Two airlines failed yesterday, one south of the border and one up north. Is there a connection?

First up, Líneas Aéreas Azteca. These guys have followed in the footsteps of Aero California. The government looked into their safety and training practices, didn’t like what they saw, and decided to shut them down. They have 90 days to respond.

So, an airline gets shut down in the middle of the peak spring break season. What do they do? Put up a notice on their website telling customers? Nay. They haven’t changed a thing on their website at all. In fact, they still have the booking engine up, but spot checking a couple of dates produced no flight results.

You’ll notice that they have pictures of attractive women all throughout the site. My favorite is the one you see here. It translates to “Upon boarding, don’t forget . . . .” I’m guessing you can finish that sentence with ” . . . to book on an airline that actually is allowed to fly. Instead, stare at this pretty girl for a few minutes.”

Azteca flew almost exclusively within México but they did have a flight a couple days a week between Ontario (California) and Guadalajara.

Up in Canada, Harmony Airways announced it will close its doors in a couple weeks as well. These guys were based in Vancouver and flew down to sun spots including Hawai’i, Palm Springs, and more. On their website, they do have a long note announcing the shut down. They’re offering full refunds and have instructions on the home page for all to see.

Now, Harmony’s chief Dr. Ho will have to time to focus on some of his other favorite hobbies . . . crack and hookers. Don’t believe me? Read this. Maybe he can give the Azteca girls a call since they’re all going to be looking for employment now.

Ah, now it all comes together.

All the warm sunshine here in Tampa has me in a good mood. So, I thought I’d put my “cranky” hat away and talk about something, er, sunnier. So, let’s talk about Delta Air Lines, and more specifically, CEO Jerry Grinstein, the latest recipient of a gold star.

If you haven’t been paying attention lately, you’ve missed Jerry’s plan for taking care of his employees upon exit from bankruptcy. Now to be fair, if you’re going to follow United’s lead, it’s hard NOT to look good. But Mr Grinstein deserves more praise than that.

Last week’s press release outlines the plan. About 3.5% of common stock in the newly unbankrupt (is that word?) company will go to non-union employees as will $130 million in cash payments (8% of each person’s 2006 pay). Going forward, the profit sharing plan will see at least 15% of total profit paid out to employees with no minimum threshold. Also this summer, the first pay raises in a long time, up to 4%, will be handed out. The union employees (only pilots and flight dispatchers are union at Delta) have negotiated similar plans.

As for management, this is where the airline really stands out. About 1,200 managers will share 2.4% of the common stock upon exit. (As this other article notes, United handed out 11% to only 800 managers.) Officers and directors won’t be eligible for pay increases until the front line has reached the industry standard. Most importantly, the incentive plan won’t pay out unless the airline is profitable and it uses the same metrics as the plan for the front line employees.  So everyone gets paid for the same types of success.

And unlike United’s Glenn Tilton, who has pocketed somewhere in the neighborhood of $40m, Mr. Grinstein will not take anything.

Whaaaaaaaat?!?

Yup. At Mr Grinstein’s request, the money “will establish two new charitable foundations that will fund scholarships and hardship assistance programs for Delta employees, retirees and their families.”

Fantastic.

How does this impact the customer?  Well, Delta employees have to be riding high right now. They bonded over fighting the US Airways takeover attempt and now they’re getting close to exiting bankruptcy. Their CEO will funnel his bonus back into the employees as he rides off into the sunset. I may not agree with much that this airline has done in the past, but this is definitely a great thing. Hopefully it will result in less surliness and better customer service for the regular traveler.

Since I’m on the road and don’t have as much time to put posts together, I thought I’d post a link to a very interesting post over on my friend Benet Wilson’s Aviation Daily on Airports Blog.  No offense to Benet, but she didn’t say anything interesting.  It was her guest-poster, TSA chief Kip Hawley, that made it interesting today.

It must be nice to have access to the big guns.  If any airline CEO’s or airport heads would like to do a guest post over here, I’m all ears. (Hello? Anyone?)

Anyway, back to the post.  Mr Hawley wrote about the recent move to 100% screening of airport employees in some Florida and Puerto Rico airports.  Orlando was on the list due to the employees that were found smuggling guns onboard airplanes earlier this month.  (Oops.)

Once you get through Mr Hawley’s government-speak (any mention of a “surge” of any kind gets my blood boiling these days), it actually makes a lot of sense.  To sum it up, the TSA is going to keep shifting resources around to keep potential “terrorists” guessing.  We’ll never have 100% security, but we’ll do our best to minimize risk.  Now, I’m always skeptical about anyone who refers to the government as being “flexible and nimble,” but I at least like the idea.

I’m off tomorrow for a week of travelling that will include the CASMA conference (come visit if you’re there), a visit to Dodgertown for a Spring Training game, and a wedding.  That means my posts will be somewhat sporadic next week.

I will be posting when I can.  And of course, I’ll have a full trip report when I return.

As I mentioned yesterday, the airline world is abuzz about the newly agreed-upon Open Skies deal between the US and the European Union (EU). The agreement takes effect in March 2008, but what exactly does it mean?

EU-based airlines can fly from any EU airport to any US airport


EU-based airlines can fly from any US airport to any other country (if that other country approves)


EU-based airlines can NOT fly between any two airports in the US (also know as cabotage)


EU-based companies will continue to only be able to own up to 25% of the voting shares of a US-based airline


US-based airlines can fly from any US airport to any EU airport


US-based airlines can fly from any EU airport to any other country (if that other country approves)


US-based airlines can fly between any two airports in the EU


US-based companies can own up to 49% of EU-based airlines


As you can see, the US was unwilling to give on foreign ownership of US airlines and on cabotage. As part of this deal, a second round of negotiations to address these issues must start within 60 days of the signing on April 30. If a deal can’t be reached on changing these rules by 2010, EU countries can petition the EU to repeal some of the open skies provisions. Hopefully by that point, a new administration in the US will lead to liberalized rules that move toward true open skies.

Now, those are the details, but let’s talk about what could actually happen because of this.

Bye, Bye Bermuda II

The biggest sticking point for the EU in the past has been access to Heathrow airport in London. I went over the insane Bermuda II rules that have governed US - UK travel for years here, but fortunately that agreement will disappear when this one goes into effect. This means Heathrow will be open for flights to the US from any airline in the EU or US. Of course, it’s still a congested airport and obtaining slots won’t be easy, but it’s possible.

Continental has already applied for authority to fly from Houston/Intercontinental to Heathrow in addition to all the Gatwick service they already have. I expect this to be the first of many applications from US airlines.

Delta (DL) is probably kicking themselves right now, because they spent a bunch of money on obtaining the soon-to-be irrelevant New York - London authority from United (UA) just last year. My friend Eric Olesen, former PlaneBusiness BB moderator and longtime industry pundit, did some math and put the high cost into perspective:

Just for fun, I did some math against what DL paid last year for UA’s NYC-LON authority. The sale price was $13M plus $2M per year assuming open skies didn’t materialize.

Based on just the $13M price, a November 16, 2006 startup, and a potential March 1, 2008 implementation for Open Skies, DL will have held the rights for a whopping 15.5 months, or approximately *$28,000 per day* just for the rights to serve London 465 days earlier than they could have under the new deal.

Better yet, UA effectively re-enters the market either [through codesharing on bmi flights] or on their own, wiping out whatever value there was for DL having eliminated them as a potential competitor.

Ouch. Now, I looked and the agreement actually goes into effect on March 30 (not March 1), so it’s slightly cheaper than that, but still . . . ouch.

I’d be surprised to see United go back in on their own, but bmi seems like a given to me. They are really one of the biggest winners here. The UK-based Star Alliance member has a good number of Heathrow slots but they haven’t been able to fly from there to the US in the past thanks to Bermuda II. I bet that Star Alliance members will be happy to see them in Heathrow - JFK and probably other markets as well.

BA/AA, Hooray?

Then there’s British Airways. They clearly aren’t happy that their little exclusive club is being disbanded, but they could be big winners here in the end. British Airways and American Airlines have been trying to set up a full partnership for years. Heathrow restrictions being lifted means that this should now be able to sail through. That should mean that you can earn AAdvantage miles when you fly BA over the Pond and vice versa. There should also be full codesharing. It should make oneworld a much stronger alliance and could result in a lot of new flights between the two countries.

British Airways has even suggested they’d want to fly from New York to the West Coast on their own metal. As I mentioned above, that’s not allowed yet but it is part of the next round of negotiations. I actually wouldn’t be surprised to see this if they have planes sitting on the ground in New York for a long time right now. It may not make sense to fly those planes beyond New York before returning to London if you can’t carry US passengers, but if you can it changes the story. Still, I don’t think they’re that enthusiastic about flying domestic flights. I think they just want to keep the pressure on the US to further liberalize or they’ll plan on trying to take back their Heathrow exclusivity in 2010.

The End of the Shannon Stop

For years, Ireland has had an obnoxious rule that made airlines serving Dublin have the same number of flights to Shannon. This meant that some airlines would make a stop in Shannon instead of having two separate flights because there was rarely enough demand for two separate flights. That just inconvenienced people who wanted to fly to the much more desirable market of Dublin and has artificially kept the number of flights lower than you would expect. The rule has been relaxed over the years, but this agreement will mean the end of the rule entirely.

Aer Lingus celebrated the announcement by announcing new service to San Francisco, Orlando, and Washington/Dulles. These start this year so it has nothing to do with the elimination of the rule, but I did notice that while they did specifically call out Dublin - San Francisco, the other markets didn’t mention the destination in Ireland. Maybe Shannon will be on the roster until the rule is phased out next March.

Fly United From London to Paris

Now that US airlines can fly within Europe, will we see more of it? I highly doubt it. You may remember seeing United 727s flying around Europe for a short time and of course Pan Am ran the German domestic flights to Berlin back in the day as well. Those flights just don’t make sense for US carriers anymore, and it probably won’t happen. If it does, it probably won’t last long.

Volez Virgin Atlantic de Paris à New York

I don’t speak French, but I’ve been told by my friends that the heading makes sense. Virgin Atlantic says they want to start flying to the US from cities throughout Europe now. I wouldn’t be surprised to see them make New York a hub from which they’ll fly to big European cities. It could be interesting. Other EU airlines could do this as well if they’d like, but I’m not sure anyone else would be as interested as Virgin seems to be.

Bottom Line

There is no bottom line here. This is a big deal, and I only wish it went further with respect to foreign ownership and cabotage in the US. Hopefully we’ll get there and then it will truly be an open skies agreement. You know that every airline has its planners hunkered down right now trying to figure out what makes sense for them in this new agreement. I’d expect a flurry of announcements over the next few months in anticipation of the official effective date of March 30, 2008.