I spent last week at two of my favorite events – US Airways Media Day and the Phoenix Aviation Symposium. As usual, one or two big headlines will come out of these things, and they’re usually reported incorrectly. This year was no exception. So let’s talk about US Airways and why it won’t actually be merging anytime soon despite some misguided stories.

Many outlets picked up on the fact that US Airways CEO Doug Parker once again spoke about how the airline believes that eventually the legacy carrier world will come down to three main players – American, Delta, and United. And again, Doug mentioned how US Airways could merge with any of these at some point. That’s not a surprise. He’s been saying this for years. But apparently there’s enough turnover in the people covering the airline industry that some treat this as if it’s actually some kind of news. Take a look at Shira Ovide at the Wall Street Journal, for example:

Doug Parker is flagging he’s more than willing to break out the “for sale” sign on his lawn. It’s also a sign that US Air, which combined with Parker’s then company — America West — more than five years ago, didn’t get the kind of scale it wanted from that deal.

*sigh* That “for sale” sign has been out there for a long time, and it shouldn’t come as a surprise to anyone who has even remotely paid attention to this industry. But the chance of a merger happening anytime soon is slim at best. There simply isn’t a good opportunity for US Airways with any of those three right now.

American
Let’s start with the one that everyone points to . . . American. Since Northwest and Delta linked up as did United and Continental, that means US Airways and American will as well, right? Wrong. It would be a disaster of epic proportions if American tried to merge with US Airways now.

US Airways is never shy about pointing out how it survives as an airline. Its hubs are in less desirable locations than the big three airlines and that means it is able to generate less revenue from them. How does it compensate? It has lower costs than the big three to offset the revenue deficiency. That’s how the math comes together. If American buys US Airways, it buys a route system that doesn’t generate enough revenue to cover American’s costs, but American would naturally bring US Airways costs up to its level. That is bad.

I can only think of two ways this works. One would involve American buying US Airways and running it as a separate airline under a holding company. This would not only be a wasteful distraction for American but it might not work. If the feds decide that the airlines have single carrier status (just as Republic/Frontier/Lynx/Shuttle America/Chautauqua just received) then it would mean a single workforce and costs would start to rise. American would also get little benefit. If it really wanted this kind of benefit, it would be better off just agreeing to a codeshare.

The other way is more plausible. If American continues its downward slide and ends up in bankruptcy, I would look for a US Airways bid just as it did with Delta. Then US Airways could rework American before it took it out of bankruptcy and come out with a highly competitive airline. Right now, this is the only plausible merger scenario I see, but American isn’t going into bankruptcy anytime soon.

Delta
The Delta/Northwest merger went so smoothly that some wonder if the airline could handle another one? I imagine it probably could, if it so chose, but there are too many problems and not enough benefit. Forget about the cost issue and look at the route overlap. The feds are unlikely to allow Delta to control Atlanta and Charlotte – the only two viable hubs in the southeast US. Also, the feds were so concerned about the US Airways/Delta slot swap because it would concentrate power in Washington and New York that they blocked it. Just imagine how concentrated the power would be if the two merged. In addition, Phoenix and Salt Lake would only work to hurt each other in the same airline. This would simply be about eliminating competition and nothing else. I just don’t see it happening now.

United
These guys are so tied up with the Continental merger right now that I can’t imagine them being interested in taking on something further. Besides, how do you think the feds would look at a Newark/Philly/Dulles hubbing situation? And there are a bunch of cities in the west where US Airways and United provide the only two options (e.g. Yuma, San Luis Obispo). There could be plenty of concern in the near term.

But overall, the cost issue is going to be the biggest one for any of these airlines. Does that mean that a merger can’t happen? Of course not. There have been plenty of stupid airline mergers of the years. But the chance of one happening anytime soon is remote, and that’s being optimistic. Down the line, things can always change, so will US Airways be around in 5 years? That one is much harder to predict.

When I did airline pricing at America West a decade ago, I found that just about everyone I met thought they could do a better job than I. “Why are fares so high? If you lower fares, you could get more people to fly and make more money.” Now US Airways has decided to let people prove that they’re right by lowering fares in Rochester, New York.

In general, it makes sense that if you cut fares, you should have more people flying and then hopefully you’ll make more money. Even if your planes are full, you can cut walk-up fares and sell more of those and less of the leisure seats. The ultimate result is that profit would go up and that’s good.

The problem is that is doesn’t usually work this way. Often the fare cuts won’t bring enough extra to make up for the loss in revenue per customer.

US Airways is going to test this out in Rochester by cutting fares and seeing what happens. It looks like walk-up fares (purchased on the day of departure) will be going down anywhere from 31 percent (in Melbourne, Florida) to a whopping 76 percent (in Jackson, Mississippi). Here’s a chart with all the cities that are getting lower fares:

But it’s not just walkup fares. Other fares are being reduced as well. To Philly, a key market because it’s nonstop, leisure fares will drop 48 percent, for example. That ain’t bad. Down to $198 roundtrip from $378 roundtrip.

I like this move because it effectively tells people . . . “You think you know how to price? Great. Now put your money where your mouth is.” The residents of Rochester now either have to put up or shut up.

It’s also important to note that this was being done in partnership with Rep Louise Slaughter (D-NY) who has Rochester in her district. She’s the ranking Democrat on the House Rules Committee, so I imagine that it can’t hurt for US Airways to build up a little political capital there.

So now it’s up to the people of Rochester. Your fares are now lower by far, but will more of you fly? Will it stick?

US Airways says it will examine results over the next couple of months. For those cities that don’t see a revenue increase, the old fares will come back. For the successful ones, those will stay.

Anyone want to guess which markets will keep the fare cuts?

Fuel hedging no guarantee for airlines – CNN Out of the Office
Following up on last week, this week I wrote about fuel hedging and why airlines don’t actually have fuel prices locked in, for the most part.

How Not to Design a Website, Courtesy of a Lousy Indonesian Airline – BNET Headwinds
PT. Tri-M.G. Intra Asia Airlines out of Indonesia may be best known for its position on the EU blacklist (if it’s known at all), but really it should be known for a truly awful website.

US Airways Takes Its Frequent-Flier Program to the Next Level – BNET Headwinds
US Airways has added “special dividends” to keep people flying even after they’ve reached status. It’s a low cost way to keep people flying.

In the Trenches: The Agony of Credit Card Fees – Intuit Small Business Blog
Trying to compare credit card processors is like trying to grab a fistful of air. It’s impossible.

How Some Airlines Thrive Without Global Alliances – BNET Headwinds
Alliances may be for the cool kids, but there are plenty of airlines doing just fine without. Look at Alaska, JetBlue, and Hawaiian, for example.

As mentioned yesterday, I was in DC last week to speak on a panel. Transportation was provided on US Airways, so it gave me an opportunity to do a few things I haven’t done in a long time. First, I flew Mesa. (That’s not something I’ve done in a long time.) Second, I flew US Airways long haul. And third, I flew into National. I love that airport.

So why did I fly Mesa? I needed an early flight, and knowing that I would only be back for less than 24 hours from my previous trip, I couldn’t justify an even earlier wake up call just to go to LAX. I needed every extra minute I could get. It turns out, I almost took a couple minutes too many.

As usual, I checked in online and then left home an hour before my flight. Only this time, I got there and saw a long security line snaking back into the terminal, almost as far as the ticket counter. This wasn’t good. There were a lot of nervous faces in line. I was curious what the heck was going on, and I found out when a Transportation Security Officer (TSO) came by to check on the line’s length. Apparently, another TSO was late so they could only open up one lane instead of the normal two. Great.

It took nearly 30 minutes for me to get to the front of the line when the guy checking IDs stopped me. I’m not sure why, but any time I print out a US Airways boarding pass (my wife has flown them a lot recently), the top part is blacked out except for the barcode while the bottom part shows everything. (Yes, I’ve tried this in multiple browsers.) This time, the TSO decided it wasn’t a valid boarding pass. I disagreed. So he called his supervisor over who said that since it didn’t have my name on it, it couldn’t be valid. I politely but firmly pointed out where my name was. She then decided she had to go to the gate to ask the US Airways people if it was valid.

She finally came back and said it was ok, so I made it through. With five minutes to spare, I walked on to the airplane, but I wasn’t the last. We took a five minute delay while others behind me ran to the airplane.

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February 22, 2011
US Airways 2762 Lv Long Beach 645a Arr Phoenix 910a
Long Beach (LGB): Gate 21, Runway 30, Depart 5m Late
Phoenix (PHX): Gate B9, Runway 7R, Arrive 3m Early
N915FJ, Bombardier CRJ-900, US Airways White Colors, 100% Full
Seat 3A
Flight Time 55m

This flight was a blast from the past. The first thing I noticed when I boarded? All the America West “bug” logos still adorned the bulkhead and the seats. I thought Mesa was supposed to update its interiors? America West hasn’t existed in over five years, so clearly this airplane had seen better days. The seats were worn, the cushion had lost a lot of its, um, cushion, and the elastic was gone in the seatback pockets. Combine that with the fact that Mesa’s seats are almost all misaligned with the windows, and you have a pretty nasty interior experience on this airplane.

Fortunately, the airplane itself worked just fine. We jumped up into the morning sun and winged our way toward Phoenix. The flight attendants came through and served drinks. I promptly spilled my ginger ale all over the only pair of jeans I’d brought on the trip. Great. Now I looked like I peed my pants and it felt awful. Once we landed, I got up and immediately headed toward the bathrooms. Even though I only had a 45 minute layover, I had to try to dry off a little better. Somehow, Phoenix is the only airport on earth that doesn’t have dryers in the bathroom. It was paper towel-only. So my saggy pants and I headed toward our connecting gate.

When I arrived, I saw that someone I knew from my America West days was working at the gate. We talked for a couple minutes until the last few people boarded, and then I hopped on.

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February 22, 2011
US Airways 44 Lv Phoenix 947a Arr Washington/National 359p
Phoenix (PHX): Gate A19, Runway 7L, Depart 19m Late
Washington/National (DCA): Gate 42, Runway 1, Arrive 17m Early
N832AW, Airbus A319-132, US Airways White Colors, ~99% Full
Seat 14A
Flight Time 3h26m

I wish I could say that we were on our way and airborne within a few minutes but it wasn’t that easy. The captain came on and told us that maintenance was on its way. That was followed by a collective sigh throughout the cabin. He did, however, tell us not to worry since they’d probably just write up the problem and order the part from Toulouse, or some place like that. Funny guy. Turns out one of the plastic window rims had seen better days, so they replaced it and we pushed back.

Then we sat. And sat. This is rush hour in Phoenix and the taxiways were jammed. It was actually frustrating that the pilots didn’t tell us anything during our 40 minute taxi delay. We could see airplanes passing us on parallel taxiways and we weren’t moving. Having already had maintenance on the airplane, there was concern that there was some more work to be done. But it turns out that they were just using two taxiways. They filled ours up and then filled the next one up. We soon enough passed in front of all those airplanes that had passed us on the parallel taxiway earlier and we headed off toward DC.

This is a route that I know well. Before Senator McCain worked his magic to get America West a couple of nonstops from Phoenix, I used to go back and forth to school at GW via America West’s Columbus mini-hub. This flight brought back a lot of memories.

We had a quick flight time with a stiff headtailwind, so it made the fact that there was no movie on this flight (or any US Airways domestic flight) slightly more palatable. (It still bugs me a lot, though.) The only thing I wanted to do was eat, but they ran out of the sub sandwich way in the front and even the cheese plate was gone by the exit row. The rest of us in the back half of the plane were forced to forage for leftovers. I had pretzel M&Ms and chips and salsa.

The one thing I can say is that the service was excellent. The flight attendants were constantly going up and down the aisle with water and collecting trash. It was actually some of the most attentive service in coach that I’ve seen in a long time.

Soon, we were descending into Washington. I had picked my left-side window with the hope that we would do the river visual approach from the north, but the winds forced us to come from the south. I missed the great views of the District and instead just stared at farmland.

Less than 2 days later, it was time to come home. I got to National very early so I could spend time at one of my favorite airports in the world. In fact, I may write another post about the airport soon. After spending a while roaming the halls, I went to board my packed flight home.

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February 24, 2011
US Airways 267 Lv Washington/National 1030a Arr Phoenix 140p
Washington/National (DCA): Gate 39, Runway 19, Depart On Time
Phoenix (PHX): Gate A28, Runway 26, Arrive 10m Late
N823AW, Airbus A319-132, US Airways White Colors, 100% Full
Seat 11A
Flight Time 4h54m

The jet bridge was overflowing with people and the line was barely crawling. Not long after boarding began, it was announced that the bins were full. They at least had printed out barcoded bag tags so that when bags had to be checked, people could feel comfortable that they were in the system. I opted to keep my bag with me and either hope for an overhead space to squeeze in or just stick it under my seat. There were a couple crevices for my bag up top, but none near my seat, so I just stuck the bag under my feet and killed my legroom.

A storm was coming but it hadn’t hit DC yet. We took off into the clouds and didn’t break out for about 2.5 hours. It was a little bumpy so the captain kept the seatbelt sign on that whole time. We finally broke out and I was able to run to the bathroom.

Once back at my seat, we had about an hour of calm before the seatbelt sign came on, the engines were throttled back, and we started descending at the same time. With 1.5 hours left, we weren’t close enough to Phoenix. Either we were diverting or this was a turbulence-evasion move. Fortunately, it was the latter, and our descent from 36,000 to 30,000 feet must have been to find smoother air. It worked, because we just had a few small jolts along with some light chop.

The next time we descended, it was for our uneventful landing in Phoenix. I spent the weekend there and drove home with my wife afterwards, so that was the last flight on this trip.

Last week, I was back in Washington, DC for the first time in about 5 years. What was the occasion? I was invited to speak on a panel at the American Bar Association’s Forum on Air and Space Law Update. We were supposed to focus on passenger rights, but ultimately, we ended up focusing almost entirely on the 3 hour tarmac delay rule. It was excellent to finally get some hard cancellation numbers from the airlines, but the response from the DOT couldn’t have been more frustrating.

The most interesting thing about the discussion was that airlines actually came prepared with hard numbers, something I’ve wanted to see for a long time. Unfortunately, the DOT’s representative disregarded them with “I don’t know where those numbers come from.” Let me explain in greater detail.

There were five of us on the panel. The other four were:

• Sam Podberesky- Assistant General Counsel for Aviation Enforcement and Proceedings, DOT
• Charlie Leocha – Director, Consumer Travel Alliance
• Denis Barrett – Director, Operations Control, US Airways
• Leila Lahbabi – Airport Attorney, Charlotte Douglas International Airport

Sam brought the DOT’s basic stance that there were no additional cancellations in 2010 as compared to the previous year, so the rule was great because it killed tarmac delays. That was the argument he used throughout the panel.

I began to argue that a simple year-over-year comparison means nothing because there are far too many other factors, like weather and operational changes, but I was interrupted by Sam to repeat his basic argument for the first of many times.

This is where it got interesting. Denis brought numbers with him regarding the number of flights canceled by US Airways since the implementation of the rule, something that I’ve been hoping to see for ages. He said that including US Airways Express, there have been 927 flights forced to return to the gate because of the three hour rule. Of those 318 canceled.

Those cancellations inconvenienced 16,000 passengers but that wasn’t all. Those airplanes were needed elsewhere after those flights and that meant further flights had to cancel. Another 12,000 people were impacted because of that.

What’s the most interesting stat here? On those 927 flights that returned to the gate, no more than 20 people elected to get off. So even the flights that did eventually go had to take delays just to return to the gate, often without a single person deciding to get off. We’re talking thousands and thousands of impacted passengers here. And that’s just US Airways.

When Sam repeated his original argument, someone from Delta stood up in the audience and said that they also had seen cancellations from this. Delta saw 279 airplanes return to the gate and 88 cancel, but that didn’t include Delta Connection.

Add this to comments made by American’s SVP of Government Affairs Will Ris in an earlier panel that the airline had definitely been forced to cancel more flights because of the rule, and the result seems clear. There has been a serious impact on passengers, and not in a good way.

Charlie jumped in and suggested that the airlines would just need some time to adapt to the rule and that within 18 months, they’d figure it out. The airlines didn’t seem convinced.

I tried to interject once again and say that year-over-year comparisons are not valid. What really matters is comparing what would have happened this year had the rule not been in place, and the airlines are clearly showing that cancellations would have been lower without the rule. Sam clearly didn’t agree.

How could we have two people sitting on the same stage seeing the complete opposite results? I suggested that maybe the DOT and airlines needed to get together to create a reporting standard since clearly that hasn’t happened.

Sam first suggested that it would be technically difficult because some of those flights that airlines reported as canceled would have canceled anyway, but that’s the reason I suggested getting together to create an acceptable standard. He then shrugged it off and sarcastically said, “I’m sure the airlines want to give more data.”

I proposed that the airlines would be happy to give data if it enabled them to help tweak the rule, but that seemed to fall on deaf ears. And that was that.

So where did this leave us? The DOT still says there has been no impact on cancellations (or at least very minimal impact), but Sam did give a little lip service to the problem at the end by saying “whether [the rule is] creating other issues is something we’ll have to look at.”

In the meantime, cancellations continue to mount, if you accept the airline interpretation of the data. And more people end up being inconvenienced than need to be. Hopefully one of these days, the DOT will come around and decide to see how it can really improve the rule instead of just arguing that it hasn’t had a negative impact.