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Posts Tagged ‘US Airways’

Estimated reading time for this article: 2 minutes or less

Press Release:

US Airways (NYSE: LCC) today announced that it has reached a tentative agreement on a new collective bargaining agreement with the Association of Flight Attendants (AFA), which represents the airline’s 6,700 mainline flight attendants. Details of the agreement will be made available by AFA.

“We are very pleased to have reached a tentative agreement with the AFA and thank the union leadership for their dedication in support of our flight attendants,” said Doug Parker, Chairman and CEO.

“We want to express our appreciation to the National Mediation Board and our mediator Jim MacKenzie, for his instrumental role in helping both parties reach a successful conclusion to our mediated negotiation sessions,” said Al Hemenway, US Airways’ vice president, Labor. “I would also like to thank the leadership of AFA for their hard work in helping us reach a tentative agreement with our exceptional flight attendants.”

The AFA Master Executive Counsel’s (MEC’s) must first approve the tentative agreement before it can be sent to its members for consideration. This first step is expected to take place in the coming weeks. The tentative agreement would cover the airline’s 6,700 mainline flight attendants, who are based in US Airways’ three hub cities of Phoenix, Philadelphia, Charlotte, N.C., and in its Washington D.C. focus city.

6 full years after US Airways and America West merged, the flight attendants have finally gotten a joint contract. This will give US Airways more scheduling flexibility, and will presumably get the flight attendants their first pay raise in 9 years. It’ll certainly be an interesting analysis to see what the terms of the deal are…
Perhaps the pilots will be next?

Estimated reading time for this article: 3 – 4 minutes

"A Star Is Born" Source: Star Alliance

In May this year, it will be 15 years since United, Thai, Air Canada, SAS  and Lufthansa lined up 5 of their aircraft for a photo shoot and announced to the world “A Star Is Born.”

These days, we have come to take the existence of the 3 big alliances for granted – we tend to forget that the deep relationships that exist today were not always there.

Earlier today, I chatted with a friend of mine about the old tie up between United Airlines and British Airways. He gently corrected me and pointed out that I meant USAir. I gently corrected him and pointed out that UA and BA had a very close tie up in the ’80s well before the USAir/BA flirtation, a relationship that showed every promise of developing into something deeper until UA gained access to LHR of their own by doing a deal with PA in 1991.

No doubt , many aviation enthusiasts would be equally surprised if they found an old Lufthansa paper timetable from the early ’90s and discovered that LH’s codeshare partner to the North was Finnair not SAS , and their Canadian partner was Canadian Pacific not Air Canada, or to know that when oneworld stalwart LAN was first privatized, the successful bidder for the anchor stake was SAS, one of the eventual founders of the Star Alliance ( the unsuccessful second placed bidder was future Star Alliance member Air New Zealand, itself not long privatized at that time, in turn, their biggest shareholder was Qantas but both JAL and American also held small stakes in the carrier).  Qantas had beaten out their rival British Airways to win the privatization bid for Air New Zealand.  Think about that for a moment, 3 future Oneworld members, including two founder members, successfully bidding against another future Oneworld founder member for a stake in a future Star Alliance member.)

Some of you may be thinking “Interesting historical trivia, but what is the relevance of all this in 2012?”

George Santayana famously said “Those who do not remember the past are condemned to repeat it” .  At the moment, if you log on to almost any aviation discussion board you can find at least a dozen threads regarding possible alliances/re-alliances/changes of ownership and re-organisation of ailing airlines.  All these disparate threads have one thing in common.  At least one poster who definitively states “XYZ will NEVER happen”

We all have our own preferences  ( I will own up right now to being a die hard Star Alliance fanboy) and there is nothing wrong with that, unless we allow our preferences to cloud our thinking.   I would encourage all of those who love this industry to keep open minds, even on matters we consider extremely unlikely ( or that we stubbornly do not wish to see happen).

If discussion boards had been around in the ’80s I am sure that anybody who predicted the end of some very close airline relationships which existed back then would have been emphatically told “Never!”

I intend this post to be the last time anyone on any aviation forum sees me type the word “never”, at least for 2012.  (The first person who catches me do it in this blog from here on in can claim a beer from me.)

For 2012 I urge you all to actively participate in open discussions, with open minds and I will strive to do the same.

Estimated reading time for this article: 3 – 4 minutes

With 12 aircraft expected to be delivered this year, Virgin America will have to decide where else toe expand. Some of the aircraft they receive will likely go towards increasing frequency on existing routes which are performing well. However, there is no doubt that Virgin America will launch new destinations as well.

The cities in the contest – Atlanta, Houston, Newark, and Pheonix – are all likely additions in the near future. If Virgin launches service to Houston and Atlanta, it will serve all of the top 10 metro areas in the USA.

Estimated reading time for this article: 4 – 5 minutes

In case you haven’t heard yet, the Wall Street Journal has reported that Delta is considering the option of acquiring American Airlines. American, while in bankruptcy, is a major acquisition target, since it can be bought very cheaply compared to the value of its assets, such as aircraft, slots, hubs, route authorities, and terminal buildings.

I have to say, this acquisition is rather unlikely. Delta and American are the second and fourth largest airlines in the country respectively by domestic market share. If put together, they would control over 1/3 of the US market, including regional partners. That is a lot compared to the Delta of today, which controls less than 20% of the market. This massive increase in size would undoubtedly raise flags with government regulators. While sheer size isn’t an issue per se, combining the airlines would create areas of high market concentration, like New York. Both Delta and American have large operations and JFK and La Guardia Airports in New York. Delta would be forced to divest a significant amount of slots in these areas to new entrants and low fare carriers in order to get the acquisition approved. Since Delta and American are both very big and have significant overlap, the combined airline would probably have to give up so much during a merger that it just wouldn’t be worth it.

The second reason that this acquisition is highly unlikely is alliances. Delta is a member of SkyTeam Alliance, while American is a member of oneworld. Since American is the only North American partner of oneworld, it is extremely important. Without American, oneworld would likely dissolve, since it wouldn’t have coverage in the largest aviation market in the world. For this reason, American’s oneworld partners like British Airways and LAN would fight a Delta acquisition very hard. They would likely attempt to get the acquisition rejected by regulators, and they might even team up with a private equity firm to buy out American. No matter what happens, oneworld and its carriers will fight the move of American to any other alliance with all the power that they have.

Since it’s so unlikely that acquisition will ever occur, you might be wondering why Delta is even considering it. There is no doubt that Delta wants this acquisition to happen. Some reasons why:

• American has hubs in major cities with large amounts of high yielding business traffic.
• American also is the largest American carrier at London Heathrow airport, a major business airport with very high yields.
• American has a very large frequent flyer base that Delta would love to get its hands on.
• American has a lot of profitable corporate contracts that Delta would like to take.
• American has a large Latin American network that would be a valuable addition to any other airline in the US.
• American has a fortress hub in Dallas. Fortress hubs are hubs in which one airline controls a massive amount of the capacity. These hubs are incredibly profitable since airlines enjoy the effect of a monopoly, allowing them to increase prices.

With all these reasons and more, it makes perfect sense that Delta would want to acquire American. Perhaps Delta feels that even with the hurdles that regulators will subject them to, the acquisition will be valuable enough in the end to be worth it. However, I don’t think this is likely.

What is more likely is that Delta is using these rumors to try to force the hands of US Airways and TPG Capital, the other 2 companies interested in purchasing American. Delta wants to find out the intentions of the other two groups, and also increase the prices that they will have to pay if they decide to bid. The latter is a big risk. Increasing the price of American significantly would mean that Delta would have a weaker competitor in the future. However, if they bid too high and the other companies walk away, they will be stuck with an overpriced American Airlines for themselves, a disastrous outcome. This is exactly what happened when AirTran was interested in buying Midwest Airlines back in 2007. TPG Capital, along with Northwest Airlines, tried to inflate the price that AirTran would pay. However, AirTran decided to just walk away from the deal, and TPG ended up with the airline. 2 years after TPG bought Midwest, they sold it to Republic Airlines at a $400 million loss.

Another extremely unlikely possibility is that US Airways and Delta could team up to buy American, and then split up the airline. Each airline could take the parts of American that they need, and they can avoid many of the regulatory issues by allocating parts of the airline based on market concentration. Both US Airways and Delta would face less financial risk by each paying for only part of American Airlines. Delta and US Airways have worked together before on the DCA/LGA slot swap which finally is taking place this year after the US Department of Justice approved it.

Whatever happens to American, it is many months away. However, it is important not to discount any possibility – strange things have happened in aviation before.