I don’t think anyone was surprised to hear that American filed for Chapter 11 bankruptcy protection. The only surprise was that it happened this week. I didn’t think we’d see it so quickly.

For travelers, this truly is a non-event. We’ve all been through so many airline bankruptcies in the last decade (Delta, Northwest, United, US Airways . . .) that we all know the drill by now. Airlines restructure behind the scenes while the operation itself goes on. I don’t expect this to be any different.

But looking behind the scenes, this really is the exclamation point on one long decade of fail. It’s been awful, and this is just the proverbial icing on the cake. Despite all the so-called efforts to stay out of bankruptcy, none worked. Let’s look back.

American was the rock star of this industry for years. It innovated with things like the first computerized reservation system, the first frequent flier program, and the first adoption of modern revenue management. Though it’s hard to pinpoint the exact moment when American lost its mojo (didn’t see when Dr Evil stole it), an easy place to start this tale is in April 2001 when American bought TWA.

This merger, like most of the mergers American has participated in during its life, resulted in no real benefit to the airline. But this one was possibly the most harmful because of its timing. TWA, though on death’s door, was supposed to bring this great connecting hub in St Louis that would allow American to focus on local traffic in its stronger hubs in Dallas and Chicago. But wait, connecting traffic is low yield and really not a good base for running a hub at all.

During the good times, however, when fares were high and fuel was cheap, just about anything could work. The good times ended quickly. By the time American bought TWA, the bubble had burst and the economy was heading down. Then, September 11th just made things far more difficult (though it wouldn’t have been a good move regardless). St Louis was de-hubbed a couple years ago. There is just about nothing left from TWA except for a few MD-80s and those rare few employees who managed to avoid getting the axe.

Of course, on September 11, when American lost two aircraft, several crew, and scores of passengers, things could have changed for the airline. Despite the awful nature of what happened, this really was American’s chance to show that it was different. It worked hard with its unions to help them understand exactly what was happening financially. As bankruptcy appeared to be close, a deal was reached and the airline averted that fate. That was probably the high point for the airline’s efforts to stand out in a positive way.

A new era of cooperation was supposedly taking hold at American. Gerard Arpey took over as President in April 2002 and was CEO a year later. He was going to lead the airline to be the shining example of how a big airline could survive without bankruptcy.

But the airline fell flat on its face. When it came to union relationships, American completely destroyed any goodwill it had by defending lavish executive pay plans that weren’t tied to profitability but rather stock performance. Taking those outsized payments while the rank and file dealt with cuts did not sit well. Relations got ugly very quickly and they’ve never recovered.

In fact, its inability to come to an agreement with a relatively moderate pilot leadership recently shows just what a failure current management has been. Throwing in demands for domestic codesharing at the last minute is a great example of how not to get anything done. There’s plenty of blame to heap on to the pilots as well, let me not take away from their poor judgment, but management certainly didn’t make it any easier.

Possibly the most frustrating thing about this whole debacle is that American continues to hammer on the issue being one of higher costs. Instead of accepting blame, it simply says it is hamstrung. In its release, the airline said it needed to file bankruptcy “in order to achieve a cost and debt structure that is industry competitive.” While costs clearly are an issue, as you would expect to be the case when all competitors have gone through bankruptcy, there is a bigger problem.

Time and time again, American has been chastised for its weak revenue performance. I talked a little about this back in July, but it’s not hard to find plenty of other mentions. The airline simply has not done what’s needed to get its fair share of revenue out of the operation.

Not that it needed an excuse, but it now has all the tools it could possibly need to make this airline run better, thanks to bankruptcy. It can cut its fleet, slash wages, restructure debt, etc. But if it couldn’t maximize its revenue opportunity before, what’s going to change now?

One thing that’s changing is Gerard Arpey. The CEO was a lightning rod for the unions, and his time is now done. Apparently he was asked to stay by the Board of Directors (why?) but he decided to opt out. Clearly he’s been thinking about this for awhile, because he’s already lined up a new job with former Continental chief Larry Kellner’s investment firm.

So now we’re going to have some dynamic new leadership to right the ship, right? Bzzt. It’s the same old thing. Tom Horton, who was promoted to President last July, will also take over as CEO. He’s an American guy through and through. He started with the airline in 1985 and except for a couple year stint with AT&T beginning in 2002, he’s been with American since then.

Will he be able to provide the needed spark? Maybe, but he also might not have the chance. With the company in bankruptcy, creditors are angry. They should be. American isn’t short of cash. It just wants to cut back on what it owes. And creditors don’t like when that happens.

If a better offer comes along, then it could be time for a more radical change. I’m sure that Doug Parker, Scott Kirby, Derek Kerr, and the rest of the team at US Airways are putting their plan together right now. This would be the dream result in my opinion. I’ll write more about that tomorrow, but of course, the best option doesn’t always carry the day. Odds are probably on a simple restructuring with the current management team, though I’m no bankruptcy attorney.

Even if management sticks around, we will see some change. We’ll see American shed its MD-80s faster than planned, and I imagine the regional fleet (if not all of Eagle) will be ripped to pieces as well. Labor is going to be pretty unhappy. After years of complaining about not getting enough, labor is going to learn the hard way that things can get worse quickly.

In the end, there is tremendous opportunity here, but what’s to prevent American from squandering it, like it has previously? The last decade has been lost, so there’s no reason to think that’ll change unless there’s a major shift at the top.

Remember that whole Delta/US Airways slot swap deal? US Airways gave most of its slots at New York’s La Guardia airport to Delta in exchange for most of Delta’s slots at Washington’s National Airport along with a couple of other considerations. As part of that, Delta had to put 24 slot pairs up to auction for new entrants. That happened last week, and now, we know the winners . . . sort of.

At La Guardia, there were two bundles of 8 slot pairs being auctioned off. That means that two airlines will get the right to operate 8 takeoffs and 8 landings per day at good times. The bidders had to be either new entrants or airlines with very small presences at the airport already. One of the winners has been officially announced . . . WestJet.

That’s right. Those crazy Canucks are swooping in to fly 8 daily trips to La Guardia. It’s not a surprise that WestJet was interested. The rumors were that WestJet’s proposed partnership with Southwest ended over something closely related to La Guardia. See, WestJet wanted to be able to partner with multiple airlines in order to help feed its network. This was important at La Guardia, where Southwest couldn’t add much. Southwest supposedly didn’t want to see WestJet partner with anyone else. The partnership ended so that WestJet would be free to pursue a life of religious fulfillment, er, um, multiple partnerships.

Earlier this year, Delta launched an interline partnership with WestJet. I imagine we might see it get a little cozier now that Delta will have so many flights that could feed WestJet. Someone is going to need to fill those 8 flights, most if not all of which are undoubtedly bound for Toronto.

But what about the other eight? That’s a bit more of a mystery. Though it hasn’t officially been announced, Bloomberg reports that JetBlue won that bid. It also is said to have picked up the 8 slot pairs down at Washington/National as well. That’s a big win for the Blue Crew.

JetBlue’s interest should be no surprise. It already runs just shy of a dozen daily flights out of La Guardia to Ft Lauderdale, Orlando, and West Palm Beach. At National, it has nine with flights to Boston, Ft Lauderdale, and Orlando. This will help the airline expand its reach at those airports with a nice chunk of new slots.

So is anything surprising about this whole thing? You bet. The most surprising thing is that Southwest didn’t win anything. It has a gajillion* dollars in the bank (*rough estimate) and certainly could have outbid anyone if it wanted. It has made serving big cities a priority lately as a way to get its customers wherever they need to go in the US.

Southwest fought its way into La Guardia when it got 8 slot pairs there to start flights to Baltimore and Chicago. It gained more when it acquired AirTran, which has about 20 slot pairs. It acquired its first beachhead at National with AirTran’s 12 slots there. So you would think it would have been hungry for more, and in fact, it has expressed great interest in the past. It just somehow got outbid this time.

So, Southwest fans won’t be thrilled, but JetBlue lovers should be. There will be more JetBlue flights coming soon, assuming the deal gets done. And Canadians can rejoice that they will have another option to get to New York.

Now we just have to wait for all the “i’s” to be dotted and “t’s” crossed. Oh yeah, and we’re still waiting for final governmental approval in a couple areas. But things are starting to shape up nicely.

If you want to follow this closely, head on over to Things in the Sky. Dan Webb is keeping a close eye on this.

[Original photo via Flickr user Bob n Renee/CC 2.0]

Earlier this month, British Airways introduced Avios, a new name for miles. Now if you’re a member of the BA Executive Club or Iberia Plus, you will earn Avios when you fly, use a credit card, etc. In other words, it’s a shared currency that can be used across airlines under the same ownership. There has been a lot of criticism about redemption levels, but on the bright side, a new elite tier was introduced. I spoke with Simon Talling-Smith, Executive Vice-President, The Americas at British Airways to talk about this and more, including the dreaded fuel surcharge.

Cranky: Let’s talk about some of the changes. It looks like on the elite side, it’s the new tier?

Simon Talling-Smith: Exactly right. We’ve launched a new Bronze tier. Really, a lot of the benefits customers accrued started at our Silver level. We knew there was a big segment of active customers who were not making that Silver level but we still wanted to have a more engaged relationship. So we’ve introduced this Bronze tier. It allows people to enter at half the points of the Silver tier. It gives them substantial benefits like First Class check-in, a better chance to do seat selection, and a 25 percent uplift on Avios when they fly.

Cranky: Can you explain how the tier points work? I see for Bronze, it’s 300 tier points to qualify.

Simon: We distinguish between qualifying points and earn and burn mileage. The qualifying points are our tier points and those are earned by flying, pretty much only by flying. And they accrue over a period of a year and that qualifies you for a level in the Executive Club. Then the following year you need to attain a certain amount of miles to retain that level, but it’s easier for retention than to initially earn it.

Cranky: If I’m new to BA, what kind of flying do I need to do to get 300 tier points?

Simon: A lot of ways to do that.

Cranky: Ok, so I’m in the US and I’ll likely be going over to the UK.

Simon: It’s probably only a couple of Business Class flights per year that will get you into Bronze.

Cranky: I assume part of the motivation for creating this tier was to help align better with American?

Simon: Yeah, both American and Iberia both offer that extra tier. And of course oneworld as a whole has a name for it; it’s Ruby.

Cranky: Beyond elite, earning has not changed, is that correct? If I fly from LA to London I still earn the same?

Simon: Yes.

Cranky: But redemption has changed fairly dramatically.

Simon: Redemption has changed in terms of redeeming your Avios points. Instead of having quite crude and large zones that we carved the network up into, there’s a finer level of segmentation now so different flights may have different redemption levels. It’s not as granular as mileage pricing, but there are are a number of different levels. We have quite a cool map-based calculator to help people.

Cranky: There’s no award chart, right? It’s more opaque than that. You have to put in where you want to go and it’ll spit out how many points.

Simon: Yeah, what we’ve done is basically create nine zones in the world.

Cranky: So why isn’t there an award chart? I was thinking it was much more complex than that.

Simon: The problem is that it’s fairly easy to do that when you’re just flying BA, but as soon as you start to include partners, it starts to get a bit more complicated. So when we wrestled with doing a straightforward redemption table, it became quite unwieldly.

Cranky: If it’s BA, you get up to one connection and it’s journey based, but on partners, it’s leg by leg.

Simon: Exactly.

Cranky: There’s been a fair bit of criticism about what’s being considered a devaluation. I think the claim was that the cost of redemption would go down on most itineraries, but that was really just online BA itineraries to and from London. How much attention do you pay to the criticism, and are you looking at making tweaks?

Simon: I’ve read some of the same feedback on FlyerTalk and we’ve been quite active in that space in responding to questions in there. And to some extent, communicating in the world of frequent fliers is a bit complicated with all the rules. When you communicate change, it’s important to stay close to the customer. In particular we did clarify that statement. It’s something like 97% of online journeys with BA are the same or better.

Cranky: Yeah, that’s what it was.

Simon: And then once you start to add partners it gets more complicated. But of course because some of the online journeys are better, you can get situations where online plus partner is still better than it was before. It’s pretty complex, but yes, we are getting a lot of feedback especially from specific groups of people who are focused on partner jounreys and we’re doing our best to follow up with them.

Cranky: So have you identified areas where you said, “maybe we should make a little change”?

Simon: I haven’t done that yet. It’s a little bit early. With a change of this scale, you need to find out what turns out to be frequent significant issues and then start working on them. But at the moment, it’s so early into the change that I think it would be just a little bit too soon to start making the tweaks. We may well make some tweaks, but it’ll be further down the road.

Cranky: But you are paying attention.

Simon: Yeah, we watch FlyerTalk, we’re completely on top of the tweets, we have an active presence on FlyerTalk where people are engaged. So we take all of that, that whole space of blogs and more generic social media very seriously because that’s where people are talking about our brand and we need to be very responsive.

Cranky: Can you talk about what spurred the change to the redemption scheme? I mean, I understand the change to Avios to try to get a shared currency, but in terms of changing the way the redemptions work. What was the thought process?

Simon: I think again sort of opportunity to react to a bit of feedback that we’ve been accruing over years since we last made a change. Customers had been saying “the scheme you’ve got is a bit unwieldy.” Of course a lot of people’s feedback and critique comes down to whether they perceive the number of miles they pay on a journey to be fair or not. And if you have a more granular level of charges, then you’re always going to have a more fair selection. That’s because you have very big regions and the shortest in the region and longest in the region are the same price and people ask why. That’s a big driver.

Cranky: The differentiation between partner awards and BA awards, was that an issue of aligning your incurred costs with mileage spend?

Simon: That was very simple. We have individual exchange arrangements with all those partners, so to some extent when people start flying on partner networks we have to recognize the rules and structure of that partner’s program as well.

Cranky: But you’re not differentiating redemption values by partner at this point, right?

Simon: That’s right.

Cranky: I think that’s all I have, but if you do start looking at changes, I’d love to see the fuel surcharge dropped.

Simon: Yeah, if you could just lean on those guys at OPEC to reduce the barrel price, we’ll be dropping the fuel surcharge quickly.

Cranky: I’m sure that’s something you hear a lot of.

Simon: All I can tell you is that not only does the fuel surchrge not cover the cost of fuel but it doesn’t cover the increase in the cost of fuel.

Cranky: Right, but if it’s a redemption ticket, it’s a question of whether people earned the right to not pay that. We could probably discuss this as a scholarly level.

Simon: The basic math is that if the fuel price goes up so that we end up paying $100 more to carry someone across the Atlantic, the surcharge allows us to recover some of that but it’s not $100. We have to recover that from somewhere else. We don’t want to take that out of any part of the customer experience. We don’t have to have lower quality food or anything else. So that leaves us in the uncomfortable position of having to surcharge while the fuel prices are so high.

Cranky: Did I miss anything?

Simon: I guess the other thing to say is that the relaunch is part of a much bigger program of investment. We’ve said it’s about 5 billion pounds including everything from lounges to service experience to the aircraft themselves to technology. We’re into a very big investment at BA and we see that going on for a number of years.

To learn more about Avios, visit British Airways online.

Taking First-Class Coddling Above and Beyond – The New York Times
I was quoted in a front page article talking about First Class on long haul flights. More importantly, Geoff Fischer was interviewed about his write-up on Cranky of his Cathay Pacific experience.

Air travel tax could pinch small cities – CNN Out of the Office
I wrote about this on Cranky fairly recently, but I wrote another one about the air travel tax proposal. I believe this is dead for now since the Super Committee failed to reach any agreement this week, but that doesn’t mean it won’t come back.

The Qantas Labor Issue – CNN International World Report
CNN International had me on to talk about the Qantas labor fight, and I was off my game. Definitely take note of the hilarious stone-faced response from the anchor after my phone accidentally goes off. (Thanks for the call, Justin . . . punk.)

[Thanks to @CNNFanCentre for grabbing the clip]

Friendlier Skies? Airline Passenger Rights – The Kojo Nnamdi Show
If you have some time, take a listen to this hour-long segment from the Kojo Show on DC public radio. We get into some good discussion about passenger rights. The one thing I wish I had been able to respond to was Charlie’s mention that airlines won’t give travel agencies and online travel agents access to their fees. That’s not true. Fees are readily available. If TripAdvisor can integrate fee information, why can’t others?

Free Checked Bag Legislation is Stupid – Conde Nast Daily Traveler
I love when my editor gets to the point with titles. The latest proposal from Senator Landrieu (D-LA) to require a free checked bag is just so wrong.

It’s the holiday season, so that means it’s time for some nice warm and fuzzy stories. Southwest put out a good one that also used the power of social media for awesomeness.

A guy and his girlfriend were traveling on a flight to Phoenix and it had wifi onboard. The guy went to the Southwest Facebook page and said that a flight attendant onboard was so great that she deserved something excellent when the flight arrived at the gate. If that happened, he would sign a contract agreeing to fly Southwest for life as long as that flight attendant worked there. Someone at Southwest saw it, got a big cookie with an inscription recognizing Holly, and brought it to the gate along with a contract for the passenger to sign. Awesome. Read the whole story.

So, let’s hear some of your feel-good stories as you work off that turkey coma.