Washington Dulles finally gets a break – Frontier Airlines announces new services

by: Siva Vayali - May 14th, 2014   Filed under: Airlines, Airports Add Comment

Frontier Airlines (F9) has announced plans to start new services from Washington Dulles International (IAD) airport. The ultra low fare carrier will start nonstop flights to fourteen destinations, with the first being planned on August 19, 2014. All destinations, except Orlando (MCO) will be served anywhere between four times a week to six times a week. Orlando will be served daily.

While international passenger traffic has consistently increased every year with the arrival of new carriers, Dulles has been steadily loosing domestic passenger traffic to the close-in Ronald Reagan National Airport (DCA). Airlines have been shifting services from Dulles to Reagan National because of the availability of new slots as well as the sale of existing slots by US Airways (US) and American Airlines (AA) to get their merger approved. United Airlines (UA), which operates a hub at Dulles has trimmed its domestic services as well. The airport authority, which manages both Dulles and Reagan National, has been trying hard to bring in new domestic carrier at the airport. With a mega construction project to bring Metro rail to the airport underway, it is imperative to bring in new carriers to improve traffic volume at the airport.

Frontier sees an opportunity at Dulles as the airport has ranked as one of the most expensive airports in the country every year. Its low fares should bring in enough passengers to sustain the services.

It will be interesting to see how United would respond to this new development. Anyone remember Independence Air (DH)? United’s own contract carrier Atlantic Coast Airlines turned against it by taking a new avatar as Independence Air (DH) with a hub at Dulles. Oh, I remember that period. It was fun times for the travelers and the airport (Dulles became one of the top ten busiest airports in the country and home to the largest low cost operation in 2005). United matched Independence Air’s ultra low fares and made the later to bleed cash and eventually shut down. But, I don’t think, Frontier’s operations at Dulles is a threat to United. United operates a medium sized hub at Dulles with multiple daily flights to most East Coast destinations. Also, Dulles is United’s second biggest transatlantic hub (after Newark Liberty). With lots of corporate contracts and frequent flyers, United would easily hold its court.

Tags: , , , , , , ,

Win for Southwest and a setback for United Airlines – Houston Approves International Flights from Hobby

by: Siva Vayali - May 30th, 2012   Filed under: Airlines Add Comment

In a major win for Southwest Airlines (WN) and a setback for United Airlines (UA), Houston City Council today overwhelmingly approved to start international flights from Hobby Airport (HOU). Beginning 2015, Southwest plans to start flights to Mexico, the Caribbean and  South American destinations, pending regulatory approvals.

Southwest welcomed the decision saying that it would bring in additional jobs and millions of dollars in economic impact to the city. United Continental Holdings, the parent of United Airlines said that it is disappointed in the decision.

United contends that allowing international flights from a secondary airport like Hobby would drain passengers from the city’s main international gateway, George Bush Intercontinental Airport (IAH), which is also the biggest hub for the combined entity of United Airlines and Continental Airlines. United already indicated that if international flights are allowed out of Hobby,  it has to retrench 10 percent of the workforce in Houston, drop the proposed Houston – Auckland flight and put the $700 million improvement at IAH on hold.

As always, both airlines brought out studies to bolster their arguments. The Houston Airport System, part of City of Houston, manages both airports and already approved the decision.

There are supporting facts to both United and Southwest. United has invested heavily in IAH over the years, building a respectable route system to Caribbean, Mexico and South America. Southwest would bring down the pricing power in the market, there by reducing United’s operating margins. United maintains its Latin American hub in IAH and does not want to jeopardize its growth (even though much smaller scale than the massive American Airlines (AA) hub in Miami (MIA)).

Southwest argument of additional revenue and passengers to the city also makes sense.

Eventually, United has to bring down its operating costs in line with that of Southwest to make money on those routes. Otherwise, United would end up losing the battle to Southwest as most travelers on these route are price conscious.

Tags: , , , , , ,

American Airlines Bows to Pressure from US Airways – Agrees to explore all possible options

by: Siva Vayali - May 11th, 2012   Filed under: Airlines Add Comment

AMR Corporation, the parent of American Airlines today agreed to its unsecured creditors to explore all possible options including consolidation. The airline, in Chapter 11 Bankruptcy Protection, since November 2010, in a statement released today, AMR did not mention US Airways by name. But it is suffice to say that it is finally relenting to exploring the possibility of merger with US Airways.

American Airlines B737-800 - Courtesy: American Airlines

The statement said “The purpose of this collaborative joint agreement with the Committee is to reinforce and assure what we have stated before: what’s best for our company, our people and our financial stakeholders will be determined by the facts in a disciplined manner and process. And this includes whether American will choose to pursue any combination down the road. This is the charge of the board of directors and the leadership team to be done in close collaboration with the creditors committee. It is best for all that this process be very clear so that we are not distracted or diverted by anything that does not serve the best interests of all our company’s financial and other stakeholders. To be clear, American has committed to work in collaboration with the Committee to develop only potential consolidation scenarios and this agreement does not in any way suggest that a transaction of any kind or with any particular party will be pursued.”

As always we will continue to watch this developing story and report to our readers with detailed analysis.

Tags: , , ,

US Airways Pushes for a merger with American Airlines – WSJ

by: Siva Vayali - April 3rd, 2012   Filed under: Airlines Add Comment

US Airways is pitching a plan to some creditors of American Airlines for a merger, the Wall Street Journal reported online. According to the report, US Airways claims at least $1.5 billion could be gained in terms of revenue and cost savings.

If the story is true, there could be more stringent scrutiny from the anti-trust regulators and it could delay AA emerging from  bankruptcy.

We will follow this story closely and report if more details are available.

Tags: , ,

US Airways announces flights to Jackson, MS from Reagan but no details yet on the route for its long distance slot

by: Siva Vayali - March 5th, 2012   Filed under: Airlines, Airports Add Comment

I received few emails from our readers about announcement from US Airways about nonstop flights from Washington Ronald Reagan National Airport to Jackson, MS (JAN). I think they are under the impression that US Airways is utilizing the long distance slot to start service to Jackson. This is not correct. US Airways has not yet announced its plan for the usage of one slot pair permitted by DOT under the FAA Reauthorization Bill to start service to a destination exempted by the perimeter rule. The Jackson flight will be operated using the slots it gained by the slot-swap deal with Delta. I confirmed this with the US Airways Corporate Communications department.

[TABLE=8]

Under the FAA Reauthorization Bill, the four network careers (United, Delta, American and US) got exemptions to operate one round trip service to a destination beyond the 1250 statute miles limited by the perimeter rule. The careers did not get new slot pairs, but have to use one of their existing slot pairs to start this service. United, American and Delta already announced their routes for these exemptions.

Considering the fact that US Airways is the dominant career at Reagan National, it would take time to carefully evaluate its route options for the long distance slot. From Reagan National, it already operates three daily flights to Phoenix(PHX) and a one daily to Las Vegas (LAS). It would be very interesting to see how it would use the slot.

Tags: , , , , , , , , , , , , , , , ,

More long distance flights to Washington Reagan National – American to LAX and Delta to SLC

by: Siva Vayali - February 29th, 2012   Filed under: Airlines, Airports 5 Comments

The effects of the recently passed Federal Aviation Administration Reauthorization bill are already showing some positive signs for Washington’s Ronald Reagan National Airport (DCA). American and Delta announced new flights to the airport.

American Airlines yesterday announced a daily flight between Reagan National and Los Angeles International Airport (LAX) staring June 14, 2012. The flights will be operated by a 757 configured in two classes with 22 seats in First and 166 seats in Main Cabin. The route is already served by another daily non-stop from Alaska Airlines. The Los Angeles to Washington region flights are dominated by United Airlines with up to eight daily frequencies to between its hubs in LAX and Dulles and a daily flight between LAX and BWI. It has no flights between LAX and Reagan National. American operates up to three daily flights between LAX and Dulles. It would be interesting to see how United would respond to American’s new flight between LAX and Reagan National.

Starting June 7, 2012, Delta will be adding a second daily frequency between Reagan National and Salt Lake City (SLC). Though I haven’t seen a press release yet from Delta on this, I confirmed the news from its corporate communications office. This shows strong demand for the DCA-SLC route and Delta’s desire to lock in its status as the preferred airline between Salt Lake City and the National Capital Region. Delta already operates services from its Salt Lake City hub to all three airports in the Washington Baltimore Metro area: once daily to both Dulles and Reagan National and twice daily BWI. United operates a single daily frequency between Dulles and Salt Lake City. So does Southwest between BWI and Salt Lake City. With the addition of the second flight to SLC from Reagan National, Delta will reinforce its share between these sectors.

Reagan National Airport’s traffic is mostly O&D. The slots to the close-in, capacity constrained airport are strictly controlled by FAA and command a premium. The airport has set a passenger record for 2011 and this year will be another breakout year for many reasons: the recent slot-swap deal between Delta and US Airways would allow the latter to increase the service at the airport starting March 25; JetBlue announced additional frequencies to Boston Logan (BOS), Fort Lauderdale (FLL), Orlando (MCO) and new service to Tampa (TPA); the FAA reauthorization bill would eight new long distance flights.

Tags: , , , , , , , , , , , , , , ,

Etihad Announces Daily Service to Washington Dulles

by: Siva Vayali - February 23rd, 2012   Filed under: Airlines, Airports 4 Comments

Etihad Airways (EY) today announced its plans to launch services to Washington Dulles from its hub in Abu Dhabi (AUH), its fourth North American destination. The service will start from March 31, 2013 using Airbus A340-500, subject to regulatory approval. Etihad will join a growing number of airlines that offer flights to Middle Eastern region from Washington Dulles (IAD).

Etihad’s announcement shows that there is a strong demand from the Washington metropolitan area for services to Middle East. Etihad expects strong O&D traffic between Washington and Abu Dhabi, with less reliance on any connections, because its code share partner American Airlines has minimal carriage from Dulles (mostly to American’s hubs). Washington metropolitan region (which also includes Baltimore metro) has strong political, military and institutional ties with the Middle East and hence the demand for first and business class cabins should be high. The region also has large populations from Indian subcontinent and Middle Eastern countries, which should take care of filling the economy class.

In recent years, United Airlines and its Star Alliance partners have steadily added services to Middle Eastern and African destinations from Washington Dulles, making the airport a primary transit point to these regions. Qatar Airways has been flying the Doha-Washington route since 2007. It is a very popular route with travelers to Middle Eastern countries and the Indian subcontinent. United Airlines already operates daily flights from Dulles to Dubai, Kuwait and Bahrain (extension of Kuwait flight) and Accra. Recently United Airlines announced extension of its Dubai service to Doha. Qatar Airways already has code sharing agreement with United Airlines, with most of its connections to US cities routed through United’s Dulles hub. Ethiopian Airlines has been serving the Washington-Addis Ababa route for a while.Turkish Airlines is flying to Istanbul. And South African Airways is flying to Johannesburg. The only missing link is the Emirates’ service to Dubai. One reason could be to avoid competition with United Airlines which already operates in that route. But it is only a question of time before Emirates announces the Washington service. May be 2013?

An Offbeat Note: James Bennett is the CEO of Abu Dhabi Airport Company (ADAC). Before taking over that position, he was the President and Chairman of Metropolitan Washington Airports Authority (MWAA), which manages both Washington Dulles and Washington Reagan National Airports. May be it is a coincidence that Etihad has announced the AUH-IAD route?

Tags: , , , , , , , , , , , , , , , , , , ,

Lufthansa bringing in its subsidiaries BMI, Austrian and Swiss into Transatlantic Joint Venture

by: Siva Vayali - April 15th, 2011   Filed under: Airlines 1 Comment

Lufthansa is quietly bringing its European subsidiaries into the Transatlantic Joint Venture (formally called the A++ Joint Venture) it formed with United Airlines and Air Canada. The UK based subsidiary British Midland International (BMI) has joined the JV on April 1, 2011. Two other Lufthansa owned airlines Swiss International Air Lines (Swiss) and Austrian Airlines are set to join on July 1, 2011. Lufthansa is working to bring in Brussels Airlines also, but the date is not finalized because the airline is not yet completely owned by the German carrier.

Lufthansa Passenger Airline Group - Courtesy: Lufthansa

Lufthansa Passenger Airline Group - Courtesy: Lufthansa

Lufthansa wants to consolidate its position as a major force in the transatlantic market because competition is heating up. In addition to competing with other major European airlines, Lufthansa wants to prepare itself for the onslaught from the Middle East carriers, especially from Emirates Airlines, Qatar Airways and Etihad. Even though these airlines cannot directly serve the Europe – North America market, Lufthansa feels it is very important to offer the widest network choices so that it can maximize its revenue potential. According to one of its investor presentations, Lufthansa feels greatest threat from ever expanding Emirates Airlines. Bringing its subsidiaries into the Joint Venture will allow it offer wider choices for the corporate travel market.

US Airways Still not in the JV

Even though a part of the Star Alliance, US Airways is still a member of the Joint Venture. Its president Scott Kirby has indicated many times the willingness to join, but, I guess, United (still integrating the merger with Continental) is still not ready. The sooner US Airways joins the venture, the better for it. The reason is that all other major network carriers in the United States already have JVs – Delta Air Lines with Air France/KLM; American Airlines with British Airways and Iberia. US Airways will lose the revenue sharing opportunity if it takes more time to join the venture.

Tags: , , , , , , , , , , , , , , , , , , , , , ,

Thoughts on Lufthansa’s selection of Miami as the next A380 destination

by: Siva Vayali - March 31st, 2011   Filed under: Airlines, Airports 1 Comment

Lufthansa today announced that Miami would be the next US destination to be served by Airbus A380. The world’s largest passenger airplane would replace the Boeing 747 currently operated on the Frankfurt – Miami route.

Lufthansa A380 - Courtesy: Lufthansa

Lufthansa A380 - Courtesy: Lufthansa

Lufthansa’s selection of North American destinations for A380 is interesting:

New York JFK is currently served four times a week using A380. The JFK service will become a daily on A380 starting April 10, 2011 (this means LH will delay the resumption of A380 service to Tokyo Narita, suspended due to the recent Tsunami and Earthquake, for a longer period). San Francisco will be served using A380 starting May 10, 2011. Miami will get A380 service starting June 10, 2011.

The JFK service is a no-brainer. The interesting thing to note here is Lufthansa’s preference of Miami and San Francisco over Newark Liberty (EWR), Chicago O’Hare (ORD) and Washington Dulles (IAD), all Star Alliance hubs and major gateways for LH. As more A380’s join the fleet, these gateways would get the service, but right now, they are not included.

There could be several reasons for this. I believe the following reasons played a major role in the selection process.

1. Single daily flight is easy to upgrade: Miami, with just one flight per day, and virtually no connection traffic, gives Lufthansa the flexibility to switch the metal from B747 to A380. San Francisco, though a Star hub, is also served by a single Lufthansa flight. So, it is easy for LH to replace the B747 with A380. Newark, Chicago and Washington need multiple flights from Frankfurt, as Lufthansa connects majority of its US bound traffic from these hubs through Star partner United. From these hubs, Lufthansa needs multiple frequencies a day to provide better connection options to its frequent flyers.

The exceptions to this theory are Toronto (YYZ) and Los Angeles (LAX), both Star hubs with a single Lufthansa flight (though Toronto is served by 2 daily flights from its anchor Air Canada).

2. A380 better than B744 on non-hub cities: Operating an A380 is more cost effective than a B744. Lufthansa’s B744s have poor customer reception. Replacing them with A380 would provide a better chance to protect its turf in hubs dominated by other carriers (MIA is a good case – it could deter American Airlines from starting a competing service).

3. Alliance Partners have a say in equipment upgrade: United and Air Canada have a transatlantic joint venture with Lufthansa and the schedules at Star hubs are coordinated between these carriers for optimal connections. United, being the anchor at EWR, ORD and IAD, has to make sure parity of service quality with Lufthansa in these hubs. So, United may be less receptive to LH upgrading these routes with A380, because its own product would fall behind in quality. The same argument goes for YYZ and Air Canada.

[TABLE=7]

So, my prediction is this: the next Lufthansa destination for A380 will be Los Angeles, followed by Houston and Boston.

Newark, Chicago, Washington and Toronto will have to wait get their turns.

Moral of this analysis: sometimes, being a hub with multiple daily flights to a destination can be a drawback to get better service!!!!

Tags: , , , , , , , , , , , , , ,

Jet Airways talking to Delta, Air France and KLM – A gain for SkyTeam?

by: Siva Vayali - March 15th, 2011   Filed under: Airlines, Airports Add Comment

Jet Airways is reportedly in talks with Delta Air Lines, Air France, KLM and Alitalia to form a transatlantic joint venture with SkyTeam. As India’s largest and most respected airline, currently Jet does not belong to any of the major alliances. It has code sharing pacts with many airlines from different alliances.

Jet Airways Boeing 777 - Courtesy: Jet Airways

Jet Airways Boeing 777 - Courtesy: Jet Airways

Why considering a Joint Venture with SkyTeam now?

Ideally, Jet would like to join Star Alliance. It has strong relationship with Star through its code share pacts with Brussels Airlines, United, US Airways, Air Canada, and ANA. Majority of Jet’s European traffic is routed through Brussels Airlines. Jet uses Brussels Airport as a transfer point for connecting passengers between India and North America. It also has strong ties with Oneworld carriers through code share pacts with American Airlines and Qantas. Jet has no code share partner from SkyTeam, except with Alitalia through its recently launched Delhi – Milan Malpensa route.

SkyTeam Partners - Courtesy: SkyTeam

SkyTeam Partners - Courtesy: SkyTeam

So, why Jet would consider the option of joining SkyTeam or a JV? With Air India joining Star and Kingfisher Airlines joining Oneworld, Jet is running out of options. It has been reported that the Indian government was against Jet joining Star as it might dislodge Air India as a second tier partner. SkyTeam does not have any major airline from India in its kitty. So, the deal could be mutually attractive.

Is it good for Jet?

Jet Airways has built a nice little operation at Brussels Airport. It is an efficient operation with all flights arriving and departing within the same short window of time. This makes transfers easy. Brussels Airport, being small compared to other European hubs and a one-terminal facility, also helps (but, I have heard few complaints about passport control and security scrambling to handle high passenger volumes in short window of time). Code share partner Brussels Airlines (now part of the Lufthansa group) provides decent connections throughout Western Europe and Africa. Jet Airways can keep the revenue from lucrative North American traffic to itself as the later does not have flights across the Atlantic.

Joining an alliance with SkyTeam would involve Jet transferring its hub from Brussels to Amsterdam’s Schiphol airport, where KLM operates a mega hub. KLM offers much better connections throughout Europe, Africa and North America than Brussels Airlines. Delta Air Lines also has significant operations at Schiphol. This greatly expands Jet’s ability to offer connections. If Jet starts a flight to Atlanta, it would virtually put the entire North America under its map through Delta’s network.

But, the downside is that Schiphol has a much better transatlantic connectivity and competition than Brussels and how much control would Jet get on the transatlantic routes from there. Media reports suggest that SkyTeam is willing to allow Jet to takeover only one route from Amsterdam. Currently Jet Airways operates its own metal on Chennai – New York JFK, Mumbai – Newark, and Delhi – Toronto sectors, all routed through Brussels. It has plans to add more North American destinations in future. If Jet has to shift the hub to Amsterdam, would it be able to offer these routes? KLM serves to Delhi and Delta servers to Mumbai currently. From Schiphol, KLM and Delta pretty much cover the entire North and South American continents. Under these circumstances, what could Jet offer using its own metal? How the revenue would be shared? What would happen to Jet’s existing code share agreement with American Airlines? All these questions need to be answered.

A win for SkyTeam and a loss for Star Alliance

If this happens, it would be a major win for SkyTeam.  It was scrambling to find a partner in India. It could not ask for a better one than Jet Airways. Jet connects the length and breadth of India. SkyTeam instantly gains access to the second fastest growing economy in the world.

It would be a major loss for the Star Alliance. Star would be better served with the inclusion of Jet than the current proposed partner in Air India. The government owned Air India is in survival mode and it’s joining the alliance has been delayed due to several operational reasons. Air India is also financially bleeding, with massive debt and labor issues and it is steadily losing market share in both domestic and international routes. I don’t know why Star, especially Lufthansa, preferred Air India over Jet. One reason could be that, Lufthansa has a major presence in India and did not want a stronger carrier that could compete with it.

Tags: , , , , , , , , , , , , , , , ,