Monthly Archives: August 2012
Starting an airline is hard. Seriously it is really hard. Airlines have huge fixed costs, planes, staff, facilities, ect. Airlines have huge amounts of regulation that also discourage startup. I can think of only three start-ups in the past few years that have stuck around, JetBlue, Virgin America, and Vision Airlines. Of those three only JetBlue is really prospering. The numbers of failed start-ups is long and undistinguished. Now we have new carrier coming to the U.S., Travel Service. Travel Service is a Czech charter carrier that has decided to start regular service from Prague to Miami on a 737. Yes you heard that right 737 service.
Now 737s can fly Trans-Atlantic routes. Private Air flies 737 Trans-Atlantic service for KLM, Suisse, and Lufthansa in an all-business class configuration. Now, this is going to be regular service with coach service. Since, coach service crams more seats into the plane, the planes are heavier. This means they carry less fuel, and have a shorter range. There is no way this could ever be a non-stop flight. Travel Services has added in a fuel stop in the Azores to compensate for this. Even with the fuel stop, the flight is much shorter than connecting service in the U.S. or Europe; so if you are going from Miami to Prague this is the way to go.
Convenience asides this flight is not going to last, if it starts at all. I am sure there are people that want fly from Miami to Prague and the return. However, the number of people who actually want this flight is quite small. Delta want to try something similar with the Azores, they were going to use the Azores as a scissors hub to Africa. People would fly to the Azores from Atlanta and then split off into a half-dozen Africa flights, this service never got off the page. I firmly expect this to be the same with the Travel Service flight. It looks bad on paper, and that’s where it will stay.
Tags: Travel Services
Today talks between Lufthansa and their cabin crew union broke down. The union gave notice to its members to prepare for a series of surprise strikes. The issues are the crews pay raise; they want 5% Lufthansa only wants to pay 3.5% and the number of contract workers. The issue of pay isn’t a huge concern the issue of contract workers is. Lufthansa largely without notice in the U.S. outsourced large portions of Austrian Airlines operations. It seems like Austrian Airlines has become a shell corporation with limited in-house operations. Even parts of Austrian’s long haul operations are operated by contract carriers. Just imagine the uproar if United Airlines hired SkyWest to fly 747s to Tokyo, United’s employees would be livid. Clearly Lufthansa’s cabin crews see the same in their future.
Lufthansa isn’t known for their dicey labor relations. When I think of European Airlines with bad labor relations I think of Alitalia and British Airways. Lufthansa has been seen as typically German, quiet, reliable and professional. It’s that opinion of Lufthansa that is threatened by this labor action. If you’re traveling on Lufthansa there are a couple of things you can do to mitigate any potential travel interruptions. The best thing a traveler can do is be pro-active in monitoring their reservation(s). Accurate operations information will on Lufthansa.com. Travelers should be in the habit checking the airline’s website anyways, but with potential strikes it will be even more import to monitor the website. In the event of a strike, the alternate travel plans have to be considered. For those traveling within Germany this will be difficult as there are limited options for purely domestic travel. Travel within Europe and intercontinental travel is easier as Lufthansa can push the ticket to another airline.
What to do if you end up stuck in a strike. First, remain calm. Screaming at airline staff will not impress staff. The airport is likely to be crowded with travelers who all need to get to their destinations. Next, before talking to an agent, it is best to already have alternative routings to make the agent’s job easier. Finally, be as flexible as possible. Never, book the last possible flight. If you have to be on that flight then you needed to book a different flight to begin with.
All of these tips can apply to any disruption, weather, mechanical, stupid, or otherwise. By taking a few simple steps any traveler can mitigate disruptions and have a reasonably smooth travel experience.
On or about 1pm on 8/28/12 I went on to UA.com to see if the upgrades had started clearing for my flights this weekend. Well…I couldn’t get into my account, and then UA.com shut down completely. Outside of this being annoying and UA losing some revenue from people unable to book this is not a huge problem. However, apparently all of United’s computers are down this is a huge problem.
Airlines as backwards as they are rely on computers for their daily operations. Beyond the seat assignments and upgrades, the computers do all of the flight planning, load management, and communicate with ATC and the FAA. Now all of this can be done by hand but it is very difficult. Agents can’t pull up tickets to see if passengers are even on the flight. Flight plans have to be generated by hand and physically filed with the FAA. Pilots have to do the entire load planning by hand insuring the plane within proper weight and balance specifications. Now, United has some method for getting flights off. They have stated that some international flights originating outside of the U.S. will use a “backup” system.
But as I am writing this, the website is back up so at least people were not inconvenienced for more than an hour or so.
Spirit Airlines is another one of those Ultra Low Cost Carriers that live in the margins of the U.S. Aviation market. Perhaps best known for their cheeky advertising and $9.00 fares that rarely add up to $9.00; they have been frequent targets of DOT enforcement for violating fare disclosures. Today however, they are in the news for a different reason. Via press release, http://ir.spirit.com/releasedetail.cfm?ReleaseID=702720, they have announced service from Houston to Chicago and Las Vegas, joining their existing service to Dallas.
Spirit has been expanding their service out of Dallas for some time now. It is surprising that Sprit would announce service not just from Houston but to a major operation for Southwest and a hub-to-hub route for United. People who write aviation blogs and have opinions about the effects of low cost expansion will tell you that this will have no real impact on United’s or Southwest’s operation in Houston. I think those people are wrong. It’s true spirit makes its own markets. They target people who do not use air transport and would not without Spirit otherwise travel. However, there will be some leisure travel that will move to Spirit from both WN and UA. WN is in the middle of dramatically increasing its Houston operation while UA is in the process of trimming theirs. Spirit will continue the trend of draining passengers away from United. This drain will further decrease the profitability of UA’s Houston operation. Whether or not this decrease will accelerate or increase UA’s pull back remains to be seen.
Spirit has largely gone unnoticed by the legacy carriers. Their aggressive expansion over the past couple of years suggests that they are fast becoming a force to be reckoned with. UA and WN have for the most part peacefully co-existed in Houston. That balance that existed before the merger is largely gone with United ceding ground and markets to Southwest. With Spirit’s entry into the Houston market this suggests that the Houston market will rebalance again.
It is rare that I write about hotels. I am top tier with Hilton Honors, mostly because their properties tend to be less expensive than Hyatt, SPG, and Marriott and there are more of them. Hilton in addition to Hyatt and SPG provide their top members suite upgrades as an additional benefit. In contrast to airline upgrades hotel upgrades are a bit more inconsistent. This is understandable as generally hotels are not owned by the brand, or flag as it is called in the hotel industry. Hotels are franchise operations own by local companies who pay a franchise fee to their flag. That means each owner has his or her own interpretation of the loyalty program guidelines. This leads to some properties doing a lot upgrading and others not so much.
Let’s talk about how large hotels work, specifically room assignments. About two weeks out from your stay, the hotel’s computer auto-assigns all people who booked in advance a room. This makes sense; it gives the people who have control of the process a place to start from. Then in the three or four days leading up to your stay, rooms control takes over. Rooms control is run by generally a front-office manager. They look at the requests people put in, the guest’s status, the rate paid, and other information to finalize room assignments. People who book only a couple of days in advance are only going to get whatever is left. Then when you arrive on your day of stay your room has been pre-assigned by rooms control.
Using that quick and dirty overview of the rooms assignment process, let’s turn to the upgrade process. Rooms control and the Front-office manager have total control of the upgrade process. Having read some of the Hilton brand standard documents, they mandate that hotels complete the upgrade process 48 hours in advance. Well, that almost never happens. I think hotels mostly run upgrades the morning of the stay in order to maximize the chance that they will sell a more expensive room, rather than giving it to the upgrader. When you, the guest, gets to the check-in desk your upgrade has already been determined. The agent you are speaking to have little to no discretion on your room type. There may be some movement within the class of rooms you booked, IE moving from two queens to a king bed, but they rarely have the ability to upgrade you. That’s not to say they can’t, if for someone reason they have to take a room out of service of upgrade due to overbooking then the agent has control over the process. But that control has been expressly delegated from the front-office manager of the manager-on-duty. Abusing the front-desk agent over upgrades will not only fail to get you the upgrade, it will make you look like a jerk.
John Nicholson of the Huffington Post publishing an article today proclaiming America’s need for a five star airline. http://www.huffingtonpost.com/john-nicholson/america-needs-a-five-star-airline_b_1823666.html In this article he proclaims need for better loyalty programs and better on-board service. He states that compared to international carriers US Airlines provider generally inferior service and an inferior product. He writes from the position of being one of Delta Airlines “Diamond” members. Diamond is the top tier of Delta’s loyalty program. His argument is that US carriers should strive to become more like the foreign carriers like Singapore Air, and that the regulatory system in place, is a detriment to US commercial aviation.
He is both right and wrong.
Loyalty programs are interesting. The US airlines have the most generous frequent flyer programs. Let’s compare John’s program of choice, Delta Skymiles. With Skymiles John gets complementary upgrades on domestic flights, discounts or no fees at all, upgrade certificates, lounge access, bonus miles. Compared to Lufthansa Delta’s program is beyond generous. Lufthansa’s Miles and More program doesn’t provide complementary upgrades, limited bonus miles, and limited upgrade opportunities. But it is not the miles on the ground that concern me, it is the benefits in the skies. Even if Lufthansa gave out complementary upgrades it would be upgrades to a coach seat with slightly better food. The plush seats that John likes so much do not exist on most short haul flights.
John’s point though is well taken. Ask any frequent flyer, who would they fly long haul, an American carrier or a non-American carrier and you would get non-American carrier every time. Why is that? Well service and seats tend to be better on non-American carriers. However, there is no incentive for American carriers to provide better long haul service. Most US Airlines are in agreements with European carriers to share all revenue on long haul flights. This means that while Delta and Air France charge the same amount and split the revenue, the lower cost structure of Delta’s service means they make more money. Oddly, the most innovative US carrier in premium cabins has been US Airways, and they are not in a revenue sharing agreement with anyone.
John’s next point is that loyalty programs have been devalued. No shock there. US Airlines see loyalty programs as a revenue center, not a cost center. Airlines make huge amounts of money by selling miles to banks, credit cards, hotels, and shopping partners. The problem is the same with countries, the more miles issued the less each mile is worth. Airlines have countered this problem by reducing the amount of available seats and increasing the cost of awards. As John knows he would be very lucky to find domestic reward sets for 25,000 miles. Now, most seats on Delta go for 40,000 miles. This is basic inflationary pressure. Non-US airlines tend to limit the amount of miles issued through non-airline partners and through bonus miles as part of elite service.
So what can US Airlines do? Well, like John said US Airlines need to rededicate themselves to service. It is ok for airlines to provide peanuts or sell meals if the service is good. It is beyond me in the age of increasing dissatisfaction with airlines; the airlines can use service as a way to differentiate themselves. However, the service personnel are fighting any change that would require them do work. American started to provide PJ’s to their long haul first class passengers. The union that represents American’s flight attendants fought the change saying it would impact security. I have been on flights with downright atrocious service. Maybe the glamor is out of air transportation, maybe it is not. US airlines need to make these changes in order to be successful, it is just a question of will they.
Today, Allegiant Air announced that they will be starting service between Phoenix Mesa airport and Honolulu. This service will be three times weekly with an afternoon flight outbound and a morning return the following day. This marks the first time Allegiant has really gone head-to-head with a US legacy airline. Allegiant has been primarily a low-cost leisure airline bring passengers from airport that do not see much if any major air service to Las Vegas. However, recently the airline has been changing that model. Over the past two years or so Allegiant has been making moves to acquire second hand Boeing 757-200’s and open service to the Hawaiian Islands. This is not Allegiant’s first route to Hawaii. Previously, Allegiant has announced service to Honolulu from Bellingham WA, Eugene OR, Santa Maria CA, Stockton CA, Boise ID, Fresno CA, Las Vegas NV, and Spokane WA. Allegiant is set to compete with Alaska Air on the Bellingham route (which Alaska started to preempt Allegiant service). As you can see these routes, with the exception of Bellingham, are not served by any other airline.
This new service from Phoenix Mesa will compete at least indirectly with US Airways service from Phoenix’s Sky Harbor airport where US offers 10x Weekly service during the Winter season. An unscientific search shows Allegiant pricing round-trips out at $378.00, with Allegiant’s bag and seat fees the price rises to $580.00 approximately depending number of bags and seat selected. US Airways is currently charging $803.00 for a flight on the same days, plus similar fees. Currently, Allegiant’s flights do not come up in Expedia and Orbitz Phoenix-Honolulu searches. I don’t know if that will change or even if US will take Allegiant seriously in this market. United’s one-stop service is about half of US’s and with bag fees and such is about equal to Allegiant’s all in fare.
Allegiant is a leisure carrier, it is interesting that they chose to go head-to-head with US Airways and to do so in Phoenix which is also home to a large Southwest Airlines operation. Allegiant is building up Mesa with flights into other destinations. It’s clear from the routes announced that Allegiant intends to have a large presence in Phoenix. Living near Phoenix, I can state that fares out of Phoenix have been generally been tied to Southwest Airlines. Allegiant, intends on at least some level to change the two incumbent carriers. The question is whether or not this service will be accepted by the local market as competing with US Airways and Southwest. Currently Mesa just announced service to Denver on Frontier and there is service to Dallas on Spirt Airlines.
Personally, I hope this service sticks around, because the fares are too high out of Phoenix.
Last week AA’s petition to the bankruptcy judge to throw out their contract with the pilots was rejected. This is a situation that is pretty much unprecedented in bankruptcy court. Traditionally, firms in bankruptcy are given wide latitude to restructure their obligations. Bankruptcy courts have recently seen an influx of “prepackaged” bankruptcies. These are not true bankruptcies, but the firm has decided that their current cost structure is not to their favor. The firms have decided that bankruptcy court is the best way to renegotiate their contracts. Bankruptcy court is supposed to give firms a second chance, not provide a negotiate edge to the firm.
It was bound to happen that bankruptcies court would start pushing back. Bankruptcy courts are becoming less of a rubber stamp for the firm and the creditors committee. This is a good thing; the DOT does not really appear to understand the airline industry they are tasked with regulating in regards to economic concepts. The only government influence over airlines has been though the bankruptcy courts. Now it appears the courts seem at least willing to hear out other groups, pilots, traveling public, ect. For AA this is not a good thing, though it should be good for everyone else. As stated previously, US Airways is positioning itself as a merger partner to take over AA. The court at least appears to be willing to listen to US and others. Overall this does not bode well for AA’s plan to continue to as a standalone airlines.
I was driving into work this morning and I heard the following piece on NPR’s business review.
The piece emphasizes that US Airlines have been having a good summer season, with fewer customer complaints and an on-time arrivals percentage that’s has been at a near 30 year high. Where is NPR getting these numbers from, I mean is the NPR reporter just making them up. Customer service complaints to the DOT are way up from earlier this year, on-time percentages have been dropping and there have been four successful fare hikes this year.
I never thought of NPR as having a strong business reporting side, but this is bad.
Earlier this week El AL by way of a contractor made a pricing error that cut the price of tickets from the US to Israel from the norm of well over $1,000 to $400.00. The estimate for the number of tickets booked range from between 5000 to 6000. Yes almost 6000 tickets issued. Today El Al announced that they were going to honor the tickets issued. Not just honor the tickets but offer the people traveling an opportunity to take a direct flight on El Al into TLV for a $75.00 fee.
This situation is unbelievably similar to the United ticket debacle. Yet, United stands alone, telling its consumers and the government that no, they will not be responsible for their mistake. I just have one question United why have you broken faith with your customer base?