Flight Blog

 

We’ve received several questions about US Airways’ apparent interest in merging with American Airlines…first some background.

Last November American filed for Chapter 7 bankruptcy protection. American provides our airport with service to Dallas and Chicago. The question we’re being asked: if US Air and American merge, what will that mean for Springfield’s service to Dallas and Chicago?

Here’s the short answer — I don’t know. Trying to predict the outcome of airline mergers is beyond tricky. Now for the long answer…

Let's begin with a simple fact: US Air does not have significant status at either Chicago or Dallas.

US Air says a merged airline would have it corporate headquarters in Dallas, which is the current corporate home of American.  American is the No. 1 airline at Dallas/Ft. Worth International Airport. Would the combined airline sacrifice its No. 1 status at the 4th largest airport in the country? Not likely. That probably means our service to Dallas would be safe in a combined airline. Moving on to Chicago…

American is not the No. 1 airline at Chicago O’Hare. But would the combined airline want to reduce its presence there?  O’Hare is the second largest airport in the country. Its central location makes it a good hub for coordinating east-west passenger flow across the country. So, that probably means our Chicago service is safe in a combined airline. But remember — trying to predict the outcome of airline mergers is beyond tricky!

There’s really a bigger question to ask — is US Air serious about merging with American? Consider the following:

  • A few years ago US Air made considerable noise about merging with United, and then Delta. United ended-up merging with Continental; Delta merged with Northwest.
  • The current management team at US Airways successfully merged US Airways with America West. That was back in 2005. Even though that merger was seven years ago, the combined airline has yet to reach deals with its combined labor unions. As you read on, keep that point in mind…
  • US Airways has approached the labor unions representing many of American’s employees. Last week US Air announced it has signed agreements with three of those unions that, “would govern collective bargaining agreements…at the merged airlines.” The American's Allied Pilots Association union says that US Air has offered American pilots an immediate 5.5% raise.

That last bullet point sounds pretty good for US Air, doesn’t it? It apparently has the support of many American employees for a merger. But then, this tidbid came out in the Dallas Morning News:

The International Association of Machinists and Aerospace Workers put out word Tuesday that its members at US Airways aren't happy about US Airways' announcement that it has deals with American Airlines' three unions for a possible merger. District 141 president Rich Delaney called events "insulting" and "disrespectful" since US Airways hasn't been able to get a deal with its own unions…

As you can see, there are many, many elements in play here. And there are a multitude of reasons, besides labor, that could swing a possible merger one way, or the other. Is US Air serious about a merger? Possibly — or it could just be waging psychological warfare against an opponent airline.

 

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Apr 24 2012 Bad Trend, Good Trend BY adminTAGS Fares

 

We ran across this bit of gloomy news this morning:

"The cheap fares travelers enjoyed just a few summers ago are gone, killed off by a combination of an improving economy, rising fuel prices and fewer airline flights."

Read the rest of the story from the Arizona Republic.

And then there's this interesting story from the New York Times about the apparent comeback of travel agents:

"...in 2011 travel agencies experienced a second consecutive year of growth; their bookings account for a third of the $284 billion United States travel market."

This trend makes a lot of sense. We've been advising people for years that it's best to have a travel agent in your mix. In other words, don't depend entirely on online booking. A travel agent can often better deals than a booking engine.

 

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The nation's airlines begin reporting their first quarter profits today. Good news is not expected. The price of fuel is the killer -- up approximately 30% since this time last year.

While the news looks gloomy for the airlines, things are bright and sunny here in Springfield. Our airport finished the quarter with a 10% increase in total passenger numbers. Here are the numbers for the first three months of the year:

 

  • January: + 4.7%
  • February: + 16.3%
  • March: + 10.1%

An increase in passengers is always good news for an airport, but it's especially good right now. That's because we finished 2011 down 10%. The decrease was due mainly to the airlines providing 21.5% fewer seats in the market (or, in the jargon of the business, 21.5% less capacity).

The cut in capacity was not limited to Springfield. Small and medium sized airports across the country felt the pinch last year as the airlines shrunk their fleets in response to high fuel prices and the recession.

It would be easy to assume that our first quarter increase in passengers was due to a big capacity increase. That's not the case...capacity rose only 1.7%. So what's going on here?!

As is often the case in the airline/airport business, there are no clear cut answers. But here are some of the factors undoubtedly involved:

Here's the bottom line when it come to the local economy: employment is a key driver in airport passenger demand. If more people have a job, more people will fly.

While passenger numbers are up, we're not overly exuberant -- just cautiously optimistic. If there's one thing we've learned during this recession, it's that the swings in passenger numbers are wild and crazy. Take a look at the craziness since the first quarter of 2007:

Each dot represents a financial quarter. The numbers on the left represent percentage increase, or decrease, in total passenger numbers.

Talk about a roller coaster. In 2008, during the worst of the recession, our total passenger numbers were down 12%. That was the largest decrease in the airport's history.

But then, in 2009, the numbers leaped up 16%. Then, in 2010, they went down 2%. Along comes 2011: down 8%. And now they seem to be on there way up...again. Whew!

So, the news is good here in Springfield. But be warned: things could change quickly if fuel prices spike this summer (as many expect they will due to tensions in the Middle East). A big price spike would force the airlines to raise fares and cut capacity. That would mean fewer people flying from Springfield.

 

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Apr 18 2012 Strange, But True? BY adminTAGS Airlines, Delta

 

We've been following for several weeks the back and forth speculation in the business press about Delta Air Lines getting into the oil business...yes, you read right. The oil business.

This week a credible new organization, Reuters, took the story beyond idle gossip and rumor mongering...

"A deal for Delta Air Lines to buy ConocoPhillips' 180,000 barrel per day refinery in Trainer, Pennsylvania could be announced as early as this week, according to two sources with knowledge of the negotiations. The deal, which could help ease a potential shortfall in fuel in the East Coast this summer, would entail the airline partnering with JP Morgan to help run the idled refinery."

At first blush, the notion of an airline buying an oil refinery may seem like shear folly. Indeed, it may be, but consider the following:

  • The price of fuel is killing the airlines right now. They've raised fares to compensate; they charge for bags; they've reduced the number of flights in the air. Yet, many airlines are expected to report first quarter losses.
  • The cost of fuel is one thing the airlines have little, if any, control over. Wouldn't it be nice to have some control over it?
  • According to Reuters, "Delta spent $12 billion on jet fuel last year, with its average pricing rising by 31 percent to $3.06 a gallon. Last year, the company's aircraft consumed 3.86 billion gallons or just over 250,000 barrels per day of jet fuel."

Would owning a refinery really lower the cost enough to make a difference?

Suppose that owning a refinery lowered the airline's overall fuel cost by just five cents a barrel. Do the math: 250,000 barrels a day, times 365 days a year. That's 91,250,000 total barrels a year. Now multiply that times a nickel. That's a savings of approximately $4.5 million. If Delta makes the purchase, it will be a very interesting experiment.

 

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Apr 12 2012 Allegiant Soon Flying to Hawaii BY adminTAGS Allegiant

 

Allegiant says it will begin service from the mainland to Hawaii, beginning in June, from Fresno, CA and Las Vegas. This morning's announcement ends two years of speculation about which mainland cities would get the proverbial prize — Allegiant first announced its intent to fly to Hawaii in March of 2010.

Allegiant president, Andrew Levy, says, "Service to Las Vegas and Fresno reflects a moderate growth plan by our company. With the addition of the four aircraft we have acquisitioned, we plan to expand service to other mainland cities in the future. We anticipate the service will be very popular, especially when customers take advantage of Allegiant's low pricing when bundling their air, hotel and car rental package."

As many of you know, Allegiant provides our airport with non-stop service to Las Vegas. How much would a Springfield - Vegas - Hawaii fare cost, vs. fare from Kansas City to Hawaii? Let the comparison shopping begin!

 

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