Air France and Delta might become closer

photo courtesy of caribb

The AFP and the French newspaper Les Echos are reporting that Air France is in joint-venture talks with Delta Air Lines, which is a fellow SkyTeam partner. A spokeswoman for Air France said that it "is still in negotiations with Delta, but nothing has been finalized". She also said that "the agreement being negotiated should be signed in the autumn."

The joint venture would happen in two stages - the first would start in April 2008 and include New York - Paris flights, as well as flights from Heathrow airport in London to cities in the US. In 2010, the second stage would cover the rest of Air France and Delta's trans-Atlantic flights. Les Echos reports that both airlines would split their profits from their main trans-Atlantic routes 50-50.

Air France-KLM, Northwest, and Delta have also applied for a joint venture agreement. Northwest and KLM have been close partners for more than 15 years, and this venture, if successful, will bring the four much closer together than they already are (all are SkyTeam members).

United stock buyback plan raises controversy

photo courtesy albspotter

Executives at United Airlines have been talking about the possibility of the airline buying back stock or paying dividends to shareholders. “We realize the importance of doing something for shareholders," said CFO Jake Brace.

But the idea has not gone over well with the unions, who claim that the airline should be doing more for its employees, who had to sacrifice a lot during the airline's extensive stint in Chapter 11 bankruptcy. To be fair, United might want to consider setting up a fund for employees that have faced personal crises - rather like jetBlue and Delta have. The bankruptcy process adversely affected employee morale (and pay) - if United has a little cash left over, at least some of it should go back to employee's pockets.


But personnel issues aside, there's another issue for United management to consider: fleet renewal. Crain's Chicago Business quoted a United spokesperson as saying, “We have one of the industry’s youngest fleets, and the likely availability of next-generation narrow-body aircraft fits well with our timing for replacement planes, giving us a competitive advantage.” United's average fleet age is 12 years, which is pretty average but still on the older end of the spectrum. And with its rivals buying newer planes - Northwest, for example, has ordered the 787 and there are rumors that American and Delta will do the same - United should tuck away some cash when this issue arises in a few years.

And last, but not least, there's the airline industry itself, which is notoriously cyclical. Right now might be a time of (relative) prosperity for the industry, but like it has always done in the past, it will eventually take a dive. United needs to make sure that it has enough cash on hand to weather any downturns.

This isn't to say that a stock buyback plan isn't a bad idea, but United's management needs to get its priorities straight first. Work on clearing away debt and do something to help out employees. This doesn't mean to necessarily cave in to every demand, but if the airline is making a little extra cash, maybe give some of it back to employees - after all, they're the ones that have the potential to satisfy customers, who will then (hopefully) reward with repeat business.

No buyer, no Alitalia?

What happens next for Alitalia?

The Italian carrier has seen its suitors drop out one by one: Aeroflot said no, Lufthansa-backed Italian carrier Air One said no, and MatlinPatterson, a US firm, was the last bidder - and it too said no. That leaves, well, nobody to bid for Alitalia, and it leaves the Italian government in a bit of a bind: it is under some pressure to solve the problem - especially when the 'problem' is losing 2 million euros ($2.8 million) a day. "When something is diseased, you need to amputate it," said Infrastructure Minister Antonio Di Pietro. But on the other hand, the Italian government has come under fire from the unions and opposition groups for the collapse of the seven month-long sale, and the current quagmire is not making it look any better.

Why aren't there any interested bidders? A major reason: the terms and conditions imposed upon the potential buyers by the Italian government. A buyer wouldn't be allowed to cut as many of the 20,000 employees as it wants to, for example. The dual hub system, at Milan and Rome, is inefficient, especially when Alitalia's competitors only have one (e.g. Lufthansa, British Airways, Air France, etc.) And labor unrest is a major discouraging factor - in fact, 100 Alitalia flights were canceled yesterday as some of its staff went on strike. Who knows, though - maybe the government's threat of liquidation might scare the unions into not striking. And there still might be bid in the future - the Italian government has said that it might directly contact some of the former bidders to strike a deal, since it is (understandably) seeking to get out of this mess (and to sell 39.99% of the airline, even though it could sell up to 49.9%). And Alitalia, Air One and MatlinPatterson have said they might be interested in buying - if the government relaxes some of its regulations. The newspaper Il Corriere has said that the Air France-KLM group might be interested, even though a spokesperson for the group said that the Air France-KLM would not be interested in Alitalia unless it is restructured.

In any event, it's up to the Italian government now to make the next move. I'd be interested to hear the opinions of The Airline Blog readers - do you think Alitalia, the historical flag-carrier of Italy, should be saved? Or is enough, enough - should it just liquidate (and maybe start over)?

US carriers look for more US-China routes

Several US airlines are pushing for more nonstop routes between the US and China, beginning in March 2009. And they're also going straight to the customer for help - most of them have designed separate websites highlighting their bids and are asking fliers to help out by signing petitions that will be presented to the Department of Transportation. Here are the airlines:

• American Airlines filed an application on Monday to start nonstop Chicago O'Hare - Beijing service, to start on March 25, 2009. (This isn't the first time American has tried to do this - a few months ago it filed a similar petition but failed because it couldn't agree with its pilots on work rules for the rather long flights.)
• Continental Airlines wants to fly between Newark and Shanghai starting on March 25, 2009.
• Delta Air Lines applied for Atlanta-Beijing and Atlanta-Shanghai service.
• MAXjet quietly filed for Seattle-Shanghai service, with a continuing flight from Seattle to Los Angeles.
  
• Northwest Airlines wants to fly Detroit-Beijing and Detroit-Shanghai.
  
• United Airlines is seeking San Francisco-Guangzhou service in 2008 and Los Angeles-Shanghai service in 2009.
• US Airways has proposed flying between Philadelphia and Beijing.

The Department of Transportation can only allow one new airline to enter the US-China nonstop market each year. Currently, all of the above airlines except Delta, MAXjet and US Airways serve China nonstop - a fact that might give them a bit of a competitive edge. My prediction: the Continental and Delta proposals will pass, mostly because there isn't any New York area-Shanghai service and Atlanta/the southeastern US are also underserved when it comes to nonstop US-China flights. United Airlines will also probably get at least one of their routes, too.

A big change for Delta, indeed

Well, it's certainly been a long road for Delta, but only three months after exiting Chapter 11 bankruptcy, it has posted a $1.8 billion profit.

"Delta’s emergence from bankruptcy was a significant milestone in the history of the company and the airline industry,” said Gerald Grinstein, Delta’s chief executive officer, in a press release today. “In delivering the kind of outstanding financial, operational and customer service results we saw this quarter, it is clear Delta people at every level are producing a strong airline with a bright future.”

Delta's profit is even more amazing when compared to the airline's financial performance this time last year (it posted a $2.2 billion loss). Not counting bankruptcy-related costs, profits came out to 70 cents a share - much better than the 59 cents per share that analysts had predicted.

We'll see how United and Northwest, two carriers that have also gone through long, hard bankruptcy processes, have performed financially when they release their second quarter results (on the 24th and the 30th of the month, respectively).

And now for a bit of an editoral. Recently I've noticed that it doesn't seem like United or Northwest are announcing their bankruptcy exits the way that Delta has. Its 'Change the Experience' website allows travelers to suggest ways to improve Delta (or so the website says), and touts such things as its "Clean Campaign". The airline has also run television and print advertisements announcing its 'change'. It also put up a 'Today is a new day' banner on its website following its exit from bankruptcy.


I'm not sure if this effort is having any impact with the flying public, but it probably wouldn't hurt Northwest and United if they did the same thing. After all, Chapter 11 bankruptcy - even if it doesn't really affect the day-to-day operations of an airline - can have a negative effect on the average flyer. So when you exit bankruptcy, be sure to announce it as much as you can. Delta's done a pretty good job of it, and their agressive PR campaign, combined with the latest posted profit, will probably continue to improve the airline's image. (Oh, and the fact that the CEO is giving up a lot of his pay to a fund for employees - that might help employee morale a bit, and morale, good or bad, is something that affects the flying experience.)

To be fair, Northwest has announced its exit as well. In the July 2007 copy of WorldTraveler, its inflight magazine, President and CEO Doug Steenland penned a letter entitled 'A New Day at NWA, along with a link to the "NWA Moments" photo gallery on Flickr. And United did release a Hemispheres magazine article highlighting the changes it underwent during restructuring. But whether United and Northwest can genuinely 'change' (and whether Delta's 'change' extends beyond a slick PR campaign) remains to be seen.

Lufthansa economy-class sleeping area?

Recently on both Airliners.net and FlyerTalk.com there have been rumors floating around of Lufthansa introducing an economy-class sleeping area on overnight intercontinental flights. In an email survey that the airline recently sent out, one of the questions was:

To increase the travel comfort on intercontinental night flights, Lufthansa is thinking about a separate sleeping area within Economy Class. There, you would have the possibility to sleep in beds with an angle of 180° (Full Flat). This option could be booked instead of a seat.

In the future, when booking a night flight with Lufthansa from Johannesburg to Frankfurt, would you generally be interested in booking into the sleeping area instead of a seat in Economy Class?

Apparently Lufthansa also included a picture of the 'sleeping area' (see above; click on it to see the larger version). While it might raise some safety issues (could the bunks be occupied during takeoff/landing?), it certainly might be worth a try on a fifteen hour overnight flight, especially when compared to regular economy-class seating on Lufthansa.