Airline roundup week ending 2 July 2010

Mergers galore part 1 :  British Airways has now signed a merger deal with Iberia, subject only to ratification by both airline’s boards of directors, something that is 99.9% assured.

Mergers galore part 2 :  Alitalia has said it will join with Delta and Air France/KLM in their joint venture to jointly set fares, plan routes and share revenues on transatlantic flights.  Though a 2008 Department of Transportation decision granted Alitalia antitrust immunity along with five other SkyTeam airlines, the carrier was not part of the original transatlantic joint venture that included Delta and Air France-KLM.  Alitalia is waiting to receive antitrust immunity for its participation in the transatlantic joint venture and has gained all other government approvals to participate in this joint venture.

Mergers galore part 3 :  And for travel to Asia, AA and JAL have applied to the Japanese Transport Ministry for antitrust immunity to operate as one airline for commercial purposes on flights between North America and Asia.  ANA, United and Continental have already filed a similar application.

Both applications are pending with the DOT.  The US-Japan open skies accord that was reached late last year is contingent on antitrust approval for both applications, which increases the already very favorable odds of the applications being approved.

Mergers galore part 4 :  But the UA/CO merger is encountering some mild speed bumps.  A group of passengers filed a lawsuit in the US District Court in San Francisco earlier this week, claiming the proposed merger would lessen competition, lead to higher fares and would result in service cuts.

The lawsuit lists more than 45 individual plaintiffs.

A similar lawsuit was filed against the DL/NW merger (with at least one person figuring on both lists of plaintiffs) and was not successful, so the chances of this suit succeeding do not seem very great.

A slightly more difficult challenge (but only slightly) is from the two airlines’ pilots, with negotiations stalled as to how the two sets of pilots will be treated in the new merged airline.  The pilots say the two airlines have not followed through on their promise to negotiate in good faith and have taken the wrong path, but add that they are confident that a full contract would eventually be reached.

Does that mean the pilots know they have the airline(s) over a barrel?  Or do the pilots feel that the airline(s) have them over a barrel?

That sort of ambiguity is often the case in labor disputes, with the latest example being the as yet unresolved dispute between BA and its flight attendants.

After the first and second sets of strikes failed to encourage the two sides to reach agreement, it seemed for a while that the parties were diverging rather than converging.  BA announced that it would hire new flight attendants, to be employed at much lower pay rates, and to replace striking flight attendants.  It said it hoped to have 1250 new flight attendants within a year, and 5,000 within four years (they currently employ about 11,000 cabin crew and it seems that approximately half or slightly more have been supporting the strikes), and reported they had already received more than 25,000 applications, even though the new wage structure was about half the rate it is presently paying its cabin crews.  Details here.

The flight attendants called another ballot to authorize a new round of strikes.

But then it seemed possibly both sides got cold feet, and now the union is suspending its strike ballot, instead allowing its members to vote on if they should accept a new offer from BA and resolve the dispute.

Good news for coach class passengers on AA – the airline says it is upgrading both the coach and first class cabins in all 76 of its 737s.

Of note is AA’s promise for more spacious and comfortable seats in both first and coach class.  But the chances are you’ll find that AA’s definition of what makes a seat more spacious and comfortable may not equate with your own.  The problem with the 737 is that it is too narrow to allow for the six across coach seating to get any wider, and increasingly, seat width is as much a critical comfort issue as is seat spacing.  We need our elbow room as much as we need our knee room.

So how can AA make the seats more spacious if it is not making them wider?  As for increasing legroom, that’slooking problematic too, because the airline says it will be able to squeeze in two more rows of coach class seats, in part due to taking out some galley space that is no longer needed.

The new cabins will also have larger overhead bins.  More details here.

In other AA news, AA is giving up the battle on the Boston/San Francisco route.  It had formerly shared that route only with UA, but Jetblue and Virgin America both moved in to that route in 2009 (Jetblue has had seasonal service since 2007, but went year round only in 2009).  It seems their competition was too much for AA, which has been experiencing lower yields from its BOS-SFO flights than the average for other routes in its system ever since the first whisper of competitive pressure arose in 2004 when both DL and America West briefly offered flights too.

Not that AA is admitting that it lost a competitive fight.  Instead, it says it wants to focus on its hubs and reduce point to point flying.  It says its priorities are now New York, Miami, Chicago, Dallas and Los Angeles.

Overall, however, AA – and every other airline – should be feeling positive about the future.  IATA has reported this week that May saw a strong increase in air travel (up 11.7% compared to May 2009) and air freight (up 34.3% over last year), meaning that passenger traffic is now 1% above pre-recession levels and freight is 6% up.  Largest growth came from Latin America and weakest growth from Europe, but even the European carriers reported an 8.3% lift in passenger traffic.

Expedia is now the largest seller of travel in the US.  It is followed by American Express, Carlson, Hogg Robinson, BCD Travel, Orbitz, Priceline, AAA Travel, Flight Centre USA and Travel Leaders Group (note that Travelocity does not report its sales and so can not be included).

The FAA has awarded $125 million total, split over five companies, to ‘develop and demonstrate technologies that will reduce commercial jet fuel consumption, emissions and noise’.  These contracts are part of the FAA’s Continuous Lower Energy, Emissions and Noise program, or CLEEN.

The five companies (Boeing, GE Aviation, Honeywell, Pratt & Whitney and Rolls-Royce-North America) will each match the agency’s investment dollar-for-dollar, bringing the total CLEEN investment to $250 million.

$250 million seems like a huge amount of money, but the $50 million that each company is spending is pocket change compared to what it costs to develop new engines and their underlying technology.

The FAA has set some lofty goals for this program that seem completely removed from the reality of what you can buy from each $50 million investment.  It says it hopes the research will bring about new technologies that will make engines 33% more efficient, reduce nitrogen oxide emissions by 60%, and be 32 decibels quieter.

A 33% reduction in fuel consumption is an enormous improvement and one has to think that if there was an easy way to achieve such a massive saving, the engine manufacturers would already be right on top of it.  Airlines happily spend millions of dollars to retrofit winglets onto planes that might give them a 2% or thereabouts boost in efficiency; they’d rush at any sort of engine with that massive an improvement in fuel usage.

And an engine that is 32 dB quieter is one that generates 1500 times less noise than at present.  It is like the difference between a loud speaking voice and a whisper.

So is this wishful thinking?  The FAA says the goal is for the new technologies developed through the CLEEN program to be in commercial use by 2015.  I’ll believe it when I see it.

Talking about believing things when I see them, the latest attempt at a viable ‘flying car’ has been given special approval from the FAA to qualify for an easier to obtain pilot license than would otherwise be the case.

But does that mean the flying car, with an estimated list price of $194,000, may succeed where all its predecessors have failed and become a viable commercial success?  That’s something else I’ll believe when I see.  Details here.

And still on the twin subjects of airplane technologies and optimism, the 787 has had another delay over another problem in its construction – this time related to the Italian made horizontal stabilizers.  Early production planes seem to be getting patch after patch after patch (and I mean ‘patch’ in an almost exact literal sense).

I’ve earlier voiced my concern that the 787, with its very new carbon fiber composite construction, is being excused some of the rigorous testing that you’d perhaps think appropriate for such a new type of airplane construction.  Instead, the plane is being subjected to computer modeling analysis, and speaking as one with a Master’s degree in Information Systems, I have to say this concept terrifies me.  The problem with a computer model is that it can only model for things that are programmed in to the model’s assumptions.  It can’t look for or test things that the programmers don’t think or don’t know about.

Now if this was to do with a traditional aluminium built airframe, using computer models might be satisfactory, because over 70+ years of aluminium airplane construction, we’ve built up a wealth of real world experiences and knowledge on which to base the computer model parameters.  This real world experience has included some unfortunate learning experiences such as the metal fatigue issues that plagued the disastrous first passenger jet, the Comet and its crashes – something that was a new phenomenon encountered for the first time.

My fear is that the computer modeling that is being done to validate the 787 may conceivably be overlooking some unknown factors that we don’t know about at present – unknown factors that will only become apparent in the real world as the planes build up airframe hours in flight and have hard landings, equipment failures and crashes.

Computer modeling can only test for things we know about, it can’t test for things we don’t know about.

Here’s a well written article that reports on some aspects of the 787, its new construction material, and the testing it is receiving.  Suffice it to say that it will be many years before I feel as comfortable flying on a 787 as I do on current airplanes.

A rose by any other name?  Now that London’s Gatwick airport is under new ownership, the new owners have decided to change its name.  And so the airport formerly known as ‘London Gatwick’ will now be known as ‘Gatwick’.

This is not only a ridiculous change, but also one that flies in the sense of conventional wisdom.  Most airports choose to deliberately incorporate the name of a near-by (or even not so near-by) city in their name to try and boost their appeal to travelers, by dropping the the London part of its name, plain old Gatwick airport may sound even further out of the center of London than it already is.

Gatwick is to undergo a £1.5 billion ($2.25 billion) modernization.  The new owners did not disclose how much of this sum will relate to the name change, but one thing is for sure – the UK government will not allow for any extra runways at Gatwick, so the money is purely for upgrading current facilities, not for adding to its capacity.

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