Sunday, May 17, 2009

Lufthansa's bmi takeover drama continues

Although the takeover of British carrier bmi (formerly known as British Midland Airways) by German airline Lufthansa was approved on Thursday by European Union antitrust authorities, the German newspaper Suddeutsche Zeitung yesterday reported that Lufthansa is backing out of the deal, apparently after taking a closer look at bmi's rather precarious financial situation and deciding that the price would be too high.

bmi, which lost $151m in 2008, was 30% (minus one share) owned by Lufthansa, 20% by Scandinavian Airlines, and 50% (plus one share) by former British Midland chairman Sir Michael Bishop. Last October, Lufthansa announced that it would be acquiring Bishop's stake in bmi, meaning that the German carrier would be effectively controlling bmi.

bmi is one of the latest of Lufthansa's potential acquisitions; it already wholly owns Italian carrier Air Dolomiti, German low-cost carrier Germanwings, Swiss International Air Lines, Lufthansa Italia, and regional carriers Eurowings and Lufthansa CityLine, among others (it will wholly control Austrian Airlines pending approval by the EU later this year). It also owns significant stakes in bmi, Luxembourg's national airline Luxair, Belgian carrier Brussels Airlines, and jetBlue.

Saturday, May 16, 2009

UPS retiring DC-8

photo by So Cal Metro
Another aircraft retirement took place recently as UPS operated its final DC-8 flight into Louisville, KY Tuesday morning, receiving a 'water cannon salute' from fire trucks. Last month, UPS decided to accelerate the retirement of its 44-strong DC-8 fleet as a cost-cutting measure; originally, the planes were due to be phased out by 2013. Most of the airline's DC-8s were around 40 years old, and it will certainly sad to see the type go. DC-8s have been absent from scheduled passenger aviation in the US for almost twenty years now; generally speaking, many older types of planes (DC-10s, 727s) often find new lives hauling packages after they're through hauling passengers.

Friday, May 15, 2009

Whatever happened to flying the friendly skies?

Editor's note: This is the first in a series of articles contributed by readers of The Airline Blog. If you have an airline-related article that you've written and would like to see it on The Airline Blog, please email it and it might be published! Please note that the opinions expressed in this article are of the author, and not necessarily those of The Airline Blog.

Whatever Happened to Flying the Friendly Skies?
by Sedef Onder

I have a confession: I’m a frequent traveler. By choice. Even in these days of predictable flight delays, less predictable baggage handling snafus, elimination of in-flight meals and snacks, and endless waits in long lines on the tarmac while flights takeoff or disembark passengers.

I make regular trips to the nation’s capital at least nine times a year. That’s a round trip air ticket, plus rental car for each visit (oh, and I’ve travelled to Washington, DC twice within the past three weeks). I’m a pretty regular customer for anyone whose paying attention.
Hertz is. Every time I bid on Priceline for a rental car at the airport in Washington Dulles, I get a nearly instantaneous reply from Hertz accepting my offer, virtually regardless of the amount bid. It’s turned me from an Enterprise-by-choice to a Hertz-by-choice customer. Not bad, considering how often I rent cars, including during holidays when they charge a premium.
I noted recently that Hertz’s Connect service offers hourly rentals in NY with rates as low as $8.50/hour, ala Zipcar and other competitors. Smart move, considering more and more consumers are reducing their carbon footprint through less reliance on cars, among other promising energy trends. For this, I applaud Hertz. Some brands get it. When the marketplace changes, and it always does, it’s critical to remain relevant and customer-focused. Innovation is essential, particularly these days.

Which is what makes me particularly baffled by the recent experience I had with Delta. Besides DC, I book at least another 5-6 trips annually; double that if you count travel by car. Recently, I bought round-trip air tickets on the Delta.com Website for the upcoming July 4th weekend. Only three days later, the fare was reduced by $100 total. On Orbitz and countless travel sites, for some time now, they guarantee your purchase at the lowest rate. They want to ensure you’re a satisfied customer; and they definitely want to provide a compelling reason to return and use their site the next time you’re booking travel. It’s a pretty simple formula for creating brand loyalty. What part of it does Delta not understand?

One might expect, as a customer, that you’d receive better treatment and select benefits by booking directly via a company’s Website over an aggregator site intended to sort and compare competing travel offers and rates by emphasizing lowest fees. It’s a market opportunity for airline brands to differentiate themselves and offer consumers advantages for choosing their brand over other options. Jet Blue gets it. They actually charge a $15 fee for booking on a site other than theirs. They also charge nothing to have an existing ticket re-issued at a lower available fare.

And like Hertz, Jet Blue is an innovator. Their Jet Blue Promise Program is a policy that refunds flights or vacation packages in full to anyone whose been laid off recently since making travel plans. How’s that for counteracting the “uncertain” for those unfortunate enough to experience difficulty during these uncertain times. You can call it recession marketing, as some have. Or, I prefer to attribute it to Jet Blue’s exceptional customer focus, which has always been core to its brand experience.

Despite the economic downturn, I’m planning to keep up my aggressive travel and flight schedule. I figure I’m a catch, and a keeper, by anyone’s standards for customers these days. I think I’ll pass on Delta from now on. Jet Blue...or anyone else, are you listening?

Thursday, May 14, 2009

Air New Zealand staff bare all for TV ad


A recent Air New Zealand advertisement has ANZ employees - including CEO Rob Fyfe - wearing body painted uniforms. It's part of the airline's campaign to differentiate itself against 'budget' airlines with 'miscellaneous' fees (i.e. drinks and checked bags) - ANZ claims that when it comes to fees, it has "nothing to hide."

Edit: Sorry for the oversized video screen - I can't seem to figure out how to make it regular size. To view it without the text in front, just click on the "full screen" icon.

Wednesday, May 6, 2009

Airbus slows A380 output

photo by NguyenDai
Airbus unsurprisingly announced that it would lower the amount of A380 aircraft it produced this year to 14, down from 18. Originally, the company had planned to increase production this year compared with last (and still is expected to deliver 20 next year), but the weakened economy and recent scare over swine flu has had an impact on travel demand, causing airlines to defer/delay some aircraft deliveries. IATA has estimated that air traffic, which started declining back in September, fell by 11% in March. (The figures for April will be released soon.)

It's only the latest bump in the A380 program, which has not only seen cost overruns (development spending is now at $18 billion, up from the originally planned figure of $12 billion) but also substantial delays. Singapore Airlines, Qantas and Air France are expected to be among the airlines that take delivery of A380s this year. And Airbus is also scaling back production of other models, too - a move that competitors Boeing and Embraer have also followed.

Tuesday, May 5, 2009

AirTran's CEO says airline can remain profitable

Robert Fornaro, AirTran's CEO, was recently interviewed by the Associated Press. He mentioned how the airline had faced a troubling time last year when oil prices shot up. But in the first quarter of 2009, despite a weak economy and lowered travel demand, AirTran managed to post a profit. I'll post a clip from the interview at the end of this post, and more can be read in the original article, but here are some interesting points:
  • He doesn't see further consolidation, at least for a while: " Clearly we've seen Northwest and Delta come together, but I'm not sure we're going to see another merger over the next two or three years. The financial condition of the carriers now is weak, and there's probably some real big issues that need to be resolved with the labor contracts."
  • Even though AirTran attempted a hostile takeover of Midwest Airlines a few years ago, Fornaro (who has been in the top job for a year) is moving away from acquisitions: "We now feel that we can be much more successful going in on our own. Over the next two years, thinking about acquisitions will be very very low on our priority list."
  • How did AirTran responded to the economic crisis? "We stepped back, we reassessed our operation, we adjusted our capacity and obviously managed our costs and have very quickly rebounded."

Monday, May 4, 2009

Canadian airlines create passenger bill of rights

photo by caribb
Canadian carriers Air Canada, Air Canada Jazz, Air Transat, and WestJet have come up with new legally binding operating rules, or "airline tariffs," that give passengers more options if their flight is delayed or canceled. As part of the new set of rules, the four airlines must:
  • Distribute meal vouchers for delays of four hours or longer
  • Let passengers off the aircraft if the plane is delayed on the ground for more than 90 minutes
  • Pay for hotel rooms for passengers affected by overnight delays or cancelations
Not bad - if I was a delayed or stranded passenger, I'd say that those rules are a pretty good improvement. But the four airlines, which have formed a lobby group known as the National Airlines Council of Canada, aren't exactly doing this unprovoked, however. A Canadian MP proposed a bill that would fine airlines $1200 per traveler who was bumped off of a flight longer than 3500km (about 2175 miles). Airlines would also have to start giving $500 an hour to passengers stuck on a plane on the ground for more than 60 minutes after the doors close.

Naturally, the airlines are keen to avoid having to pay such exorbitant fines, and are thus rolling out their own "bill of rights" in advance. And it's doubtful whether the proposed bill would actually pass; as the lobby group's president stated: "The compensation requirements are grossly punitive and do not recognize the cost/revenue environment that air carriers face today. In the current economic downturn, airlines are already struggling to provide service to their customers." The fines outlined in the proposed bill do seem rather "grossly punitive"; but at the same time, passengers who are stuck for hours on a plane on the tarmac should be compensated fairly. The National Airlines Council of Canada is proof that even if it takes the threat of a harsh bill to do it, airlines still have the capability to ensure that their customers are compensated in a fair manner.

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