Reviewing Your 2014 Predictions

At the end of last year, I put a topic up for you all to make your predictions for the airline industry in 2014. Let’s take a look and see how many of them panned out.

The Battle for Seattle and Alaska’s Future

• Elliott Smith – 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.
• Industry Outsider – Alaska draws into a closer alliance in possible preparation for a merger, DL loses out on AS but draws ever closer to a solid Asian US hub foothold against United and American
• DL – 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.
• Sean – On the DL front, SEA will continue growing despite the As partnership while they shrink CVG, NRT & MEM.
• Len – Alaska gets bought.
• Jon M – Who gets Alaska Air will be the big story.
• PF – DL will get another surprise in Seattle – people are brand loyal to AS. AS will successfully fight a take over.
• MeanMeosh – 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.
• A – AS will not merge or acquire anyone but will hold their own against DL in the SEA home.
• Robert – DL will go all out for ALASKA-a nasty hostile takeover
• Robert – 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

There were more comments on this topic than any other, and most of you were wrong. Alaska did not get bought. It also did not enter an alliance. And while Alaska and Delta have seen relations become frostier, they are still partners.

A and PF were right. Alaska has remained strong and held its own in Seattle. Elliott Smith was also right. It’s good to be a traveler in Seattle with low fares and a lot of options. Sean was right too. Seattle has kept growing for Delta and Cincinnati, Memphis, and Narita have shrunk to fund that expansion.

The American/US Airways Merger

• James Burke – 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??
• Industry Outsider – AA works on improving labor relations in preparation for 2015 and beyond.
• DL – 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.
• Nick B – 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.
• PF – The US/AA honeymoon with labor will end; the pilot groups will not be happy (are they ever?)
• yo – The new American will be a money machine, USAirways East pilots lose, big time (binding arbitration means…binding….)

Of course the American/US Airways merger was going to be a hot topic. Most of you were right on this one. The merger has progressed smoothly, American has become a money machine, and it is challenging Delta already. And yes, the pilot groups aren’t happy. (And no, they are not ever happy.) As for the systems integration, well that hasn’t happened yet. We’ll have to revisit that in 2015.

Southwest’s Changes

• Industry Outsider – Southwest continues to lose its identity and continues its no growth policy
• yo – 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).
• MeanMeosh – 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.
• CS – In the year 3000, Southwest will start code-sharing with a European Low Cost Carrier that flies only 737s and 787s…
• CS – 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
• Paul – 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.

It was a mixed bag with your Southwest predictions. There were no bag fees or change fees implemented, there was no major computer issue, and Southwest hasn’t announced codesharing with anyone. But you were right that there were a whole lot of delays as the operation suffered badly. It did get a lion’s share of the slots at National as well. As for losing its identity, well, I’ll let you be the judge.

Frontier, Spirit, and the Rise of the Ultra Low Cost Carrier

• Industry Outsider – Frontier and Spirit continue to refine/fine-tune the “ultra low cost” model in their markets and may bump into each other
• DL – 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??
• DL – 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.
• yo – Spirit and Allegiant get squeezed. Frontier gets smaller.
• Paul – 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.
• Robert – JetBlue and Frontier should merge as should Allegiant and Spirit

Industry Outsider was certainly right that Frontier and Spirit have been bumping into each other. That’s only going to get worse. Frontier didn’t get much smaller, but has turned more toward growth mode. The ultra low cost carrier model has been gaining traction there, but the work isn’t done. Allegiant hasn’t been squeeze though, as it reports solid results. And as for Spirit, well it hasn’t really pulled back in Latin America. In fact, we’ve seen a push there from Houston this year. And sorry, Robert, but the merger frenzy you wanted did not happen.

Upstarts Get Moving

• yo – California Pacific Airlines…oy vey. They start operations, but quickly become Primaris part 2.0.
• yo – 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!!!!”
• CS – In the year 3000, PEOPLExpress paints a plane in it’s livery
• Paul – 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.

PEOPLExpress did come through here. CS was right, a plane did get painted and it even flew. But Paul was right-ish. It never ended up buying Xtra Airways but it certainly has faded into the sunset. I don’t think we’ll see that flying again. As for California Pacific and Family Airlines… nothing. Don’t expect to ever see either of those take flight.

United’s Failings

• Industry Outsider – United limps along in spite of what PR/SEC/DOT releases say (rate of decline slowed only by improving economy)
• Paul – I also believe we will see a United computer issue that will cause major delays in Denver & Chicago.

How liberal do we want to be on this one? Paul, there was most definitely a major computer issue that caused delays in Chicago, but I think this is a stretch. That issue was the fire in the air traffic control facility and had nothing to do with United itself.

As for the airline, there’s a lot of talk about how United has turned the corner. It doesn’t really seem to be presenting itself that way for the customers yet, but financial performance has improved. Maybe we’ll have to defer this until 2015.

Virgin America’s Sustainability

• Industry Outsider – Virgin America shows better results due to improved economy and goes public
• CS – In the year 3000, Virgin America actually makes a yearly profit

Both of these are right, but you get the gold star, Industry Outsider. Thanks to the economy (and capacity constraint), Virgin America is making money and went public.

The Love Field Gate Fight

• PF – DL will get a surprise when they don’t get the AA gates at Dallas Love.
• MeanMeosh – 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.

PF was absolutely right on this one, though the airline still hasn’t given up on serving Love. We’ll see what transpires in the new year when it runs out of space to operate. MeanMeosh, if you replaced DL with VX, you’d have been totally right about early results being dismal. I haven’t seen the numbers but the early load factors are low. It’s going to take time for this to ramp up.

Frequent Flier Changes

• Bob E – 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.
• MeanMeosh – 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.

Neither of you were right on this one. While United and Delta have gone to revenue-based plans, American has remained where it is for 2015. And it hasn’t gutted its program either.

Delta Basic Economy

• MeanMeosh – 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 had to point this one out because of all the recent news about Basic Economy. You got the first half right on this one MeanMeosh. But it hasn’t failed yet. And change fess haven’t gone up either.

Ryanair’s Customer Strategy

• Billy – Ryanair will struggle with their recent conversion to customer service while easyJet will continue to win passengers over.

From what I hear, Ryanair’s transition to a kinder, gentler airline seems to be going pretty well. Both airlines appear to be really killing it right now.

And lastly, let’s take a look at your general industry trend thoughts.

Industry Trends

• Sean – 50-seat jets wil continue to fall out of favor with most airlines as feul prices keep rising in 2014.
• Len – The demise of the RJ continues.
• Len – Talk of pilot shortages heats up.
• Len – Very slow capacity growth, but a younger fleet.
• A – Globally the economy will have a hiccup and result in lower or negative profits for airlines.
• A – 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.

Lots of good calls here. The 50 seaters have continued to fall out of favor, Sean, but what will happen in 2015 if oil prices stay low? That could change the equation on those airplanes. Talk of pilot shortages certainly did heat up dramatically as predicted by Len, but we’ve seen that talk fall off once again. It looks like your picks didn’t pan out so well, A.

That’s it for the 2014 review. I’m not posting on Thursday but Friday we’ll have another topic of the week to get your predictions for next year.