This week’s featured link
Best Of The Banter: Our PBB Interview With American Airlines’ Vasu Raja – PlanePerspectives
You probably heard about Holly Hegeman’s PlaneBusiness Banter interview with American’s Chief Revenue Officer Vasu Raja, because Vasu does not hold back at all. She’s decided to post it publicly for all to read. Enjoy.
Two for the road
CEO chat: Sun Country Airlines fears a ‘rough’ September as travel uptick plateaus – TPG
I still love a CEO chat. Here’s a check-in with Sun Country CEO Jude Bricker.
Breguet 941, the turboprop that could have changed commercial aviation – Airway
I had heard of the McDonnell 188 and seen a picture of that goofball, but I had never really looked into the back story. There’s a video in here that I could watch all day. That airplane looks like it’s floating when it lands.
22 comments on “3 Links I Love: American Unplugged, Sun Country CEO Talks, The Breguet 941”
Cranky,
You are doing the “slow burn” with the LGB story. I guess we could call it “Jetbridge blues.””
SEAN – Well, don’t worry. It’ll come Monday.
Just a few excerpts from the PBB interview show that what many of us said about AAL was and still is completely accurate.
Vasu: Yeah, we have to figure out New York and L.A. L.A. does becomes a whole lot easier with Alaska though.
Now, however, when you talk New York, let’s talk international.. Do you realize the first time we have ever made money on international was in 2019? The first time.
Vasu: United has a difficult road. I mean, they are literally built to be big in what is now the wrong places. I mean, they are big in San Francisco, New York, Chicago. They made their big money internationally. Zed talks to me about what their international margins were like, and holy shit, I didn’t even know you could make that much money flying international. (of course you didn’t know; American hasn’t made money flying the Atlantic and Pacific for years).
Delta was yesterday’s genius. Tomorrow is up for grabs. The most interesting thing to me though is Delta. You know, I’ve said it in the past, and I’ll say it again. I feel it already. These guys, if they don’t watch it, could be the new AMR.
And then just days after this interview aired, American announced a wholesale gutting of its international network and completely walking away from development of its LAX hub. And then the virus rapidly started growing and AA’s bookings at its hubs, esp. DFW on which it hangs its very future, are falling dramatically.
Vasu is the typical AArogant airline executive that trash talks its competitors to try to distract from the fact that his own ship is taking on water.
DAL and UAL’s future (as well as LUV’s and JBLU) couldn’t be more bright as long as Vasu is in the position he is in.
AA cutting back heavily on FA base at LAX and PHX (which was overstaffed apparently and helped staff many LAX flights) means they will much smaller at LAX. Their will lose large part of their regional operation at NYC. JetBlue made announcement yesterday they plan to expand to 70 flights in LAX and are not moving out of T5. Which points to one thing. AA is getting a whole lot smaller at LAX. If DL is smart, it’d be busy building back its LAX operation as quickly as possible. Then, it’d be the largest carrier in both NY and LA.
I don’t necessarily see AA’s strategy of growing DFW/CLT and shrinking in NY/LA as wrong. They really don’t have much choice given their weak finances. But the arrogance and need to sound like AA is smarter than DL (which it’s not) is quite nauseating.
based on current schedules, Delta is already the largest carrier at LAX as well as LGA and JFK where it has been the largest carrier for years.
As CF has noted, Delta started rebuilding its west coast network sooner and faster than its core hubs. That should tell you alot about its intentions of continuing with its strategic operations. BOS is coming back slower – but it is for B6 as well. It is precisely because of the slow return of BOS – which is heavily dependent on point to point business-related traffic for both carriers – that B6 has made the decision to expand to EWR and LAX, both smart moves. Add in that DL has committed to aggressively growing in Miami and to Latin America as part of the JV – some routes will be flown by DL and some by Latam – but the trend is clear; DL is setting up a major operation (part of which will be via the JV on Latam metal) in the single region where AA has reported its strongest international profits and specifically where AA has had a US carrier monopoly (MIA) for more than 20 years, since UA pulled down its hub acquired from Pan Am.
Growing in DFW and CLT is fine if it makes money. But you can’t be a global carrier when you serve only parts of the country from the two hubs that you say are your two most profitable esp. given that AA also cut several key CLT international routes as well.
The arrogance I referenced is about trash talking DL and UA when Vasu knew full well that AA was going to retreat dramatically in LAX – when all 3 have flown LAX to both PVG and Tokyo (HND and/or NRT) for years. AA is setting up for the same thing in LA as it did in Chicago- keeping service only to its strongest alliance carrier hubs.
The fact that Vasu said they first made money flying JFK international in 2019 and it is highly unlikely that will repeat again for years, they are simply cutting the size of the strategic losses they are willing to sustain – which gutting their international network to a fraction of its competitors in NYC, CHI and now LA. You can’t be a global carrier when you don’t or can’t compete in the same markets that your competitors can clearly serve and intend to retain.
Instead of foul-mouth trash talk, Vasu would do well to figure out how to make AA profitable as a global carrier or admit that it is in a worse position now than either AA or US was at the time of the merger.
I think you should take heed of your advise for AA and not overestimate DL’s ability to add stuff back. If DL is building back SEA/LAX first and adding to MIA, that means it would bring back NYC/BOS/focus cities slowly. The data would bear that out. DL has been very cautious in its planning, waiting for corporate demand to come back. That means it will not recover to its pre-COVID size for a few years. You should re-adjust your expectations based on that.
We will probably get the final August cuts from DL and other carrier this weekend. And then, DL is unlikely to make any addition from that until next year, so probably March. And then, let’s see what they bring back. At this point, JFK is a lot smaller, LGA is a lot smaller, BOS is basically hubs + Florida, RDU/CVG are hubs + Florida. DL will have to figure out which ones to bring back sooner. I’m willing to put a wager down that SEA/LAX/LGA will get bought back sooner than these other coastal hubs/focus cities.
You wonder why B6 is picking fights everywhere? They feel no pressure in BOS/JFK and all their leisure stuff at JFK is returning a lot faster than DL’s NYC stuff.
They are already back to 3/4 of pre-COVID # of flights in NY/NJ area for August. BOS is an afterthought at this point.
nowhere did I say that I expect Delta to be anywhere near its pre-covid size across its network or in any of the cities you cited. Nowhere.
Delta and United both recognize that the recovery will be slow so there is no reason to flood the market with a bunch of capacity.
The difference between the big 4 is that DAL and LUV have very high market shares in their strongest markets; they don’t need to worry near about competitive capacity as other carriers.
LUV simply has the money right now to try and pick up market share; they simply are not going after Delta, though. Their ATL capacity is down despite the new markets because they will be out of the entire ATL-west coast market. United is more in Southwest’s crosshairs than anyone else.
B6 is smart enough to know that DL is not going to flood either the NYC or BOS market and yet B6 needs to fly capacity so B6 is going after AA at LAX and UA at EWR. AA’s cuts at JFK in the 2008/09 financial crisis allowed both DL and B6 to grow and the same cycle is setting up at LAX.
DL isn’t starting anything new; it is continuing with the same initiatives it operated before – and which resulted in being the most profitable and highest market cap airline on the planet in 2019. They know the nature of the markets they are involved in.
And, just as it has been multiple times before, downturns provide the opportunity for the strong to keep growing and the weaker players to pull back. American is by far the weakest and the gutting of their international network plus their intentionally slow regrowth at LAX shows that they are moving further from being the global carrier they were pre-covid, to the benefit of DL and UA.
and let’s see how well all of this capacity turns out; multiple airlines are saying bookings have fallen off the cliff as the virus has run amok in the South over the past few weeks.
B6 and NK and every one else that added a bunch of leisure capacity might be posting some dreadfully low load factors – and higher losses than they were hoping.
Airlines earnings season starts Tuesday with Delta’s report. We can have a round table after everyone has put their hand on the table to see who has figured out how to play this recovery and who has not.
9 degree approach angle and 100 degree flap settings? That’s insane. The Breguet 941 was really impressive. Thanks for sharing.
Riding in a Breguet 941 while it landed must have been a pretty scary experience, as it gives the impression of a “lawn dart” or controlled flight into terrain event. A 9 degree approach angle is indeed insane… Watching a good test pilot put one of the planes through its paces at a place with very strong headwinds (like Valdez) would be quite a sight to see.
NASA’s tests (https://ntrs.nasa.gov/archive/nasa/casi.ntrs.nasa.gov/19640007812.pdf) give a stall speed of around 49 knots, only a few knots faster than a Cessna 172, and describe the plane as being controllable at speeds down to 42.5 knots.
Connecting the engines together and allowing a prop to be powered even if the engine behind it is out is an interesting concept, but that must have made the plane a bear to maintain.
Why has ORD become the ugly duckling to AA? And with B6 pulling out of Long Beach what will that do to the airport’a revenue structure?
Angry Bob – American just knows that it doesn’t do all that well with international there. It’s a competitive hub, and American does well focusing on a narrow area. It can’t pull out, because if it does then United gets to own Chicago and that’s bad for them. So, it’ll just make the hub work the best it can.
CF Interesting comments from the AA VP of Revenue.
With UA having the greatest capability and breath internationally. coupled with the AA VP’s comment on how foreign international carriers will soon be failing, one has to wonder how many crews and widebodies will UA keep in reserve or be able to flex after October 1 to fill in International opportunities.
It is pretty clear that UA’s recently announced expansion of flying to TLV is more positive for them with EL AL’s complete shutdown, including their Cargo Division this week.
I worked on the Model 188/Breguet 941 program at McDonnell Aircraft in the late 1960s. It was a unique aircraft, I actually made one flight on the demonstrator. I remember being in a pattern to land and they told a Cessna to slow down while we landed. The Program Manager was Marvin Marks who headed up the development that lead to the C17. Eastern was more interested than American. They wanted to use the plane to supplement the Eastern Shuttle between Boston, New York and Washington. It would have been a great program if only we could have built a “STOLPort” in lower Manhattan.
Do people like Vasu Raja because he’s smart or do people like him because he’s arrogant, interesting and willing to make big, entertaining bets?
Kudos to AA for spotting an opportunity to zag: maintain capacity, leverage connectivity in DFW and CLT, and see if you can use this opportunity to fundamentally reset union contracts. Next up we’ll see if this works or if Raja’s making an entertaining and doomed bet that hurts the whole industry and lands AA in bankruptcy.
(You’re betting that senior AA pilots will accept fewer hours and less pay to save junior pilots who’d otherwise be furloughed. Why would senior pilots do that? Some would get captain or type downgrades with furloughs, but that may be better than the hours lost by senior pilots to avoid furloughs.* Oh, and you think they’ll give you more scope relief while you’re at it. Right.)
Also, DFW and CLT are great. How about the other half of your capacity in LAX, JFK, ORD, PHX and MIA? What’re you going to do with that? MIA isn’t hurting? Listening to him you’d forget about the service and balance sheet advantages that DL and WN have.
*Courtney Miller’s done the math on this.
The article on The Air Current is great. There is an enormous amount of capacity being added by airlines – and there is a very high likelihood that some airlines will simply be pushed over the edge not by the low demand from the virus but because of competitor actions.
AAL is ultimately a for-profit company just like the rest of the U.S. airline industry, nearly all of which is also publicly traded meaning there are pretty robust reporting requirements.
Vasu can make all the grandiose statements he wants but ultimately the financial statements tell the story.
As of right now, industry analysts are expect AAL to report by far the largest operating loss in the industry for the 2nd quarter.
Now that nearly the entire industry has obtained government loans (or qualified for them whether each airline takes them or not), the risk of bankruptcy is pushed in 2021. After an election, regardless of the party that wins, the chips will fall where they may with the airline industry.
No one wants to see any company fail but there are natural consequences of failing to run strong businesses during the best days the airline industry has ever seen – which are now just history.
Ken – I had no idea you worked on it and even got to fly it! That’s fantastic. Thanks for sharing.
Cranky, your article brought back some great memories from over 50 years ago. It was a great program and really launched my career. Remember a lot of this happened pre merger with Douglas
Keep up the good work
Thank you for your comments! Really ironic that the Breguet 941 was recently featured. A feature in the April 20-May 8, 2020 issue of Aviation Week discussed the nascent reemergence of air taxi concepts with electric propulsion. Mention was made of the pioneering work of the Breguet.
The two subsequent issues of AW&ST featured reader feedback by individuals who also had background with the McDonnell program. One individual – Brad Gale – mentions having worked on both the American Airlines and Eastern Airlines demonstrators. One portion of his comment I found particularly interesting. The AA demos involved flying STL-MDW and STL-CGX (Chicago Meigs). He describes a demo where a local Chicago anti-noise group attended a Midway demo in order to measure noise created by the Breguet. Mr. Gale indicates the result of the effort was finding the noise signature was indistinguishable from that of truck traffic on streets around MDW. Further, he mentions the end result was achieved as a result of the maneuverability of the Breguet: “….we were able to climb to 8000 ft. without overflying the airport boundaries.”
The last highlighted comment came from George Vittas, the former longtime VP of Real Estate & Airport Planning for AA. His letter focused of the siting efforts he (and AA) made for potential competitive advantage vs. EA in the NYC shuttle markets. Mr. Vittas mentions that AA ultimately chose a location on the Hudson River, west of Madison Square Garden. Though the site had the support of then NYC mayor John Lindsay, a local lobby, ‘Chelsea Against the STOLport Committee”, managed to exert enough pressure that Lindsay/NYC subsequently withdrew support for a grant AA was seeking for the demonstration project.
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All any business can do is deal with the realities of its situation. No one knows how the whole COVID-19 situation is going to work out. At this point, speculation is a useless exercise. I hope all of the airlines get back to profitability as soon as possible. Unlike others, I don’t want to see any of them liquidated.
If Vasu is half as smart as he thinks he is, AA will be in great shape. Or maybe he’s just overcompensating? Kinda sounds like the latter to me.
Either way, I can’t wait for the “LGB Sings the JetBlues” eulogy on Monday. IMO it was over after the international arrivals facility got quashed but CF knows best.
I’ll be brief and stimulate discussion around:
1. Any fixed cost asset with a 9% breakeven (cash?, profit?) is going to be put to work!
2. Absent LA, NY, International and AA RASM is 112%?
3. Most humans rise to extraordinary heights during times of crisis. AA will find its New Team and Furlough List based on Summer 2020 behavior.
4. Both crisis and debt bring clarity to decision making and my $en$e is AA is playing with House Money (US Government Grants) during Summer 2020.
5. When the House Money runs out, they will make the obvious cuts (LA, NY, International, Labor), until then they are applying some interesting Game Theory.
6. During crisis, $40B debt makes you focus on debt holders more than shareholders.
7. I’m sure this will drive restructuring with Alaska, JetBlue, and TBD holding winning cards in M&A with Big4
8. I could endless discuss LA, NY, International, and Labor but I’ll leave it to CF to start an analysis and thread.
Stay Healthy and be safe all