Monthly Archives: September 2010

Delta to Launch Service to Angola

Delta is continuing its expansion into sub-Saharan Africa with its announcement of three-times weekly service from Atlanta to Luanda, Angola, via Dakar, Senegal (that’s quite a mouthful, isn’t it?).  I keep mentioning Delta’s growing route network in Africa because, although it’s not yet at Pan Am’s footprint in Africa, it marks the largest US airline presence in Africa since Pan Am.

And, from what I can tell, this marks the first scheduled service from a US airline to Angola (Atlas Air runs a thrice-weekly nonstop charter flight from Houston to Luanda dubbed the “Houston Express” for oil industry folks, but that’s not really a scheduled passenger operation).

Also worth noting that although Delta has killed plans for a mini-hub in Cape Verde, they are using Dakar and Accra as stopping points for onward flights within Africa.  God knows the regulatory issues, but it wouldn’t be surprising to see them move African continuing flights to Dakar since it can be served with a 757 from New York, allowing them to build out a hub-type situation there (even if no origin/destination traffic is allowed).

In any case, Africa needs as many commercial flights as possible – this is another great piece of news for the continent.

A Quick Word about “Low Fare Airlines”

With the Southwest/AirTran announcement yesterday I’ve seen a whole bunch of articles referring to Southwest and AirTran as “low fare airlines.”  No doubt Southwest has been in the low fare game forever.  But the airline world has changed enough that in reality, every airline is a low fare airline.  The only real difference is on the high end of fares.  Legacy carriers typically have higher walkup fares than so-called “low fare airlines,” but with any advance purchase, Southwest is roughly in-line with everyone else (except when they’re more expensive).

Yes, we can argue about whether fees should be included, etc etc etc.  But rare is the route with a so-called “low fare airline” where legacy airlines are priced any higher.

That all said, Spirit and Allegiant truly are low fare airlines, offering prices markedly lower than competitors (and competitors, if they have any on that route, generally don’t bother matching).  But I just thought it was worth pointing out that nearly every article yesterday about the merger referred to lowfare airlines, even though every airline offers $300 round trips coast-to-coast — those are low fares, indeed.

We Did NOT See This Coming: Southwest to Buy AirTran

Wow, we did not see this coming at all.  When we saw the news that Southwest is buying AirTran I thought that maybe there was some other Southwest Airlines in Pakistan or something (a la Pakistan’s Air Blue).  But no.  Southwest, the little airline from Texas, will now have 685 aircraft and fly internationally.  Southwest has not been the Old Southwest since Gary Kelly came onboard.  It’s still talked about as if it’s a leisure-focused airline offering only peanuts in exchange for cattle boarding on flights to secondary cities.  But that hasn’t been the case for years.  Southwest already announced service to all 3 New York airports, and has been expanding to major airports like Boston for years.

This acquisition allows them to step up that strategy.  AirTran has gates at Washington National and LaGuardia that allows Southwest to build out those cities in ways they could not without AirTran.  It helps them further their base in Atlanta and create strong growth there.  It allows them to build up service through the Ohio Valley, where AirTran is strong.  And it allows them to launch that international service everyone has asked about for years, with flights to a handful of cities AirTran serves in Mexico and the Caribbean.  It accelerates everything they’ve been doing for years, and no one (that I’m aware of) saw it coming.

The airlines will operate separately until the deal closes, and then the AirTran name will disappear and its planes will be painted in Southwest livery (AirTran flies 737s and 86 717s, marking Southwest’s first foray outside the 737 family).

One amusing note:  Southwest put out a fact sheet that lists some info about both carriers, with one section talking about accomplishments.  Southwest lists things like its lifelong profitabilty; AirTran lists “serves more Coca Cola brands than any other airline.”

Spirit Airlines Files for IPO: Say What You Will, They Are Pretty Impressive

Spirit Airlines filed their S-1 statement in anticipation of an IPO, and complain all you want about them, they know how to run an airline.  In short, if you like Allegiant’s finances, you’ll be pretty impressed with Spirit’s.

Read all of the complaints online about how Spirit is the worst run airline blah blah blah – it’s nonsense.  In 2009 they made $83 million on $700 million in revenue.  That’s not the BS “operating profit” that some airlines brag about, it’s actual profit.  Remember in 2008 when the economy was collapsing and the major airlines were complaining about how horrible the market was?  Spirit wasn’t complaining, because they made $33 million on $787 million in revenue.

They’ve succeeded by shrinking themselves to the right size (28 airplanes in 2009 vs 36 in 2007); increasing utilization (13 hours a day in 2009 vs 8.9 in 2005); and raising ancillary revenues to $31.28 per ticket for the first half of 2010.  Oh, and they did that while at the same time lowering average fares from $104 in 2006 to $82 in the first half of 2010.  In comparison, Allegiant had an average fare of $70, with $33 in ancillary revenues in 2009 on a similar average stage length (about 900 miles for both).  Both airlines, frankly, have performed amazingly well.

It’s not brain surgery (I’m not at all discounting how difficult their job is) – it’s just about consistently executing on their plan to lower fares, reduce costs, and shift as much of their revenue as possible toward ancillary non-fare charges.

Their executives are not overcompensated, especially considering their impressive ongoing financial performance, with their CEO earning about $800k in salary and bonus last year.  Compare that to the CEOs in the rest of the industry, and he’s basically living below the poverty line.  OK, not quite.

Does Spirit occasionally have some customer service issues?  Sure.  But they have really done just about everything right from an operational perspective.  People can laugh all they want, but these guys understand how to run an airline.

Dear Lufthansa…

Dear Lufthansa,

We hear so much nowadays about the golden age of air travel, and I wanted to take the time to thank you for bringing me back to that earlier age on my 747 flight from Frankfurt to New York yesterday.  The lack of seatback TVs, the absence of power plugs, and having no option for more legroom really harkened back to an earlier era of travel where 8 hours on a plane was pure bliss.  Keep up the great work.

Sincerely,
Jared

P.S.  Charging for wi-fi in the lounge was a nice touch.

Budget Airlines Come to Tokyo (Finally!!)

Japan has been quite noticeably absent from the Asian low fare airline parade – Japanese travelers have been paying a fortune to fly anywhere forever.  That’s about to change.  Long-haul low fare airline AirAsia X announced that it will launch 3x weekly service between Tokyo (Haneda) and Kuala Lumpur beginning in December.  Fares start at 5000 Yen ($58) each way, which is about 1/10th the current price.  Lie-flat business class tickets will cost about $600 each way, a steal.

The new service is possible thanks to a new runway being opened at Haneda and an Open Skies pact.  Although AirAsia X is a pioneer in cheap flights to Japan, China’s Spring Airlines also flies cheap flights between Shanghai and Ibaraki Airport about 50 miles north of Tokyo.   ANA recently announced that they will create a low fare unit to take advantage of the newly available slots.

Ridiculous Airline Complexity #372

One of the primary reasons people are constantly annoyed with airlines is the unbelievable complexity involved in the operation, and how that complexity ends up as customer-facing nonsense.  To wit:

I flew to Amsterdam yesterday on United, though I bought it through Continental (it’s a codeshare).  (Side note:  My company travel policy suggests I fly on partner airlines, of which Continental is one.  It would allow me to book this ticket as a Continental flight, but if I tried to book it as a United flight, it would not let me.  It’s the same flight).

Anyway, I wanted to upgrade (if that’s the word) to Economy Plus ($97, a steal), so I called United.  Here’s the conversation:

Me: Hi, I’m flying on United on Sunday and I’d like to buy Economy Plus — I’m on a Continental ticket, though.

United: Oh, we can’t help you with that.

Me: Do I have to call Continental?

United: No, they can’t help you with that either.  You have to call our travel agent.

Me: Really?  They can upgrade it but you can’t?  Are you sure (as I’m about 100% sure the travel agent will tell me to call United).

United:  Yes, the travel agent can help.  They have to reissue the ticket as a United ticket.

Me: Isn’t there a fee associated with making that change?

United: I don’t know, you have to ask your travel agent.

Me: No, I mean in the fare rules, doesn’t it say what the change fee is.

United:  No it does not.

Me: Wait, you don’t know what the fare rules say?

United: No.  You have to call the travel agent.

And….scene.

I’ll spare you the part about where I call the travel agent and they tell me I have to call United.  In any case, good luck the next time you use a corporate travel agent to book a codeshare flight on United and want to get Economy Plus.

Venezuela’s Conviasa to Suspend Flights for 2 Weeks for Safety Review

Perhaps I should have bunched together this story with the Air Zimbabwe news, but here goes:  Venezuela’s flag carrier, Conviasa, has suspended all flights until October 1st for a safety review following two incidents this week (a crash that killed 17 people and a landing issue in Caracas).  When you think about it, suspending the airline is an impressive move, especially coming from a state that is not considered to be the height of virtue.

I also can’t imagine who is going to get on one of their flights after the government shuts them down to make sure they’re running a safe airline.  But I also won’t be surprised when it opens up under another name somewhere down the road.

Air Zimbabwe Fires All of Its Pilots

Poor, poor Air Zimbabwe.  As if its country didn’t have enough problems, the airline’s management fired all of its pilots after they held a strike over back pay they hadn’t received.  40 staff were dismissed from their jobs, leaving the airline’s survival in question (it’s kind of a miracle that it still survives today).  While I had a perfectly acceptable experience when I flew them years ago, they are known for being plagued with cancellations, and the occasional takeover of the plane by the country’s First Lady so she can go shopping in Paris.  So it is.

About 1,000 passengers are currently stranded, but airline management says they will find new pilots quickly to fill the roles.  Good luck.

Aer Lingus Abandons Low-Cost Model

You may remember that a couple of years back, a struggling Aer Lingus decided to go the low-cost route, acting as a low-cost provider on European flights.  They felt that given Ryanair’s success, there was no way they could compete on intra-European flights with them and, rather than give up those routes or form a subsidiary to handle them (which is the typical response in Asia to this situation), they decided to try to compete directly against Ryanair.  So much for that:  their CEO has announced that the airline has abandoned that strategy, and is now focusing on carrying passengers over Ireland as a way of working through that country’s recession.

And it’s starting to work.  An unusual arrangement with United on joint venture flights between Dulles and Madrid via Dublin (operated by Aer Lingus) allows the airlines to split revenues and risk.  That venture is already profitable after a few months.  On other trans-Atlantic Aer Lingus flights only 20% of people are terminating in Ireland.  This sounds like the Icelandair model, where if they can get costs down, they can be a lower priced alternative to Europe (and with Americans able to clear customs in Shannon, it’s not much extra time at all).

Aer Lingus doesn’t have much choice – it’s seen a 40% drop in Irish passenger demand in the past 2 years.