Reviewing Your 2015 Predictions

It’s a relatively new tradition here on the blog, but I like it. At the end of each year, I ask for your thoughts on the year ahead. Now, it’s time to review how you said for your 2015 predictions to see how they panned out. Let me first say that you have a LOT of predictions. For 2016, I’m going to limit each person to no more than 3 predictions to help make my life easier when sifting through them all.

There were so many last year that I had to cut several out. Here are the ones that made the cut, in no particular order.

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IAG Buying Aer Lingus and More

Billy – British Airways will succeed in buying a European flag carrier: they have been rebuffed by Aer Lingus, they will try again and also go for TAP (facing regulators)

Rzn – Aer Lingus is Bought By IAG after a second takeover bid between 2.40£ and 2.50£ a share, which in turn The Irish Government, Ryanair, and other investors quickly jump at. Still don’t know how Etihad will take part.

Lauri – IAG will buy Finnair

Good work, Billy (and Rzn), at least on the first part. You hit that one on the nose. BA did indeed take another swing at Aer Lingus (well, technically, its parent IAG did). And Aer Lingus is now a member of the IAG family. TAP? That didn’t happen. instead TAP went to JetBlue and Azul founder David Neeleman’s team of investors.

As for Finnair… well that hasn’t happened yet, Lauri. But it could still be on the table.

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American’s Merger Progresses

Len – The new American will complete the transition to a single operating certificate with little fanfare or hassle. Post-merger life will be better for the masses compared to the glitchy United.

Carl – The newly merged AA will find labor peace elusive, as pilot groups and FA groups continue to bicker while at the same time lusting after a greater share of the profits. The systems integration will be delayed beyond May 2015. Management will continue to roll out moves that irritate AA elites, and back down on some of them.

Yo – American Airlines makes outrageous amounts of dough, again. Pilot seniority: the US East guys lose big (I said it last year, but this stuff takes time). AA increases Asia services by the end of the year, going after United, Charlotte hub gets smaller, PHX remains the same. Doug might start looking to buy off a competitor.

IO – > aa – wraps-up remaining labor contracts and begins to bring together tasks/systems together

Len and IO were spot on. The transition has been incredibly smooth for American. Carl wasn’t as accurate with labor peace being somewhat achieved. (Though true peace is never going to happen.) Yo? Well, Charlotte didn’t get smaller and Doug doesn’t seem to be interested in buying anyone right now. There’s still too much work to be done.

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Revenue-Based Frequent Flier Programs

MeanMeosh – After being totally wrong on this last year, AA will buck the trend and announce that they will maintain the existing mileage-based structure of the AAdvantage program for 2016 and beyond, deciding that it provides a significant competitive advantage over DL and UA.

IO – > aa – It announces mostly tactical changes in frequent flyer and pricing areas with strategic changes being a minor component. meaning that changes can be done/undone easily.

Tara – AA does not adopt a revenue based mileage program but in the 4th quarter they release the new award charts with substantial devaluations.

Carl – UA and DL get more of a negative hit from the lowered dollar-based mileage earning than they expected as formerly loyal lower level elites favor AA, AS and even WN.

The conventional wisdom agreed with all of you, that American wouldn’t go revenue-based in 2015 for the 2016 program. Apparently American doesn’t like conventional wisdom, because it has done just that, proving all predictions wrong.

Meanwhile, United and Delta do not seem to have taken any kind of hit from their move.

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American’s Hub Rebanking

MeanMeosh – Speaking of AA, the hub rebanking strategy is left in tatters after a day of training summer thunderstorms at DFW leads to days-long delays for some fliers, many stranded after being diverted to alternate airports due to lack of gate space, and the resulting bad press.

TC99 – American will discontinue the hard banks after losing a lot of money in missed connections at MIA. (Hotel rooms, Transportation to/from, meals) They will try to blame Immigration and Customs for being too slow, but the problem is they schedule these connections.

American rebanked its hubs last year, allowing for more flights operating at peak times. Connections became shorter, but some of you thought the risk of things going wrong would be too much. It wasn’t. The rebanking seems to have been successful and though American isn’t running at the top in terms of operational performance, it is doing very well for an airline that is trying to integrate two different airlines into one.

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Cheap Oil and Fare Wars

Len – Lower (for now) fuel prices will reduce pressure on bottom lines, but will not do much for fares. No more new fees for now, but the biz traveller won’t be seeing any $99 trips anytime soon.

Jim M – With oil cheap, fares relatively high, consumer and business spending robust, and planes full there will be some fairly healthy profits. Which will lead someone, somewhere to dream up an airline start-up. And it might actually work.

Peter V – One of the big five will start a fare war in a tightly contested market. Fare wars are like crack to airline executives and will spread industry wide. Ticket prices will come down on the eastern seaboard and some transcontinental flights.

Mitch – Low oil prices will lead to debilitating fare wars in 2015. 2014 brought profits due to high load factors and stable fares. At least one major carrier will lose this restraint and try to dominate a market through crazy fares and high frequency. It is rare for the airline industry to show year-after-year of high profits. 2015 will see at least one major go back to the same old formula.

A – Oil prices will be lower than 2014 but highly volatile thus price wars will not happen and ticket prices remain unchanged or higher equalling solid profits across the board.

Guido – Oil prices will continue to drop in 2014, up until the point the domestic shale drillers throttle back production due to lack of profit, at which point oil shoots back up to over $90 a barrel.

Some conflicting opinions on oil here. Oil prices did indeed continue to drop and they have stayed very low with no rise in sight. Peter V was probably the closest to describing the state of the industry. Fares have come down and there have been some fare wars. But in general, airlines are still making a ton of money.

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Alaska and Seattle

Len – I still think something will happen out west. Alaska has got to be feeling pretty good and make a disruptive move. I was wrong in 2014, but hey, maybe I was just a year early!

Carl – Surprisingly, both AS and DL both continue to prosper in SEA.

Jeremy McMillen – Alaska starts code sharing with UA and uses the big three to just feed its large west cost network.

PF – Delta downsizes domestic in Seattle.

Nick Barnard – Alaska and Delta end their codeshare and frequent flier partnership. Its not a huge deal as many would expect, but is announced with a joint press release.

Nick Barnard – Also shortly after ending the Alaska-Delta partnership Alaska and American announce a closer relationship. American also makes a token investment in Alaska.

CraigTPA – ALASKA – Ends partnership with Delta, suddenly and with much drama on Delta’s part. Alaska looks for opportunities to expand relationship with American. By year’s end AS and AA begin preliminary merger discussions (UA may kick the tires as well) – these are mainly window dressing to satisfy dissident shareholders and don’t go very far.

IO – > AS – wonders why DL has not gone away and begins to explore alliance/merger partners versus expanding nationwide on their own.

You guys love speculating about Alaska and Seattle, and what happened? Nothing. Oh sure, the Delta partnership frayed further, but it’s not completely gone yet. Alaska and American do seem to be getting cozier, but there was really little movement. Alaska just continues to kick ass.

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Flying Down Under

Tara – AA also announces at least one route to an Australian city, probably SYD (though I would prefer BNE).

chris r – AA or UA will take a look at the NZ monopoly on the US-NZ route and start services DFW(AA)AKL or HOU(UA)AKL with a view to starting West Coast services later.

Adrian in NZ – 4. A One World or Sky Team carrier will challenge NZ’s monopoly on NZ-US flights by flying direct to DFW or SEA. (Maybe a bit of wishful thinking as AA, CO, QF & UA have all flown AKL to USA in the past but no longer do.)

Right on, Tara, as American announced and started Sydney. Adrian and chris, you were right about Auckland but wrong on the US destinations. As we know now, United is doing San Francisco and American is doing LA.

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The Fate of Malaysia 370

Jeremy – They will find MH-370.

Rzn – MH370 is found I predict some wreakage on the Australian coast, but mostly either in Indonesia coast or near antarctica.

A – MH 370 will not be found and conspiracy theories will continue.

So who’s right? I have no idea. Maybe part of it has been found? Maybe not. I’m still confused.

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The Rise of United

Carl – UA will improve its operational reliability. But it will continue to lag behind DL in most polls.

PF – United continues to improve service & perception, gaining back with CO had.

I’d say you summed it up well Carl. United has most certainly improved, but it has a ways to go before it reaches Delta level. At least it looks like it’s finally trying after many years of sucking.

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Basic Economy

MeanMeosh – DL’s rollout of Basic Economy is a failure, primarily due to problems with disclosure on OTAs. After tens of thousands of DOT complaints, Delta initially shelves the idea, but brings it back by the end of the year at a substantially lower price point that the current $10 each way discount. I’m guessing $50.

I’d say the opposite is true here. Basic Economy has only grown and now we hear both American and United making rumblings about doing something similar.

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The Middle East 3

MeanMeosh – Sustained low oil prices roil the Middle Eastern carriers. At least one, my guess being Etihad, begins to substantially cut back service, and jettisons its interests in a handful of the money-losing carriers it has picked up over the past few years.

PF – The middle east big 3 (QR, EY, EK) slow down their aggressive growth and rightsize.

There’s no question that growth has become more challenging this year compared to previous ones, and the results have shown that. But that doesn’t mean they’ve slowed down. Regulatory pressure appears to be rising, with Europe showing interest in taking a more active stand against the Middle East carriers. But those orders keep coming in and those airplanes have to go somewhere.

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Pilot Crunch

Eric C – The US majors, American in particular but also United, will discover that transferring regional aircraft from large operators to smaller cheaper ones doesn’t mean the pilots will go with. Envoy and ExpressJet will see a pilot exodus greater than their shrinkage accounts for, while carriers like Trans States and PSA will find it exceedingly difficult to recruit them.

It’s actually the bigger operators (*cough* Republic *cough) that have been having the hardest times maintaining their schedules. But clearly the pilot shortage is really hitting home this year, and there’s no easy solution on the horizon in the short term.

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JetBlue

CraigTPA – By year end, has a timetable to add Mint to all service between their major West Coast business-customer airports (SFO, LAX, LGB) and their Northeastern counterparts (JFK, BOS, EWR, with EWR last.) This is directly aimed at Virgin America. The Mint introduction won’t be complete until enough A321s are on hand with a Mint cabin, but the process will be started.

IO – > B6 – begins to implement shareholder happy changes and stock makes big gains; however, b6 determines that aa is in the way of its successful implementation and asks to expand ff alliance. if aa agrees then stock continues to rise but if aa says no then b6 aggresively looks to merge with as to gain scale and press aa.

The JetBlue/American partnership is now a distant memory, and there aren’t any credible rumors of a merger. But, IO, you’re right that the “shareholder happy” changes have been implemented. The thing is, they’re “customer happy” too. CraigTPA, you were right about Mint expanding, but so far it’s only to Boston and on limited Caribbean routes during off-peak transcon days. I’m guessing there’s more to come.

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Southwest Bag Fees

Yo – Southwest labor issues continue, if oil goes back up to where it was, they will…finally start charging a nominal fee for bags.

No luck on this one, Yo. And honestly, it couldn’t have happened anyway since Southwest’s existing reservation system can’t support bag fees anyway. But instead of just trying to wait it out, Southwest is doubling down on the no bag fee thing with its Transfarency campaign.

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Frontier’s Future

Daniel – Frontier leads U.S. airlines in DOT complaints.

PF – Frontier’s Investors buy or sell to merge, and/or IPO.

Guido – Frontier will have difficulty getting a foothold as a low cost carrier, in light of the other horses in that race having such a head start. They will soldier on through 2014 on the backs of the economic recovery but they won’t see the ridiculous profits that Southwest and Spirit will see next year.

Frontier has certainly had a lot of complaints, Daniel, and we won’t have full year stats for a couple more months, but thanks to Spirit, I’m thinking Frontier may escape the title.

Beyond that, Frontier has actually done well with its ultra low cost model and continues to push on, Guido. But, PF, you’re a little premature. This might be better on the 2016 list.

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Jetstar Hong Kong

Adrian in NZ – 1. Jetstar Hong Kong will never get off the ground.

Good call, Adrian. Hong Kong shot this one down and it never did go anywhere.

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Spirit and Miami

TC99 – Spirit will expand into MIA after seeing the success that Frontier has with domestic flights. They will eventually add International flights to most of the cities they serve out of FLL because of the demand.

There has been a lot of speculation about this over the last couple years, but still nothing. From what I hear, Miami is just too expensive and too difficult for any low cost carrier to take a serious shot at service. Frontier’s operation is still pretty tiny.

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Another International Incident

TC99 – Finally, we will have another tragic International Incident involving the shooting down of a passenger plane. This will lead to a major military action to take out the people behind it.

I’m sad to say that I think the bombing of the Metrojet aircraft in Egypt fulfills the first part of this prophecy. As for a major military action, well, it depends on what you consider major. Russia has certainly stepped up its attacks on Daesh, but there’s probably a lot more to come.

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C-Series Delays

R – Bombardier CSeries encounters additional delays and will not be introduced in 2015.

Yes, indeed. That was the case, but delivery isn’t far away now… we hope.

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CEO Trouble

Daniel – One of the 4 major U.S. carriers’ CEO resigns.

So define “resign”…. It’s hard to say that Smisek’s disappearance at United was in any way a resignation since it clearly wasn’t his choice. But I’ll give half credit on this one.

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Alitalia’s Rise or Fall

Adrian in NZ – 7. Alitalia will morph into an LCC.

My favorite topic. Alitalia actually went in the opposite direction, trying to follow in Etihad’s footsteps and go upscale. There is no indication that this is in any way working so far. Viva Alitalia!

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Baltia

Daniel – Baltia Air Lines sells it’s first ticket but will give the passenger a refund

HAHAHAHAHAHA. No. (But I admire your optimism, sir.)

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If you’d like to discuss other predictions from last year that I didn’t cover, go for it in the comments. We’ll open a new post on Friday to discuss your predictions for 2016.