This week’s featured link:
American’s SEC Filing About Qatar’s Investment Interest – EDGAR
American has received word that Qatar is interested in investing in the airline. There’s a lot of speculation out there about this one, so let’s stick with the facts. The link above is to the SEC filing that American was
required decided to file.
Qatar isn’t looking to take over or merge with American, mostly because it can’t. This is probably similar to the investment Qatar has made in IAG over in Europe. There are a lot of reasons for Qatar to do this, and undoubtedly one of them is to try to soften the anti-Middle East carrier stance in the US. That’s not going to work. American CEO Doug Parker put out a letter almost immediately after this was announced and it was as blunt as can be, as you would entirely expect. Here’s the gist of it.
While anyone can purchase our shares in the open market, we aren’t particularly excited about Qatar’s outreach, and we find it puzzling given our extremely public stance on the illegal subsidies that Qatar, Emirates and Etihad have all received over the years from their governments. We remain committed to that effort, and we will remain so even with this potential investment.
While today’s news for some of our team may be puzzling, at best, and concerning, at worst, here’s what we know for sure: We will not be discouraged or dissuaded from our full court press in Washington, D.C., to stand up to companies that are illegally subsidized by their governments. We stand for American Airlines, and we stand for all of you and the amazing work you do every day, around the globe, to take care of our customers.
If anything, this development strengthens our resolve to ensure the U.S. government enforces its trade agreements regarding fair competition with Gulf carriers, because we must make it crystal clear that no minority investment in American will ever dissuade us from doing what is right for our team members, our customers and all of our shareholders. And do not worry, per U.S. law, no foreign entity can own more than 25% of a U.S. airline, so there is no possibility that Qatar will be able to purchase enough of American to control or influence our Board, management or our strategy.
American can’t stop Qatar from becoming an investor, at least not up to 4.75 percent of the company.
Two for the road:
AirAsia X CEO Takes to Twitter to Call Off Plans to Fly to Europe and California – Skift
Two years ago, I spoke with AirAsia’s founder Tony Fernandes and he told me they had their eyes on the west coast of the US and Europe. AirAsia X, the longer-haul division of the company, had flown to Europe previously but pulled out when it proved unprofitable. But with newer aircraft on the market, AirAsia was bullish and made it clear in repeated comments that long haul was coming. And now… scratch that. Tony took to Twitter to say they’ve had a change of heart. New flights will be under 9 hours so they’ll focus on that middle-haul market primarily within Asia that seems to have worked much better. This one looks like yet another proof point that long haul doesn’t work too well for a low cost carrier.
Frontier Airlines Tells Customers To Just Fucking Deal With It – The Onion
Yes, it’s The Onion. Yes, it’s suppose to be satire. But damn if this doesn’t ring true. I honestly kept reading this thinking that the ULCCs would be much better off if they actually said it like this. “You’re the ones who wanted to save $150, so you’re welcome, assholes.” TRUTH.
The Onion speaks truth for sure.
Love the Onion piece. “You’re Uncomfortable For A Few Hours And Then You Get To Be Somewhere Else” – so true. Reminds me of Louis C.K.’s “Everything’s amazing and nobody’s happy” bit.
As far as AirAsia X goes, I think Seth Kaplan from Airline Weekly put it very well a few weeks ago: Low-cost shorthaul succeeds because it sacrifices a small amount of revenue for a large amount of cost savings. Low-cost longhaul struggles because it sacrifices a significant amount of revenue for relatively modest cost savings.
How does Norwegian fit into this model? Is their premium cabin as currently configured able to earn enough revenue to offset relatively modest cost savings, or are they eventually going to have to install a real business class that commands thousands of dollars per ticket?
This looks at it the wrong way. Low cost models succeed in part because there are enough price sensitive consumers who are willing to trade off some discomfort for significantly lower fares. The fact that the flights are short haul is important for two reasons: (1) absolute fares are low (which matters for price constrained individuals) and (2) discomfort is of limited duration.
For long haul flights, fare is higher in absolute dollars (lower in relative terms) and that matters to price sensitive consumers. If I don’t have $300 to fly to Florida on a full-service carrier, I don’t have $300 to fly to Europe on a low cost carrier. There may be people who are willing to pay $300 to go to Europe in preference to paying $600, but they’re still well-off relative to many who fly on a ULCC to Florida for $90.
Further, discomfort is now of lengthy duration and so a much bigger deal.
Good satire, and good humor in general, are good because they ring true.
Isn’t the Onion article basically what Spirit actually does say to the public?
Thanks kinda what I was thinking. They’ve softened their tone a bit since he left, but it does sure sound a lot like Ben Baldanza.
I don’t know if that’s what Spirit actually said, but it’s sure what I’ve seen reporters say they said.
>This one looks like yet another proof point that long haul doesn’t work too well for a low cost carrier.
What about carriers like Scoot, with its upcoming flights to Athens, and Norwegian, with flights to places like Bangkok and Oakland?
I’ve yet to see any proof that Scoot is actually successful. Norwegian has struggled financially and while the numbers aren’t broken down by region, I’m going to bet that it isn’t doing well on long haul.
American seems to have a point about unfair competition, although it’s not quite the case they would like us to believe. In the Middle East, they’re up against privately held companies with effectively unlimited access to capital, and significantly less pressure to produce short-term returns. That’s a tough competitor for a corporation like American. It should also be noted that the Middle Eastern and many Asian carriers put a distinctly superior long-haul product in the air, well beyond the difference suggested by their competitors’ ample funding.
American (and European) carriers have long made the class distinction clear – business class and first-class passengers are desirable customers worthy of respect and attention. Economy passengers deserve the back of the bus, and should be grateful they’re permitted to fly at all. Asian and Middle Eastern carriers are far more conscious of the good will they can generate by offering better treatment to the common flyer. They staff the rear of the aircraft more generously, giving the crew greater opportunities to offer small bits of customer service and connection that mean so much on a long flight. They are more pleasant and more respectful. They have fewer cranky senior citizens patrolling the aisles of their airplanes. And it doesn’t hurt that most of their aircraft are new or at least new-ish. Some American aircraft appear to have been produced back when we were all wearing double knits, and some of them haven’t been modernized in a couple of decades. And yes, I know that financing is one of the reasons why this is so. But so is short-sighted management.
Doug Parker would do well to channel some of the energy he expends on the unfair competition he’s getting into programs and projects designed to make his airline the best experience in the sky. That would include extensive retraining of cabin crews – especially the crew leaders, and spending enough money on cabin maintenance to make sure most of the amenities work all of the time. It would probably also include raising the social position of cabin crews in the airline’s social structure, since right now they’re about a half step above the struggling immigrants the airline’s contractors bring in to clean the planes.
Or more succinctly, “Quit yer bellyachin’ and get to work.”
I think at this point the adage of them putting up a “superior” long-haul hard product is questionable. Outside of the extravagant top-end options, most of the hard product’s available with Gulf carriers in premium economy and business class are the same or worse than American airlines, especially Delta. And the economy section is effectively the same as well.
Emirates airline is gives best service than others.They give us some facilities.It’s a comfort & relax journey.There are lnflight entertainment option make journey easy & comfortable.if anyone sick he can also journey.As there is a flat belt seat.After all it’s service is amazing.
I saw that Onion article on Facebook and had the same reaction.