Airlines

Category Archives for Airlines.

How did American make money in the second quarter?

by Gary Leff on July 26, 2005

Jul 26 2005

Now that American Airlines announced a profit for the second quarter, there are lots of stories trying to figure out how they did it. One piece contends that they managed to cut costs by listening to ideas from their employees. (Naturally the piece cites no evidence whatsoever that American did this any more than any other airline.) Still, there are some interesting stories about cost savings. For example,Two American Airlines mechanics didn’t like having to toss out $200 drill bits once they got dull. So they rigged up some old machine parts – a vacuum-cleaner belt and a motor from a science project – and built “Thumping Ralph.” It’s essentially a drill-bit sharpener that allows them to get more use out of each bit. The savings, according to the company: as much as $300,000 a…

No outside food or drink

by Gary Leff on July 24, 2005

Jul 24 2005

bmi has introduced its buy-on-board menu and it contains this frustrating statement: Only food and drinks purchased from the cabin crew may be consumed on board. I’m not sure how or whether this will be enforced, but it’s a striking policy. US domestic carriers offering buy-on-board haven’t adopted similar policies… yet.

A new wrinkle in the debate over daylight savings

by Gary Leff on July 23, 2005

Jul 23 2005

Airlines oppose the move to extend daylight savings time to March and November because if the rest of the world doesn’t go along the timing of their flights will be out of sync with limited landing slots in foreign airports. One estimate I’ve seen is that this will cost US airlines more than $170 million per year, though I presume the figure is somewhat self-serving and likely lower in reality. Perhaps the cost argument isn’t the only place to focus. Tyler Cowen asks whether daylight savings time is dangerous, because the moving the clock forward is equivalent to imposing a mild case of jetlag on the whole country. Some data suggests that automobile accidents go up after the change to clocks, although the data is far from conclusive (Tyler observes a lack of data on…

Marketing price increases

by Gary Leff on July 13, 2005

Jul 13 2005

Last year I explained why airlines instituted ‘fuel surcharges’ instead of simply announcing ‘price increases’. One reason is that customers seem to accept price increases more readily when there’s a story that accompanies the change. Another reason is that surcharges are often permitted in negotiated corporate travel contracts that have fixed prices. The dance that accompanies surcharges leads to some absurd explanations. Northwest has announced that it will no longer ‘absorb’ passenger facility fees (which they have to pay to airports that they carry passengers cross), and as a result will be adding those fees onto tickets. Gosh, I never knew that they were kindly ‘absorbing’ a fee for me. Turns out I was getting something for nothing! Airlines have recently instituted ticketing fees for using their call centers or buying at the airport. One…

Flyertalkers meet with Northwest Management

by Gary Leff on June 30, 2005

Jun 30 2005

A couple of Flyertalk members met with management from Northwest Airlines and the Worldperks program and filed this report. An interesting read, though I’ll nitpick at a couple of explanations Northwest offers for decisions. In keeping with its commitment to customer loyalty, WorldPerks currently has no plans to participate in the American Express Membership Rewards program. Northwest see this as simply: “Why should someone who has no loyalty to Northwest Airlines receive miles for the points they have in another loyalty program, and redeem them for awards, thus reducing the number of awards for loyal WorldPerks members? If that’s the case, how come I can transfer points to Northwest from Diners Club, Starwood, Goldpoints, etc. etc.? And if the issue is sharing a fixed pie of award seats with folks other than Worldperks members, how…

The economics of frequent flyer program spinoff

by Gary Leff on June 30, 2005

Jun 30 2005

The cover story of the July, 2005 Inside Flyer is on airlines spinning off their frequent flyer programs in public offerings. David Rowell thinks United could be worth $15 billion. Randy Petersen says “greater than $2.5 billion.” According to the piece, airlines sell $3 billion worth of miles annually. United’s spinoff of Mileage Plus into a wholely-owned subsidiary in 2002 was a $1.4 billion transaction. Mileage is clearly a big business: In 2003, ULS accounted for 5 percent of UAL’s 2003 revenues. In 2004, United recognized more than $400 million in revenues related to ULS, which would not reflect the entire business revenue of ULS for that year. In 2000, revenue for third-party mileage sales reached $220 million during the first six months alone. But American AAdvantage is clearly the king of frequent flyer programs,…

Another “No Notice” Frequent Flyer Program Change

by Gary Leff on June 25, 2005

Jun 25 2005

Effective yesterday, Alaska and KLM have discontinued their partnership. This was revealed on Flyertalk. I can’t find any mention of the change on the Alaska Air website, all references to the KLM partnership are just gone — down the memory hole — very Orwell-esque. Award tickets that have already been issued are valid for travel for one year from date of issue or June 6, 2006, whichever comes first. Not only was the change done without warning, but members haven’t been informed.

Aeroplan Goes Public

by Gary Leff on June 22, 2005

Jun 22 2005

Air Canada successfully sold a stake in its frequent flyer program today, and based on the price paid for a 12.5% stake Aeroplan has a market value of CAD$2 billion.

Is the Qantas Award Cupboard Bare?

by Gary Leff on May 20, 2005

May 20 2005

Back in November I reported that Qantas had gutted its frequent flyer award chart, with awards increasing in price as much as 92% (Sydney to New York-JFK in First class was going up to 392,000 points)! It should come as no surprise that Qantas frequent flyer members reacted to this news by booking as many international awards as they possibly could before the new point requirements went into effect, and as a result there are reports of very limited award availability — that most of the international awards on Qantas have simply been snatched up. It’s difficult to know the real numbers without a systematic award search, but the theory itself seems plausible.

America West and USAirways to Merge

by Gary Leff on May 19, 2005

May 19 2005

The press release is here. As expected, USAirways is essentially being acquired by America West, though the airline will operate with the USAirways name. Significant cash will be added to the merged airline through the deal, including $75 million from Air Canada. This participation suggests to me that the combined airline will be a member of the Star Alliance. Of particular interest to me, $300 million in a signing bonus and a loan from prospective affinity credit card providers for the merged company. Negotiations with credit card companies are still in progress. Bank of America currently issues the affinity cards for USAirways and America West both. Now, this is the part of the press release that I simply don’t believe: The $600 million in anticipated annual synergies are the result of route restructuring, revenue synergies…