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Puckinflight

An all things aviation blog

Monthly Archives: April 2012

Meet the nine votes that will determine the fate of AA:

Boeing

Three AA Unions (APA, APFA, TWU)

HP Enterprise Services

Wilmington Trust Bank

Bank of New York

PBGC

Manufacturers and Traders Trust Co

Remember what I said earlier about the Ch. 11 process. AA has to present a plan to these 9 that shows it can operate profitably. Other entities can present a take over plan to the committee that if approved will end AA’s existence. The Bankruptcy judge has final approval, but they generally follow what the committee approves.

The three banks: Manufacturers and Traders Trust Co; Wilmington Trust Bank; and Bank of New York will do whatever is in the interest of their bottom line. They are going to side with the people that promise to pay them more. Representing the bondholders, their votes are a toss up.

The three unions are another issue. I wondered why US was inking deals with AA’s unions, now it makes sense. These deals will give US three yes votes.

The Pension Benefit Guarantee Corporation is a lot like the FDIC for pension programs. When AA kills their pension program, the PBGC takes over the obligation. They are no fan of AA but I can’t image they are a fan of US. They are going to put the employee’s interest first. This vote is up in the air. With AA wanting to kill the pension program, I can imagine this vote leaning US

HP is an interesting creditor. There were rumors of AA developing a new passenger service system to be called “jetstream” developed by HP. Apparently AA owns HP such a substantial amount of money they got a seat. HP owns SHARES the current PSS for UA and US. If US kills Jetstream then HP may want to vote for AA. HP want’s to get paid, I think they lean to AA

Boeing is the last creditor. AA inked a huge deal with Boeing to lease over a 100 new aircraft in the coming years. US has promised to honor these leases. I am not buying it. US hasn’t ordered any new Boeing aircraft in a long time and is looking to retire the aircraft they do have. Airbus continues to cut US sweetheart deals on planes just to increase US market share. I think Boeing has to vote for AA. AA’s got rid of the A300’s and is looking to accelerate the retirement of the MD-83s in favor of 737-800’s.

Totals:

Banks, ? ? ?

Unions, US, US, US

PBGC, ?

HP, AA

Boeing, AA

If I was AA, I would forget the PBGC vote and focus solely on inking deals with the bondholders. If I was US, I would assume the AA pensions and pay off one bank or pay off two banks whichever is cheaper. Either way the banks are going to be the swing votes here.

Ch. 11. is a blessing and a curse. Right now AA’s future is in the hands of three banks. On the other side of the table you have one the most capable CEO’s of all time in Doug Parker.

People always discount Doug Parker because of how poor U.S. Airways is. This underestimation has hidden the facts, that will three second tier hubs, a marginal route network, a mutinous workforce, and a southwest airlines incursion at two hubs, US is making money. Something neither pre-merger United nor American could apparently pull off.

BTW Southwest is starting to pull back out of PHL.

Doug Parker ranks as either the number one or number two Airline CEO’s of all time. Gordon Bethune may beat him out for the number one spot for saving Continental Airlines, but it is close.

Will AA survive, maybe, but it is going to be very very close.

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I got an e-mail announcing the death of bmi.

The e-mail stated a couple of things:

1. as of April 20, 2012 (today) bmi is no longer in star alliance.

2. Star alliance benefits will continue until the end of May 2012, except on Lufthansa Group airlines which ends today.

3. members will get equivalent status in BA’s executive club and have the option to transfer miles on a 1:1 basis.

Most telling of all, there was no announcement of bmi joining OW. It’s these last two I find most interesting. This basically signals the final death of the airline as a whole. It appears that IAG/BA intend not to run bmi as a subsidiary airline, like Iberia, but to fold operations into BA.

This is a sad day for both the employees of bmi and for the people who fly bmi. I always maintained that the best possible outcome for bmi would have been to merger with Virgin Atlantic so there would be two major carriers at Heathrow. Now there is only going to be BA and also ran VS.

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A week or so ago a tornado ripped through the central United States and Kansas. Your question is well why do I care? Spirit AeroSystems a major supplier has it main facility in Kansas and their plant was damaged in the tornado. Thankfully everyone is safe, however, their ability to supply parts was impacted. They supply the fuselages for the 737 and are a major 787 supplier as well.

The tornado’s effect on the 787 line should be minimal, Boeing already has a huge number of planes being readied in Seattle. However, the potential effect on the 737 line is much higher. Boeing’s 737 line is more like a car assembly line where the line moves continually and Boeing user “Total Resource Management” and “Just In Time” manufacturing techniques to insure they only get parts from suppliers when they need them. Any delay in that supply line could have severe short term and medium term effects.

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According to the BBC, Virgin Atlantic has filed an appeal with the European Commission to block the sale of bmi to IAG  (British Airways). Now the EC has already approved the sale, and Virgin Atlantic has already committed to bidding on all of the Heathrow slots that BA will be required to divest as a result of the sale.

My question is, will this sale EVER  go through?

What do you think, leave you comments below.

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Much digital ink has been spilled in the name of UA’s million miler program and the post merger changes. This debate exists because of the merger of UA’s Mileage Plus and CO’s OnePass program. The new program has created a deal of controversy because of the devaluation of benefits provided to the million milers  But before we get to the debate lets look at the two programs before the merger and the program after the merger.

UA’s Pre-merger mileage plus million miler program

Members that flew 1 million miles on UA metal receive the following benefits.

Lifetime Premiere Executive status (the 50,000/year elite tier)

and a one time gift of upgrade certificates.

Members that flew 2 million miles on UA metal receive the following benefits.

All 1 million mile benefits plus Lifetime club access

Members that flew 3 (could be 4 I don’t recall but it’s not important) million miles on UA metal receive the following benefits.

All 2 million mile benefits plus lifetime 1K (UA’s 100,000/year elite tier)

Continental’s pre-merger million miler program was as follows:

Members that acquired 1 million elite qualifying miles receive the following benefits.

Lifetime Silver (25,000/year elite tier)

Members that acquired 2 million elite qualifying miles receive the following benefits.

Lifetime Gold (50,000/year elite tier)

Members that acquired 3 million elite qualifying miles receive the following benefits.

Lifetime Platinum (75,000/year elite tier)

The CO million miler has the ability to name a person with a OnePass account at the same address as the million miler, to receive one years worth of equivalent status as the million miler. This means if the 1 million miler is currently platinum, they “gift” platinum status

With that out of the way, lets talk differences:

at 1 million miler, UA gets Premiere executive as opposed to CO Silver. This is important as CO gold and Premiere executive grant international lounge access.

at 2 million miles, UA gets lifetime club access, No level on CO gets that

at all levels UA gets upgrade certs appropriate to the elite level and the one time gifts, No CO level gets that

For CO all elite miles count, this includes credit cards, class of service bonuses, and 500 mi minimum,  and partner airlines, UA only actual butt in seat miles.

At all levels there is the partner benefit on CO, it does not exist at any level for UA elites.

The current program adopts the following:

1 million miles is Premier Gold (50k), 2 million premier Plat (75k) 3 million premier 1k (100K) and 4 million (invite only global service).  Adds in global service level, removes the CO silver level

No upgrade certs or one time gifts, straight adoption of the CO program

Partner benefit, straight adoption of the CO program

Only butt-in-seat UA miles count, straight adoption of the UA program (there was a one-time adjustment but its not relevant)

For CO flyers, there is the loss of all EQMs counting,

For UA flyers, there is the loss of the upgrade certs, one-time gifts, and lifetime club status.

For CO flyers, there is the gain of moving the lowest tier to the 50k level. (which grants star alliance gold status and all important international lounge access)

For UA flyers, there is the gain of the partner benefit and access to global services.

Where is the controversy? Well CO flyers have largely been absent from the debate online and it has been mostly the UA folk that have been making their displeasure known. The controversy has been the loss of the upgrade certs that are good on North American flights or some that are good Systemwide. The UA million milers feel that the substitution of benefits, the partner benefit for certs is not a fair trade. They have a point, if they do not have a partner, or their partner is elite they do not benefit from the benefit.

you can read about their displeasure here:

http://www.flyertalk.com/forum/united-mileageplus-consolidated/1261734-co-ua-million-mile-beyond-flyer-benefits-effective-spring-2012-a.html

and

millionmilersunited.com

They feel this is a breach of trust. The company promised them “lifetime benefits” and the company is removing those benefits. Center to this is the controversy were the elites promised a specific set of benefits or just some benefits generally. Also to complicate matters there is a FAQ screen shot from UA that states UA million milers will continue to receive the same benefits. Though the language on this unclear.

What has been clear is the direct response. Some people state they are moving their business to UA some state they are going to sue. All are unhappy…

Which program is better, you decide.

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The for-profit aviation blogger is an interesting person. They are out there and they want you to click on their link to any number of credit cards. Basically they the blogger gets a “referral commission” when you get approved for a card using a link to their page,

Right now, you can tell who the for-profits are because they are pimping the Chase BA visa. They are telling you about all of the cool features ect all in the hope of getting you to click their link so they can get paid. There is nothing wrong with getting paid, heck I want to get paid. I am not going to get paid because of this blog though.

This begs the question who am I and why did I start this blog. Well I am a late 20’s aviation addict. I am fascinated by all aspects of commercial air transport. I started this blog not because I had any particular agenda but mostly I wanted to improve my writing. I figured that by writing short pieces about aviation, I’ll be able to improve my writing and get some news out there.

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Lucky Coins a fellow aviation blogger wrote a piece on the death diamond club this evening, you can find it here

http://boardingarea.com/blogs/onemileatatime/2012/04/12/one-week-left-to-burn-those-british-midland-miles/

The article starts out by saying you have one week to burn your miles. This is not accurate information. His post comes from the following quote on the bmi website.

It is the intention that bmi will begin to withdraw from Star Alliance at the date of completion of the sale, which we expect to be around 20 April, 2012.

bmi, Lufthansa and Star Alliance will be working together during the coming weeks to ensure bmi’s smooth exit from Star Alliance.

We will update you as soon as more information becomes available.

Well there are no surprises in that quote. The sale will be completed on the 20th of the month and bmi, and will exit *A soon after. Yes in order to redeem on Lufthansa group airlines, you will need to do that before the 20th. bmi will *a sometime after that and you will have to redeem on *A before that date. Or if you want, you could hold on to miles and they will be eventually converted to AVIOS miles in One World.

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The slow death is speeding up. Announced via e-mail on April 19th 2012 reward bookings will no longer be accepted for lufthansa group airlines. (Lufthansa, Brussels Airlines, SWISS, and Austrian Airlines). While not unexpected with the change of ownership this does confirm that bmi is transitioning out of star alliance. At what date that is set to occur depends on the the contract bmi has with Star Alliance.

As with the trend of loyalty programs what once was very generous is now not so much. Value in bmi was found in two places, their business class and first class redemptions and cash + plus miles. Now the levels are normalized with Miles and More (the LH program, though that will change) which were not so generous and the tack on fuel surcharges to tickets, which on long haul flights can be 500-700 added on the ticket. Quite a lot to pay for what is a “free” ticker.

Oh well AVIOS here I come.

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For those of you that are not familiar with Hotel programs here’s how they work. One earns points for how much they spend. Hotel Chains break their properties down into discrete groups. Each group has their own points per/night cost.

Well Hilton published their list of “point breaks” this is the list of properties that change categories.

Hilton has 7 categories Cat 1-7, from 7,500 pts per night to 50,000 pts per night.

My friend said it best,

Looks like the judge finally signed the order finalizing Hilton’s divorce from reality.
Let me disclose, I am mid-tier in Hilton and they are the only Hotel program I am apart of. They do not pay me and I doubt they will start after this article.
Frankly the list speaks for itself, but I will highlight some of the changes.
All London Hiltons move to Cat 7. No doubt for the olympics.
However,
Hilton Galveston Island
The Embassy Suites Destin, FL
Hilton Boston Logan Airport
and the Saratoga Hilton
All join the Cat 7 list that includes the Paris Hilton and the Hilton Bora Bora, I don’t see the Hilton Galveston Island measuring up.
Cat 6 is just as bad.
I just have one thing to say about this,
The Embassy Suites Lubbock, TX
Whys is this the way it is. Well for that you have to look at how the Hilton program is run and how programs operate generally. First, the hotels which are not owned or operated by the flag company, (Hilton is a flag) buy points from Hilton. When people redeem those points, Hilton pays the hotel for the room. Hilton decides on the point breaks primarily based on how much the hotel charges them for a room.
Hilton makes serious bank selling points and they in-fact give them away. A top tier member with the top credit card can earn up 29pts/dollar on a hotel stay before bonuses. This has resulted in a serious number of points being issued and redeemed. Hilton to avoid losing money has to inflate either the tier levels or move properties up the list. Which is what they have done. The result is this.
If anyone redeems 50k points at the Hilton Galveston Island, let me know I want to talk to you.

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I’ve talked about Boeing in the past. You may not have heard about Embraer. Embraer is Brazilian aerospace company that make regional jets. Depending which airline you fly there are EMB-120 prop jets, the small ERJ-135/145 and the ERJ-170/5 190/5 regional jets.

On March 22nd the two companies agreed to partner on bio-fuel development. (link)

This is interesting for two reasons. One, neither company makes the engines that would burn the bio-fuel. Major engine producers are Rolls-Royce, GE, and Pratt and Whitney. The partnership was expanded on in article from TheStreet.com, (Link)

Now comes the second reason, the partnership could lead to the joint development of aircraft. I am not so sure that is going to happen. It would be nice though. The article appears to be straight speculation on the part of thestreet.com

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