AirTran Pilots Have a New Tentative Agreement, Thanks to Southwest – BNET Headwinds
AirTran pilots have an agreement, and it comes suspiciously close on the heels of the acquisition agreement by Southwest. Interesting, no?

Federal Air-Service Grant Program Sees Some Worthy Applicants in 2010 – BNET Headwinds
It’s SCASD week over on BNET and here I look at some of the best proposals from this year’s crop of small city grant applications.

The Worst Small Community Air Service Grant Applications For 2010 – BNET Headwinds
And now it’s time to look at some of the worst proposals.

Horizon Looks to Create Small Community Air Hub in San Jose – BNET Headwinds
One of the more interesting SCASD trends this year was Horizon’s support of a number of cities looking for flights to San Jose.

Great Falls Aims to Prove Airline Pricing Analysts Wrong – BNET Headwinds
Great Falls took the SCASD opportunity to propose offering rebates to customers to bring fares down.

Good morning from the big D (that’s Dallas, ya’ll). I spent yesterday with the good people of Southwest at their sometimes-annual Media Day. There were a few announcements, but instead of diving into everything, I thought I’d just do an overview today. Look for more next week.

As you can see, the theme of Media Day was centered around Bags Fly Free. We all had mugshots taken and used those as our name tags. We also were given this graduation certificate from Bag Cop Academy at the end of the day. Kevin Krone, VP Marketing, Sales and Distribution even walked into the first session with his Bag Cop badge and mirrored sunglasses. He then went on to talk about the success of the program, but I’ll cover that more next week. Let’s look at the other highlights.

Wifi Now $5
For a long time, Southwest has said it’s experimenting with pricing for wireless internet. Yesterday, the announcement was made that it would be a flat $5 per flight regardless of distance and type of device (phone vs laptop).

Today, there are 32 airplanes equipped with wifi (maybe 31 since the one they trotted out for us yesterday didn’t actually work when we booted up), and there will be 60 by the end of this year. The 737-700s will be done by the end of 2012 and the 737-300s that are getting this (126 of them) will be done by mid-2013.

I like the flat rate per flight and $5 seems fair, but people obviously aren’t going to log on during those famous Southwest 1 hour flights, right? Well, maybe. Southwest has created a login portal that’s actually free. To start, it will have a moving map of your flight, access to Southwest.com, and shopping with HSN and SkyMall. So there still is a reason to boot up, even if you don’t want to pay. (I particularly like the moving map.)

I asked if people would be able to look up whether their flight would have wifi or not, and they said that won’t be until next year. People traveling on wifi flights now, however, do get emails the day before if they’ve given Southwest their email addresses.

Newark to Chicago and St Louis
Southwest will eventually have 18 daily flights out of Newark, and yesterday, CEO Gary Kelly told us about the first 8. Six will go to Chicago/Midway and I can’t imagine that’s a surprise to anyone. What is a bit more surprising is that the other two initial flights will go to St Louis. Both begin March 27.

I spoke at length with Bob Jordan, EVP of Strategy and Planning about the St Louis decision, and the thing that stuck with me is that this allows one stop flights to Dallas. Remember, until the Wright Amendment goes away, Chicago can’t go nonstop to Dallas but St Louis can.

This is also just part of the Newark story. The schedule was already closed, so Southwest had to reopen it and find a way to squeeze Newark in. This is what worked. We’ll see more to fill out the rest of the slots soon.

Volaris Partnership Finally Begins
After two long years, the Volaris partnership will finally go into effect for booking on November 12 and flying beginning December 1. This isn’t a codeshare but it’s as close as the two can get with existing technology at Southwest.

I’ll actually go into much greater detail on this next week, but it’s safe to say that this does open up new connecting opportunities but not nearly as much as I imagine it should. Still, it’s a step forward and that’s a good thing.

The 737-800 and Hawai’i
CEO Gary Kelly spoke at length about the 737-800 and the impact it will have if Southwest decides to order it (still hasn’t happened). He said it does open up Hawai’i as a possibility and it also allows Southwest to operate flights with lower unit costs which could be important in some markets. Could be an interesting airplane when it happens, and even though Gary said the decision hasn’t been made, it sounded like it really had been.

AirTran Update
You’re probably wondering about the AirTran merger, but there wasn’t really any news around that. Since the merger isn’t complete, they can’t really start sinking their teeth into things just yet. So all the juiciest questions went unanswered.

Bob Jordan did say that he thinks Atlanta has the potential to be the largest city in the Southwest system. COO Mike Van de Ven also went into detail on the 717 and how it has good trip costs for short trips, something that Southwest needs to serve small cities.

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There was a ton more during the day but these were the biggest news highlights. Next week, I’ll be writing more about this here and on BNET with more in-depth looks at what’s happening.

Once again, it’s Small Community Air Service Development (SCASD) week over on BNET and I’ve been digging in to the applications for this year’s federal grants. There’s one in particular that stands out, and I decided to write about it over here on Cranky because it’s just too awesome. The tiny town of Diomede in Alaska wants $1.25 million to sustain weekly helicopter service to Nome. This is an incredible story about one of the most remote places in the entire United States.

Never heard of Diomede? There’s no reason you should have heard of it. Its 117 residents (down from 143 just two years ago) live on the edge of the barren, steep-sloped rocky island of Little Diomede which is 25 miles off the coast of Alaska in the Bering Strait. Not cool enough? Unlike Sarah Palin, the residents of Diomede actually can see Russia from their houses. Russia is only two miles away on Big Diomede. The International Dateline runs right in between, so they can literally see tomorrow. Amazing, right? Here’s the map:

But the location only tells half the story. The residents on this island are primarily natives and very little cash exchanges hands. It’s a subsistence economy where residents rely on hunting and fishing for the most part. They’ve lived there for thousands of years and at one point, used to freely connect with their now-Russian relatives across the strait on a regular basis. The Russians turned Big Diomede into a military installation and the residents there were moved to the mainland, so the Little Diomede people no longer see their kin. This truly is the most isolated place imaginable in the US.

The island itself is just a big rock (2.8 sq miles) with steep cliffs that juts out from the water. There is no running water (except in the school), no sewer, and not even roads. So why would you live there? Because your family has lived there for ages. It’s home. Here’s a shot of the island in winter, or summer, or who the heck knows. . . .

Do I even need to explain that an airport doesn’t exist here? Even if it did, the weather is so frequently awful with high winds and low clouds that flights are adventurous at best. But the people on this island still need to live and as part of the US, need to be connected in to the country. That happens today via a weekly helicopter flight that brings the mail in, when the weather is good. Evergreen Helicopters used to use a larger helicopter but it had problems and now the company uses one that doesn’t carry passengers. So how do people get on and off the island?

If it’s an emergency, the Coast Guard or Alaska National Guard can come evacuate someone 130 miles away to the nearest hospital in Nome, but other than that, it’s almost all by boat. But even that’s problematic. The crossing is treacherous and there is no harbor on Diomede so people have to wait for hours at times just to get on and off a boat. What kind of boats do they use? As one local put it, “Our community only has one skin boat now, but the skin is not very good. We have to replace the old skin with new walrus hide.”

In the winter, things are a bit different. When the sea freezes over, there are usually a couple of months a year when they can build an ice runway to get 9 seat airplanes in and out a couple of times. But this last year, the ice never got thick enough so no runway was built. You can see why Diomede is looking for some help here.

But what kind of help could a SCASD grant provide? Well, as mentioned, there is a heliport on the island and Diomede wants a weekly flight to Nome on a four-seat helicopter to reconnect it with the rest of the world. It needs $1.25 million over three years to make this happen. The city isn’t eligible for the traditional Essential Air Service program but it is hopeful to get into a program that will provide funds through an alternative EAS subsidy after the SCASD funds dry up.

I’ve been very critical of the EAS program in the past, but this seems like a case where it should be put to work. There is no other option for Diomede, and since it’s part of the US, we should be doing what we can to re-connect them with the rest of the country. A single weekly helicopter flight hardly seems excessive. If SCASD is the only way to make that happen at this point, then it’s what we have to do. Yes, I realize the subsidy is about $3,500 per resident per year, but this is one case where I support the expense.

Though Delta has never ordered the Boeing 787 itself, it did inherit 18 firm orders for 787s when it merged with Northwest. There had been a lot of speculation about what would happen to those airplanes post-merger, and now we have some resolution. Delta and Boeing have agreed to delay delivery until 2020. That’s right, 2020. I think you can consider this a cancellation for the 787-8 version, but my bet is on this morphing into something for a larger version down the road.

Way back in 2005, Northwest ordered 18 787-8 airplanes for delivery during 2008-2010. As we all know, the 787 has suffered through 3,483,048 different delays. The Northwest order should have been mostly delivered by now, but Boeing hasn’t delivered a single 787 airplane to anyone yet. That delay combined with Northwest’s merger with Delta put the order in limbo.

There was only speculation until Delta released in its most recent 10-Q that it would defer delivery until the 2020-2022 timeframe. Seriously? I’ve seen deferrals, but that looks more like a cancellation to me. “Let’s just push this thing out and maybe Boeing will forget about it,” right?

So why bother deferring that far and not just cancelling? We don’t know the details of the contract, but Delta might not have had the option to cancel. Of course, with the constant delays, that makes any cancellation easier. But my guess is that Delta is positioning itself to switch to another variant when it becomes available.

The 787-8 is the smaller of the two long haul versions of the 787 (forget about the short-haul 787-3 designed for the Japanese market). It is expected to seat about 225 people in a three-class configuration while the 787-9 would seat 280. What many airlines are interested in is the often-discussed 787-10 which would seat over 300. This version hasn’t been launched primarily because Boeing wants to protect the 777-200 from cannibalization. That’s not showing to be the best plan.

Airbus has the A350-1000 which will seat upwards of 350. That’s easy for Airbus to do since there is no real existing offering to compete with the 777. But by delaying the 787-10, Boeing runs the risk of losing orders to Airbus (as it did with United when it opted for the 787 and A350 to fit its needs). Besides, it’s not like anyone is really ordering the 777-200 anymore. Most of the growth is in the 777-300.

So my guess here is that Delta is holding out hope that the 787-10 gets launched at some point in the next decade. Then it can switch its orders to the larger airplane and still be in a prime spot for delivery when it’s ready for the airplanes. This is all speculation of course, but it seems the most likely scenario.

United and Continental continue to push out new routes on a regular basis as the two airlines find opportunities that may not have existed before. These are all either new or restarted hub routes, and some are more interesting than others. In this last round of announcements, there was one that stuck out immediately for me: Denver to Dallas/Love Field.

Southwest fliers and Dallas old-timers know Love Field well. It was the main airport for Dallas until the monstrous DFW opened in 1974. At the time, the plan was to shift everyone over to DFW, but the airport wasn’t actually shut down. Because of that, the little startup known as Southwest decided to stick around to give itself a competitive advantage for Dallas fliers. Love is closer to the city of Dallas itself. At the time, Southwest was just a little guy so the Wright Amendment, which limited flights from Love only to surrounding states on aircraft larger than 56 seats, wasn’t a problem. But over the years, it became a bigger issue as Southwest went national.

The Wright Amendment has been expanded over the years to include some other nearby states, most recently Missouri, but Southwest wasn’t settling for these little carve-outs and went on the offensive. Southwest fought to eliminate the Wright Amendment while American and others fought to keep it in place. In the end, it was agreed to kill the Wright Amendment but it won’t really disappear until 2014. There will, however, remain a cap on the number of gates at the airport as part of the compromise.

One common misconception about the Wright Amendment, however, is that it impacts all commercial flights. That’s not the case. If you had 56 seats or fewer on an airplane, you could fly anywhere in the US. Legend Airlines decided to give this a try at the turn of the century with some airplanes in executive configurations. It was an interesting idea, but American dropped a nuclear bomb on them by fighting them in court and then eventually adding their own executive flights on the same routes. Both operations were disastrous money-losers but Legend went under and American just went back to normal, another potential competitive threat destroyed.

But these days, there are plenty of 50 seat jets around. While you probably don’t want to sit on those cramped sardine cans for very long, if they’re the only option out there, there could be some worthwhile routes. Southwest, of course, doesn’t operate airplanes that small, so going into Love with an airplane with 56 seats or less could result in a real opportunity. With that in mind, you’re probably wondering what took United so long to fly there from Denver at all, right?

Well, Denver to Dallas is an hour and a half flight and that’s a long time to sit on an Embraer 145 (though yes, I’ve done it and survived). While Southwest can’t fly the route nonstop, it does have single stop flights with no change. Right now, I see five of those per day and they only add about 40 minutes to the scheduled flight time because of Southwest’s quick turns. Meanwhile, you can fly United six times a day mostly on mainline airplanes to DFW. So it might be tough for United to really make this work considering all the external factors. But two things have changed with the merger that I’m guessing have led to this move.

First, Continental already flies to Love from Houston. Other than Delta’s three daily flights to Memphis, Continental has the only non-Southwest service out of Love with its seven daily on ExpressJet down to Intercontinental. So Continental has the gates and the staff set up in the airport already. That significantly decreases the cost of adding new flights there, because there are no additional infrastructure costs. United will even be using the same ERJ-145 aircraft that Continental has in there flown by the same regional airline, ExpressJet. So it’s a very simple addition and might even help with better aircraft utilization.

That alone should be plenty of reason to give this a shot. There’s not much to lose by throwing a couple of regional jets a day into a market where you already have a presence on both ends, but I think there probably is something more to it than just that. I think this is also the beginning of Continental’s more aggressive culture coming in. Continental will take chances on routes whereas United is traditionally much more conservative. After all, this route isn’t a slam dunk. Putting only two flights in a market that’s a business route may not be enough, but Continental’s mindset is that it’s worth trying. I couldn’t agree more.

[Original photo via Flickr user Cordey?]