This Week’s Featured Link
How to Lead through a Merger: US Airways and American Airlines – Cold Call podcast
This Harvard Business Review podcast talks to a consultant who worked on the American/US Airways merger and is now a lecturer at Harvard who does this case study. It’s just shy of half an hour, and it may seem somewhat basic. But it’s still interesting.
Image of the Week
As a Rams fan since I was a kid, I’ve always hated the Raiders. But hey, if you’re Allegiant, you already have your name on the team’s new stadium so I can’t begrudge the Las Vegas-based airline for also doing a Raiders sponsor deal.Two for the Road
Inside a hijack: The unheard stories of the Pan Am 73 crew – BBC
Quite the tale here. It’s remarkable how many of these hijackings there used to be, and how poorly some of them ended.
Review: JetBlue Mint Suite A321LR New York To London – One Mile at a Time
I don’t often link to other trip reports, but the new Mint service to London does look pretty spectacular. I always enjoy reading Ben’s trip reports because he goes into incredible detail which can be useful for someone who is really trying to figure out what to expect onboard.
13 comments on “3 Links I Love: Merger Look Back, Hijack Flashback, JetBlue’s Great Ride”
Very interesting trip report on JetBlue. I mentioned this a few days ago, but I’ll post it again for those who missed it. There’s a YouTube channel I discovered about a week ago called “Long Hall” by Simple Flying that has great content & the aviation geeks among us will be hooked in no time. And to bring it back to the subject at hand, there’s at least one video on JetBlue’s new London service with “Mint.
Re; the AA/US merger, one of the most accurate metrics of whether it has succeeded at its goals is to go back to Doug Parker’s statement from the merger – which I vividly remember- is that the-then new American would be a global competitor to Delta and United, both of which had gone through mergers with carriers that each combined 2 carriers with strong global presences. For those that remember, AA and US were in different alliances, the latter w/o joint ventures which was significant in Europe while AA was the dominant US carrier in Latin America and neither were strong in Asia.
Fast forward and AA’s own filings with the DOT have shown for years that its international profits came entirely from Latin America with Asia a big drag on AA with Europe (mostly continental Europe) being breakeven for AA even in the best of times. AA and US have always had strong domestic systems and they have been able to juggle their hubs to keep a leading position domestically but it is doubtful that AA can admit they have achieved the goal of being a global competitor to DL and UA. The success of its global network is but one metric that has to be considered in evaluating the AA/US merger.
As for B6 and its transatlantic network in progress, it is far from certain that B6 can be profitable on transatlantic flights given the relatively low number of seats on their TATL A321s. Unlike domestically, airport and passenger handling costs increase significantly for international flights and favor the efficiency of widebodies. B6’s premium international product is at least competitive with what legacy carriers offer but the real question is whether the economics will work to make their transatlantic network more than just a loss leader needed to compete in NYC and BOS against carriers that will have much greater international size and efficiency in their international operations.
So what? Who cares if American isn’t as successful internationally as Delta? Is there some kind of macho award for that? What does it mean to be a “global competitor?” When did it become a federal offense not to have a strong presence in Asia?
More to the point: When did it become a capital offense for airlines to be different? Southwest has none of the attributes you consistently assert are necessary for airline success, yet it has the most consistent record of profitability in the last 50 years in the airline industry. How can that be? Allegiant, featured elsewhere, doesn’t serve Europe or Asia, yet it’s consistently profitable. How can an airline possibly be profitable without being number one or two to Europe or Asia?
Are you suggesting that Delta has never made a single mistake in all of its years in business? It sounds like it at times. Why do you seem to rejoice when Delta’s competitors appear to struggle? Why do you automatically criticize other airlines’ moves to improve their competitive positions vis a vis Delta? Do you think Delta deserves to have a monopoly on all of its routes? Your comments often read that way. I’m not suggesting for a nano second that American is perfect. Far from it. But no airline, not even your man crush Delta, is perfect.
Ghost,
You keep saying that different is good – and nobody is debating that. Parker specifically said that the merged American/USAirways would be a global competitor to Delta and United and that hasn’t happened. Add in that AA’s own execs have said that 50 or so of AA’s widebodies were not generating sufficient profits pre-covid to justify replacing them and AA’s international network will be smaller. It is hard to argue that they will be near as much of a competitor with just 2/3 of the widebodies. They are a for-profit company and cannot sustain the billions in losses on their international system that they had pre-covid. Their position in Latin America will be challenged by competitive growth at MIA but they still will be the largest to that region but perhaps not as profitable. AA is more of a mega USAirways with Latin America bolted on than the true end on end mergers that were DL/NW and UA/CO.
FC,
B6 has not merged with AA and does not have a joint venture. The revenue is either AA’s or B6’s but you can’t add the two together and then act as if B6 is now larger than DL because you include AA’s schedule.
And if AA gives away huge portions of its domestic markets in NYC, BOS, and LAX and the rest of the west coast in hopes of gaining benefits in international markets where it hasn’t succeeded from multiple other hubs before, then B6 (and AS) might win but at AA’s expense.
B6’ A321 unit costs will simply not be lower in their TATL configuration relative to widebodies such as the A330 or 787-9. And they will not generate enough revenue to offset their higher costs since their whole model is to discount business class relative to the legacies.
And, B6 has chosen to be smaller in BOS relative to DL over the next few months in order to fund opportunities in NYC and elsewhere. DL reached revenue parity with B6 in BOS pre-covid even w/ fewer flights. B6 will achieve little if they give up what they have built in BOS in order to become a bigger #3 but still #3 in NYC.
I think it would serve you well if you didn’t go out of your way to attack every airline that is encroaching on your beloved DL. The reality is that DL has shrunken a lot. It has shrunken big time in heart of America. May not sound like a big deal, but that’s where DL had a lot of its revenue premiums. AA has significant advantage over them in places like IND, CMH, STL. It will also gain back its market leading position in RDU. AA decided to give AS and B6 access to its largest corporate customers in order to win more ff around the country. AS and B6 are big winners here DL and UA are all losers in this game. AA will now keep its ff in NYC/LA/Boston, because it can offer a large combined network than DL and UA.
B6 does have access to all of AA’s customers now. That’s what AA said in its own earnings call. They signed up B6 and AS to all of their largest accounts. B6 has said in numerous places that it expects to be at 220 to 240 flights a day at JFK, well over 200 flights a day at BOS, 70 to 80 at EWR and 50 to 60 at LGA.
Take a look at PANYNJ reports, B6 was the largest airline in JFK for the past year. They will get a whole lot larger when they get to 230 flights a day. And across the 3 NYC airport, it is already about the same size as DL in the past 12 months ending in June. Most of that was before they had the aggressive expansion in EWR and LGA. Going froward, B6 will be the single largest airline in NYC. It might not have the most number of flights, but it also doesn’t fly regional and is mostly O&D.
They haven’t given up on BOS at all. They will be over 130 flights a day by November. They have 30+ gates at BOS and AA has 18 gates there. There is nothing to worry about. And most importantly, they have enough aircraft and will have enough crew members to get to 600 departures a day in NYC/BOS by 2023/2024.
Maybe DL should be a little more concerned about SEA where AS is increasing its market share there and getting more gates allocated.
Your TATL comment is simply not reflective of reality. DL/VS on JFK-LHR is around $2K R/T in J for most dates in October. The CASM of A321LR will be very competitive with the larger widebodies as you can see hre https://leehamnews.com/2018/04/11/is-long-haul-lcc-viable-part-3/ Of course, JetBlue does use a more premium config (138 seats) than their example, but VS also uses a more premium config (264 seats) in 787 than their example. DL also uses a more premium config in A330-900 (281 seats) than their example. In both cases, the widebody has about twice as many seats as the narrowbody. And none of this even factors in the much higher fixed costs and other non-flying costs that VS/DL has in its system. So, JetBlue will be very competitive in CASM here and it will have much fewer seats to fill.
The loss leader in TATL right now is VS. A whole lot of widebodies with nowhere to fly them + dwindling cash reserve. B6 can easily deploy (and have deployed) A321LR on JFK-LAX during the current low TATL traffic period and get a premium doing so.
Also, your comment about low number of seats on A321 shows that you don’t quite understand supply & demand. By limiting number of Y and J seat available for purchase, JetBlue can fill those seats at higher yield than its competitors. And there have been leeham studies that showed A321LR has comparable CASM to A330NEO and B787-800. Sure, B6 probably does have a larger premium cabin than the one that’s been studied, but it will also generate higher RASM by having more all-aisle access suites available. On top of that, it has much lower fixed costs and non-flying costs vs legacy airlines. So, it can achieve comparable CASM vs competition while having to fill much fewer seats.
The reality is that B6 has almost everything that DL has out of NYC + a lot lower cost.
– premium transcon market (more options than DL)
– slots at JFK (will be about equal to DL as the result of NEA)
– large terminal space at JFK (will be even a lot larger than T-4)
– TATL flying (check, will add a lot more over the next 3 years)
– access to premium corporate customers (through AA)
– access to large domestic network (through AA)
The only thing B6 really trails DL is LGA slots. We will see when the demand for that comes back. DL can have fun losing a lot of money on its LGA slots over the next few months.
When you factor in codeshares. alliances and J/Vs, global reach is really a zero sum game for the US3. Give or take a few smaller destinations of course but if AA can’t get you from Podunk to Nowhere…what are they missing out on, really?
The “Image of the Week” isn’t coming through – there’s no picture and the words are strangely in a long, narrow column.
Ben’s trip reports are great, almost too detailed sometimes, but this one made me really want to fly Mint to London, even though I haven’t even had the chance to fly domestic Mint yet.
CraigTPA – That’s weird. Not sure what happened, but it’s fixed now.
I’ve always hated the Raiders too (well, more a hate for Al Davis really), but I have to admit that’s a very sharp-looking livery.
Was the customer service Manager at Pan Am JFK when flight 73 was hijacked. Was assigned to bring home the survivors from Frankfurt to JFK. Was one of the most intense experiences I have ever had. We set up a 747 charter, including installing cabin stretcher beds for the seriously injured, which included all medical support apparatus like IV’s etc. Several doctor’s were onboard for the whole flight taking care of the wounded and critical cases. The attitude and resilience of the survivors was extraordinary. Incredible people.
The most remarkable thing I remember is the resilience of the children in the group. They remarkably, consoled and helped even the adults through the trauma. I was amazed at the wisdom of two of them in particular consoling an older man. A remarkable and brave group of people who I admire forever. Upon arrival into JFK, NYC Mayor Ed Koch came out to the airport meeting the survivors in customs, welcoming and consoling them and admiring their bravery. He then was remarkably helpful in redirecting the press and cameras so we could respect the survivors privacy so we could get them peacefully to the their homes, or hotels for the next part of their journeys. NYPD was also extraordinarily helpful .
Who pays who for branded livery like that? Is that a Raiders ad that they’re paying Allegiant for, or is Allegiant paying the Raiders to use their brand to sell the airline? Or is it a mutual cross-marketing thing that doesn’t necessarily involve cash going one way or the other? (Ditto other branded liveries.)
Alex – I don’t know in this specific case, but usually it’s an advertising deal where the company being advertised pays for it. Of course, for things like Southwest’s flag liveries, the states aren’t paying for that. At least, I don’t think they are.