Five Airline CEOs on New Aircraft and Regulation

And now, finally, part three of the airline CEO panel. I promise this is my last post on the symposium for this year. They finished Airline CEOsup with a discussion about new aircraft and regulation. (See part one on consolidation and part two on competing and cooperating with low cost carriers.)

On the Introduction of New Aircraft
Republic CEO Bryan Bedford: We spent a lot of time looking at the narrowbody product offering and we fly a lot of Airbus products. Our employees love them. It’s a great aircraft. Then you start looking at operating capability and cost. You’re looking for that step function change to overcome the induction differences with training, different costs. Before I’m going to induct a new fleet type, I have to get a new double digit saving opportunity.

So with the [Bombardier] C Series, we saw an airplane that at least, as advertised and engineered, will deliver the goods. We compare a 138 seat aircraft to 138 seat aircraft, we’re looking at between 17 and 19% aircraft-related cost savings.

Qatar CEO Akbar al Baker: We look at the operating costs, amenities and the product improvements that these new airplanes bring. We also believe in keeping types of airplanes we operate to a minimum. We like to keep our fleet up to date. The average age is just 3.2 years.

British Airways CEO Willie Walsh: It’s great to see good competition between Boeing and Airbus and developing competition like the C Series. We have had a look at that and it looks like an excellent aircraft. We’ve ordered A380s and 787s. We see them as being very different from the A380. An aircraft like an A380 can be very effective at some destinations we serve. Hong Kong is a good example where typically we’d operate 3 747s a day and they leave within an hour of each other. So frequency is not important, volume is. If you can replace 3 747s with 2 A380s you get much better economics and it frees up a slot at Heathrow. The A380 works really well but we never saw it as an ideal replacement for the 747.

The 787 has the opportunity to be a game changer more than anything else. It’s a very efficient aircraft, it should be, and I think that will open up new destinations that are just not economic with the aircraft we have today.

US Airways CEO Doug Parker: I see nothing revolutionary coming out of the manufacturers. It’s not meant to be disparaging, the jet age is over and physics are what they are. Clearly there are some things evolutionary that would be of interest. What matters to airlines right now is, consumers don’t care, you can find no difference between aircraft types. No premium for a better airplane including even regional jets. Now it clearly matters how many seats you have. So what matters is for the number of seats you have in the market, how do you generate seats at the lowest cost. If there’s a next generation narrowbody that’s coming that works, that’s great, but I don’t think it’s a revolution.

JetBlue CEO Dave Barger: We’re kind of boring compared to Willie. I’m just looking for a winglet or a sharklet so we can go Boston to Oakland 100% of the time. We’ve been testing with Aviation Partners a winglet. We’re through the testing now and we’ll see if Airbus can work the engineering accordingly. Not just better range but the fuel efficiency that everyone talks about. That’s a big number for an airline like JetBlue. As Doug mentioned, whenever it’s decided to be built, there are some improvements that are out there technologically that can help.

Willie: I think there are issues. Doug is right to a point, but sometimes you’ve heard customers say it. “I hope I’m not traveling on that thing.” Propellers somehow still discourage people. I think there is an issue, the open rotor from an efficiency point of view sounds fantastic, but I’m not sure if it’s the right way forward. You’ve got this balance between noise, which is a very sensitive issue, and fuel efficiency. I think people need to think long and hard before leaping to these solutions.

Doug: If that’s the only problem, that’s a marketing problem. Get Sully to fly around in one and say it’s safe and you’re fine. There is more to it than that but the simple optics issue is something that we can deal with.

Bryan: Clearly today, Willie mentioned it, there is this aversion to getting on a prop plane whether it’s less safe, noisy, bumpy, lower altitude, who knows but it’s there. It’ll be one of these issues about how low a cost for someone to take the revenue.

Dave: Put TV in the back of the seat and nobody will ever notice.

On Regulation
Dave: I think, Doug I’ve heard you say, we brought [the three hour rule] on ourselves. We were there 3 years ago. It’s unfortunate that we spend so much time because we brought it on ourselves, because if we could spend more time talking about investment and technology, as we start talking about RNP and RNAV, the procedures at these airports, what a better use of time as long as we’re not stranding customers on the tarmac. That type of thing, things such as financial regulation and oil speculation and the bills that are making their way through Washington.

There are parts of the same building talking about oil going to $200 a barrel and other parts talking about shorting the airline stocks. What’s wrong with that picture? Investment in technology, focused oversights, position limits, whatever it might be so that we’re not caught in the middle is very important and then climate change. I think we’re playing catch up to other countries. Just do no harm. We’ve done an awful lot to really drive fuel efficiency. It’s a big deal.

Bryan: I agree with everything Dave said. I’d like to envision a partnership between government and industry between regulators and those who are regulated so we don’t feel like we’re constantly fighting each other. The things that bind us together are much greater than the things we don’t see eye to eye on, but the climate in Washington seems to be more of a “gotcha.”

I’m not sure what it is but it feels like there’s less cooperation. It may not be happening in the trenches, but when we see our public officials come out and castigate a guy for wanting to implement a carry on baggage fee – why is that a political thing? Customers should be able to decide not to fly that guy. I think the problems are real and significant and there’s opportunities to fix them. You’ve got very willing industry participants. We want efficiencies because burning less gas makes that pie bigger for our employees to share in. We all want the same thing; we just have a hard time getting there.

Doug: Our message is simple: do no harm, which means two things to us. Please no new taxes or fees. We’re already the most burdened industry, higher than cigarettes, alcohol. We’re taxed like we’re a vice. For now, just don’t give us any more please.

The second part of that is that you’ve got to let us go do self help so we can fix ourselves. Don’t get in the way of us trying to do things to get this industry profitable. This slot swap that we announced in August still isn’t approved. Just please execute the slot swap. It’s symptomatic about what’s going on. This is pro-consumer. Delta is going to take those slots and fly big airplanes, we’re going to do the same in Washington. This is good. . . . All we want is just let us compete; let us do the things that other businesses are allowed to do – trading assets – let us compete within the antitrust laws. There are laws if we start to violate those, but these are not even close. I can’t imagine there’s any problem with United/Continental but there are going to be people in the administration that are going to try to make problems. Our government doesn’t seem to want to let our industry get itself profitable. Just leave us alone and let us compete.

Willie: I enjoyed that. Governments and regulators have two very important roles: safety standards and security standards. It’s important to acknowledge there’s a standard of safety that we must match and aim to exceed. Regulators telling us what to charge, where we can fly, those days are long over. I think they need to stand back. We’re dealing with a situation in Europe. European airspace closed down for the best part of 6 days. As an airline we’re deemed responsible for providing food drinks, phone calls, etc. This had nothing to do with the airlines and yet with thousands and potentially hundreds of thousands of customers stranded away from home, we’re forced to pick up the bill. We then have to give priority to the people with bookings instead of trying to get people repatriated because it forces us to pay high levels of compensation to anyone who we would bump from the flight. Politicians were criticizing the industry yet at the same time telling us to comply with this legislation which prevented us from doing that. Common sense says the regulators should have suspended the legislation and allowed the industry to sort out the problem. We do well in the face of challenges like this. If we had been allowed the scope to do what’s right for customers, we would have handled that situation in a much better way. And when we talk about closing down airspace in the first place – scandal – it never should have happened. We’re forced to stop flying and yet we have to pick up the bill. Consumers do not benefit from that. We need regulators to stand back and look at the big picture and really challenge us to sort these issues out. This is a brutally competitive industry. We will fight for every customer. If one airline wants to charge you to carry on a bag and everyone else says they won’t do that, why should a regulator intervene?

Doug: I enjoyed his comments.

Akbar: I entirely agree with Willie that they should leave the airlines alone. The more they interfere with us, the more they will put us against the wall. The general public will suffer.

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24 Comments on "Five Airline CEOs on New Aircraft and Regulation"

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Jason Steele
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“Doug: Our message is simple: do no harm, which means two things to us. Please no new taxes or fees. ” This was sarcastic right? Did everyone in the room start laughing when the CEO of US Airways started complaining about fees? Isn’t this the same guy who thought charging passengers for water was a good idea? I don’t like airport taxes and fees any more than he does, but this industry in particular has zero credibility with the public when it comes to complaining about fees imposed on them when they are tripping over themselves to impose fees on… Read more »
Dan
Guest

Complaining about Parker’s stance on this issue doesn’t make any sense… you know who pays the government imposed taxes and fees, right? It’s not the airline… Do you *want* to pay more BS government imposed fees? If not, then don’t you think it would be better to support the airline’s position instead of attacking it?

As far as the ala-carte models go… well I’m a fan of the free market.

Jason Steele
Guest

I do not beat up their position, as I said clearly that I do not like the airport taxes and fees. I am beating up an industry that has the hypocrisy to complain about government fees while one upping each other to place fees on passengers.

Ala-carte works for them, but they hate it when the government does it. Aren’t government fees just ala-carte taxes? The industry will never have much political sway as long as it is so deeply unpopular with the public, and increased fees are a big reason for their notoriety.

Dan
Guest
Well, in politics, if your enemies are doing something that you support, you don’t fight them just because they’re your enemies. You make nice with them if it leads towards a common goal. IMHO, there’s true ala-carte fees (checked bags, food, premium seating, etc) and then there’s sucker fees (fuel surcharges, credit card payment surcharges, etc) that are just hidden increases that you can’t avoid. And more taxes just make the consumer mad anyway. Look at rental cars, where local municipalities like to tax the crap out of them to pay for various things like stadium improvement and what not.… Read more »
Jim
Guest

“Akbar: I entirely agree with Willie that they should leave the airlines alone. The more they interfere with us, the more they will put us against the wall. The general public will suffer.”

Of course, the banking industry was probably saying the same thing five years ago … and look what all of that benign neglect got for the public.

Nick Barnard
Member

This isn’t a fair comparison. The banking regulators flat out abdicated monitoring several areas. The airlines still are regulated for safety and multiple other areas. They’re not calling for safety regulation to be dropped, only regulation regarding what they have to provide.

Dan
Guest
Cranky, I think you saved the best for last. Now, this quote from Parker makes me scratch my head: “What matters to airlines right now is, consumers don’t care, you can find no difference between aircraft types. No premium for a better airplane including even regional jets.” What does he mean by that? What aircraft types does he think should extract a premium? When it comes to the typical mainline fleet, the things that matter to the customer have nothing to do with the manufacturer and everything to do with how an airline configures it. As far as the dig… Read more »
stan
Guest
i don’t think dougie’s comment meant that people don’t hate the RJs, because they do, what he meant is that a vast majority of air travelers are NOT changing their buying habits based on the equipment. it’s a price-driven business and saving $50 by taking an RJ over a 737 or A320 is what matters to most travelers. now business travelers may have a different (or at least LOUDER) opinion, but i think that unless there is an obvious shift in buying habits away from RJs, you will not see any change in their implementation. he makes a valid point.
Dan
Guest
One thing that I don’t understand is how they try to make these comparisons (even thought I think they’re correct). It’s not as if they conducted a valid scientific experiment. I mean, many routes are served by a single fleet type, and market demand/volume determines the equipment. For instance, when I worked for UAX, most of our routes were either all RJ or all turboprop. For the sake of discussion, it would make no sense to run a 50-seat aircraft with higher costs on a route that could only sustain 34-seat turboprop service. Even on routes that have a mix… Read more »
David M
Guest

Try 9B or 9C (as designed on SkyWest aircraft anyway) on an EMB-120 sometime. This is the exit row on the starboard side of the aircraft, aft of the wing, and it has a lot of legroom. It does not, however, have a tray table.

A
Guest
I see nothing revolutionary coming out of the manufacturers. So the 787 is not revolutionary compared to what it’s replacing?!? I guess Doug Parker isn’t an aviation engineer. What matters to airlines right now is, consumers don’t care, you can find no difference between aircraft types. Well, if he’s talking about the difference between a 737 and A320, well sure, most people find zero difference and or care. Then again, I vividly recall in the early to mid 80’s flying domestic routes on DC-10 and L1011 aircraft quite frequently. Those same routes are all operated by narrow body aircraft today.… Read more »
Dan
Guest

But does it really? My seat specs are my seat specs, and I don’t really think the number of aisles makes my airline’s choice of seat spec any different. Granted, a widebody “feels” more open and spacious, but that doesn’t mean my knees aren’t buried in the seat back in front of me.

jaybru
Member
Actually Cranky, as far as I am concerned, you can drag up something more from the symposium anyday things are a little slow, like…? A little unfair to generalize, but’s it’s still fun to, the CEOs are of the mind that “…customers don’t care…,” and I know it was in reference to aircraft types. Oh? And, if only that partnership between the government and industry were such that the industry would be left alone so they could compete. Sort of like, we got the customers where we want ’em, now if we could only get the government and the regulators… Read more »
Sanjeev M
Guest

Interesting that Barger said just put a TV in every seat and no one will notice. That was probably a wink for Bryan and Republic to put LiveTV (JetBlue owned) in the E190’s and E170’s.

Nice try, Dave, but it’s not happening.

tharanga
Guest

I’m glad that the jetblue CEO is bothered by the fact that their transcons sometimes need to refuel in the winter. I don’t know the stats, but it seems to happen too often.

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