To say that this was a bad week for LAWA (the organization that runs LAX) would be an understatement. I mean, if this were a football game, there would have been a flag for unnecessary roughness. Judge Goodwin absolutely dropped the hammer on them. By the time I got to the end of the 210 page ruling (read at your own risk), I was surprised he hadn’t insulted the airport director’s mother.

But let’s back up for a second. What the heck am I talking about? There have been a few lawsuits flying around between LAX and the airlines lately, so let me try to clarify which one this is. This lawsuit, I believe, has nothing to do with the $10 surcharge that United added to their LAX fares a few weeks back. That one is in protest of the across-the-board rent raise that LAWA instituted on all LAX tenants.

From what I can tell, this lawsuit is about the Maintenance & Operations (M&O) fees which were dramatically increased by LAWA as well as the rent. (If I’m off base here, someone please help me.) These fees, however, only went up for airlines in terminals not tied to a long term lease. That means the airlines in Terminals 1 (T1) and 3 (T3) as well as those in the Bradley International Terminal (TBIT), on a separate lawsuit, had to pay up. Here’s a map:

Not only did LAWA increase the fees, but they made them retroactive all the way back to January 2006, so there was a lot of money in the balance here. The airlines balked and took LAWA to court, the People’s Court. Ok, it was actually the DOT, but close enough. In the end, the judge ruled against LAWA on everything. Now, this isn’t final. The judge’s ruling goes to the Secretary of Transportation who can accept it or override it in the next month. With a ruling this strongly worded, I would be surprised if she didn’t accept it though. Even then, either party can still take this to federal court, so we’re far from done here.

But, this is what we have now . . . so, wait, what exactly DO we have now?

Basically, LAWA’s plan to charge higher M&O fees to those airlines not under long term leases isn’t kosher. Since all the airlines have facilities that are effectively the same (don’t tell that to the airlines in ghetto Terminal 3), they can’t charge dramatically different amounts or use different methods for determining those amounts.

LAWA was also trying to start charging the airlines not under long term leases for the areas they don’t directly use (like the bathrooms or restaurant spaces), but that doesn’t fly either. And, they wanted to start charging based on what the market would bear instead of based on actual costs. That’s another no-no.

So if this ruling stands, the airport has to pay back all the increased fees collected since January 2006 and they have to pay interest on the money for as long as they’ve had it. Ouch.

But that was just the beginning. The judge then went on to discredit pretty much everything LAWA has ever done. He chastised them for using LAWA employees to determine the new rates instead of using an external auditor. He even questioned LAWA (and the Mayor’s) policy of airport “regionalization.” He said it could be against DOT policy, and it should be investigated.

Not enough? The judge said that LAWA was clearly using enough bad math to call every one of their assumptions into question. For example, the increase in fees related to security would mean that T1 and T3 are responsible for 70% of the total increase in security costs at the airport. Uh huh.

Sounds like they’re just trying to get the airlines in T1/T3/TBIT to cover some of the costs they can’t pass on to the other airlines in long term leases. And the judge won’t have any of that.

If the Secretary of Transportation agrees, this will impact LAX flyers. Lower costs for the airlines may make more new service
possible, but it also means that LAX will continue to be a dump. Without additional money, they can’t fix up the airport, and we all know it needs it. LAWA is going to have to find a legal way to collect additional funds, and apparently this isn’t it.

It has been far too long since we’ve checked in on the airline I love to hate, Alitalia. So what’s new?

Well, They just reported stellar first quarter earnings. By stellar, I mean absolutely horrible, but not quite as bad as last year. They lost just a tad over 147m euros, far better than last year’s 156m euro loss. Yeehaw!

Meanwhile, in the crawl to privatize the airline, things are leisurely moving along. Sadly, Fabio Scaccia has been disqualified from bidding, but the final three contestants have been set. Italian airline Air One, Russian airline Aeroflot, and private equity group Texas Pacific Group are leading their own teams to win a date with, er, I mean the right to buy Alitalia. Final bids are due at the end of June. I’d go Price is Right style and bid $1 personally. But that might still be too much.

Oh man. I really didn’t think this one could get much worse, but American CEO Gerard Arpey just found a way. Yesterday was the big annual shareholder’s meeting for the airline, and the front line employees were out in force. The main protest was over the executive compensation plan that has netted senior management (not Arpey, but others) many many millions.

How has it made them so much money? Well, it wasn’t tied to profitability but rather to stock price. I’m all for pay for performance, and yes, stock price is a component of it, but when the airline isn’t showing a profit and the lower level employees aren’t sharing in the success, it makes it a very hard sell.

So, all the employees who didn’t take part in the plan (with the exception of Arpey, of course) are seething, and management needs to do something. So yesterday at the annual meeting, with employees protesting, petitions being passed, and security measures stepped up (officially because of the Virginia Tech shootings, uh huh), how did Arpey address the issue?

Not well.

According to this article, Arpey just brushed it aside.

Gerard Arpey, who heads the Fort Worth-based airline, said he understood some of the employee concerns over executive and management compensation. But he said he hoped they could “agree to disagree” on the issue and focus on keeping the airline profitable.

“This is an issue on which we may have a hard time finding common ground,” he said. “That doesn’t mean we can’t or shouldn’t keep working hard to find common ground on the other issues affecting our business, because there is no debating that all of our futures are linked to the success of American Airlines.”

Holy crap, is he crazy?!? This is clearly a big issue for the employees, and it has been for months. I think Delta understood this when they tied bonus plans for all employees to the same metrics, but Arpey doesn’t seem to think it’s worth addressing any further. The employees aren’t angry that senior management gets a share of the wealth. They’re just angry that they don’t get a piece of it as well. With such an emotional issue as this one, you’d think Arpey would be more interested in finding a way to fix the compensation structure, but no, he’s happy with it just the way it is. Oh boy.

It’s funny. When JetBlue announced that the Board had decided to remove David Neeleman as CEO last week, I didn’t even think twice about blogging it. Now that I’ve gotten a few emails from people asking about my thoughts, I thought I’d explain why I hadn’t written about it in the first place.

I think it’s a good thing for the airline, but I don’t see it as anything completely earth-shaking, especially for the customer.

See, Neeleman is a great visionary, but he also gets bogged down in the weeds. The Board, which deserves a ton of credit for making a move this big (I wish other boards would do the same *cough* United *cough*), decided it was time to find a way to prevent him from getting stuck in the day-to-day stuff while still being able to benefit from his vision. So, by removing the CEO role from him and isolating him as Chairman, they’re trying to force that change.

Meanwhile, Dave Barger, who has been Neeleman’s partner in this thing since the beginning will now take over the top role. Some people have wondered if this is the end of JetBlue culture. No way. Barger has been there since the beginning, and this isn’t a shocking transition. Things will go on for the most part as they have been going lately anyway, but now Neeleman won’t be able to stick his nose in too deep.

At least, that’s the theory. I imagine that Neeleman will have a hard time sticking to the high level stuff just because his title has changed. You can’t change a person that quickly, especially a guy like Neeleman. So if he truly can find a way to stay away from where he doesn’t belong, it will be a big improvement for the airline. They will be able to dedicate their focus to real problems, big problems and that is how it should be.

If, however, Neeleman can’t stay away, there’s a decent chance that the Board will have to remove him entirely from the airline. Considering they had the guts to make this move, I’d like to think they’ll be willing to make that move as well if necessary.

So for now, I just don’t see this having a huge impact. JetBlue has been in the throes of change for some time. They’ve basically completely turned over their management team in the last couple years, and this is just another move that needs to be made to help complete the transition to a more mature airline. Behind the scenes, it should afford the airline more focus on pressing problems, but for the customer, I don’t think there’s going to be much impact.

Last week, both Singapore and Aloha came out with some cool looking new planes. First up, let’s take a look at Singapore’s first A380 to come out of the paint shop. I definitely don’t think they got its best side. That cro-magnon looking forehead is definitely exaggerated even further with all that white space. (Taken from Singapore website. Photo credit: Airbus – C. Brinkmann)

Next up we have Aloha’s Wyland-painted 737. Yup, they say it was hand-painted by Wyland, but I don’t know if you can actually hand paint and airplane without affecting drag. Anyway, you might recognize the name – he’s famous for painting huge marine life murals primarily in the US but also all over the world. I found this one on the HNL RareBirds blog, a great place for airplane porn in the Hawaiian Islands.