Friday, October 31, 2008

Delta Looms Large

On Wednesday, antitrust regulators signed off on the proposed merger between Delta and Northwest Airlines. Although integration will proceed slowly as ticketing systems, employees, and corporate cultures differ, "the new Delta" will ultimately become the world's largest airline.

As part of the consolidation, Delta is also expected to:
  • Remain with SkyTeam;
  • Charge extra for exit row seating as well as some "preferred" window and aisle seats, adopting a practice already in place at Northwest; and
  • Neither scale back any of its airport hubs nor lay off any of its front-line employees--promises made to the Department of Transportation to get approval for the merger.

As I explained some time ago, the acquisition of Northwest will also return Continental Airlines to full autonomy. In an interview with the St. Petersburg Times, Continental CEO Larry Kellner mapped out a few strategies that Continental sees as keeping it successful in the new market. Among them, Continental plans to:

  • Continue serving complimentary meals at mealtime, the only U.S. carrier to do so; and
  • Join United and U.S. Airways as a member of the Star Alliance in early 2009, pending regulator approval.

In the interview, Kellner was also asked why Continental--with its strong customer-first focus--decided to impose a $15 checked baggage fee after resisting the move for so long. Kellner's response? People weren't willing to change airlines over the fee, so Continental wasn't seeing any reward for not charging it.

Passengers, take note: If you aren't willing to show preference to an airline that doesn't charge a fee, airlines won't resist fee increases.

Wednesday, October 29, 2008

American copies Continental, Continental copies Delta...

It's a game of catch-up these days for the airlines. Like the other legacy carriers, American used to offer a minimum of 500 miles in its frequent flyer program. As of yesterday, that minimum is history for rank-and-file passengers. Like Continental, though, American has opted to keep the 500-mile minimum for members of its AAdvantage program who hold elite status.

Continental, meanwhile, has adopted new carry-on baggage size limits, scaling back from 51" to 45". The change brings Continental into alignment with the limits already in place with its Skyteam domestic partners, Delta and Northwest. It also comes at a time when virtually all airlines have implemented charges for checked baggage, which has led to a surge in popularity for carry-ons.

Speaking of baggage, Continental also announced a new policy to waive first-bag fees for passengers who carry its branded Chase credit or debit cards; these passengers join OnePass elite members and passengers flying First Class in being exempt from the first-bag fees.)

By the way, those who pay attention will notice that oil is now well below $70 per barrel, down from more than $140 just a few months ago. You might see a bit of a price drop, but don't count on it: all of the airlines have slashed capacity, and at least in the short term, fewer flights means that prices can stay relatively high for the seats that remain. There's also the matter of fuel hedging, which helps when prices are rising but hurts when they start to fall.

But it's not all supply and demand. Those fuel surcharges that airlines imposed when prices were high will also be staying around, and the reason is simply "because they can." As I cautioned some weeks ago, once a cut is made or a new fee is introduced, it's bound to stay beyond its time.

Tuesday, October 21, 2008

USA Rail Pass? Um, yeah... we know.

To give you an idea of how little attention Amtrak gets from the mainstream media, the Associated Press today reported that the USA Rail Pass is now available to U.S. residents, whereas it was previously open only to travelers coming from outside of America.

Thanks for the tip, AP... but we covered that in this blog back in July. Sheesh!

Monday, October 20, 2008

A new day for Amtrak

Last Thursday, President Bush signed the Rail Safety Improvement Act into law. The Amtrak reauthorization bill provides a framework for funding that, while requiring annual votes to actually provide, gives the National Passenger Rail Corporation the means to engage in mid-term capital planning that has been impossible since the last such bill expired six years ago.

It also marks the end of a campaign by the Bush administration to dismantle and privatize the passenger rail infrastructure across the United States, a plan that would almost certainly seen service vanish entirely from most parts of the country as happened when a similar plan was enacted in Mexico nearly two decades ago.

This is, then, a new day for Amtrak, which is seeing record ridership amidst surging fuel prices and a population of people increasingly more interested in how they spend their time than how much time they save. To twenty-first century Americans, the rush from place to place is slowly giving way to an ability to be "always on" by way of 3G cellular connectivity to voice and data networks. In such a world, traveling by rail--where one can both enjoy the scenery and use a laptop immediately after sitting down, without having to wait for the captain to say that it's okay or turning it off in preparation for landing--is more appealing than a decade ago.

Will this new romance with rail continue? It depends. Amtrak is underfunded and understaffed, but the people it does have are also often undertrained and less enthusiastic than their counterparts in other developed nations. The easiest and most striking difference is versus VIA Rail Canada, Amtrak's equivalent to the north, and Amtrak President Alex Kummant would do well to look to them for advice on how to build a world-class rail service. As for the first-class service offered on Acela, it's not bad, but it could be better. For that, Mr. Kummant might consult with Amtrak's partner in the skies, Continental Airlines, whose BusinessFirst service regularly wins awards from experts and passengers alike.

Amtrak's time is long overdue. Now, it has what it needs to demonstrate that those of us who kept the faith through the dark times were right, and that it can be what we need it to be. Let's hope that we aren't disappointed.

Thursday, October 9, 2008

Virgin America focuses on luxury choices

Times are tough for the airlines. Oil has plummetted from nearly $150 per barrel to less than $100, and usually, that would be good news. But with the economy unraveling in what many consider the worst financial crisis since the Great Depression, airlines are now facing a challenge from the other side of the equation: fewer people flying, for business or pleasure.

A drop in passenger bookings isn't good news under any circumstances, but the stakes are particularly high for relative-newcomer Virgin America. Launched in (year), Virgin America styles itself as the ultra-hip airline with a younger staff, next-generation amenities, and innovative service (like letting you order a drink when you want one, rather than waiting for the drink cart to pass by). It's been an effective combination that has earned Virgin America plenty of kudos--but with a smaller route map and fewer established customers, how will this feisty company weather the current economic downturn?

The answer, at least in part, seems to be luxury. Hoping to lure passengers not only from rival low-cost carriers like Southwest but also from legacy carriers like United and Delta, Virgin recently introduced Main Cabin Select. Similar at first glance to United's Economy Plus seating, Main Cabin Select gives you the same style of seat as regular Coach but with more legroom and deeper seat pitch.

Whereas that's all that you get with United, though, Virgin America has taken it several steps further, offering an impressive list of amenities:
  • Priority check-in at the First Class counter;
  • No change/cancel fee associated with Main Cabin Select;
  • Pillows, blankets, headsets and water at every seat;
  • Complimentary food, snacks, and beverages; and
  • Unlimited use of the RED™ entertainment system, including premium movies and other features.

In effect, Main Cabin Select has become a mini-First Class. On the one hand, that's a little surprising, since Virgin America already has First Class seating. But in today's extremely challenging market, Virgin America needs every trick it can muster to compete with larger, more established carriers. If Main Cabin Select does what it's meant to do, then it's a great idea.

Oh, and there's also good news for those of you who are frequent flyers with Virgin America already: at long last, Virgin America has gotten its mileage redemption system in place so that you can use your hard-earned Elevate miles for free travel.

Tuesday, October 7, 2008

AirTran adds Cancun for 2009

AirTran Airways announced yesterday that it will add service to Cancun in early 2009. There are already plenty of ways to get to Mexico's premier party spot, but the news is noteworthy because this route will be the Atlanta-based airline's first route to a destination outside of the United States.

One daily round-trip will be offered out of AirTran's Atlanta hub beginning February 25, 2009, with a second daily round-trip added to and from Baltimore-Washington International (BWI) on March 7.

Monday, October 6, 2008

Sun still shines for Sun Country

With all of the bankruptcy announcements in the news these days, one could hardly be faulted for not noticing that discount airline Sun Country has joined the list of companies seeking protection from creditors.

More than half a dozen airlines have gone bankrupt this year. Historic Aloha, trendy all-business class carriers MAXjet, Eos, and SilverJet, and several regional carriers have vanished from the scene forever. Even Denver-based Frontier, which is still operating, is under bankruptcy reorganization.

But in each of those cases, the reason for the failure can be traced to high fuel prices caused by peak oil prices of nearly $150 per barrel. Sun Country is different; its decision to seek court protection stems from its founder--who was until just a few days ago also its chairman and CEO--being arrested on Federal charges ranging from mail and wire fraud to money laundering and obstructing justice.

A tiny airline that competes with much-larger Northwest Airlines and the many direct flights that carrier offers from its Minneapolis hub, Sun Country has nonetheless attracted a following for its combination of low prices and good service, as well as a selection of Minnesota-made foods that can be purchased onboard.

Sun Country's new CEO, Stan Gadek, says that he does not expect the bankruptcy filing to impact operations and that all flight schedules remain in place.