The Cranky Flier

Browsing Posts in Northwest

Go On Delta, Take the Money and Merge

January 10, 2007 CF 3 comments

I don’t know about you, but all this merger talk and no action is starting to make my eyes glaze over. I want action!

We had a couple of pieces of news today that I thought it would be worthwhile to discuss. First, US Airways decided to sweeten the pot and increase their offer by oh, a couple billion dollars.

The previous US Airways offer was for $4 billion in cash and 78.5 million shares of stock in the new company. At the time, that was valued at $8 billion but as the US Airways stock price rose, it came up to about $8.5 billion. The new offer adds another $1 billion in cash and 11 million more shares of stock. This brings the current offer market value up to $10.2 billion. Oh, and now the offer expires on February 1, so they’re trying to get things moving here.

Previously, US Airways said they felt the original bid was more than fair. They said that Delta’s valuation was overinflated and they weren’t going to budge on the numbers. So why the change in heart? Well, clearly they found a good reason to bump it up, and I’m guessing it’s from informal creditor discussions. The creditors may have been on the fence before, but this has to push them over.

Meanwhile, Delta’s response to the proposal was that it “does not address significant concerns that have been raised about the initial US Airways proposal and, in fact, would increase the debt burden of the combined company by yet another $1 billion.” That doesn’t really say very much to persuade me that they have a strong argument here.

More important is the response from the creditors that came out tonight. This one “calls on the company to provide thoughtful and unbiased consideration to US Airways’ enhanced offer.” Sounds fair to me. What exactly do they want?

Well among other things, they want US Airways to be allowed to perform due diligence, they want Delta management to postpone a Disclosure Statement scheduled for February 7 so they can evaluate the offer, and, interestingly they want the company to “Desist from taking actions intended to deter other companies from proposing transactions with Delta that may result in greater creditor recoveries than under a stand-alone Chapter 11 plan.”

Now I’m not sure what Delta has been doing to deter other companies, but that’s a fairly strongly worded accusation there. One thing that might be bugging the creditors is this other tidbit of news that came out today saying that Delta and Northwest have been talking merger.

Wait, Delta said they wanted to come out as a strong independent carrier when US Airways made an offer, but secretly they’ve been talking to Northwest about a merger as well? That doesn’t make sense. Oh wait, yes it does. I think they see the writing on the wall.

If Delta thinks there’s a good chance that the US Airways bid will be accepted, then they must be scrambling for another alternative more to their liking. Why is this alternative better? Well, they could be the surviving management team theoretically. That would certainly be more interesting to them. Why else?

If you read this article, you’ll see that they are discussing a possible combination AFTER they exit bankruptcy. Remember the United bankruptcy? Remember how much money the management team made when they emerged? I would assume that the Delta management team stands to benefit as well as long as they bring the company out of bankruptcy. They would be able to do that if a merger occurred after exit.

A merger after exit also means a more uncertain future for the creditors. That means the creditors would have to accept Delta’s standalone plan and then hope the stock price would increase under a merger scenario after they come out. If Delta can convince the creditors that this is in their best interest, then it could become more attractive. There’s a lot more risk in that though. The creditors could also just take the $5 million from US Airways along with the stock and run.

Delta, Mergers/Finance, Northwest, US Airways none

Why United Won the Right for More China Flights

January 9, 2007 CF No comments

The long awaited decision about who would win this year’s rights to fly to China came down today. United was awarded the rights to fly daily between Washington/Dulles and Beijing beginning March 25. This is definitely the right move, in my opinion, and it should provide the greatest public good.

United put out the usual fluff press release about how excited they are and all that jazz, but the really interesting stuff is in the actual DOT order. Click here to read all 24 pages in PDF form. For those who don’t want to read that much, here’s a summary.

First a little backfill. As part of the last agreement between China and US, air travel would be gradually opened up to more capacity over the years. This year, there were 29 weekly flights up for award and they all had to be awarded to airlines that already fly between the US and China (no newbies allowed).

Fifteen of those flights were for all cargo service. Polar, Fedex, and UPS all asked for 4, so they all got what they wanted and there were 3 leftover. Seven of those flights were for cargo or combination (cargo and passenger) flights between the US and China Zone 2. That means anywhere in China except for Shanghai, Beijing, and Guangzhou. Unsurprisingly, nobody wanted those frequencies.

That left us with 7 weekly flights (once a day) between the US and China Zone 1 – Shanghai, Beijing, or Guangzhou – and that’s what was so hotly contested.

As I mentioned in this previous post, American wanted flights from Dallas/Ft Worth to Beijing, Northwest wanted Detroit to Shanghai, Continental wanted Newark to Shanghai, and United wanted Washington/Dulles to Beijing.

After American was unable to come to agreement with their pilots to fly such a long route, they tried to amend their application to have a stop in Chicago/O’Hare. In today’s order, the DOT said that American was too late to do that, and if the agency allowed it, it would delay the start of the service. So, American was booted out of the running.

Starting on page 16 of the DOT order, you can read the meat of the findings. The agency was working hard to inject “as much nonstop capacity into the US-China market as possible.” The following reasons are why United’s bid was chosen over the others:

Washington is the largest market in the US without any nonstop service to China (only SF, Chicago, and New York are bigger in overall demand)

United offers the most seats (347 seat 747-400s) in their bid. This is slightly more than Northwest but a whopping 22% more than Continental

Washington and Beijing, as country capitals, provide the best opportunity to improve convenience of travel for “government, academic, and industry representatives”

United’s flights would connect to many other destinations in the Mid-Atlantic and East. Other airlines had argued that United already serves most of those cities via its Chicago service, but the DOT found that considering how full the Chicago flights are today, there is still plenty of opportunity to serve more people in the region

United’s flights would also connect with partner Air China in Beijing to offer service beyond Beijing to 16 cities via a codeshare arrangement

As you can see, that’s a pretty strong argument. The DOT also acknowledged that other bids were good as well but just not as good as United’s. Northwest’s big downfall is that they currently serve all their China routes through their Tokyo hub. They could easily shift those flights to be nonstop from the US if they want but they have chosen not to. That certainly didn’t help their cause.

Continental’s bid appears to have lost because of the amount of service already flying between New York and China and the smaller size of the aircraft they would have used (777 vs. 747).

As I said before, I think they’ve made the right decision here. Congratulations to United on this victory. The order is still tentative as parties have 14 days to object, but I can’t imagine we’ll see anything that will hold up though.

Next up is another 7 weekly flights between the US and China Zone 1 beginning March 25, 2008. This time anyone can bid, even newbies, so it should get interesting.

American, Continental, Northwest, Schedule Changes, United none

Northwest Says Aloha to the DC-10

January 9, 2007 CF 2 comments

DC-10 Retirement – 01-07-07 – 01 – 017
Originally uploaded by NWA Moments.

Yesterday morning, Northwest flight 98 arrived in Minneapolis/St Paul from Honolulu. That flight marks the last scheduled DC-10 flight in the United States.

The DC-10 has had and checkered career. After first flight in 1970, the type was plagued with problems. In 1979, American flight 191 crashed after an engine separated from the wing on departure and caused other damage to the aircraft. That left the type grounded until it was determined to be safe again.

The most famous DC-10 accident was likely United flight 232 in Sioux City, Iowa. After an uncontained engine failure in the tail engine, the aircraft lost all hydraulics. After a herculean effort to line the aircraft up with the runway using alternating thrust, the aircraft ended up losing stability and it did cartwheels down the runway. Amazingly, many people survived.

Since that time, the aircraft has become the reliable workhorse it was expected to be. I’ve had many DC-10 flights over the years including:

*SAS from LAX to Copenhagen
*United and American various flights
*Hawaiian, Delta, Western, World, and Leisure Air from LAX to Hawai’i

My last flight on a DC-10 was on Hawaiian from LAX to Kahului (Maui) in July 2001. I will always remember the aircraft as feeling very big inside. It seemed to be built like a tank.

The aircraft will live on in some third world countries, cargo, and charter flights for now. As usual, Douglas built an aircraft that can keep going for years.

DC-10, Northwest none

Mesaba Saved

October 31, 2006 CF No comments

You’ve probably never heard of Mesaba, but if you live in the upper Midwest, there’s a good chance you’ve flown them. Mesaba flies as Northwest Airlink, primarily with turboprops.

The airline filed bankruptcy soon after Northwest did and things have been getting uglier ever since that time. They were in an epic struggle with all their labor groups to reduce costs and they were unable to come to an agreement. Because of that, they would not have been able to offer Northwest a competitive bid for flying the small planes, and the airline would likely have just been liquidated.

Mesaba received permission to impose their own contract terms through the bankruptcy court (like major airline partner, like son), and then earlier this month, the labor groups were forbidden from seeking self-help of their own. Apparently, that was the impetus for the labor groups to settle, because the pilots and flight attendants settled in the last few days and the mechanics, the last holdouts, settled today.

To be fair, these are tentative agreements and so the membership still has to approve them, but this has been a long ugly road and I hope the saga ends soon.

Mesaba, Northwest none

The New Role of 757s – Northwest Bumps Up European Flying

October 11, 2006 CF 2 comments

The 757 is an aircraft that missed its calling. It was supposed to be a replacement for the 727 back in the 1980s. This meant its mission was for mid to longer-range domestic flights. The longest hauls were still the domain of the widebodies.

Slowly, airlines began using the plane more and more on coast to coast flights instead of using widebodies. They found that flying more flights with fewer seats on each flight was much more desirable for the business traveler’s schedule, so it ended up being very successful at this mission.

As people started becoming more comfortable with flying twin engines over water, the 757 again found a new market for itself. As production wound down, airlines just began discovering that the 757 could be used to open up long haul routes with lower demand, such as from the East Coast to secondary cities in Europe. Though production has ended, the plane is now very “hot” as airlines scramble to find more to use for these longer range routes.

Northwest is the latest to announce 757 flying over the Pond today with the following:

Detroit – Brussels (Belgium) effective May 7
Detroit – Dusseldorf (Germany) effective June 5
Hartford (Conn) – Amsterdam effective July 1

As you can see, it’s connecting secondary cities (two in Europe, one in the US) with larger hub airports on either end.

Continental has done the most work with 757s over the Pond, mostly from their Newark base. From Newark, they fly 757s to Amsterdam, Stockholm, Barcelona, Belfast (UK), Birmingham (UK), Bristol (UK), Paris/Charles de Gaulle, Cologne (Germany), Copenhagen, Dublin, Edinburgh, Glasgow, Hamburg (Germany), Lisbon, London/Gatwick, Madrid, Manchester (UK), Oslo, Shannon (Ireland), and Berlin/Tegel. They also fly from Cleveland to London/Gatwick and soon to Paris/Charles de Gaulle.

American has tried flights between Boston and both Shannon and Dublin in Ireland, but those have had mixed results.

US Airways started 757 flying this year from Philadelphia to Dublin, Shannon, Glasgow, and Lisbon. They were happy with results and expect to increase 757 flying going forward.

Delta has also indicated an interest in flying 757s over the Pond while United seems to be the only one who hasn’t.

On the other side of the Pond, Icelandair pioneered 757s flying from its Mid-Atlantic home in Keflavik to Boston, New York/JFK, Baltimore, Minneapolis, and Orlando/Sanford. Next year, Air Greenland makes its foray into the US market with flights from Baltimore to Kangerlussuaq.

Finnair has been experimenting in Stockholm – Boston and bmi used to fly from Washington/Dulles to Manchester (UK), but that appears to have been dropped. Plenty of charter airlines are wroking on 757 transatlantic service as well.

I won’t even get into the premium market where airlines fly in all Business Class configurations over the water on planes as small as an A319.

Though many people seem to prefer widebodies simply because it feels more roomy, alot of it is just overcoming perception. For example, nobody would think twice flying a 757 from Boston to San Francisco, but a 757 from Boston to Glasgow seems crazy. Well, the latter is a mere 300 miles further, so there isn’t much difference.

If you’re in coach, the accommodations should be about the same. Though the premium cabins may not be as nice for now, the airlines are working on that. In the end, 757s allow airlines to fly places nonstop that never could be flown before. If you live in Hartford, you can now get to Amsterdam nonstop and you can connect beyond to all the destinations in KLM’s network. I’d definitely rather fly the 757 than have to connect twice.