Monthly Archives: November 2007

American Airlines Just Says No to Pilot Proposal; APA Eagle Deal Collapses

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No surprise here.

American Airlines today told the airline’s pilot union thanks, but no thanks, to the union’s most recent contract proposal.

According to American’s response to the Allied Pilots Association, the proposed package would have increased American’s pilot costs by more than $1.4 billion a year and would have brought the pilot cost per hour to a level that was more than that of competitors Delta Air Lines and Continental Airlines combined.

In other news, Bloomberg reports that a seniority agreement that had been negotiated between American, American Eagle, and their respective pilot unions has collapsed. The reason? A disagreement over adding 25 additional regional jets to the Eagle fleet.

The agreement, reached Oct. 24, would have preserved seniority rights for American pilots and helped recruit new pilots at the commuter unit.

The issue now will now be decided by an independent arbitrator, the APA told members in a message today.

Ticker: (AMR:NYSE)

Alternative to the Southwest Changes; Gotta Get Away, Gotta Go Now

Commentary

In a follow-up to my post from yesterday, here is what I think Southwest should have announced yesterday. That is, if the marketing foot had been in gear with the hand holding the excel charts.

Instead of the new “Business Select” and “Business” class monikers, Southwest should have gone with two main fare classes — “Gotta Get Away,” as they have done for the lower fares, but “Gotta Go Now” for their fully refundable price fares. Or “Gotta Get There Now” if the previous suggestion sounds too much like one of those commercials for an overactive bladder.

Anyway, there are a couple of potentials that could have been used.

My point is — Gotta Go Now, Gotta Get Away? Simple. Ties into the airline’s established marketing mindset. Makes the point. And no crappy “Business” fare tag for a product that is not any different from  the product sold as a “Gotta Get Away” fare — except that it is more expensive and refundable.

Then, they should have created the “A+ Boarding” option. A simple flat add-on fee for guaranteed “A” group boarding.

“Flying on a Gotta Go Now fare? Upgrade to the “A+” boarding option for (fill in the blank) and be assured of an “A” Group boarding pass.”

Marketing could have had a field day with this. Given out special little buttons. T-shirts. Given “A+” purchasers more drink coupons. I can see the commercials now.

In other words, the airline should have taken that “exclusive” group feeling that is there now and run with it. Taken advantage of it. It would have fed right in with the exclusive “clubby” “A” boarding group mentality that we “A” group boarders like to think we possess.

But does the term, “Business Select” lend itself to any of this? Not hardly. In addition, note to Southwest. Not all “A” group boarding nuts consider themselves to be “business travelers.” And you shouldn’t have made that assumption, or hung that moniker on them. It’s a mistake.

I have a lot of friends at Southwest Airlines. Some very dear friends. And the airline has done more positive things over the years than most. There is no question about that.

But the more I think about this announcement from yesterday, the more my head hurts. It makes things way too complicated and it takes the very guts out of their existing core marketing strength. It really makes me wonder if any of this decision was run by the great folks at GSD&M in Austin (they handle the airline’s advertising) beforehand. If it was, shame on GSD&M. If it wasn’t, shame on Southwest.

“Business Select?” Arrrrgh.

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SkyWest, WestJet Earnings: SkyWest Pilots Tell ALPA No Thank You

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Speaking of Skywest and WestJet, SkyWest reported earnings today — and WestJet came yesterday. While SkyWest had good quarterly numbers, remember a few days ago when I gushed about the numbers from Allegiant? Get ready. WestJet had one drop dead quarter. A record-breaking quarter. More on their great numbers in this week’s PlaneBusiness Banter.

One final note about SkyWest. It was announced yesterday that pilots at the airline had once again turned back efforts from ALPA to unionize the pilot group at the airline.

The vote wasn’t even that close. 65% voted against ALPA representation.

Ticker: (SKYW:Nasdaq); (WJA.TO)

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Ugly Day on Wall Street Today; Airline Stocks Take a Beating

Economics

I may sound cynical, but my reaction is, it’s about time.

Can we please get rid of the “Alice in Wonderland” thinking now? Or, rather, the “techs are strong and that will save the market” thinking?

This morning crude oil continues to pick up ground, (hovering around $97.40 as of this writing) while we have more banks talking about more billion dollar writedowns, and those banks which have already confessed to mortgage debt-related write-downs are now talking about even more on the horizon.

This morning it was announced that retail sales for October were, er, mixed to down.

Thomson Financial, which compares monthly results at 43 of the nation’s largest retail chains, said October same-store sales overall rose 1.6 percent, weaker than its initial forecast of a 2 percent rise. Same-store sales in October 2006 rose 3 percent.

Last month’s lackluster performance follows a 1.4 percent gain in September, which was the slowest monthly same-store sales gain since August 2004.

Notable in their gains for the month? Target, Costco, and Saks. Interesting.

Then there is the issue of the dollar. Been to Europe lately? Good luck. As of this writing, the euro is hanging at almost $1.47.

Thinking of getting married in the near future? Be prepared to spend more for the bling. Both gold and platinum are continuing their record-making climbs today — as commodities prices in general continue to surge.

And finally, there was Big Ben’s pronouncements this morning to Congress. The Chairman of the Federal Reserve told Congress this morning that the U.S. economy not only faces the risk of a sharp slowdown from the housing market’s contraction but also of an inflationary surge from sharply higher crude-oil prices and the weaker dollar.

Sharp guy that Bernanke. Wonder how he came to these conclusions.

Bernanke said that the policy-setting Federal Reserve Open Market Committee expect the economy to slow “noticeably” from the third-quarter growth rate and remain sluggish in the first half of 2008. But Bernanke also suggested that the hawkish members of the Fed might have a point about inflation. There were downside risks to the subdued growth forecast, and upside risks to the benign inflation outlook, Bernanke said.

Oh, and the Things with Wings?

They’re getting beaten up today on Wall Street. All the airline stocks we follow were in the red, last time I checked, with the exception of Republic, SkyWest, and WestJet.

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United CFO Tells Analysts Airline Will Ground Planes if Demand Starts To Fall

In light of the mounting evidence that the economy is falling apart — United Airlines said today that if demand starts to fall off noticeably, the airline will either have to raise fares or reduce capacity — given the specter of $100 a barrel oil.

Sp And 100-Front

According to Dow Jones, United CFO Jake Brace told those at the Goldman Sachs Transportation Conference in New York yesterday that with crude oil prices approaching $100 a barrel, United and other airlines eventually will have to deal with those skyrocketing prices by either raising fares further or reducing capacity rather than flying with too many empty seats.

“Either the industry passes on the higher fuel prices or we’re going to have to lower capacity, but you have to make the equation work,” he said in comments to the conference in New York.

Brace said United has a little more than 100 aircraft unencumbered by debt, including 50 Boeing 737s, “that we could ground whenever we needed to if the demand environment were such that it didn’t make sense to fly those planes.”

The 100 planes would represent more than a fifth of United’s mainline fleet of about 460 aircraft, as of Dec. 31.

It also has 13 narrow-body airplanes and one 757 coming off lease in 2008 that also could help it adjust capacity.

Ticker: (UAUA:Nasdaq)

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Just What Did “Administrative Leave” Mean at Mesa Air Group, Anyway?

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For those of you who are followers of the ongoing Mesa Air Group/Hawaiian affair, I have a tidbit to share with you today.

And the most remarkable, ironic, or telling part of all this? (Take your pick.) It comes compliments of Mesa’s own website.

It can’t get much better than this guys.

Just a hint. If you want to see the pictures we’re talking about live, you’d better act fast, because I’m sure they will be removed pretty quickly. Then again, for those of you who aren’t quite as fast, don’t worry. We’ve made copies of the page, and the pictures. (We are posting all links below.)

But for those eager beavers who read this quickly enough, if you want to see what interesting thing we found today while scrolling the Mesa website, first, open your browser and go to the Mesa Air Group home page.

Scroll down to the section on the recent launch festivities involving Kunpeng Airlines, the regional joint venture created by Shenzhen Airlines and Mesa Air. Headline is “Kunpeng Airlines Launches Services in China.” Check out that fake fog while you’re at it. (Well it was around Halloween.)

Click on the link that says “MORE” in that section. It will bring up an entire page of full resolution photos. Not minimal JPG sizes. Oh, no, full resolution photographs. (That will become important here in a minute.)

The picture that caught our eye is on the next to the bottom row — one picture towards the right. It’s the one with the huge flower artwork on the wall behind a number of people seated at a long table.

Direct link to the photo.

When the photo is downloaded,  it is identified by the Mesa Air Group site with a moniker that includes  “Kunpeng Launch.” As you can see, it is in a group of other pictures that were clearly also of the various launch festivities. When did this particular occur? Well, the launch was officially Friday the 27th of October. So, it could have been the 26th, the 27th or the 28th.

Now, here’s the point of my web adventure.

Look who’s seated next to Mesa CEO Jonathan Ornstein at the official event.

To his right — with, appropriately, an open laptop in front of him? (I know, at this point it’s becoming more and more like a skit from Saturday Night Live.)

While he seems to be somewhat pre-occupied with a napkin in the photo, and not what is on his laptop, there’s no question the person seated next to Jonathan is Peter Murnane. In fact, because the photo was uploaded in its full resolution — you can clearly make out his name on the little white name placeholder in front of him. George Peter Murnane III no less.

But wasn’t Peter on administrative leave from the company at the end of October?

A little historical perspective here for those who took a cruise to Alaska in October.

On Sept. 21, Mesa Air Group sent out a press release. In that release, it stated that the Board of Directors of the airline had put  Peter Murnane on “administrative leave.” In the press release, Mesa CEO Jonathan Ornstein said, “Our policy is to comply with only the highest ethical standards of conduct and, if we become aware of a potential or alleged violation of such standards, to conduct an appropriate investigation and to take appropriate remedial action when warranted. We will report the outcome of the Company’s investigation as soon as it is completed.”

“Until the investigation is complete, William Hoke, Vice President of Finance will continue to be responsible for the financial and accounting functions of the Company and will perform the duties of Mr. Murnane,” the release said.

As you recall, it was just a few days later that U.S. Bankruptcy Judge Robert Faris ruled that Murnane had intentionally destroyed files that Mesa had used before launching its airline go! These files had been sought as part of the trial’s discovery process. This was the ruling that came after the porn-made-me-do-it defense by Murnane.

I’ll let all of you talk amongst yourselves about this. Goodness knows there is enough to chew on.

For those of you who didn’t go see what we saw today soon enough, here are the pertinent copies.

PDF of the page of Mesa’s Kunpeng launch pictures

Photo in question

Ticker: (MESA:Nasdaq)

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One Last Clarification on the New “Freedom Awards”

When you take two current Rapid Rewards tickets and turn them in — to get one “Freedom Award” — there is a $50 charge only if you want to start a new 12-month usability time frame. Otherwise, the airline will take the “closer” of the two expiration dates on the tickets being turned in — and give you that date for the new ticket.

Okay, off to expand my horizons.

Couple of Errant Thoughts on the Southwest Announcements

Still mulling over the changes announced by Southwest this morning, and here are a few thoughts.

One, I really don’t like the fare names.

I’ve already had more than one of you send me notes in regard to “Business Select.” Yep. As in that horrible adventure in futility that US Airways pursued in the mid-90s. Exactly. And, as we all know, memories are long on the East Coast. Especially when it comes to US Air. Bad karma associated with this name guys.

But here is my bigger picture objection.

Let’s say Joe Blow Passenger goes to buy a fare tomorrow on the Southwest Airlines’ website. The three fare classes are now “Business Select,” “Business, ” and “Gotta Get Away.”

Now, is it just me, or do some of you also see the problem here?

The classifications seem incongruent.  “Gotta Get Away” is the playful, normal Southwest type of title. It is also a term that has been used for years by the airline.  But “Business” and “Business Select?” Those are about as innovative or Southwest brand-friendly as “More Room in Coach.”

I would have preferred something along the lines of “Whole Enchilada, Taco, and Rice and Beans.”

Not really, but you get my drift.

I just have this feeling that if Joe Blow is looking to fly from Tampa to New Orleans, might he not think that “Business Select” or “Business” class fares are something he should avoid, because they are for “business people.”

I mean, to me, with the three names across there, I get one connotation. Those two fare brackets are expensive.

Period.

And if I was going through the process of buying a ticket, and there were no “Gotta Get Away” fares left, I think that might make me more prone to go look at another website, rather than buy an expensive “Business” or “Business Select” ticket.

There’s just something that’s not working here. I think the desire to appeal to the “business traveler,” in an attempt to increase revenues has superseded the airline’s usual superb branding efforts. The three titles send off very different “intangibles.” And the airline does not want to send out mixed messages as to who they are and what they are. Especially not at the point of purchase.

Ticker: (LUV:NYSE)

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