Yes, I know. The topic of the week is a day early this week. Why? Because I’m trying to lay low and take a bit of a breather this week after a hectic December. I’m already working on Monday’s post and will be back with you on the regular schedule then.
In the meantime, what are you predictions for this industry in 2014? What will be talking about? Good? Bad? Doesn’t matter.
I think we will be talking about the US/AA merger, especially when systems merge – will the lessons of CO/UA be learned by US/AA??
2014 will be interesting in Canada, with 787 being delivered to AC, WestJet likely bringing Encore to Eastern Canada and a decision may actually be made in regards to lenghtening the runway at Toronto City Airport and if Porter (and anyone else) can use Jets.
Will profits continue? Will there be a new entrant into the market if fares are high and profits are out there? How will the evolution of Frontier go? Will Alitalia remain the Worst Airline Ever?
Happy New Year!
Alaska & Delta will fight over SeaTac passengers like spoiled divorced rich kids at Christmas. Gifts of high frequency and low fares will try to woo passengers to love one parent more than the other. It will be a great year to be a SEA flyer.
Cranky – You seem like a busy man, but if possible, at the end of 2014 or early 2015 I’d like to see a review of how your reader’s predictions compare to what actually happens in 2014.
My predictions:
– Alaska draws into a closer alliance in possible preparation for a merger
– AA works on improving labor relations in preparation for 2015 and beyond.
– United limps along in spite of what PR/SEC/DOT releases say (rate of decline slowed only by improving economy)
– DL loses out on AS but draws ever closer to a solid Asian US hub foothold against United and American
– Southwest continues to lose its identity and continues its no growth policy
– Frontier and Spirit continue to refine/fine-tune the “ultra low cost” model in their markets and may bump into each other
– Virgin America shows better results due to improved economy and goes public
i’m probably wrong on all but hey what do I know
Industry Outsider – Sounds like a good plan to me. I may rely on you to leave a comment here at the end of the year to remind me.
I too think the AA/US merger will make news in 2014. If I had to guess, I would expect we will see an orderly transition and great progress be made. There are too many examples of mergers gone bad and good for Parker to not learn from other’s mistakes.
I also think we’ll see some action on the DL/AS front. AS will pull away from DL and strike up stronger ties with AA. Although, it wouldn’t surprise me to see a similar arrangement made with UA or B6. I also wonder if there’s not an opportunity to see some link-up with HA.
F9 will be interesting to watch. I would expect them to further enhance their ULCC strategy, with DEN as it’s primary core, but also exploring other markets. Maybe some kind of focus in the Midwest or West?? I think Spirit continues their growth, but FLL will see reductions as competition there intensifies (especially with B6 and WN…future international hub). Much of NK’s capacity in Latin America will be pulled to support growth in North America.
Other than a merger, I don’t see a relationship between HA and AS likely. They used to have one, but it dissolved after AS started their own flights to Hawaii. I’m also not bullish on a merger between the two since they seem to have rather different growth strategies: Hawaiian is razor focused on being a destination carrier to Hawaii, while Alaska has been more opportunistic with growth outside their traditional Alaska/Pacific Northwest core (SAN, for example).
It’s a given that the AA/US merger will make news. I suppose the question is how much will be good and how much will be bad. Fortunately, the US guys at the top have their own experience with the HP/US merger to learn from, along with observing the others.
I think we will see some developments from Virgin America as they regroup; in the UK this year will be make or break for FlyBE, bmi regional and Eastern.
Ryanair will struggle with their recent conversion to customer service while easyJet will continue to win passengers over.
I too see US & AA making news this year, but how will the route & hub structure play out. Will the new AA utilize LAX & JFK more – or will there be agreater focus on PHX & PHL.
On the DL front, SEA will continue growing despite the As partnership while they shrink CVG, NRT & MEM.
Also 50-seat jets wil continue to fall out of favor with most airlines as feul prices keep rising in 2014. http://www.theoildrum.com for further reading on that topic.
I think CVG remains status quo. We may see some minor changes for the positive or negative, but it has been right-sized and is now profitable.
As CRJ’s continue to be phased out, I see that as a difficult proposition. One airport alone will not justify continued maintenance costs for a fleet of CRJ’s, plus the contract with ALPA stipulates that more and more flights go to mainline. That will require a significant phase out of the CRJ’s making CVG once again potentially in the cross-hairs.
Alaska gets bought.
The demise of the RJ continues.
Talk of pilot shortages heats up.
Very slow capacity growth, but a younger fleet.
Boeing sells more than Airbus (# of planes)
FAA modernization plan begins to show results in more direct routings and potential capacity increases at busy airports.
Agree about the merger talk, especially Alaska. It has lots of cash, fairly new fleet and some good routes. Seems to own Alaska and West Coast north-south. Who gets Alaska Air will be the big story. Second, 777X goes to Everett or Long Beach. No other logical choice.
Alaska may be the one doing the buying, making them too large to be acquired themselves (DL). I think a move towards oneworld may be more likely than AS buying someone, but both scenarios are possible.
On an international level, I’m interested in seeing what happens with the ever expanding long-haul Gulf carriers. Personally I think the increase in capacity and the equipment orders will lead to some level of consolidation, as capacity increasingly becomes an issue pushing down prices to unsustainable levels. Even if legacy carriers in Europe continue to get savaged by the Gulf carriers, and despite their attempts to increase penetration in America, I don’t see where the numbers will add up over the next couple years.
the current administration will continue to give away the U.S. airline industry and head for the same result as the shipping industry..today KOREAN has traffic rights from LAX to SAo paulo, emirates flies JFK to Milan, thank god air lingus gave up on IAD-madrid. most asian cargo airlines fly cargo from anchorage to anytown USA. but if things continue in 10 years we will see DL, AA UA flying only domestically
We can only hope you’re correct on that one and we finally have a fully open market. I would love to be able to fly the gulf carriers on more flights between the US and Europe and Asia.
you must be rich and a foreigner…why should the USA (which has the biggest airline structure in the world-who invented the airplane) give up over 400,000 jobs that are rightfully ours?…imagine what the un-employement rate would be today if we had not given away the cruise-cargo-passenger shipping industry…maybe 4% ? instead of 8%
So you are assuming that A) all 400,000 airline workers are primarily working on international routes (reality is close to 90% are employed on domestic operations) and B) all the foreign carriers would dominate the US market and staff domestic flights with employees based outside the US.
BTW I’m not rich, but I am American and fly economy on international routes for work.
A) The reality is that domestic operations are in many cases heavily subsidized by international routes, as they tend to have the highest premium and the least competition. This results in alot of domestic hub operations that in and of themselves may no be profitable, but are when used as feed for international flights. If international routes are pushed down price-wise, it will likely result in significant contraction of domestic operations.
B) Of course they would staff them with foreign workers. After all, that is a large reason why many of the Gulf carriers (and the larger Gulf economies) can run, because they pay significantly less than most of their legacy competition in Europe/Australia and have few, if any, worker protections.
I can see it now, all flights to Europe converting to gulf styles seating: 777’s with 3-4-3, 757’s with 3-4, whatever can be squeezed in. They have have superior premium products, but their coach seatin mirrors their governmental attitudes towards workers/ labor.
Hmm interesting remark considering Qatar has the top ranked coach seats and two of the top ten are Gulf carriers. Not a single American or European airline made this list.
http://www.airlinequality.com/Experience/bestYclass_seats.htm
Or this ranking that has three Gulf carriers on the top 10 and Hawaiian, no surprise the Three big US carriers didn’t make the list.
http://www.theaviationwriter.com/2013/06/top-10-airline-economy-class-2013.html
Are you serious? That would be disastrous for people living in small to mid-sized cities. Does anyone seriously expect long-haul carriers to care about domestic feed or network once they poach the lucrative 5th/7th Freedom flights? Of course not. What you’ll see is many airports simply stop having flights at all if hubs cannot be used to file traffic into lucrative intercontinental flying.
What does that have to do with the current administration? Isn’t the current administration the one that supposedly is in bed with organized labor?
Have you looked at 5th freedom rights for US carriers?
The IAD-MAD Aer Lingus flight was chartered by United. And it was United that pulled the plug on it. That being said United will fly IAD-MAD seasonally Summer 2014.
And it was launched not during the current administration.
I expect AA to lay the groundwork to a very successful competitor to DL, and to start to take a bit out of DL’s 800 pound gorilla.
I also expect to fly more by taking advantage of DL/AS’s fight in my hometown.. Oh and a new job won’t hurt..
DL will get a surprise when they don’t get the AA gates at Dallas Love. Will the gates be awarded to a carrier already at DFW (like DL), a new carrier not in the Dallas market (is there one) , or perhaps a carrier with a small footprint at DFW will move operations to fly exclusively from Love.
DL will get another surprise in Seattle – people are brand loyal to AS.
AS will successfully fight a take over.
The US/AA honeymoon with labor will end; the pilot groups will not be happy (are they ever?)
Mexican carriers gain strength with an uptick in the Mexican economy. Jet Blue gets merged, with ??? Spirit and Allegiant get squeezed. Frontier gets smaller. Alitalia lingers because someone in Italian government has $$. The TWA legacy plane at the new AA will be…..resplendent…. The new American will be a money machine, USAirways East pilots lose, big time (binding arbitration means…binding….)
California Pacific Airlines…oy vey. They start operations, but quickly become Primaris part 2.0.
Southwest Airlines has a bad year, too many planes, not enough destinations, too much employee rancor, and bad performance. But, if they start to charge for bags, it will be Q3 or Q4, depends on economy (I expect it to be quite robust).
Family Airlines will finally get a good rate on a 747-200 from One Two Go airlines and they will announce coast to coast service, replete with mimes and pedicurists on every flight, when “Soon!!!!”
2014 will produce a sea change in frequent flyer plans as UA and DL see Parker getting his teeth into AAdvantage and know that the new AA will not stand alone resisting the trend as they move to gut their plans.
He will follow right along and throw in some wrinkles of his own as the plans move further and further toward basing everything on revenue. Do not be surprised to see DL try to implement its notorious “Pay With Miles” as the sole method of getting an award. Whether they get away with something that radical depends on what the others will do.
Here go the darts at the dart board:
– DL announces a hostile takeover bid of AS. AS fights back vigorously, the takeover bid fails, DL abandons between a third and a half of the build-up at SEA, and AS joins oneworld.
– Southwest institutes a change fee, a system-wide bag fee (i.e. not just on the few routes still operated by AirTran), or possibly both.
– DL ends up getting the two gates at DAL. Early results for DL are dismal, as WN launches nonstops on the same routes, siphoning away most of the traffic as it plays up its all-737 service vs. mostly RJ on DL.
– As an end-of-year surprise, after making it through the systems integration process without much trouble, AA announces that it is moving to an entirely revenue-based FF program in phases, starting in 2015. DL and UA quickly follow suit.
– At least one major network carrier attempts to make certain Y-class fares entirely nonchangeable, not just nonrefundable. The effort fails, but change fees increase to $250.
I agree with most of your comment, It is true that Delta would love to take over AS, but it won’t and can’t happen. First, the Govt. wouldn’t approve a merger between AS and DL. Too many overlapping routes which would be viewed negatively and virtually create a monopoly in some given markets. Second, Seattle and the Northwest love Alaska. It is an ‘icon’ company and holds ‘cult like’ status with it’s frequent fliers. It is part of Northwest culture like Starbucks, Microsoft, Boeing etc. Delta’s culture is like comparing ISIS and Israel as being compatible. AS employees despise DL. Alaska has grown significantly this past year at ‘Delta’s expense’ due to many Delta frequent fliers abandoning Delta after Delta ‘screwed them’ on their revamped frequent flier program and switched to AS.
Yes, I think Delta will back down in time on Alaska routes and also due to ‘resistance’ from many Northwest fliers and some loss of their customer base that switched allegiance to AS.
In the year 3000, Southwest will start code-sharing with a European Low Cost Carrier that flies only 737s and 787s…
In the year 3000, Virgin America actually makes a yearly profit
In the year 3000, Southwest will get almost all the DCA slots, will stop service to/from around 5-10 cities and people will moan about CAK or CMH getting southwest flights to DCA
In the year 3000, PEOPLExpress paints a plane in it’s livery
Globally the economy will have a hiccup and result in lower or negative profits for airlines. I don’t buy the hype that things are good and getting better. Additionally my clients have been implementing lots of technology to cut travel and it keeps accelerating. Pre-2008 we always had meetings in person. Not so much anymore.
I think we’ll see an attempt at a 100% revenue based FF program, urged in part due to lower profits, but it will fail as other airlines don’t follow suit. Still think this model is several years out as it moves in baby steps.
There will be a incident that will be due to design/engineering errors and not pilot error. The cracking on the 380’s and the burning batteries on the 787’s were warning bells and the doomer in me thinks that we’re due for an incident (does not mean lives lost, think BA 777 at LHR).
I think we’ll see the failure of a national carrier, at least on the secondary level like Virgin, Frontier, etc. In Chap. 11 they will be gobbled up by DL as UA and AA are still working through their mega mergers.
AS will not merge or acquire anyone but will hold their own against DL in the SEA home.
My only prediction is that the U.S. airline industry will be more consistently profitable in the future. Now that consolidation has rationalized the industry and most airline managements are more concerned with profitability than market share, the real possibility exists that airlines can improve their credit ratings to investment grade and the industry will be a place to invest, not merely to speculate.
Here is what I think might happen….
*Delta & Alaska will battle it out in Seattle.
*Frontier will continue to grow it’s Denver & Trenton Hubs, I think it will slow down on its Wilmington hub & I think it might try to compete more with Spirit on the east coast.
*I Think Southwest will have a major computer system shutdown that will drive away customers, I also see them having more delays because of the computer issues.
*I think 2014 is the year California Pacific Airlines gets going, i think we will also see People Express shutdown Xtra airways and slowly fade into the sunset.
*As for Jet Blue & Virgin America i don’t see much happening they will just continue to muck around in there respective markets.
*I also believe we will see a United computer issue that will cause major delays in Denver & Chicago.
Interesting predictions,some I agree and some I dont
DL will go all out for ALASKA-a nasty hostile takeover–DL WANTS THE WEST COAST AND Alaska IS THE ONLY WAY to grow there–DL may dump PDX for a second time to cut cost and UA could try and get before AA// AS WILL PUT UP A GOOD FIGHT,BUT DL HAS MONEY ALSO,AND WILL FINISH OF MY HOMETOWN OF CVG
JetBlue and Frontier should merge as should Allegiant and Spirit
hopefuly the big 3 will order more 70-90 RJ s and maybe more B737 next-gens and MAXe- ,the B737-600 and the B737-700,and the B737-800
Alaska may go ONEWORLD and eventualy taken over by the new AA/ it would be the only way AA could grow on the west coast
wonder why AA chose US ,instead of AS / Frontier could have been a good buy for US ,as they have the same fleet
Alaska ,Frontier,and JetBlue are the top choices to get now
THANKYOU AND SAFE TRAVELS TO ALL