Dec21st

Midwest Making Changes

Midwest announced a few changes today, but I don’t think these are related to AirTran’s bid to take them over. Instead, I think this has been in the works for quite some time.

Before we get into the changes, let’s talk about how Midwest is currently set up. From their hubs in Kansas City and Milwaukee, the airline has two distinct types of service.
The first type is called Signature Service, and this is what they’ve offered since the beginning. This is on all the 717 aircraft in the fleet. Those planes normally have a 2/3 (five across) configuration, but Midwest has them with 2/2 for extra seat width. Seat pitch is an above average 33 to 34 inches.
Next up is Midwest’s Saver Service. This was introduced a few years ago on what they deemed to be leisure-oriented routes. By now, I believe all the MD-80s are in this configuration. These aircraft are closer to a standard configuration for coach seating. They are in a 2/3 configuration but they do have a good 33 inch pitch.
In general, all the airline’s routes have either Signature or Saver and not both as you can see on this route map.

midwestroutemap

There are exceptions, however. Flights between the Kansas City and Milwaukee hubs may be Signature or Saver depending upon the flight. This, along with a desire to offer more consistent options to their loyal travelers, has led the airline to announce today that it will now have a Signature cabin at the front of every Saver flight. In other words, you can think of Signature Service as First Class and Saver Service as Coach in terms of seating configurations. Now the MD-80s will get a First Class section. This is different than regular First Class though, because all seats will get the same service - there’s just more legroom up front.

In the Milwaukee hub, there is also a third distinct service called Midwest Connect. This is their commuter operation which until now has been run exclusively by Skyway, a wholly-owned subsidiary. Skyway flies 19 seat Beech 1900 turboprops and 32 seat Dornier 328 Jets. There is nothing special about the seating configuration on these aircraft, but they do have leather seats.

As you can imagine, flying only aircraft with 32 seats or fewer leads to a network of distinctly smaller cities than you would find with most regional airlines. Raise your hand if you’ve heard of Manistee, Michigan. That’s what I thought. So, this led the airline to look at some larger alternatives to fill the gap between the 32 seat regional jet and the 88 seat 717.

In what seems to be somewhat of a surprise, the airline announced today that it will contract with SkyWest to fly 15 to 25 CRJs with 50 seats. The surprise was that it was rumored that other airlines would have won the bid, but SkyWest has a stellar reputation that should mesh well with the Midwest product.

They mentioned that the aircraft will have all leather seats, buy-on-board meals, and their signature baked onboard chocolate chip cookies. That will bring it up to par in terms of service, though the number of seats will be standard for an aircraft that size.

This expansion allows Midwest to go after some new routes to build up and strengthen their hubs. One obvious opportunity is to start flying from Kansas City to smaller regional airports. There are also more mid-sized markets from Milwaukee that can be served by this size aircraft.

I personally like the moves.


Dec20th

How Bad is Denver’s Snowstorm? Learn to Read METAR

snow As you can see by the picture on the right, Denver is completely and totally snowed in today. Ok, maybe that’s just a white square, but I bet that is what the city looks like right now.

If you go to the FAA’s website, you’ll see a dreaded black dot under the Denver airport. That means that the airport has been officially closed as of 245p Mountain Time. They are unable to clear the runways fast enough.

If you’d like to see actual conditions at the Denver Airport, you can go to the National Weather Service’s weather page where they have the METAR. The acronym apparently stands for something in French, but it’s basically the aviation weather report.

Right now, the Denver METAR shows this:
KDEN 202131Z 34028G34KT 1/4SM R35L/1400V1800FT +SN BLSN FZFG VV002 M04/M06 A2984 RMK AO2 P0000 $

For those who don’t speak airline/weather dork, it basically means this:

  • KDEN - The four letter ICAO airport code for Denver’s Airport
  • 202131Z - The report came at 20:21:31 zulu time (GMT) The report came on the 20th day of the month at 21:31 Zulu time which is usually equal to GMT
  • 34028G34KT - Winds are 28 knots gusting to 34 knots and they’re coming from 340 degrees (north northwest)
  • 1/4SM - Visibility is 1/4 of a statute mile
  • R35L/1400V1800FT - Runway Visual Range (RVR) - so on runway 35L, you can see between 1,400 and 1,800 feet ahead of you depending upon where you are on the runway
  • +SN BLSN FZFG - Snow, Blowing Snow, and Freezing Fog
  • VV002 - Since you’re in the fog, there is no real ceiling, but you can only see 200 ft above your head
  • M04/M06 - Temperature is -4C and the dewpoint is -6C
  • A2984 - That’s the barometric pressure

The rest of it doesn’t really matter, but you get the point. This is some horrendous weather. BTW, for a full tutorial on how to read METAR, here’s a great resource from Weather Underground.


Dec20th

Baby Served Well Done

babybinIf it’s December, it’s time for the infrequent travelers to come out of the woodwork and make their annual pilgrimmages home for the holidays. Flying can be a tough things these days even for those who know what they’re going, but for those who don’t, it’s really intimidating.

LAX found a great example on Saturday when a woman thought that she should run her grandchild through the x-ray machine.

Oh yeah, I’m not kidding. The screener saw the child right away and yanked the bin out of the machine. After investigating, they say the baby didn’t receive more than a normal level of radiation for a single day, so the family was allowed to continue on to Mexico City as scheduled.

So for those other inexperienced travelers getting ready to fly, please remember that no babies are allowed in the x-ray machine. [queue NBC's "The More You Know" public service announcement music]


Dec19th

Delta Fights Back

duel

Who’s ready for a good old fashion duel? Apparently US Airways and Delta are, because that’s what it’s come down to. Today, Delta issued a barrage of press releases that basically told US Airways to go away. They have a better plan.

Think I’m kidding about it being a barrage? Here’s the lineup from this morning:

I’d say that’s enough to make any reporter cry. But let’s forget about that. What is really going on here?

First of all, Delta put out its own bankruptcy reorganization plan as a stand alone company instead of merging with US Airways. The plan values the company at between $9.4 billion and $12 billion. On the surface, this compares favorably with US Airways’ proposal valued at $8.4 billion, but when you dig in, it may not be as great as it seems.

In the Delta plan, the unsecured creditors get no cash at all. They will receive common stock in the new company to settle their claims. If the $9.4 billion valuation is correct, that’s 63 cents on the dollar for the unsecured creditors going up to 80 cents on the dollar if the valuation comes in at $12 billion. Of course, the exact valuation won’t be determined until a later date and it could be lower. That’s something with which the creditors would have to be comfortable.

On the other hand, US Airways offered a combination of $4 billion in cash and $4 billion in stock (which has now increased in value to $4.4 billion in stock). Back then, it meant the creditors would receive 50 cents on the dollar, but with the increase in share price, it now means 52.5 cents on the dollar. This, by the way, assumes $16 billion in claims. That’s $1 billion more than Delta’s estimate and I’m assuming it accounts for all the additional restructuring that US Airways wants to accomplish before it brought Delta out of bankruptcy.

So it’s up to the unsecured creditors to decide if they’d rather take the lower valuation with guaranteed cash from US Airways or take their chances on stock valuation of an independent Delta. Don’t forget that US Airways could also decide to sweeten the pot and increase the offer if they see fit.

In their rejection of the offer, Delta also outlines several reasons why they are against the merger. If you’d like to read through their investor presentation (pdf), you can get much more information than this. If you prefer the Cliffs Notes version, here it is with my comments. These are the reasons why they think the merger is a bad idea:

* Has an unacceptably high risk of not achieving antitrust
clearance because the US Airways proposal would harm consumers
and communities;

Well, that may very well be true, but why not let the government decide that? It seems like you could get an idea fairly quickly through back channels about what would be required to help it through the government review. Would they have to shed assets? If so, decide if it’s worthwhile or not and run with that decision. I’m sure Delta is using this to position themselves as the champion of the customer here, but really it’s just a PR move to get sympathy that shouldn’t impact the outcome. If you’d like to read more, go to this presentation (pdf).

* Has overwhelming labor issues precluding attainment of claimed
synergies;

This is an interesting one. The airline says that their pilot contract doesn’t allow them to reduce flying hours, so the US Airways plan to cut capacity 10% wouldn’t work. I’m guessing US Airways realized that and is planning to cut more regional flying on the Delta side. Since much of that regional flying is outsourced, they could probably shed it fairly easily. They say these problems are overwhelming (along with the usual “employees don’t want it” argument), but I just don’t see it being such a huge problem from a cost perspective.

* Depends on achieving “synergies” that are premised on faulty economic
assumptions;

There are some good points here. They say that US Airways’ synergy calculations don’t account for cost savings already implemented at Delta, so the projection is overstated. If that’s true, then I would agree that it’s a problem. Delta has made some good strides on the cost side lately, and those should be accounted for, but would US Airways really have overlooked that? Other arguments here are either vague (”inappropriate extrapolation of US Airways/America West merger estimates”) or not exactly proven (”impact of reduced customer service”).

* Saddles the company with a precariously high debt load;

It’s true that the company would have a high debt load, but is is precarious? I’m not a finance pro, so I’ll refrain from taking a stand here.

* Would reverse Delta’s progress and erode the value of the Delta
brand; and

This point is pretty “fluffy” and I don’t think it makes sense when considering US Airways perspective. Sure, Delta has done a good job of going more upscale lately, and they’ve started to rebuild some brand equity, but I don’t think that matters to US Airways. They are less emotional about the issue and more interested in just analyzing the numbers. Right now, the numbers make sense to them. In the end, it could lead to some intangibles coming out and biting US Airways in the a**, but it could also end up being insignificant.

* Would expose Delta to merger-related risks. US Airways continues to
experience significant integration problems and has not completed its prior,
much smaller merger with America West; it is not equipped to simultaneously
integrate a substantially larger company.

Now, this one very well may be true and it’s certainly concerning. Though US Airways and America West have merged from a branding perspective, there is still a lot to be done behind the scenes. Most notably, the airline needs to combine labor contracts and merge reservation systems. That is no small task, and it’s keeping the airline very busy right now. Do they have time to focus on a new acquisition? I suppose they just make it work if they need to, but it will be extremely difficult and will take a long time. I believe I remember US Airways management saying that they were comfortable going as slowly as necessary, so that may not be an issue.

Ultimately, with three diverse workgroups, a lot of route overlap, and a host of complex integration issues, this is far from the best possible merger around. I would argue that Delta and United or Delta and Northwest make a much more attractive couple on many levels, but sometimes you just try to do the best you can with what’s available.

I think US Airways saw an opportunity and jumped on it while Delta may be managing it more emotionally here. This PR campaign has been a massive effort to generate goodwill, happiness, and rainbows, but in the end it’s the unsecured creditors that matter. If they vote to take the deal that gives them the most cash, they’ll go with US Airways and run. If they think there’s a lot of potential upside to an independent Delta, they’ll go that way. Management thinks they can do better, but they need to convince the creditors of that in order to succeed.


Dec18th

Gumbo-licious

air gumboWhen was the last time you said to yourself, “Hey, I sure wish there was an airline that served gumbo onboard”?

I’m just going to take a wild guess and say . . . never. Despite that, Air Gumbo has been in the works for quite a long time, and gumbo onboard is their big differentiator. In fact, they say they’re the only airline with “one frill service.”
Technically, this isn’t a joke, but I have a hard time believing it’s going to fly.
The amazing thing about these guys is their persistence. According to their website, they were founded on February 20, 1998. Now almost nine years later they aren’t anywhere near their first flight.
So what’s the business plan? Well it appears that they expect to fly between Louisiana cities (primarily from their New Orleans home base, but also Baton Rouge and Shreveport) and cities with 2,100 miles. Judging by the nifty circle they drew here, it looked like they were focusing on flights within North America on Bombardier regional jets, but in a press release on November 20, the airline said it will order the A330 for flights to Europe. Europe? Are you kidding me? I can’t imagine there’s enough demand for flights between New Orleans and Europe.
What other red flags are there here? Most entertaining of all is this press release from January 31, 2006. First, take a look at this quote from their excellently-named CEO Ralston Champagnie (seriously, that is an awesome name) describing why they are different from failed airline Independence Air:

“We would serve the entire state of Louisiana with point-to-point air travel,
rather than offering point-to-point from a major metropolitan city.”

How does this statement make any sense at all? They’ll serve a whole state instead of just a city where people are located en masse? Right.
Later, they go on and on about how flying regional jets is a lot cheaper than flying 737s. Well, duh. Smaller planes are cheaper to operate the bigger ones in general (there are exceptions). The problem is that the per seat cost is more for a regional jet, so they’ll have to charge higher fares than, oh, say Southwest. The justification for success is there at the bottom though . . .

“Latest trends indicate that regional airlines are very profitable.” It’s true, but they fail to note that these airlines are profitable because of the fixed fee arrangements these regional airlines have with major carriers. The risk falls on the major carrier while the regionals are guaranteed a small profit. These guys aren’t going to have that at all.

In the end, I’m just amazed that this idea is still around (and that they can still afford to pay for hosting their website). My guess it that the management team consists of CEO Champagnie and that’s about it. He’s just determined to get this airline off the ground, but he doesn’t seem to have the ability to get it past the imagination stage. That’s probably a good thing, because I just don’t see how this airline can be successful.

Dec18th

The End of Air Madrid?

air madridDoes this guy look happy to you? Actually, does this guy even look alive to you? I’m guessing he’s just sleeping after the endless delays caused by the shutdown of Air Madrid over the weekend.(Photo credit: Bernat Armangue / AP)

Air Madrid is (was?) a low cost long haul airline flying primarily from major Spanish cities to South America, the Canary Islands, and Europe. They flew A330 and A340 aircraft until Friday when they were effectively shut down by the Spanish government.

The really sad part about this is that people like our friend in the above picture are now stuck with very few options for the holidays. That’s why a workers group for the airline is trying to at least temporarily resurrect the airline to get people where they need to be. See this article for more.

It shouldn’t be much of a surprise that these guys shut down, to be honest. They’ve really earned a reputation as one of the most unreliable airlines flying. Read some of these passenger opinions and you’ll understand why.

My personal favorite is the person who starts out asking if she was “the only person that has had a good experience with Air Madrid” only to let us know later that she was delayed by five hours. Apparently, the airline’s reputation caused her to anticipate “delays and allowed for this in [her] schedule.”

And that was a good review! In the long run, this shutdown is good, but for now there are a lot of unhappy stranded customers.


Dec18th

Creepy Thread

Here’s a creepy thread from airliners.net for you.

The original post, which was made on November 30, 2000, asked what the chances are that the World Trade Center could survive a 767-300 ramming into it. Reading through the responses make you realize how much the world of flying has changed.

The last one says, “You would easily have 1500 or more, since you would have a 200 in the plane, at least 500 in the building, and a real s*itload on the ground. If the building managed to fall, there might be 5 or 6 thousand dead. Oh well. That’s why they put a/c lights on buildings…”

If only the lights on the buildings could have prevented what happened less than a year later.


Dec15th

Airplane on a Treadmill

treadmillI can’t believe that this has actually turned into such a huge thing.

The question of the month appears to be this. If you put an airplane on a treadmill and get it going really fast (working up a heck of a sweat, mind you), will it eventually take off?

Upgrade: Travel Better points out that David Pogue of the New York Times even picked this one up a few days ago (and that’s where this picture came from, though the headband addition was mine). So what’s the answer?

No, it won’t.

Now I’m amazed at how many conflicting opinions there are on this thing, because it seems very basic to me. Let’s say you get that treadmill humming in a really big gym (with no wind around) and the plane has full takeoff power going. Those wheels are racing on the treadmill, but it doesn’t matter what the wheels do here. Aircraft get lift from air passing over the wings, and in this case, there isn’t any.

If there’s no wind in the area and the plane isn’t moving through the air, then there will be no air passing over the wings. It’s that simple. Now if there happens to be a 200 knot headwind, you’re going to get airborne whether your engines are on or not, but I’m assuming that’s not part of the question here.

Ever wondered why airplanes take off on different runways at different times? Well, they always want to take off into the wind. The reason for that is once again that ground speed doesn’t matter - it’s airspeed that does.

For simplicity’s sake, let’s say you need 100 knots of airspeed to get off the ground (meaning the air is moving over your wings at 100 knots). If the wind is blowing 10 knots down the runway and you take off into it, you only need to be going 90 knots on the ground, because 90 knots plus the 10 knots that the air is already moving will get you where to need to be.

Conversely if you took off the other way, you would need to be going 110 knots because you’ve already got 10 knots at your back. Only when you get to 110 knots on the ground would you have 100 knots of airspeed.

On that treadmill, air is not moving over the wing at all so it’s not taking off.


Dec15th

Rep Oberstar Against Mergers

It sounds like some bad news is on the horizon for all the potential airline mergers out there. Rep. James Oberstar (D-MN) has publicly come out against all major airline mergers. Normally, that wouldn’t matter, but Oberstar is the next chairman of the House Committee on Commerce and Transportation, so he does hold some power here.

This news came out of a New York Times article yesterday in which Oberstar was quoted as saying “I don’t think there’s any benefit from mergers except for the benefit of stockholders and airline officials. There is no benefit to the traveling public.”

You’d think that Rep Oberstar would be a little more sensitive to the plight of airlines considering that Northwest is based in his home state, but apparently not. He seems to think that low fares are good no matter what regardless of the health of the airlines involved. Maybe he should look at the other side of the coin here. There is a strong argument that shrinking the number of airlines will help reduce capacity to a more sustainable level and enable airlines to weather downturns far better than they can now.

This means that while fares would probably be higher, there’s a much better chance of stability in the industry. And that means that airline employees would be more secure in their jobs as well. Somehow I get the feeling that if you posed the question to him in regards to the welfare of airline employees, he would begin speaking out of the other side of his mouth.

If you’re really concerned about airline fares getting too high, remember this. If the lack of competition means that airline fares get so high that they start producing windfall profits, some other airline will step in with lower fares and still be successful. That’s what AirTran, JetBlue, Southwest, and others thrive on and there’s no reason to think that would change.

What can Oberstar actually do here? He doesn’t have any direct control over the mergers, but he promised to call hearings if the Justice Department doesn’t block the mergers. Oh man, what a ridiculous proposition. This is a business and mergers should be allowed to proceed if the Justice Department does not deem them to be anticompetitive. For Oberstar to think he can step in and do what he wants is an unfair obstruction of the course of business. Hopefully it doesn’t come to that.


Dec14th

JetBlue Pulls Out More Seats

Some of the JetBlue veterans may remember the dreaded row 27 from a few years ago. On the A320s, row 27 was the very last row. It was right in front of the lavs, it didn’t recline, and it had a slightly less amount of legroom. Customers complained enough that JetBlue head David Neeleman decided to pull that row out altogether. That meant that he could spread out every row between there and the emergency exits giving 34″ pitch (a proxy for legroom), a couple inches above average. The seats in front of the exits still had an average 32″ spread. (Those couldn’t move because then they’d block the exit.)

Well today, JetBlue announced they’re going to do the same thing up in the front and it’ll be done by March 2. There will be one less row in front of the exits now and that gives customers an amazing 36″ of pitch. Instead of the 162 seats that the airline launched with, there will now be only 150.

So why are they doing this? Cost savings, of course. Here’s why:

  • The FAA requires that you have one flight attendant for every 50 customers on board, so now that they’re down to 150 seats, they can get rid of one flight attendant on every flight. Since the airline is expanding, this isn’t as big of a big deal (see below for more thoughts). They will offer leave of absences to flight attendants until they’ve grown enough to need all the attendants flying again early next year.
jetblue
  • By removing that row and the people that would sit in it, each aircraft will weigh 904 pounds less than it does today. That means fuel savings as well as increased range (see the next bullet).
  • JetBlue is notorious for having to make westbound fuel stops especially during the winter months, so this should help the airline avoid some of those stops since the plane will weigh less.
Is everyone excited now? If you’re a customer, you should be. It means you’ll have access to the best legroom in coach in the US. (Some United Economy Plus seats have this, but you have to pay extra for that.)
If you’re an investor, you’re probably a little more concerned. The airline says this will save $6 million per year even including the amount of revenue being given up by not having those seats to sell. That is surprising to me. Let’s do a little back of the envelope calculation using the airline’s third quarter earnings just for fun here.

The press releases say they currently have up to 470 flights per day. Since they’re expanding fast, let’s round up to 500 flights per day for all of next year. That means that they will operate 182,500 flights in an average year (next year is a leap year, so it’ll be more). Right now about 80% of all aircraft in the fleet are A320s, but they tend to run longer flights, so let’s say that 65% of all flights are on A320s. That leaves 118,625 flights a year on A320s

If each row has 6 seats, that means we’ll lose 711,750 seats per year that we could have sold. Of course, the airline doesn’t always need those seats. In fact, for the first 9 months of this year they operated an 82.2% load factor and some of the long hauls during the winter take weight restrictions. Let’s say that they only would have sold those seats on 35% of their flights. That means that we’re just shy of 250,000 seats that could be sold per year. Multiply that by the average fare for the first nine months of this year of $119.63 and you get $29,801,328 in lost revenue.

Hopefully my calculations used conservative enough numbers that this is understating the actual impact, but still $30 million per year is significant. If they are going to net $6 million, that means they expect cost savings of $36 million per year at a minimum. Is that possible?

I’d say it is possible since that’s what JetBlue forecasted, but I’m skeptical. For one thing, United Airlines had this same issue when they launched Ted’s lame airline-within-an-airline concept. They could have run their A320s with 150 seats and three flight attendants but they chose 156 and four flight attendants instead. I would assume that United’s flight attendant wages are higher than JetBlue’s especially considering seniority and I would bet that JetBlue gets a revenue premium over Ted. That means United would have saved more money and lost less revenue by going with one less flight attendant yet they still decided to put those extra six seats onboard. Granted, United wouldn’t have had weight restrictions or forced fuel stops since the planes fly shorter routes, so maybe that is what pushed JetBlue over the edge here.

Let’s not forget the intangibles here too. It’s not like that fourth JetBlue flight attendant was only serving 6 people. The workload of serving 156 customers was spread out over four different people. Now, 150 customers will be served by three people. That’s a lot higher workload now, and that could result in a customer service hit. That’s worth even more to an airline like JetBlue that succeeds because of its customer service reputation.
Also, we should think about how the flight attendants feel about this. Since the airline is growing so fast, nobody will lose their job, but it will be harder for the less senior flight attendants to get desirable bids (routes). Think about it. The most desirable routes now need fewer people onboard, so some of the less senior people may be pushed to places they don’t want to go, like Pittsburgh or Nashville instead of Cancun and Aruba. The flight attendants aren’t unionized but this could be enough of a spark to get some of them interested.

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