Cranky on the Web (July 15 – 19)

Admin, American, Mergers/Finance, US Airways

I’m excited to announce that I’ve been named to the Conde Nast Traveler Top Travel Specialist list for 2013 for urgent airline assistance. That makes 3 years in row.

Mythbusting: Why’d They Cancel My Favorite Flight? It’s Always Full!Conde Nast Daily Traveler
This is a link that I will need to keep handy, because people always ask me how a flight could be canceled if it’s always full. Here’s why.

In the Trenches: A Get-Together Post-MortemIntuit Small Business Blog
Our annual meeting at Cranky Concierge worked out pretty well in the end.

Ontario making a case for LAX lawsuitInland Valley Daily Bulletin
Another day, another Ontario article. This time it looks like Ontario is just trying to make life terrible for LAWA.

PlaneBusiness CrankyAnalysis: The GAO Report On American/US Airways Merger –More Holes Than Swiss CheesePlaneBusiness Banter ($Subscription Required$)
I dug into the DOT data and reviewed the GAO report claiming that there would be huge reduction in competition in the AA/US merger. I found all kinds of problems with the data. The competitive impact is much smaller than the GAO has suggested.

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13 comments on “Cranky on the Web (July 15 – 19)

  1. 1) I wish that Cranky would ALSO review what he and a few other bloggers have soooo glowingly said about all the “positive” effects that a mega merger will bring to consumers. The “snake oil” sale of this move does not impress me and I find the road after a mega merger between AA and US AIR laden with land mines. I see a monetary windfall for Parker & Co., while consumers WILL suffer the consequences – as well as those individuals that think everyone will prosper and enjoy the “fruits” of this move. Why is cranky only “reviewing” items on the other side of this debate??? Come on Cranky, let’s be professional and more even handed on your Blog. I know you can do it if you try!

    2) It is about time that the folks in Ontario speak up and corner those rascals in L.A. about not actively and energetically cultivating better use and more attention to this wonderful under used airport. It is litterally dying on the vine. If Ontario itself can turn things around and fight to improve air service there, it will be no thanks to LAX. LA has their head up their cheeks modernizing LAX and dealing with the many other issues there. Ontario needs DEDICATED personnel to help it survive. The past history goes counter to what Cranky would have you believe. Ontario itself must do what is necessary to save and grow that vastly underused airport. No two ways about it. It would reduce, to some extent, the passenger growth pressure,and the Fwy traffic at LAX, while adding convenience to the inland portions of Southern California and perhaps add more flights to the area. I see this as an untapped resource, which will remain untapped if lefty in the hands of LA. It appears that Cranky believes the future is best served by losing more time, effort and money by putting all your eggs in one basket (LAX) and not really support regionalization of air service. I* disagree with Cranky. You can buy a little time trying to enlarge LAX, but in the end it will be over loaded once again – THEN WHAT? Ontario may be fighting a David and Golieth situation, but I believe it has no choice. As Cranky points out, the new mayor of LA is to involved in setting up his new administration to really become involved in this important issue. I see this as a fight for survival of the regional air service to the Inland Empire, which LA could care less about in its greed to defend the profits at LAX.

    1. 1. The positive effects will come from the merger of two almost entirely complementary, nonoverlapping networks, as has been discussed ad infinitum, and in the empowering of the merged larger, better-run airline to compete with United and Delta. There will be no meaningful reduction in competition except on a few routes between AA and US hubs. On itineraries where neither origin nor destination were a hub for one of the airlines, the leakage to that airline was around 5%, according to Boyd Associates, and of course consisted almost entirely of highly vested frequent-flyer plan members unlikely to defect and of people selecting the lowest price and thus of little consequence to the airlines. US currently has little east-west or LatAm traffic to connect to its extensive southeastern network from Charlotte or its unconstrained and well-placed transatlantic hub in Philadelphia. AA has no meaningful East Coast hub or north-south distribution; JFK is constrained and cannot serve much more than NYC O&D. Where is the detriment to consumers in all this?

      2. Are you aware of the massive reduction in LAX traffic? The greater concentration of LA basin flights at LAX is not occurring because of some evil plan by LAWA but rather because of economics: the trebling of fuel costs in just a few years and the plummeting feasibility of using 50-seat jets, which are fuel-inefficient and whose maintenance costs are rising substantially along with their age. Furthermore, while I express no opinion on whether ONT would be better run by an entity other than LAWA, it will be stuck with similar costs because of capital decisions already made and carried out, and there is no reason to believe that the new operator would be able to recruit additional traffic other than by subsidy. In general, air service economics are particularly resistant to the sort of central planning (“regionalization of air service”) you would like to carry out.

      Currently and for the foreseeable future, air service will remain a financially shaky proposition for all actors. No-one is making significant profits or building significant reserves in this country. The next increase in fuel prices threatens to consume whatever buffer anyone manages to build. Accusations of “greed” in this environment are inherently nonsense.

    2. Consumer Mike – I find both your comments extremely confusing.

      1) Are you suggesting that I “review” my own blog posts? That makes no sense. What I did in PlaneBusiness is look at a numbers-based report and point out why the numbers aren’t being used correctly. If you have a numbers-based report that supports my argument, I would be more than happy to dig into it for you. Unlike your comment, my work in PlaneBusiness isn’t based on speculation about what might happened. It’s looking at hard numbers.

      2) When I’m talking about regionalization, I’m talking about LAWA’s regionalization plan that meant supporting service to Palmdale and Ontario, neither of which worked out. So your pointed remarks about what I believe aren’t true. I’m more than happy to see Ontario take over control, but it’s not going to see some huge growth just because of that. If it can get its costs down (which proper management should be able to do, to some extent), then that could encourage more service. But it won’t be a gold mine.

      1. Cranky,

        1) Naturally I am not asking you to “review” your blog, but as I read your article it appeared to me that you were revisiting your position in developing your opinions supporting the mega merger printed in your blogs. My comment was to also hope a revisit of your strong opposition for maintaing the two airlines as competitors in the industry, which might change the level of your opposition. Sorry if I was not explicit enough in my comment.

        2) I apologize if I misunderstood your blog, but that is the flavor of the message I [personall] got from your article. In todays economy I do agree with you there certainly is no gold mine to be gained by ONT. However, if left in the current situation it will be a slow death to a great underused facility. Obviously being shackled to LA has been no help, buy rather a hindrence in making meaningful improvements – no matter how small – in service. ONT is barely hanging on, even desparate actions by Ontario should be understandable to the general public. Remember LA politics make sure LAX always comes first, it is naive to think differently.

        These are my personal opinions. Thanks

        1. Consumer Mike –

          1) You’re talking about the PlaneBusiness article? What I did there was a deep dive into the data – much deeper than I had looked for any post on this site. That’s also meant for a different readership – much more for airline industry insiders as opposed to the more general readership I try to cultivate here. (Though clearly there is overlap.)

          I have no plans on changing my view about this merger. Will I be 100% correct about how it will all turn out? No way. But that’s ok – I can only give my opinion about what I think has the best chance of occurring.

          2) I’ve written about Ontario a lot and I’ve been pretty consistent. I think LAWA is mismanaging the facility. I just think there are a lot of people expecting that a change in management would mean an avalanche of new service. That won’t happen.

          1. Isn’t the city of San Bernardino looking into subsidizing flights into their airport? If this happens, it will put additional pressure on Ontario.

          2. Ron – San Bernardino can try whatever it wants, but I don’t think it’s going to succeed. As much as Ontario has been struggling, San Bernardino is in a worse location with less demand. It does have lower costs, but that should be a cautionary tale to the folks at Ontario. Low costs don’t decide everything – there has to be demand.

  2. Thumbs up for being a specialist of the year for the 3rd year a row.

    That TV special on the week in the life of American Airlines that ran awhile back on CNBC or MSNBC showed a full 767 JFK-LAX flight in the beginning of the show and at the end told the numbers on that flight and said AA only made a $200 profit. One less ticket purchased would have meant the flight didn’t make any money at all which they said happens.

    So full flights don’t mean money in the bank, but that one flight a day to some small city no one else flies to with only 30 people on it paying higher fares could bring in more money they a big widebody flight between two major cities.

  3. Congratulations on your designation as a specialist. Your business is one of the few that I have never used myself and still recommend to people who need it.

    I have to say that the City of Ontario is starting to act like a crybaby. Why participate in a lawsuit opposing modernization plans at an airport 60 miles away? It’s pretty obvious that they are doing it as a form of harassment, and I hope the judge handles it appropriately.

  4. Of course, Consumer Mike conveniently ignores the scores of airline bankruptcies over the years that, arguably, were a function of too much competition.

  5. Since you are not a “miles and points guy” does that mean your concierge service would not be as valuable to those of us using miles for award travel? Thanks.

    1. phil – Not at all. I’m not the one doing that work. David is our award travel architect and he loves this stuff. He does a great job for all our clients using miles.

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