago O’Hare to visit United Airlines, customer with a logbook for 35 units. After Chicago, the aircraft will stay in Milwaukee for two days ahead to the aerial and static display at EAA Airventure in Oshkosh. American Airlines will not host the aircraft this time. In May 2014, the airliner visited its Dallas/Ft. Worth hub, prior to undergoing extreme climate testing at Eglin Air Force Base in Florida.

While each of the US big three carriers ordered the A350, each order is unique. Delta opted to order 25 of the more popular A350-900. This is likely due to favorable production slots offered by Airbus that Boeing simply could not offer with the 787. American Airlines inherited their order for the A350 from US Airways in the form of 18 A350-800 and 4 A350-900 aircraft. American soon followed the industry trend of converting all A350-800 aircraft to the larger -900 variant while keeping the total number of frames at 22. United Airlines ordered 25 A350-900 aircraft in March of 2010, and in June 2013, converted the order to 35 of the larger and longer range A350-1000.

The Americas tour will likely mark one of the last flying world tours Airbus will conduct with the A350. Airbus expects to have four out of the five test aircraft sold or to have found a new owner by the end of this year. Two of the aircraft Airbus will sell are fitted with heavy test equipment, while two aircraft are fitted with mock cabins used for route proving purposes. Airbus plans on keeping MSN1 for further testing and future improvements.

With airlines such as Qatar and Vietnam taking delivery of their first A350s, the Americas tour marks a ceremonial close to a successful career at Airbus for MSN2, the carbon livery aircraft.

Author’s note: You can follow the Airbus A350 as it tours the Americas on Facebook, Instagram, and Twitter using the hashtag: #A350XWBTour

Editor‘s noteKeep up with AirwaysNews by subscribing to our weekly eNewsletter. Every Saturday morning, subscribers get a recap of our top stories of the week, the subscriber-only exclusive Weekend Reads column wrapping up interesting industry stories and a Photo of the Week from the amazing AirwaysNews archives. Click here to subscribe today!

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Analysis – The Battle For Seattle: Alaska vs. Delta – Part Three

By: Vinay Bhaskara / Published July 8, 2015

(Editor’s note: Following is the final part of a three-part series written by AirwaysNews author Vinay Bhaskara. Find herein the links to Part one and Part two).

Of course the question that most people want answered about the battle in Seattle is… who’s going to win? In the short run, the answer may very well be the airport. Traffic growth at Sea-Tac is sizzling, with April 2015 (the most recent available data) showing a 13.2% increase in passenger traffic YOY. Seattle is on pace to service more than 43 million passengers this year, a marked rise from 34 million just two years prior. These additional passenger boost concession volume and revenues (through a myriad of mechanism), and the contest between Delta and Alaska has expanded the number of nonstop destinations available from the airport to unprecedented levels.

Gate space the primary concern

CGI conceptualization of North Satellite Terminal  Courtesy: Port of Seattle

CGI conceptualization of North Satellite Terminal
Courtesy: Port of Seattle

But despite these positive figures, the gate situation remains a massive drag on growth. Delta only has access to 11 gates at present in Seattle, but CEO Richard Anderson has indicated that the airline would prefer to have access to 30. In practice, this would largely result from increased utilization of so-called common use (CUTE) gates. Alaska has already had to resort to using CUTE gates after it boosted capacity by 11% at Seattle this spring. And there are no easy solutions on the horizon. The airport is embarking on a $512 million project to add eight gates to its North Satelite, but those gates are several years away. In the meantime, the airport might have to resort to using hardstands to board and deplane passengers. Regardless of its prevalence at European hubs such as Frankfurt and Paris, that is not a viable or acceptable solution for US travelers. But until Seattle figures out a gate space solution, there might be a natural cap to Delta and Alaska’s ability to pour capacity into the market.

Who has the edge?

As I mentioned in Part 1, the current DOT revenue data is mostly useless because it still predates a lot of Delta’s domestic buildup. But on a capacity and frequency basis, it is still possible to assess the relative strength of the two carriers’ networks at the airport. On a capacity basis, Alaska still controls 49.9% of seat capacity and 33.6% of ASMs at the airport versus 20.2% and 27.2% respectively for Delta. Delta holds the edge in international seats and ASMs at 38.6% and 45.5% versus 19.2% and 9.8% for Alaska, but Alaska still dwarfs Delta in the overall market. This conclusion is reinforced by a cursory analysis of frequency and network. Picking a random weekday in January 2016 (after most announced routes have begun), Delta will offer roughly 110 daily departures from Seattle versus just under 300 for Alaska. And on the Saturday of the same week (artificially boosting Delta who operates a lot of Saturday-only service), Alaska offers nonstop service to 84 destinations against just 41 for Delta. All capacity figures courtesy of CAPA via OAG

Despite Delta’s massive buildup, it still is in Alaska’s shadow when it comes to presence in the Seattle market. And that raises the question of what Delta has left to add from Seattle. On the long haul front, there are no European destinations that really make sense, and Asia is largely settled for the time being (Taipei has an outside shot of happening) until the secondary China market matures or Osaka recovers its viability. So most of the expansion will be in North America. Edmonton and Winnipeg (the latter of which Alaska doesn’t serve) make a lot of sense. Albuquerque is a relatively major hole in the Western US, and the four Texas cities plus Chicago and St. Louis are good feeders for Asia. And there are probably several transcon markets that have some viability and reasonable demand The nice thing for Delta in these types of markets beyond the West Coast is that despite Alaska’s first mover advantage, they have intrinsic point of sale strength there due to their nationwide network.

Then again, Delta could instead decided to continue to deploy an army of regional jets to Walla Walla, Yakima, Wenatchee, and the like. Only time will tell. Regardless of how Delta expands its network, it is almost certain to do so. And that raises the question of how sustainable the current situation in Seattle is. The last major market to see this type of sustained competition between two major network airlines was Denver where United and Southwest eventually settled into an uneasy co-existence after Frontier exited the market. In Seattle, the legacy carrier is the aggressor, but that experience is probably instructive. Under present economic conditions and at the current price of fuel, this situation is probably sustainable. But when the next recession hits, all bets are off. In the meantime, Seattle residents can expect an ever-expanding windfall of additional service and sharply lower airfares.

ANALYSIS: The Battle For Seattle: Alaska vs. Delta – Part One

ANALYSIS: The Battle For Seattle: Alaska vs. Delta – Part Two

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LOT Decides to Go for Growth

By: Alan Dron in London / Published July 7, 2015

In a major initiative late last month, LOT Polish Airlines CEO Sebastian Mikosz announced the Warsaw-based carrier’s intention to double its fleet by 2020, increase its operations by 60%, double passenger numbers to 10 million annually and become what he described as the largest network carrier in New Europe.

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Sebastian Mikosz, LOT CEO.

In Mikosz’s terms, “New Europe” is an area that extends beyond the traditional boundaries of Eastern Europe, extending from Finland in the north to Turkey in the south. Those two particular nations are the homes of major carriers, Finnair and Turkish – particularly Turkish, which has quietly become a behemoth over the past 15 years. However, LOT believes there remains a market of around 175 million people that it can tap, particularly as that region’s economic growth rate is four times higher than that of the troubled Eurozone.

Mikosz believes that part of its drive for regional leadership is making far greater use of its hub at Warsaw Chopin Airport. “We have already increased our transfer capabilities by 40%. Together with Chopin Airport we have a potential to consolidate the fragmented markets of New Europe and to provide it with a leading transfer hub for intercontinental connections.”
The airport and LOT are working to cut minimum connection times to as little as 35-45 minutes, some of the shortest in Europe. And as the airport is currently operating at less than half of its annual capacity of 20 million passengers, this gives plenty of room for expansion.

Like many legacy carriers, LOT has realized there is more money to be made in long-haul services than short-haul, and intends to make the former its growth engine. With this in mind, it has recently announced plans to open new routes next year to Tokyo Narita, Seoul and Bangkok and hopes to announce two more long-haul destinations later this year.

The Tokyo route is particularly significant; LOT makes the point that it the first direct service to the Japanese capital not just from Poland but Eastern Europe, an indication that the region is underserved in terms of long-haul flights.

A major factor behind the new emphasis on long-haul flights is the arrival of its fleet of six Boeing 787s, which have provided much more economical services than the 767s they replaced and are, according to Mikosz, the most profitable part of the business. This has helped transform the company’s finances. Last year, it made its first profit for seven years, 99 million zlotys ($26 million). Modest by US standards, but a definite improvement on previous years.

LOT Polish Airlines signed one-year lease to Air Europa for one Boeing 787-8 Dreamliner while the Spanish Carrier receives its own fleet of the type, expected to be delivered in 2016. (Photo Credits: Carlos Lugo, MIA)

LOT Polish Airlines signed one-year lease to Air Europa for one Boeing 787-8 Dreamliner while the Spanish Carrier receives its own fleet of the type, expected to be delivered in 2016. (Photo Credits: Carlos Lugo, MIA)

However, LOT also intends to be more active in fighting its corner in the crowded European market. Rather than merely defending its local position of an ethnic carrier it wants to start competing actively for market share in Europe. With this in mind, it has announced that it is starting new services to cities such as Venice, Cluj-Napoca (Romania) and Ljubljana (Slovenia).

It also intends to restore services to several destinations from which it had to pull out as part of a major retrenchment some years ago. In return for state aid, the European Commission insisted that LOT should drop many destinations, so that the infusion of cash did not skew the level playing field against its competitors.

So, the stylised goose on LOT’s tailfins will soon once again be seen at Athens, Barcelona, Nice, Zurich and Beirut. And from January 2016 flights to Belgrade, Düsseldorf, Yerevan (Armenia), Chisinau (Moldova), Zagreb (Croatia) and Gdansk – Cracow will also be restored.

“We have all the assets to become a regional leader,” argues Mikosz. “We already have a strong position in relation to other network carriers in New Europe and access to the largest regional market, which will grow intensively. Our Warsaw hub is perfectly located, efficient and is the largest one in this part of Europe.”

However, LOT will have a fight on its hands. A large slice of the intra-European market has been captured by LCCs. And Eastern Europe is the heartland of Wizz Air. Less well-known outside Europe than Ryanair and EasyJet, Hungary-based Wizz Air has a fleet of 61 A320s and competes heavily on price.

LOT’s biggest strategic requirement is simply to grow its business: “We need to focus on building the effect of scale,” says Mikosz. “Insufficient scale of operations is currently LOT’s biggest problem. There is absolutely no reason why in five years’ time we should not become an airline of a size comparable to Austrian Airlines, Finnair, TAP or Air Lingus.

“We operate in a fast growing market and, without development, our market share will be rapidly declining. Without expanding the network we will be very susceptible to pressure from the competition.”

This will require a fleet of “at least 70-80” aircraft by 2020, compared to today’s tally of 44.
That will require more money. Which, in turn, means finding a new investor. But LOT reckons that its new-found financial stability gives it the best chance for years to do so.

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ANALYSIS: DOJ Overreaches with Investigation Into Airline “Collusion”

By: Vinay Bhaskara / Published July 6. 2015

The US Department of Justice (DOJ) announced that it was investigating US airlines for collusion Wednesday afternoon, building a striking parallel to current efforts by major US carriers to restrict access to the U.S. market for Middle Eastern airlines and European low-cost carrier (LCC) Norwegian Air Shuttle. The DOJ has subpoenaed several major U.S. airlines as part of its investigation into “possible unlawful coordination” to limit capacity and boost airfares. News of the DOJ investigation comes roughly two weeks after Connecticut senator Richard Blumenthal wrote a letter to the DOJ asking them to probe possible collusion amongst US airlines.

RELATED: DOJ Subpoenas Airlines over Alleged Collusion The DOJ has broad latitude in proving collusion.

According to the DOJ website:

Most criminal antitrust prosecutions involve price fixing, bid rigging, or market division or allocation schemes. Each of these forms of collusion may be prosecuted criminally if they occurred, at least in part, within the past five years. Proving such a crime does not require us to show that the conspirators entered into a formal written or express agreement. Price fixing, bid rigging, and other collusive agreements can be established either by direct evidence, such as the testimony of a participant, or by circumstantial evidence, such as suspicious bid patterns, travel and expense reports, telephone records, and business diary entries.

The DOJ’s investigation is the most far-reaching probe by the U.S. government into the behavior of U.S. airlines in a long while, perhaps ever. Still, the investigation has a high burden of proof. In order to prove that U.S. airlines actually colluded, the DOJ must not only prove that the actions of the U.S. airlines reduced competition, but also that these illegally communicated with each other in order to achieve this state of reduced competition.

This second requirement would appear to be the biggest weakness in the DOJ’s case. It appears that the DOJ is (at least partly) relying on public statements made by airline executives at various conferences, as well as the more common practice of providing capacity guidance to investors and the media to prove its case. This seems like weak evidence at best. There’s always the possibility that the DOJ has some sort of whistleblower at one of the U.S. majors, but it seems unlikely given how many resources and employees U.S. carriers devote to regulatory compliance that they’d slip up.

Airlines are certainly a convenient political target given the broadly unfavorable consumer views of U.S. carriers (excluding Southwest and JetBlue?), and the veritable smorgasbord of negative stories from a media primed to view everything involving businesses almost exclusively through the lens of the consumer, without considering the other stakeholders involved (more on this later). Given that context, one almost wonders if the DOJ is looking to score cheap political points by extorting a few million dollars per airline to make this issue go away quickly. Airline stocks are certainly being punished enough such that executives have a pretty strong incentive to do exactly that.

The other plausible outcome from this case is a consent decree (basically a diktat from a federal agency saying “stop this practice or else…”) that would require airlines to stop issuing specific numbers for capacity guidance, or even to stop making public statements about capacity altogether. But airlines primarily issue those statements for the benefit of their owners (i.e. shareholders). They’re not required by SEC regulations, but they are pretty standard practice worldwide because they allow an airline’s owners the ability to react in real time to an airline’s plans and force adjustments that they deem necessary, which is a pretty fundamental shareholder’s right. Moreover, even if the DOJ bans capacity guidance, airlines will just shift to providing PRASM guidance, which will send enough of a message regarding capacity that shareholders will be able to pressure airlines into doing what they want anyway. The DOJ also technically has the ability to break up the US majors, but that’s not a realistic outcome.

Contextualizing the Problem

The argument for the anti-competitive market situation largely rests on two data points: capacity discipline by U.S. airlines and sharply rising airfares. To start with the latter, the rise in airfares is a common talking point. For example, in a CNN report on the probe yesterday, a pundit noted that “Fares have skyrocketed…. according to government data, airfares have increased 16.4% since 2010.” But this data is misleading if not outright disingenuous. First and foremost, using 2010 as a base doesn’t make sense given that 2010 was still in the midst of recovery from the global financial crisis in late 2008-2009. A better design would begin in 2008, which has the added benefit of preceding enough of the mergers such that you start with a fundamentally more competitive industry than today. Then you have to talk about the use of base fares, which are affected by a variety of factors, most importantly stage length. You would expect airfares to rise as stage length rises, and given the 6.6% rise in stage length for U.S. airlines from 2008-2015, that immediately wipes away part of the rise. Luckily, airlines have metrics that account for length of flight, namely PRASM and yield.

While PRASM is the more widely reported metric, PRASM is also affected by load factors and the balance between capacity and demand, so a better metric is adjusted yields, which reflect the average price a passenger is paying for a seat-mile on an aircraft. So just how monstrous is the rise in airfares per this metric? Between 2008-2015, they went up 6.6%, a whopping 1.08% per year. Meanwhile, stage-length adjusted cost per available seat mile (CASM) rose 5.4%. 1.2 percentage points more than costs is what fares have risen since 2008. The inclusion of ancillary revenue like checked baggage fees and change fees complicates the picture, but even so, out of pocket travel costs don’t end up coming out much higher than CPI inflation over the period, at 9.9%.

Capacity moves have been driven by Wall Street

On the capacity side, the DOJ can at least point to plenty of evidence of US carriers making statements about capacity discipline and de-hubbing airports like Memphis or Cincinnati that weren’t a fit post-merger. And on an aggregate, level, the US airlines, particularly the legacies, but also Southwest and the rest have embraced capacity discipline, with post-recession capacity growth under the rate of growth of GDP (the economy) whereas in the past, capacity usually grew at 1.5 – 2x the rate of GDP. But is the cause of this really coordinated action derived from illegal communication? Or should we apply Occam’s Razor and look for the simplest answer?

Like most publicly traded companies, U.S. airlines are in many respects beholden to their shareholders (i.e. their owners). And while Wall Street is oft maligned in industry circles for driving too much short term thinking (occasionally in this space), by and large Wall Street analysts and ratings agencies are a pretty good proxy for most shareholders, who tend to lack a sophisticated understanding of the industry and its vagaries. And Wall Street, for very food reasons, has decided that it likes capacity discipline; and that by extension it will reward it, and punish a lack of discipline. One need look no further than the recent response to Southwest’s share price when the Dallas-based carrier announced that its capacity growth for 2015 would come in around 8% instead of 7% as it had previously guided. Southwest’s share price was hammered (along with that of much of the industry) and it was forced to walk back those plans.

While this might seem to be an overreaction, airline investors have a very good reason to value capacity discipline. It is only in the last five to six years, as investors have pushed airlines to engage in capacity discipline, that they have finally got something resembling a reasonable return for the first time in more than a decade. And unlike the late 1990s, these returns are not contingent on an incredibly positive macro environment in the U.S. and the world. And when a firm’s owners want something, it usually happens (look no further than the ousting of Dave Barger in favor of Robin Hayes at JetBlue). Has this changed the behavior of U.S. airlines in aggregate? Yes. Is it collusion? No.

A situation of the DOJ’s own creation

The real dramatic irony is that the present state of competition in the US airline industry is pretty much the fault of the DOJ itself. If fares are rising and capacity is being constrained, the DOJ has no one to blame but itself. Through a mix of antitrust immunity/joint ventures, mergers, and slot swaps, the DOJ has allowed many of the more anti-competitive situations in the U.S. to develop. There are only three major airline groups across the Atlantic? The DOJ signed off on that. Six legacies merged into three? The DOJ signed off on that too. Delta and American now have fortress hubs at New York La Guardia and Washington Reagan respectively? The DOJ okayed that one as well. We are unquestionably living in an air travel oligopoly. But it’s a bit rich for the DOJ to bluster about the resultant situation today when it signed off on every one of the steps that created it.

And the federal government’s various agencies have the ability to rectify this situation pretty quickly. The US3 campaigns against Norwegian and the Middle East Big 3 can be overruled pretty quickly. Why not go further and sign Open Skies agreements with any country that’s willing? And to solve the issue of domestic competition, why not ease rules on foreign ownership and offer unlimited cabotage? The federal government has plenty of tools to increase competition in the US airline market. None of them involve a politically convenient “investigation” based on exaggerated charges.

The most important philosophical question is which stakeholders matter 

The current U.S. airline market is not the best it has ever been for consumers. It’s still better than everything before deregulation and most of the 80s and 90s, but except for high yield and business travelers, the early 2000s were probably the golden age for purchasers of air travel in terms of convenience and low fares. And the reduction in competition through consolidation and capacity discipline absolutely plays a role on that. But is the consumer’s interest the only thing to consider?

Airlines have three primary stakeholders: consumers, employees (including executives), and shareholders, as well as several other minor ones (like airports, airframers, suppliers, etc.). But when the media and broader public think about airline issues, they solely focus on the consumer’s needs and perspective. But shareholders can’t be ignored, if only because they own the airline. Ultimately, an airline, like any for-profit business, is beholden to its shareholders, and largely required to comply with their wishes and act for their benefit. There are very good reasons for this. The original rationale for the shareholder system was to allow the pooling of capital to create large companies while spreading risk. There is no way that the massive, complex, and risky airline networks that exist today would be able to function without the money of the shareholders.

But there’s a funny thing about shareholders: they like getting a return on their money. And by 2007/2008, airlines had burned investors one too many times (Southwest notwithstanding). There was no way that airlines could continue to act in the irrational and aggressive manner they adopted between 2000-2008, if they wanted to continue to access the myriad benefits (such as capital) provided by shareholders. So they decided to buckle down and get serious about delivering returns. In the process, fares went up and planes got fuller. But we have a very good reason to want shareholders, not in the least because they provide the capital for new entrants/growth agents (like Spirit Airlines) who are ultimately the most effective form of competition. Especially given the higher barriers to entry created by additional FAA and DOT rules and regulations, investors who can pool large sums of capital are critical for the US airline industry to develop new entrant activity moving forward. Investors have just begun to trust airlines again. Do we really want to take action against the capacity discipline that has allowed that trust to regrow?

Employees haven’t done anywhere near as well as investors have, but they are also better off than they were in the dregs of the 2000s. Pilot groups have probably gotten the best deals (helped by the pilot shortage), but across the board, employees have begun to share in the profitability of their employers through increased wages, profit sharing, or both. And so amongst the three stakeholders, consumers might be slightly worse off, but investors and employees are way better off. Arguably consumers have gotten the best deal from commercial aviation over the past 30 years, enjoying lower than realistic fares while being cross subsidized by employees and investors taking a hammering. The tables have turned, and we’ve hit a more stable equilibrium. But is that something that the broader populace can accept?

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Contact the author at vinay.bhaskara@airwaysnews.com

DISCLAIMER – The Author is long/short on several US airlines, including AAL, DAL, SAVE, ALK, JBLU, and ALGT, as well as several global airlines. 

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Analysis – The Battle For Seattle: Alaska vs. Delta – Part Two

By: Vinay Bhaskara / Published June 29, 2015

An Alaska Airlines Boeing 737 departing from Seattle-Tacoma International Airport. Photo: Jeremy Dwyer-Lindgren / AirwaysNews

An Alaska Airlines Boeing 737 departing from Seattle-Tacoma International Airport. Photo: Jeremy Dwyer-Lindgren / AirwaysNews

On the face of it, Alaska Airlines has held up relatively well to the face of an onslaught at its largest and most important hub. In the first quarter of 2015, Alaska reported yet another record net profit of $149 million (post taxes), and as I mentioned in Part One, Alaska has certainly managed to hold its own. The current fight in the Seattle market is a bit like a guerilla war, with Alaska playing the role of the Vietcong (or whatever your preferred ragtag group of misfits is) and Delta playing the role of the US. Through its superior knowledge of the local market and inbuilt sympathy of the populace (as well as a whole bunch of strong business execution) Alaska is staying in the fight.

ANALYSIS: The Battle For Seattle: Alaska vs. Delta – Part One

But despite Alaska’s admirable strategic positioning and focus on winning customers with quality, at the end of the day, its “victory” thus far has been almost entirely about fuel, more precisely the rapid fall in fuel prices over the second half of 2014 and the uneasy plateau at $60-65/barrel of WTI crude in 2015. Alaska’s first quarter 2015 numbers were certainly pretty: $238 million operating profit, 18.8% operating margin, 20.1% ROIC. But beyond the headlines, two numbers stand out: 5.7% and $123 million. The former is the decline in PRASM for Alaska in Q1 and the latter is the savings it accrued from the drop in fuel prices YOY. Alaska’s net profits (pre and post tax) would have declined substantially YOY if not for fuel to $117 million and $23 million respectively. A year and a half ago, I said that all of the Delta capacity being added in Seattle would harm yields and compress margins at Alaska because Seattle was its most important and highest margin hub. That’s exactly what happened in Q1. But thanks to a pissing contest between American shale producers and the Saudis, Alaska instead gets to trot out a bunch of pretty numbers and go about its business without an investor revolt.

A more charitable description of Alaska’s current position would note that many industry observers and analysts now believe that the price of oil has settled into a “new normal” with a peak price between $60-70 per barrel. And until the next recession, that’s probably a fuel price point that will allow Alaska to sustain its current level of competitive capacity and growth without harming margins too much. But the threat to its highly profitable core at Seattle is not something that Alaska can ignore. The reduction in fuel prices has merely bought Alaska more time to respond.

Alaska diversifies while going long and thin

I am loath to further overburden the guerilla warfare analogy but it fits the narrative of Alaska’s recent moves in Seattle and elsewhere incredibly well. Indeed Alaska’s response to Delta’s invasion of its home base, an event that “shocked” Alaska executives, has been remarkably measured. There was one major head-on strike (Alaska’s out-of-character buildup in Salt Lake City), but beyond that Alaska has largely stayed out of direct confrontations with Delta (Seattle – New York JFK notwithstanding). Instead, it has focused on leveraging its strength up and down the West Coast with new point to point routes such as Eugene – San Jose and Los Angeles – Baltimore while also reinforcing its secondary hub in Portland.

Photo Courtesy JDL Multimedia

Photo Courtesy JDL Multimedia

In Seattle, Alaska has conformed to a guerilla-esque strategy of indirect confrontation. Because Delta’s commitment to Seattle has been strong enough to prevent Alaska from bleeding Delta dry with price wars on new Delta routes, Alaska has instead focused on increasing its relevance for Seattle-based O&D customers through new, organic destinations. The recent announcements and additions of New York JFK, Raleigh-Durham, Washington Dulles, and Charleston to Alaska’s already powerful Seattle route portfolio are not direct shots across Delta’s bow. But they make it harder for the widget to compete with Alaska and build a sustainable hub in Seattle all the same.

In the meantime, Alaska has continued to cozy up to a hodge-podge of foreign carriers, aiming to replicate a small part of what Delta offers through nonstop long haul travel on its own metal. The more interesting partnership has come with American Airlines, who was only too happy to step in and leverage Alaska’s strength in the Western United States to boost its revenues. The most visible tie between the carriers was Alaska handing the lucrative Los Angeles – Mexico City route over to American, but overall, American has seemingly offset, if not entirely filled the void left by Delta’s sudden disengagement.

In Part 3 of this analysis, I tackle how things will shake out in the Seattle market

Editor‘s noteOur readers now have access to our weekly eNewsletter, which includes a recap of our top stories of the week, along with the subscriber-only exclusive Weekend Reads column and Photo of the Week from our extensive archives. The newsletter comes out every Saturday morning. Stay in the know; click here to subscribe today!

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ANALYSIS: United Buys a Stake in Azul

by Vinay Bhaskara / Published June 26, 2015

Azul's flagship Airbus A330-200 aircraft / Image Courtesy of Alexf.

Azul’s flagship Airbus A330-200 aircraft / Image Courtesy of Alexf.

United Airlines is making an aggressive play for the Brazilian market. The Chicago-based carrier will be purchasing a 5% stake in Azul Brazilian Airlines, the Sao Paulo based low cost carrier that is Brazil’s third largest airline after oneworld alliance member LATAM Airlines Group (South America’s largest airline) and low cost carrier Gol. United will spend $100 million for its minority ownership stake, valuing Azul at $2 billion. The two airlines will also deepen ties through code sharing in both the US/Caribbean and Brazil, optimization of schedules in Brazil, and reciprocal frequent flyer program earnings and benefits.

Initial Network Synergies might be Sub-Optimal Due to mismatch

United is by far the most Sao Paulo-centric of the three US legacy carriers in its Brazilian long haul network, with daily service from Houston, Chicago O’Hare, Newark, and Washington Dulles. It also serves Houston – Rio de Janeiro nonstop to feed into Houston based oil traffic. By comparison, Delta has double daily service from Atlanta to Sao Paulo (daily to Detroit/New York JFK), as well as daily Atlanta service to Rio and Brasilia. Delta will also be adding nonstop service from Orlando to Sao Paulo and Brasilia.  And American Airlines is of course in a different hemisphere, with service to 10 different Brazilian destinations thanks to its hub at Miami.

Azul for its part, primarily offers nonstop service from its hub at Viracopos International Airport in Campinas, about an hour north of Sao Paulo, where it operates nearly 170 peak-day departures to 48 domestic destinations. It will also operate 12 flights per week to Fort Lauderdale and 14 to Orlando this winter, leveraging its recently delivered fleet of Airbus A330-200 aircraft. In addition, Azul will offer daily nonstop service from Belo Horizonte (its second largest hub with ~80 daily departures) and Sao Paulo Guarulhos (GRU – Sao Paulo and Brazil’s primary international gateway) to Orlando. And while it has not yet announced schedules or frequencies, Azul also plans to add nonstop service from Viracopos (VCP) to New York JFK later this year.

This represents a fundamental network mismatch. United’s Brazil operations are concentrated on GRU, and while Azul does have roughly 50 daily departures to 16 domestic destinations at GRU (it’s fourth largest base by capacity), connectivity for United’s four arriving flights (between 10:40 and 11:40 am) isn’t quite as expansive. In terms of feasible connections (i.e. more than 1.5 hours connecting time [which is cutting it close] and fewer than 4-5 hours), United customers at present will have convenient connections to Belo Horizonte, Brasilia, Cascavel, Curitiba, Goiania, Porto Alegre, Rio de Janeiro (Santos Dumont), Salvador, and Vitoria. Feed for United’s northbound flights from GRU (Which all depart after 11:00 pm) is more expansive, adding Campo Grande (barely), Maringa, Navegantes, and Recife to the aforementioned destinations. But there are still enormous gaps, with suboptimal or nonexistent connectivity to Recife (unidirectional), Fortaleza, Belem, Florianopolis, Natal, and Foz de Iguacu amongst major Brazilian origin centers for US demand.

Theoretically Azul could re-time some of its GRU flights or add destinations, but given the scarcity of slots at GRU, an en-masse re-timing and/or the addition of new destinations could be difficult. When compared to Gol (who Delta code shares with and owns 3% of) with 109 daily departures to 31 domestic destinations (and 13 daily departures to 8 South American ones) or TAM (closely tied with American) with 90 daily departures to 25 domestic destinations (and 26 to 10 South American ones), Azul is clearly suboptimal for feed at GRU. Theoretically, United could add service to VCP. Campinas is an important and growing economic center in its own right, and the Sao Paulo metropolitan area increasingly resembles Tokyo, New York, or the Pearl River Delta in that is getting so spread out that multiple airports are more than justified by demand dispersal. Still, VCP is far less preferred by premium travelers than GRU or Congonhas in Central Sao Paulo, and that will work against United. Nonstops from VCP to Chicago O’Hare and Washington Dulles are absolutely out of the question. Houston and Newark would have a better shot at success, but so far the only US airport that has proven its ability to sustain a US airline flight to VCP is Miami for American Airlines.

At Rio de Janeiro’s Galaeo airport, Azul is a nonentity, with just 10 daily departures, mostly to VCP. Once again Gol (69 daily departures/23 domestic destinations) and TAM (46 departures/16 destinations) provide far better connectivity. United can of course layer Azul’s connectivity with that of its Star Alliance partner Avianca Brasil (a subsidiary of Colombia-based Avianca) in Rio (16 departures/9 destinations) and Sao Paulo (36 departures/14 destinations), but even so, United will be at a severe disadvantage when it comes to feed.

Image courtesy of JDL Multimedia

Image courtesy of JDL Multimedia

On the US side, United isn’t doing much for Azul either. Azul’s US operations are currently concentrated in South Florida, and both Fort Lauderdale and Orlando are spokes for United, with little connectivity beyond United’s hubs. And of course United is exiting the New York JFK market entirely, so they’re not much help there. One immediate fix would be for Azul to alter its New York plans to focus on United’s hub at Newark Liberty International Airport, where United offers a massive amount of connectivity (roughly 430 daily departures and close to 150 destinations). Newark might not be as preferred for New York travelers as JFK, but the feed should more than offset that.

JV Seems Imminent, Star Alliance Less So

The US-Brazil market will be liberalized through an Open Skies agreement beginning in October of this year, which would enable US and Brazilian carriers to secure antitrust immunity (ATI) for joint venture (JV) partnerships. Assuming alignment along current partnerships, United and Azul would be prime JV candidates, as would Delta/Gol and American/TAM, which would solve the network misalignment problems by allowing better coordination, planning, and marketing through a profit-sharing agreement. Service from United’s hubs to VCP would also be a lot more viable under a JV.

Whether Azul would join United in Star Alliance is less immediately clear. Azul founder David Neelman’s recent acquisition of Portuguese Star Alliance carrier TAP (who operates a massive long haul operation from Lisbon to Brazil and will open 10 new US routes as per Neelman’s announced plans) would point towards deepening ties for Azul and Star Alliance. The counter is that Star Alliance already has a major Brazilian presence in Avianca Brasil (admittedly a distant fourth in market share), and the history of two airlines from the same country co-existing in an alliance is mixed. It remains to be seen whether Azul will formally tie itself to Star Alliance, but United’s investment is unquestionably a step forward for the global alliance in the all-important Brazilian market.

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Contact the author at vinay.bhaskara@airwaysnews.com

 

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Analysis – The Battle For Seattle: Alaska vs. Delta – Part One

by Vinay Bhaskara / Published June 22, 2015

Delta and Alaska jets at Seattle-Tacoma International Airport. Photo: Jeremy Dwyer-Lindgren / AirwaysNews

Delta and Alaska jets at Seattle-Tacoma International Airport. Photo: Jeremy Dwyer-Lindgren / AirwaysNews

When Delta Air Lines announced its traffic results for May 2015 earlier this month, the 5.5% decrease in unit revenue (as measured by passenger revenue per available seat mile [PRASM]), it once again shined the spotlight, albeit indirectly, on Delta’s madcap dash to build a viable hub in the highly competitive Seattle market.

Delta has added dozens of new routes from Seattle over the last two years in its quest for connecting feed for its nonstop flights to Asia and relevance to Seattle-based customers. Once all of its announced routes are started, it will serve 47 nonstop destinations from the airport (33 domestic and 14 international). Overall, Delta’s capacity in Seattle is up 55% year over year (YOY) in terms of available seat miles (ASMs), and more in terms of seats (most of the recent expansion has been domestic or near international), and it’s not hard to draw at least a partial correlative relationship between that and the overarching PRASM weakness in the winter months.

Part of that is situational. Seattle probably makes money (or at least breaks even) in the summer, as with most US carrier hubs. Then again, in today’s US airline industry, everyone makes money in the summer. In fact, even TWA during the depths of the Carl Icahn Karabu era might have had a shot at breaking even in Summer 2015. But the winter months are a different story, and thanks to several different trends, Seattle’s inherent demand weakness in that period has been showing up clearly in the numbers. Asia’s macroeconomic weakness and the strength of the Dollar have combined with the cyclical demand weakness and low price of fuel emboldening Alaska to maintain capacity to drive down yields in the market. And because Seattle represents an ever-increasing share of Delta’s overall capacity (especially after drawing down Cincinnati, Memphis, and Tokyo Narita), these poor yields manifest in very public signals of PRASM decline

Every quarter on its earnings call, Delta tries to obscure this effect by referring to PRASM increases YOY in the Seattle market. This is a meaningless statistic, for two reasons. First and foremost, since there isn’t accurate publicly available data on Seattle PRASM (there is for O&D yields but that pre-dates most of the domestic buildup and ignores connections, which represent at least 50-60% of Seattle traffic, if not more), no one knows just how low of a base this “increase” is built on. Second, the capacity composition of Delta’s Seattle operation is continuously shifting towards shorter haul flying. This holds true for the overall hub because the long haul international flights were amongst Delta’s first major additions, but even if you isolate to domestic flying (Delta started with a bunch of flying from Seattle to hubs across the country like Detroit, Atlanta, and New York JFK), the recent addition of several west coast destinations has reduced the overall average stage length at the hub. For a variety of reasons, short haul flying has a higher PRASM than longer haul flying, and accordingly, Delta’s flights would have to be consistently less than half full for PRASM to actually decline after they added a bunch of these flights. All in all, Seattle’s effect on Delta’s revenues has been anything but pretty.

A desperate contest for O&D travelers

The strategic reasons for Delta’s buildup are well tread at this point: the need for a new Asian gateway given Narita’s long-term infeasibility, the inconsistency of feed from Alaska Airlines, etc. But a domestic buildup that started as targeted sources of feed for its East Asian flights has instead turned into an aggressive chase for Seattle origin and destination (O&D) customers, long the purview of partner turned rival Alaska Airlines and its subsidiaries. Delta has quickly realized that in today’s world, when airline investors are driven more by margins and ROIC than headline profits, it needs a viable standalone operation in Seattle. That means O&D passengers.

Jeremy Dwyer-Lindgren / AirwaysNews

Jeremy Dwyer-Lindgren / AirwaysNews

Delta’s latest route announcements are further proof of this axiom. Boston aside, many of its recent new routes offer little in the way of demand for travel to Asia or Europe, so they won’t serve the ostensible purpose of feeding Delta’s long-haul flights. Instead, they serve to increase Delta’s relevance to Seattle-based domestic travelers, the kind that would normally fly Horizon Air.

It’s a relatively low risk way of targeting additional O&D demand. Delta has already added most of the major markets in the Western US from Seattle. And rather than dedicating a narrow-body aircraft for four hours per leg to fly into competitive markets like Chicago or Washington DC, cities like Pasco and Victoria can provide incremental boosts in local revenue and traffic for a much lower trip and operating cost.

And this is crucial for Delta because Alaska is winning in Seattle. They’re not annihilating Delta by any means, and the battle is certainly taking a toll on the Eskimo (see Alaska’s PRASM figures for evidence of that). But Alaska is winning because it isn’t losing. Because by and large it has managed to maintain its share of domestic O&D traffic and avoided hemorrhaging revenue share. This is winning war in the guerrilla sense of the world, and while Delta has the flashy new destinations in Asia and Europe, Alaska has quietly expanded its reach in the Eastern half of the US.

Despite upbeat commentary (it’s not hard to record year over year gains in unit revenue when you start from a miniscule base) on every quarterly earnings call, for the moment, the only parts of the Seattle network that are clearly profitable are the hubs and London Heathrow. Paris, Tokyo, and Amsterdam probably break even during the summers. Everything else is a major work in progress. Unfortunately for Delta, domestic business traffic in Seattle is going to be a scale game. They don’t have the cost structure to substantially undercut Alaska in the long run so they have to compete on network. And despite Delta’s buildup, Alaska’s Seattle network blows Delta’s out of the water in terms of connectivity and scale (more on this in Part 3).

In Part 2 of this analysis, I take a look at the other big player in the Seattle market: Alaska Airlines

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United to Move from JFK Airport to Newark Hub in Delta Slot Swap

By Benét J. Wilson / Published June 16, 2015

United Airlines has decided to step away from the battle for dominance at New York’s JFK Airport. It is pulling up stakes and moving its p.s. premium trans-continental service to its hub at Newark-Liberty International Airport, effective Oct. 25, a move industry observer Mike Boyd of the Denver-based Boyd Group International applauds.

A United Airlines p.s. Boeing 757 taking off. Image: Courtesy of United

A United Airlines p.s. Boeing 757 taking off. Image: Courtesy of United

“This move is brilliant and makes a lot of sense for everyone,” said Boyd. “United has a hub in Newark and flights out of LaGuardia. It can go to its hub and leave others to fight at JFK.”

RELATED: The Transcon Wars: The Ultimate Airline Battleground

In this day and age, airlines want to dominate the bottom line not the world, said Boyd. “Why should United stay at JFK if American, JetBlue and Delta are fighting over it?” he asked. “United doesn’t need JFK now. They have everything covered in Newark.”

United's Terminal 6 at New York JFK. A terminal it has shared with British Airways since the 1970s. Image: Chris Sloan / AirwaysNews.com

United’s Terminal 6 at New York JFK. A terminal it has shared with British Airways since the 1970s.
Image: Chris Sloan / AirwaysNews.com

With the change, United says it will cement its role as the New York area’s trans-con flying, offering up to 17 daily round trips between Newark and San Francisco and up to 15 daily round trips between Newark and Los Angeles. The move will allow United to consolidate its operations at Newark, where, in 2014, it handled nearly 70 percent of the airport’s 35.6 million passengers.

RELATED: United and Houston Break Ground on New Terminal C-North

Overall, United offers nearly 500 daily flights out of the New York City region to more than 150 destinations around the world. It also operates 37 daily flights out of LaGuardia.

RELATED: United Highlights Changes Coming to Newark Airport’s Terminal C

United and Delta will switch their JFK and Newark slots, regulatory approval. United will also move several Boeing 757-200s flying on trans-Atlantic markets over to p.s. flights. At the same time, the airline will also add more 767s on trans-Atlantic flights.

Cover Image: Courtesy of United

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A “Quiet” Paris Air Show: Great for Attendees and Observers

By: John Walton / Published June 12, 2015

While the intelligence (and no little industry scuttlebutt) for this year’s Paris Air Show is that the event will be quieter than in previous years, there’s still plenty going on at Le Bourget.

What “quiet” really means is fewer of the massive aircraft orders we’ve seen in recent years — no hundred A320neo aircraft here, no two hundred 737 MAX there — not least because, with all the massive orders, delivery slots are far into the future. But that’s likely to mean that we see more current generation orders like Delta’s agreement to purchase 40 Boeing 737-900ER aircraft alongside 20 ex-Air Canada Embraer E190 regional jets as airframers seek to keep their current aircraft lines going even while they’re testing next-gen platforms like the 737 MAX and A320neo.

With these next-generation programs announced, and the shape of the next 15 years of the narrowbody and widebody market fairly clear now, it’s about incremental improvements to make both the aircraft and their cabin interiors more efficient. (Sorry, flyers: “efficient” means carving out an inch here and there that the airlines and interiors companies hope you won’t notice, like those new slimline seats, lavatories and galley areas.)

This year also features one of the best commercial flying display programs in recent memory, and what may be a great opportunity to delve deeper into the aviation industry.

Qatar's A350 will be on hand for a flying display

On offerings in the air: an exciting pair of dueling new-generation twinjets, as Qatar Airways is bringing an Airbus A350-900 for flying display, while Vietnam Airlines will fly a Boeing 787-9 Dreamliner resplendent in its new livery. If you think that’s “quiet”, tell that to the more than 300,000 people who have already watched Boeing’s 787-9 practice video:

Bombardier’s 135-seat CS300 will also perform in its first airshow, following its first flight this February. The Canadian airframer really needs some positive publicity for the CSeries, which is two years late and has picked up the “much-delayed” adjectival prefix. From a passenger experience perspective, the CSeries has some real benefits, but it’s understandable if airlines are reluctant to commit to being the next in line for a questionable delivery date when there are other options available.

The Bombardier CSeries CS300. Image: Courtesy of Seth Miller

The Bombardier CSeries CS300. Image: Courtesy of Seth Miller

RELATED: Bombardier CSeries CS300 Achieves First Flight

One of those other options is Embraer’s E2, the updated version of its popular 70-100 seater aircraft. Embraer will be demonstrating its new cabin, created in conjunction with design house Priestmangoode. Questions remain, however, about the extent to which the demonstrator cabin can look like the eventual product, especially in terms of the innovative tablet mounts, which may need to be refined for head impact testing purposes.

RELATED: Embraer Sees Success In North America With E175 and E2

RELATED: AirwaysNews High Flyer Interview: Luke Hawes of Priestmangoode

Bombardier is also bringing its CS100 for static display, painted into the livery of launch customer Swiss International Air Lines. Swiss has to be pleased that it will be getting some extra publicity for its new narrowbody, which it needs fairly quickly in order to refresh the smaller end of its European narrowbody fleet, much of which consists of aging BAe 146/Avro RJ aircraft. The CS100 is currently planned to be introduced into service in the first quarter of 2016.

Bombardier's CS100 is shining in its Swiss livery

Image: Bombardier

Airbus is also planning a flight display of the A400M military turboprop transport aircraft, despite a crash near its test site in Seville in March, reportedly resulting from a failure in the computer controls for three of the four engines.

There’ll also be an Airbus A380 on static display — will we see the much-derided 3-5-3 main deck seating configuration that débuted at the Aircraft Interiors Expo in Hamburg this April.

The Airbus-3-5-3 problem is in the window seat

Image: John Walton

Not currently expected: an A320neo, the next generation of Airbus narrowbodies, according to the WSJ, which suggests that the issue is with a component of the next-generation Pratt & Whitney PW1000G engine formerly known as the Geared Turbo Fan (GTF).

Airbus is also going futuristic, with its E-Fan 2.0 all-electric two-seater aircraft, a technology demonstrator that is still a large number of battery generations away from commercial flight use, but is likely to affect how this future tech develops. In the interim, the airframer may well have success with the two-seater and four-seater versions in general aviation settings.

Look also for a number of back-office announcements, particularly around MRO (Maintenance, Repair and Overhaul) facilities. There’s big money (and particularly big cost savings) to be had for western airlines in moving significant chunks of their maintenance to lower-cost sites, although public perception issues mean that big-name brands like Lufthansa Technik are reassuring for some passengers. Expect new operations in the Asia-Pacific region in particular.

The Internet of Things (IoT) buzzword will be thrown around a lot at Paris this year, and the media distribution list is already buzzing with companies hawking their wares. The large conglomerates who make their money selling networking systems that underpin the IoT would like airports to increase the amount of passenger tracking they do, but the question is whether these companies have realistic suggestions for flyers who have understandable and reasonable questions about how much privacy they will need to give up for a coupon for a discount in Starbucks or Auntie Anne’s Pretzels.

Another part of the IoT puzzle is aircraft e-enablement, which (as ever with something prefixed by a “e-”), sounds like it’s from the 1990s, but really means connecting increasing parts of the aircraft to each other and to networks so they can be monitored and adjusted remotely. Just as the IoT hasn’t had everyone running out to buy a Nest thermostat or fridge that emails you or automatically orders more milk, the aviation IoT is still in its infancy. We may well see a number of new products and integrated systems that promise a bit of growth.

AirwaysNews will, of course, have staff on the ground at the Paris Air Show — follow us on Twitter and check out our Facebook page for all the latest.

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American, Qantas Expand Trans-Pacific Operations

By Seth Miller / Published June 10, 2015

American Air CEO Doug Parker and Qantas CEO Alan Joyce at a press conference announcing new trans-Pacific service. Image: Courtesy of Roberto Leiro

American Air CEO Doug Parker and Qantas CEO Alan Joyce at a press conference announcing new trans-Pacific service. Image: Courtesy of Roberto Leiro

MIAMI — Oneworld partners American Airlines and Qantas used the closing of this year’s IATA Annual General Meeting as an opportunity to announce a significant expansion of the pair’s trans-Pacific service.

American Airlines is returning to Australia after a decades-long absence, launching service on the competitive Los Angeles-Sydney route in December 2015 with a Boeing 777-300ER. Qantas will also be adding service, restoring its Sydney-San Francisco route. The new services will see a transition of the partnership between the two carriers. The four-year-old joint venture will, pending government approval, become a route revenue-share agreement, a move which takes into account the fact that American Airlines will now be operating some of the flights.

The announcement of new trans-Pacific service via American Airlines and Qantas. Image: Courtesy of Roberto Leiro

The announcement of new trans-Pacific service via American Airlines and Qantas. Image: Courtesy of Roberto Leiro

For American Airlines, this is a significant expansion into a market that has long been lacking. CEO Doug Parker acknowledged as much in the statement announcing the new service. “Our customers have asked us to expand to important business destinations across the Pacific, and flying our flagship aircraft, the Boeing 777-300ER, to Sydney will provide another world-class travel experience from our key gateway at LAX,” he said in the statement.

An American Airlines timetable covering the inauguration of its first overseas routes in 1970, 707 service to the South Pacific. Image: Courtesy of AirwaysNews

An American Airlines timetable covering the inauguration of its first overseas routes in 1970, 707 service to the South Pacific. Image: Courtesy of AirwaysNews

Qantas will reduce its five weekly Boeing 747 frequencies into Los Angeles from Australia — four from Sydney and one from Brisbane. These reductions will be used to free up the aircraft to work the Sydney-San Francisco route. In total, the pair will have eight additional weekly flights across the Pacific once the full schedule is implemented.

This sort of coordination in capacity and service is the goal of the joint ventures and key to their financial success. By working together on capacity planning and pricing, the two carriers can ensure that growth such as this occurs in a measured and profitable manner. And in the LA-Sydney market, where there is already significant capacity and many competitors, such measured growth is critical to profitable expansion.

American Airlines previously served Australia with flights via Hawaii, but that service has not operated in decades. Adding it back to the route map is a bit of a prestige move for what is now the world’s largest airline. It is also the first of what are expected to be several moves by the company to expand service across the Pacific Ocean from the Los Angeles hub, a move Parker has previously alluded to.

For Qantas the return to northern California fills a void created in 2011 when the Sydney-based carrier cut the route amidst a soft economy and financial instability for the carrier in general. It also coincided with the launch of the joint-venture relationship which has helped to stabilize traffic and yields for the two carriers and grow back into the market.

Cover Image: Courtesy of JDLMultimedia

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Is Seattle Is Under Attack?

By Seth Miller / Published June 9, 2015

Alaska Airlines CEO Brad Tilden. Image: Courtesy of Alaska Airlines

Alaska Airlines CEO Brad Tilden. Image: Courtesy of Alaska Airlines

MIAMI — When Alaska Airlines CEO Bradley Tilden sat down on the CEO panel for the 2015 IATA Annual General Meeting it is likely he knew something about his company’s viability was likely to be a topic. And the discussion’s moderator, CNN’s Richard Quest, is rarely one to shy away from probing statements or questions, so perhaps such a bold statement was to be expected. Still, the phrase “under attack” is not one commonly used in the industry. If there truly is an attack on-going it seems that Tilden is unconcerned.

RELATED: Alaska Grows in Seattle

Tilden acknowledges that the competitive landscape is changing but feels that his company is built to survive and even thrive with such challenges. Among the advantages Tilden sees is his company’s history operating in a market with significant cost pressures and very competitive fares. “We’re a west coast airline and fares on the west coast of the United States have always been among the lowest in the world, so we’ve always had a low-cost structure,” he said.

RELATED: Delta Launches Seattle-Hong Kong, and Seattle Hub

Delta and Alaska jets at Seattle-Tacoma International Airport. Photo: Jeremy Dwyer-Lindgren / AirwaysNews

Delta and Alaska jets at Seattle-Tacoma International Airport. Photo: Jeremy Dwyer-Lindgren / AirwaysNews

It is not all about costs. In fact, Tilden suggests that fares are only a very small portion of the company’s plan for success. Alaska Air intends to be competitive on price, but there are other factors it considers to be at least as important if not marginally more so, he said.

“We’ve got a low-cost structure and we do offer low fares, but we also have got a big focus on on-time performance, we have a big focus on customer service,”  said Tilden. “Our belief is that if you operate safely, operate on time, give people great service and do it for a fare which works we’re going to have a future.”

As for the target customer market for the carrier, Tilden sees quality over quantity. “‘Bleisure’ is a word people use sometimes, the business market plus high-quality leisure [passengers].”

RELATED: Battle for Seattle Airport Continues As Delta Adds New Flights

Reliability is a noble goal and it is something which has worked for Alaska Airlines in the past as a differentiator. But Delta Air Lines has a similar focus these days, offering spectacular operational numbers and matching some of Alaska Airlines’ promotions and customer-focused actions like checked baggage delivery guarantees.

Alaska Airlines may be “doing just fine” as Tilden expressed, but that does not mean there is no attack there. And the outcome of the battle will likely not be known for some time.

Cover Image: Courtesy of Jeremy Dwyer-Lindgren / AirwaysNews

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American Airlines to Bring Its A321s to Hawaii

By Seth Miller / Published May 26, 2015

Virgin America will not be the first airline operating narrow-body Airbus jets to Hawaii. American Airlines intends to phase out its 757-200s on some Hawaii routes starting in August of this year, replacing them with its 2-cabin A321 layout. The A321s will have sharklets to increase range but are expected to still fly with weight restrictions in some cases, possibly due to shorter runways on a couple of the islands. These A321s will be a subfleet of the company’s rapidly expanding A321 operation with ETOPS certification to allow the long, overwater flights.146815-MSN-5834-American-Airlines

While American currently operates as many as 10 daily 757-200 flights from Los Angeles to the islands those are expected to be fully shifted to the A321 by the end of 2015. The 757-200s currently flying from Los Angeles will move to Phoenix where they will replace the older 757-200s currently operated by the US Airways subsidiary on the route. There are eight 757s in the US fleet which date back to the 1995-1999 era, the oldest in the combined AA fleet. These aircraft are expected to be retired as part of the move. Much like how United Airlines is retiring its oldest 757s from operation this move by American Airlines will create a more efficient and reliable operation, assuming the ETOPS certification works out.

Getting to ETOPs with the A321s should be easier for American than for Virgin America given the former’s experience with such processes on its existing fleets. Establishing a small ETOPS fleet goes counter to the efficiencies typically desired for operations but it is a necessary move in this situation in order to allow for the retirement of the older 757s. And American’s need for ETOPS-certified narrow-body aircraft is rather limited. Most of the longer over-water routes are operated by wide-body aircraft or the international configuration 757-200s. A few additional over-water routes exist which the A321s could serve but they do not require the full ETOPS levels of equipage which the Hawaii routes call for.

It should be noted that these deliveries are the “ceo” classic engine option. While the range is increased with the sharklets installed they do not have the newer engines and other improvements of the “neo” models. Moreover, they are not the long-range neo model with Airbus recently announced as a potential replacement for the 757-200s which serve intercontinental routes. American may do well to convert some of its future A321 deliveries to the LR version to take over flights from Phoenix to the islands eventually as the 757 fleet ages further but no firm progress has been announced in that direction yet.

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JetBlue CEO Meets With Cuban Officials

By Benjamin Bearup / Published April 20, 2015

On Monday, JetBlue’s President and CEO, Robin Hayes, was joined by many private sector and political leaders from New York on the “I Heart Blue York” logo jet for a special state trade mission flight to Havana, Cuba to discuss economic and political relations.

New York Governor Andrew Cuomo and JetBlue CEO Robin Hayes enter "I Heart Blue York" Photo Courtesy: Andrew Cuomo

New York Governor Andrew Cuomo and JetBlue CEO Robin Hayes enter “I Heart Blue York”  Photo Courtesy: Andrew Cuomo

This trip marked the first time that a current U.S. governor has visited Cuba since the recent thawing of relations began earlier this year.

A JetBlue spokesperson said in a statement to Airways News that “As New York’s hometown airline, we are pleased to participate in the nation’s first state trade mission to Cuba since the President began the process to normalize diplomatic relations, and we applaud the Governor’s effort to develop opportunities for New York companies there.”

JetBlue is one of six U.S. airlines with rights to operate special charter flights to Cuba. It flew its first charter flight to Havana from Ft. Lauderdale on September 17th, 2011 with additional frequencies added over the years. Currently, it also serves Havana and Santa Clara, Cuba from Tampa Bay, and it continues to fly between Ft. Lauderdale and Havana.

Once it is permitted for airlines to operate regularly scheduled air service between the two countries, the airline has big plans for the Cuba market, but it would not disclose its exact plans. However, the spokesperson did explain that “Cuba will one day play an important role in our overall Caribbean network, where we are the leading U.S. airline. Our focus cities in New York and Florida are natural gateways to Havana and other Cuban destinations from many of our existing cities. We have already built valuable experience operating in Cuba since 2011 with our successful charter program, and are interested in providing scheduled service from multiple U.S. cities as soon as legally permitted.”

By participating in the state trade mission, there could be many advantages for JetBlue; it could give Jetblue a jumpstart on negotiations with airport officials in Cuba when it comes to slots and real estate once it becomes legal to operate regularly scheduled service, despite the potential heavy government regulations that many analysts expect.

It is also worthwhile to note that JetBlue hinted that it is interested in offering service to multiple destinations throughout Cuba. In addition to Havana, the airline could start flights to:

  • Abel Santamaría Airport serving Santa Clara, Juan
  • Gualberto Gómez Airport serving the Matanzas province
  • Frank País Airport serving the city of Holguín
  • Jardines del Rey Airport serving the Ciego de Ávila Province
  • Ignacio Agramonte International Airport serving Camagüey Province
  • Antonio Maceo Airport serving Santiago.

All of the airports listed above currently receive regularly scheduled or seasonal service from airlines serving Canada and Europe.

The United States and Cuba market will be extremely competitive that could be filled with an incredible amount of untapped potential. With the visit of JetBlue CEO Robin Hayes, JetBlue is positioning itself to spearhead efforts to legalize flights between to Cuba in the coming year(s). What is exactly being discussed in these meetings we will never know. But we can reasonably say that JetBlue will be ready for the day that flights to Cuba are legalized and that JetBlue will position itself for a large chunk of the US-Cuba market.

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Delta Holds on to Haneda Slots

By Seth Miller / Published March 30, 2015

Delta Air Lines fended off challenges from American Airlines and Hawaiian Airlines to maintain its Seattle – Tokyo-Haneda route authority, but the win comes with tremendously strict rules governing the operation.new-york-jfk-terminal-4-ramp-2011_15982

Last year, American challenged Delta’s holding of the limited route authority, claiming that the Atlanta-based carrier was not operating in a manner which was best suited to passenger needs while Delta claimed full compliance with US Department of Transportation rules. At issue was the number of flights which must operate during a 90 day period so as to not have the route considered dormant. Delta’s operating schedule for the Winter 2014-2015 season had the route scaled back significantly but still meeting the letter of the law with regard to flight frequencies.

Last week’s ruling allows Delta to continue operating the flight but also requires daily service without exception. And the DoT is watching closely.

Any failure, without a Department-granted waiver, to perform a Seattle-Haneda flight, and any failure, without a Department-granted waiver, to perform a Haneda-Seattle flight, on each and every day of every week (7 days a week, 365 days a year), will constitute a violation of Delta’s Seattle-Haneda authority subject to enforcement.

Any failure, without a Department-granted waiver, to perform Seattle-Haneda flights, and any failure, without a Department-granted waiver, to perform Haneda-Seattle flights, on two days of any seven-day period (365 days a year) will constitute a default of Delta’s Seattle-Haneda authority and that authority will automatically expire.

American gave up its Haneda slot in 2013; the carrier had previously operated from New York’s JFK airport. That operating authority is now used by United Airlines for service from San Francisco. American hoped to take over the Delta slot to begin service between Los Angeles and Haneda. Hawaiian Airlines applied to provide service from Kona. American’s application was deemed the runner up in the DoT ruling; should Delta’s operations falter American will receive the Haneda slot. By requiring daily service without a break the DoT has shifted the rules traditionally used to determine dormancy to a very high standard.

Read More: US DOT Evaluating Future of Delta’s Seattle/Tokyo Haneda Slots

While it is unlikely that Delta will be deemed in violation should weather or mechanical issues arise which prevent flight operations on specific dates, the ruling leaves the carrier closely scrutinized but the DoT for this route, much more than any route in the past. This is not the first time Delta has seen challenges with Haneda operations. Previously, the carrier had a route authority assigned to the Detroit-Haneda route but shifted it to the Seattle market in 2014. Even there, with better flight times, demand was soft and Delta cut the winter schedule to save cash.

Responding to the tentative ruling in its favor Delta affirmed its position that future operations will be year-round:

Earlier this month, Delta resumed its nonstop service between Seattle and Haneda after a temporary seasonal suspension. Delta will operate year-round, nonstop flights between Seattle and Haneda as we continue to grow Delta’s international gateway at Seattle-Tacoma International Airport.

Hawaiian Airlines CEO Mark Dunkerley’s response to the ruling was rather aggressive, notable more for the disappointment that American was selected as the second place finisher than for Delta winning the slot:

Hawaiian is the only airline to have operated Haneda service continuously and successfully since the slot rights were granted. Our proposal provided more seats and would have resulted in more travelers flying between Japan and the United States than either Delta’s or American’s proposal. Kona is the largest unserved market in this proceeding, and Hawaiian’s proposed route would have generated more economic benefit than that offered by either Delta or American. None of these facts are in dispute by the DOT.

Sadly, by dismissing Hawaiian’s proposed Kona route as just simply being additive to the routes already serving Hawaii, the DOT has once more failed to appreciate the geography of the 50th state. Kona and Honolulu are separate markets, separate communities and indeed are located on separate islands. The tentative ruling also reveals a long-held institutional bias among decision makers favoring the interests of U.S. business travelers over those of U.S. travel-related businesses and travelers in general.

This ruling is subject to objections from affected carriers received by 6 April.

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PHOTO SLIDESHOW: A Visit over the Seattle Museum of Flight

Story and Photos By Brandon Farris / Published March 12, 2015

SEATTLE, WASHINGTON: After the Museum of Flight shifted its air park across the street to a temporary home while they are building a new indoor facility for the aircraft, AirwaysNews went up to get a birds eye view of the new temporary home for the aircraft along with a special flight over the flight line at Boeing Field that was featured in a previous photo gallery.

EXTRA: PHOTO SLIDESHOW: AirwaysNews Explores Boeing’s Renton Plant

Located just south of downtown Seattle and to the left of Runway 31L at Boeing Field, the museum is the only one in the world to feature both a 787 and Concorde, along with the first-ever produced 747 that received a much need face lift of new paint.

EXTRA: Museum of Flight Welcomes Boeing 787 to Collection

Also with the frequent Boeing 737 test flights, when they are flowing runway 31 provides a great photo opportunity to get those brand new aircraft.

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Contact the author and photographer at brandon.farris12@gmail.com

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