I’m going to go out on a limb and say that both United and Aer Lingus made a big mistake yesterday when they announced a joint venture that I can best describe as goofy. But that’s about the closest I can get to saying something nice. More importantly, United has decided that yes, labor relations can (and apparently should) get worse. Aer Lingus not only agrees, but it also has proven that it has no clue what to do with its business. I actually worry that in the long run, this could be the end of United. So for that, they’ve certainly earned themselves the Cranky Jackass award. Let me explain.
First, let’s talk details. Aer Lingus and United will join forces to first fly Washington/Dulles to Madrid in summer of 2010 (that’s a lot of notice) and then fly elsewhere the following summer. All costs and revenues will be shared between the two on the joint venture routes. Aer Lingus will be responsible for actually flying the route with three A330s (1/3 of its existing long haul fleet, though 6 more A330s are coming in starting this year) that will have Aer Lingus branding on the outside and apparently both United and Aer Lingus branding on the inside. United will be in charge of actually filling the plane. It appears the crews will come from the US but won’t be United employees. I’m not entirely sure how that will be structured yet, but my guess is that it will be low cost, non-union labor.
Let’s look at the math for both airlines here, so we can understand why this is a disaster waiting to happen. United, you’re up first.
This route should be a United route all the way. It’s from the airline’s Washington/Dulles hub to a European spoke that has a limited Star Alliance presence. There are a couple ways to look at this. The innocent way is that United probably looked at Madrid and figured it either didn’t have enough planes to devote to the operation or it didn’t have the right number of seats on a plane to make the route work. My guess is that with Iberia already flying the route, it’s a marginal one at best. So here comes Aer Lingus to fly it for them in a better configuration and likely with lower costs (especially with new crews). Now United loyalists can fly to Madrid when they couldn’t before. Everyone’s happy. But there’s another way to look at it, and this is what scares me.
It’s entirely feasible in my mind that this could be a way to eventually drive out the pilots and flight attendants completely. It may sound far-fetched, but think about it for a minute. United has already been effective at giving smaller aircraft flying to regional carriers. For 2009, domestic mainline will be down at least 11.5%. On the other hand, Express flying will be up at least 8%. The pilots loosened up and allowed this when the airline was about to die a few years back, and I’m sure they now regret it tremendously since they’re seeing their jobs disappear.
Now United is effectively trying to do the same thing on the upper end of the scale with long haul, international flying. The airline has no new aircraft on order, so there’s no prospect for growth for several years out. Instead, United is looking to outsource its growth, and I could see this extending to the entire operation.
Now, if I were starting a new airline from scratch, I would seriously consider outsourcing my flying. (I’d keep my customer service folks employed, but that’s another discussion.) An existing airline, however, really doesn’t have that option, especially in a weak state. It’s not like United could just dismiss all their pilots and flight attendants one day and be up and running again the next. Think of it like a strike. An airline would have to go through some severe operational pain before it could get there, and an airline in United’s weak financial condition probably couldn’t weather a storm like it barely did in the summer of 2000.
All that matters here is what the unions think, even if it’s not the ultimate goal for management. If they see United’s end game as the end of all their jobs, they suddenly have nothing to lose. Do they worry about putting the company out of business by working to rule and hurting the operation? No, they don’t. Because if they think their jobs are gone anyway, they might as well bring down management with them.
We don’t know yet exactly how the unions will react, but we do not they aren’t happy. Take a look at the ALPA’s statement on the deal. Here’s a taste:
. . . This development, where United attempts to establish an airline operation without the use of United aircraft or employees, is nothing less than the outsourcing of jobs to an international company, and clearly demonstrates that this management continues to make business decisions without regard to its pilots and other employees.
The United pilots are exploring every option to put an end to the company’s blatant disregard and lack of loyalty to the United Airlines brand.
Flight attendants won’t be happy either here, of course. And I really do fear that this could be a major milestone for when we look back in 5 years. You may call me alarmist, but I’m looking way down the road and I don’t like what I see.
Now that’s look at Aer Lingus math.
Apparently, Aer Lingus has just run out of ideas. If you’re an airline with several widebodies on order, you’d think you’d have a good place to put them. But no, Aer Lingus has apparently decided that it has at least 3 airplanes that can do nothing better than fly some routes that it can’t market on its own. Not only that, but the airline has opted to try to staff the flights with employees from the US, so airline employees over there won’t benefit either.
I suppose when you have the Irish government behind you allowing you to make stupid decisions, then this doesn’t seem so bad. See, the Irish just turned down Ryanair’s bid to buy the airline again, so Aer Lingus can continue making dumb moves. I’m sure Ryanair could come up with far better uses for those widebodies than running them for United with somebody else’s employees. It’s hard to make Ryanair attractive to labor, but a stunt like this helps. I doubt we’ve seen the last of Ryanair’s chief Michael O’Leary on this one.
O’Leary, of course, loves it. And really, he should. He put out a press release today entitled, “Ryanair Congratulates Aer Lingus on Finding a Partner Which is Even Weaker and in Worse Shape Than Aer Lingus.” At least someone is happy about this whole thing.
I’m just afraid that this is a very short-sighted move that could have long lasting repercussions for everyone involved.
USAfrica Airways, anybody?
Sounds like same stuff, different day to me. Then again, the pilots could always try another takeover bid for the bones of the beast.
My first impression is WTF? I’m kindof curious how they expect to bypass the union, because it seems like there would be some clauses against this…
I’m going to read it up on this a bit more though.
Is there any market for a DC to Madrid flight? In the short run this looks to just upset labor at United…and Aer Lingus…but in the long run, can they really fill up an A330 on that route and make money? Even with dirt cheap labor? Aside from the very odd business plan of this, it seems to me like Delta move to just have a flight on a currently unserved route no matter what the actual demand may be.
Wonder if UAL management got the cajones to pull a move like this with labor after the history of what NW did to their mechanics. Brilliant move by NW, but bringing in “scab” pilots and FA’s might be another matter. I’ve been predicting a US major to fall…maybe UAL will be the one to go.
Cranky, Wouldn’t the crews be Aer Lingus crews? Since its their metal and they’re operating it? Even if they’re based in the US…
A – That’s another good question. Iberia already flies it, so I have to think it’s going to be a marginal route for both airlines. But who knows.
Nicholas – I’ve heard conflicting info on this. Some have said that the employees will be part of the joint venture while others have said they will be Aer Lingus. Either way, it won’t be flown by existing Aer Lingus crews.
Do United not have any airframes parked up in the desert which could be used for this ? Alternatively, is demand in the leasing market really that strong that United cannot source something like an A330 on their own ?
Can Aer Lingus *really* not find a route on which to deploy a few A330s ?
Dublin are actively trying to get airlines to serve new routs – there’s a list at http://www.therouteshop.com/dublin-airport/
If not from Ireland, maybe something from the UK (not London) to the USA / Canada, now that bmi is closing their Manchester base ? Alternatively something that allows them to improve operational efficiencies with their new short-haul mini-hubs at Gatwick or Belfast ?
Although Aer Lingus are no longer part of OneWorld, they still retain fairly strong links. I can’t imagine Iberia (or in the event of the on-off merger going ahead) British Airways being happy about this !
How do you create joint branding between 2 well-known airlines ? The whole thing from a marketing standpoint can only create confusion amongst customers. In the marketing campaign, how does this get described – codeshare, franchise, or something else, and do Aer Lingus get a mention outside the small print ?
The closer one looks, the more questions emerge…
I am with Cranky and the view from the belly of the beast is that United is hell bent on becoming a ‘brand only’ airline sooner rather than later; kind of like a global version of Midwest. They would keep a core fleet with a small cadre of employees just to keep their FAA certs and internaitonal bilateral agreements in order and farm out the rest.
All of this is fine and good in a B-school theory class, but those of us who have actually WORKED in the industry know that a global network based on fee-for-departure is a house of cards (for reasons that are too numerous to list in this small space). It amazes me that UAL has not had a shareholder rebellion. Look at BofA yesterday and the steps they took to head one off, over something that is sadly common in this day and age. I just don’t get it….
Did we just find our winner for the new Worst Airline in the World sweepstakes?
Last I checked UA was shedding 747s and parking the ones they couldn’t unload along with returning a few 767s as well.
UA had flown IAD-MAD back in the day with a 767, couldn’t make it work and yanked it. The A330 is not only larger than the ’67 but UA doesn’t operate any Airbus widebodies; they’re not likely to start now.
It’s possible (or is it?) that AerLingus purposely targets those planes to take advantage of the EU open skies for opportunities like this. They could be signaling their willingness to do the dirty work for speculative markets – an airborne contractor, as it were. I mean, consider the size of their home market to begin with: they’re not likely to be another Singapore!
All that said I agree with David. This is a witches brew of a marketing nightmare.
my only cultural reference for aer lingus is a episode of veronicas closet. they are at the airport and one of veronicas gay assistants says he has to get his picture taken by the aer lingus sign.
“aer lingus….how could they not have known?”
Definitely lots of questions to ponder for sure. They did dump 6 747s in the desert last year, though I don’t know if they’ve sold them yet. I doubt we’ll see those come back though. They’d want to fly this route with a 767 assuming their 757s won’t make it (none of which go across the Pond anyway). But those are scheduled pretty tightly right now, I believe. As for Aer Lingus, you might think there would be better opportunities, but I guess not. That’s just sad.
UA had flown IAD-MAD back in the day with a 767, couldn’t make it work and yanked it.
This looks to be an epic failure for the start. By no means do I know the economics of it, but if UA has a spare 747 or 767 why not fill it to the gills with bargain basement tourist fares to see if the route works before pissing off labor like this?
Also, with fuel prices down why is anyone buying new widebody aircraft (Aer Lingus)? Revive an old MD-11, 767 or 747 out of the desert and see how a new route works before dedicating a new aircraft for that route. I’m just a traveler and not an insider…but given the cost of a new Airbus or Boeing I think the relics in the southwest would be far cheaper even with higher fuel burn rates.
Hey…just take our Deltalina’s pic off the post.
Just goes to continue to show everyone…Unions don’t mean Jack ____
or Jackass for that matter.
The employees are screwed and the Association of Flight Attendants are again spending so much money trying to unionize Delta, that they don’t have a penny left to do anything for the poor United flight attendants!
Debi – I had to put someone on there that could be recognized as a flight attendant! We’ll see if the unions can put together an effective campaign here, though clearly they haven’t been successful very often in recent memory.
CF – If Aer Lingus is trying to be an airborne contractor, what’s out there in the EU open market that would represent a better possible return?
LON – Few slots, saturated market, UA already there.
ZRH – Smaller than MAD
Scandinavia – SAS, nuff said.
ATH – Seasonal.
IST – Horrid yields, TK in Star
WAW – See ZRH.
MAN – BMI couldn’t make it work.
Not saying at all that I like this idea…I don’t. But if that’s what they’re wanting to do I’m just thinking out loud and coming up with slim pickin’s all around. Am I missing one here?
Ha! Love the pic of Katherine Lee you used…
Has Continental made any comments about this yet? If I were them, and this is what my soon-to-be almost-a-merger-but-not-quite partnership company was doing, I would have a few things to say. This seems to be exactly the kind of thing Continental would be against. Why don’t they just buy them already and give the whole United management team the boot. I dare say United’s employees wouldn’t have a problem with it.
Nice analysis Cranky. When I read about the venture yesterday my first thought was what a disaster this will be if it goes ahead.
Since you’ve covered off nicely the strategic issues, my blog post (see link above) concentrates on the passenger service issues.
As for the quote about EI and UA being 2 leading transatlantic airlines, is this proof of delusion?
At least they are trying something to see how it works. Maybe it’s a test to see how it might work in other markets. It’s pretty much like any codeshare out there now except MAD will just be an end point instead of a connection point like other codeshares with a host national carrier at their hub.
But it does seem odd to bring it up now for 2010, wonder what the reason is for that. Maybe it’s to scare the UA employees into what might happen in the future.
Just another great blunder on the part of UAL and their mismanagement team. Flight Attendants will not tolerate it…Glenn’s Gotta Go!
easiest thing would be that Air Lingus leases their 330 to united.
The Flight Attendants have been steamrolled by their own union a number of times Bob…and can be replaced in a matter of weeks….dont think management dosent know that. Given the glut of pilots in the job market…Flt Ops is in the same boat. This ‘innovation’ achieves two things: expand the network through additional outsourcing and scare the @%*% out of the MECs before they go asking for things like a living wage and human working conditions.
Maybe this wont play out the way i think it will. … Lets just say united played a suicide card.
Anyway….if they start flying only as a brand in the near future…wouldnt that 1. Disqualify them from the Star Alliance and 2. Not make it possible for them to codeshare/operate some of Lufthansa’s flights?
Ok, I’m back from a weekend in Vegas, so let me respond to some of these comments.
Optimist – If they’ve decided to convert their business into a contract operation, then ok. But last I checked they were still trying to be a flag carrier for Ireland. It seems they just don’t see any more opportunities for long haul from Ireland, something that I imagine O’Leary would disagree with if he had his hands on the airline.
Andrew – I haven’t heard a peep from Continental, but I have to think they’ll have some concerns here, as will their employees. I don’t think they’ll have any say in the matter, but I’m sure they’re going to watch closely.
Global Traveller – Very good points about the operational differences between United and this new joint venture. It could get even uglier than it already is.
David SF easy bay – I see a lot of differences between this and other codeshares. First, this one is a joint venture with full revenue sharing. Second, the codeshare carrier (United) has primary responsibility for filling the plane, unlike most codeshares. Third, this is a route from a United hub to a spoke that has no major ties to Aer Lingus. So, it’s not like United putting its code on flights from Dublin on Aer Lingus.
Eric – I agree that they could be replaced in a matter of weeks, but that’s the key. During those weeks, United would take a severe hit, just like in a strike situation, and I’m not convinced it could survive that in its current state.
Robert – I’m not sure why that would disqualify them from Star Alliance. Also, while they wouldn’t be able to operate Lufthansa’s flights if they didn’t fly airplanes, they could certainly still codeshare on Lufthansa-operated flights.
I mis-spoke on the star alliance thing…I was assuming that if they became brand only that the star alliance wouldn’t like it.
I was thinking about lufhansa dropping the codeshare, because if I were them I wouldn’t want a partner that just sat there and did nothing but collect revenue
its interesting that the contracts for all involved
are expiring. a poison pill for Aer Lingus to shut off
Ryan Air or to use muscle against the pilots in the
up n coming negotiations? I think the latter……..
I don’t understand the little eagle thing on the Aer Lingus math…
Anyway, I am praying that Continental steps in and stops United’s crappy business “ventures.” I like Continental and hate United, and hope CO brings UA up, rather than UA taking CO down with it. :(
Benji – Yeah, that didn’t work as planned. It’s actually a vulture with a Ryanair head circling above.
YOU ALREADY TRIED TED, AND LOOK WHERE THAT GOT YOU?
TED NO LONGER EXISTS.
Michael Boyd has some interesting comments about this deal on aviationplanning.com y’all.
I am with you CF in that UA can not take a hit like a general strike by any of its work groups…period. But being on the inside, I have seen time and again that this regime leverages internal employee divisiveness to the hilt. They can throw a red herring like this out there and watch the infighting; these are folks to have read ‘The Prince’ several times over.
I picked up the free newspaper here today, and noticed that Aer Lingus is now flying to lots of shorthaul destinations from London Gatwick. A bit more googling shows that this is a pretty new thing: http://www.guardian.co.uk/uk/2008/dec/19/transport-theairlineindustry
Looks like Aer Lingus is trying to throw what they can against the wall and see what sticks…
I just love your weblog! Very nice post! Ive bookmarked it and will come back again.
@ Debi Shaw:
please get your facts straight, the AFA is not paying for Delta organizing, the CWA is, with its unlimited funds. Imagine DEL/NWA the largest carrier not organized, that would set the standard, and that would only make you as good as your last trip..no thanx
@ Nicholas Barnard:
The flight attendants have been hired off the street in DC, non-union, low wages. They will be wearing Aer Lingus uniforms, but are being trained in the UAL training center in Chicago. UA financed the deal, Aer Lingus provided the aircraft. UAL has managed to pull a fast one here by trying to bypass union contract language prohibiting not only foreign ownership interests in US airlines, but hiring non-union flight attendants to work what is being advertised as a “UAL” flight. The “real” Aer Lingus (unionized) flight attendants + pilots filed a lawsuit. Pilots won, flight attendants lost… so the illegal/unethical hiring began. UAL flight attendant union (AFA) has hired a lawfirm to investigate and hopefully put an end to this blatant outsourcing of US jobs. (Yes, they are US citizens, hired in DC, but at minimum wages with minimum qualifications, and because of a big nasty legal loophole… for now).
I actually was offered an interview with Aer Lingus, not knowing any of the inside red tape like this before hand. I am already with another airline (and trust me the pay is low there too), but I wasn’t aware of the union concerns with Aer Lingus, hmm…
P.S.: They are hiring people from all over the country to fill IAD spots, not just the DC area…
Imagine…Tilton and his cronies can head United into the future. It becomes a virtual airline. Suits can book on United, earn points, save face, pay less than what it’s worth, not have to deal with unhappy, overworked employees, and probably even insist that flight attendants pass weight-check…after all, U.S. laws won’t apply.
Maintenance, food, cleaning…all farmed out to the lowest bidder. No strikes to worry about. And, with what is left over Tilton can give himself more bonuses and hire a private jet to fly himself and his family safely to vacation spots all over the world.
United Flight Attendant union (AFA) is using it’s lobbying resources to go door-to-door on capital hill to all the Senators/Congressmen, and show them what this deal really means. The UAL/Aer Lingus spin is that’s it’s creating new jobs in a poor economy… when in reality it’s outsourcing jobs to the lowest bidder via legal loopholes. Finally, some of the Senators/Congressmen are coming around, and seeing the truth behind this crooked deal. There is a bill in the works, but it still needs more support before going to the floor for a vote. CRANKY FLIER: Have you though about writing a press release? I bet there are some reporters who would love to get in on a story like this.
I use my blog as my platform and that does reach a wide audience, but I’m not interested in taking sides any further than that. I certainly don’t want to be involved politically with any of this so I will gladly let my blog speak for itself and leave it at that.
We all see how terrible United is doing since they started this route.
Flying this route in C class on Sunday. Very curious about what to expect.
You’ll get an Aer Lingus onboard product that’s simply being marketed by United. Here’s a trip report for you: