Another contender for the title of 'best-financed' US start-up airline has emerged; this one is Skybus, a would-be 'ultra-low fares' carrier based at Columbus, Ohio. In the planning since the late 1990s, the carrier recently told the Transportation Department that it had raised almost $70 million more, for a total of "approximately $160 million in paid in capital plus assets of about $100 million". That would rival very similar amounts at JetBlue ($130 million) and at Virgin America ($177.3 million). Skybus announced an Airbus order last year worth up to $4 billion. Its most recent Transportation Department filing says that Skybus might be able to start service in May, although it has yet to name its destinations. The carrier has won DoT clearance to start flying but has yet to gain its equally important FAA start-up permission, and has had to ask the DoT not to suspend or withdraw its permission while it waits for FAA permission. The DoT set a time limit on its new carrier licenses after it found some hopefuls dallying too long or trying to raise more money.
Americas: March 2007 Archives
In Canada, the bravely optimistic four-and-half-year-old Harmony Airways says it is shutting down by next month, a victim perhaps of its own ambitious plans to stress very high levels of service with low fares. And in Mexico, Azteca, a low-fare carrier, also shut down, but not voluntarily.
Harmony was begun by a Vancouver entrepreneur who was infuriated after he was stranded in an airport by a large airline. The heir to large tobacco fortune in China, founder David Ho vowed to do better. With a route in the heavily travelled Vancouver-Toronto corridor and featured flights between Canada's west coast and the Hawaiian Islands and Palm Springs Calif., Ho stressed legroom and in-flight service. He also had brave plans to begin China mainland service. But the domestic service ends at the end of March and other flights end 9 April. Harmony had also operated from Vancouver to Las Vegas, Oakland, and New York and other destinations, but pulled out of new markets quickly if it didn't like the initial reception. In fact, Harmony's own route map indicates scheduled service that it had already abandoned.
Brazilian low-fare upstart Gol is making it very clear that its deal to buy "New Varig" is in no way exposing it to any of the nastiness connected (big losses mainly) with "Old Varig".
"It is extremely important to note that VRG is in no way associated with the old Varig," says a breathless press release. This week Gol announced it had agreed with the owners of VRG Linhas Aereas to buy New Varig for $320 million.
Virgin Atlantic is not worried about new competition from long-haul low-cost or all-premium start-ups.
The carrier's group commercial director, Willy Boulter, was asked about the impact start-ups in the new long-haul, low cost and all-premium sectors at a small press conference yesterday in London following the signing of a new alliance agreement with Japan's All Nippon Airways (ANA).
Virgin Atlantic is already competing with Oasis Hong Kong Airlines between London and Hong Kong and AirAsia is planning to also launch a long-haul low-cost carrier that aims to serve London by year-end.
"It is an interesting development," Boulter says. "But there are structural differences between the short-haul and long-haul markets.
Virgin Atlantic is not worried about new competition from long-haul low-cost or all-premium start-ups.
The carrier's group commercial director, Willy Boulter, was asked about the impact start-ups in the new long-haul, low cost and all-premium sectors at a small press conference yesterday in London following the signing of a new alliance agreement with Japan's All Nippon Airways (ANA).
Virgin Atlantic is already competing with Oasis Hong Kong Airlines between London and Hong Kong and AirAsia is planning to also launch a long-haul low-cost carrier that aims to serve London by year-end.
"It is an interesting development," Boulter says. "But there are structural differences between the short-haul and long-haul markets.
Those pesky liquids can create real bottlenecks, as it were, at the airport, especially since the Transportation Security Administration has really put the squeeze on people trying to carry liquids or gels through airport security checkpoints. Remember that 'liquids' can mean many things, from water to explosives to that most common type of airborne liquid, BOOZE. And it's booze, the kind that holidaymakers buy at duty-free liquor stores to take home, here's the problem: say you're on gorgeous sun-drenched Iquanaera, the beautiful Caribbean island and former Swiss colony, and on the way home you buy some Iguoo, the island's unique cheese-flavoured liqueur with holes in it. Your IquAir flight gets to Miami, you clear customs and then go over to the American terminal to catch your flight back to Sioux Falls. Whoops...the TSA people won't let you through the gate to get to you domestic connecting flight because you're carrying a liquid or a gel, namely that bottle of booze. It could be a dangerous thing. So, if the TSA-ers are in a good mood, they might they might let you get back to the counter wait another 40 minutes and check it, if you have an extra bag, or you might just say to yourself, 'hey, bleep it' and walk on through without bringing that delightful cheese aroma home to savour.
There are only two facts you need to confirm about today's Open Skies agreement between the EU and US.
One: The UK has managed to delay implementation from October 2007 to March 2008. It bowed to pressure from British Airways to the delay so BA could be in the new London Heathrow Terminal 5.
Two: If the second stage of the deal is not signed by the end of 2010, EU states will have to right to reimpose market access restrictions. This was another UK demand. In effect, this means that if the US does not allow the lifting of ownership and control limits on its carriers by then access to Heathrow could be restricted once again.
All the rest of the package has been well flagged.
For reactions to the deal, and announcements on what several carriers intend to do, a simple Google search will give you a blizzard of results.
For the full text of the of the announcement from the UK's Department of Transport and the EC see below.
It ain't easy being a Virgin: after two years of trying to get off the ground, Virgin America has finally approached the departure gate, sort of. The carrier, which either is or isn't the brainchild of Virgin Atlantic founder Richard Branson and either is or isn't Branson's first US franchise, depending on who's arguing. The airline has sought US approval since 2004, and has either been rebuffed by regulators, or at least rebuffed after they had ignored it for months running. The problem: Branson had money in the new carrier and had lent his name to it, and even though Virgin America was based near San Francisco and had hired US airline executives, opponents argued that it failed the long-standing US limits on foreign non-citizen control of a US-flag carrier. Other carriers, ennobled only in their desire to see the law upheld and eager to meet any competition in the marketplace rather than in the regulatory arena, led the opposition, while organised labour in the form of the Air Line Pilots Association and the Association of Flight Attendants opposed the Virgin plan to hire people.
After a rejection right round Christmas, the airline reworked its finances, removed any veto power that Branson and his allies might have and established a voting trust for Virgin Atlantic's shares, gave a greater share to US investors, gave the US investors more control of the board and said Virgin America chief executive Fred Reid would resign if that would satisfy the regulators. Sorry, Fred, but they'll take you up on; that the Transportation Department said that Fred, the former number two at Delta and before that the number two at Lufthansa, would have to depart because he "might be 'beholden' to foreign interests". The changes that Virgin America has already made though satisfied the agency to give a tentative okay to the carrier, which hopes to starts flights by this summer. http://www.dot.gov/affairs/dot3007.htm
Sometimes the best way to deflect attention is to seek it. If you've done something embarrassing, you can keep people from making fun of it by admitting it up front, at the beginning of the presentation or interview. Doug Parker, the chief executive of US Airways knows this, and he showed that he knows it when then airline had about 40 reporters in a few weeks after Doug pleaded guilty to drunken driving on the night the airline's unsolicited bid for Delta Air Lines fell through. So US Airways Media Day began with Doug coming to the front of the room, welcoming people and then telling them that he was embarrassed, chastised, humiliated, and would never do it again, all in his very sincere, almost boy scout-like manner. Fair enough. The journos were quiet and no one asked him about the incident or even if the pledge never to make the same mistake again applied to the driving incident or the Delta bid
Enough said...sort of. As the presentations drew to a close, the airline served lunch from one of its local partners, a restaurant chain called Z Tejas Southwestern Grill, and, in return for the food, US Airways let the chain's chief executive, Steve Micheletti, stand up and spiel a little about his company. One of the chain's claims to fame is its margarita, a combination of tequila and triple sec to which it adds the Chambord raspberry liqueur. Z Tejas sells "more margaritas than anyone else in the Valley", Micheletti said, referring to the 'Valley of the Sun' in which Phoenix sits. He then urged reporters and others to head on over to a Z Tejas restaurant a few blocks away and test their margaritas. A voice was heard from the back of the room, adding, "walk. Don't drive". Yep, Dougy. A funny guy.
Skip Barnette, the chief executive of Caribbean Star, has responded in detail to comments made by Peter Davies, the chief executive of Caribbean Airlines, at last week's Network route planning conference about the need for a single Caribbean carrier to represent the region.
The comments from Davies are to be found on the Airline Business blog, while Skip's are printed in full below.
Other news about Caribbean Star sees the carrier finalising its merger with Antigua-based Liat, whose own chief executive Mark Darby has been talking about life as a Caribbean airline CEO in the pages of Airline Business.
Now not all of the 39,000 plus hits on Google when you type Randy Baseler into its search box are of the Boeing variety, but I'm guessing most of them are. For Mr Baseler has been a Boeing quote fixture for years. We reporters always turn to Randy for comments on almost anything regarding Boeing aircraft programmes, and of course good old-fashioned rival bashing. Nothing nasty mind you, Randy is far too much of a gent for a fist-fight, but he'll make his point, backed up with some tasty stats.
The news here is that Randy is retiring as Boeing's marketing guru. His weblog spells out his reasons. It's been a good read over the past year or two. Check it out, not least for his intriguing links, in which Elton John features heavily. As does a sombre bloke carrying a pitchfork.
Randy will be hard to replace. He's been an ever-present through Boeing's thick and thin. Most recently through its hard period, where Boeing had almost as many models as Airbus does now, some just as irrelevant. It also had plenty of false starts with potential models, something it is better at than Airbus.
But Randy now has a cool marketing story to tell, and goes out telling it at the top. Boeing's product range has a coherent feel, spanning sizes and ranges in sensible steps. It also has the 787 - everyone raves about this aircraft.
So, sad to hear you're leaving Randy. It has been a pleasure working with you. Good luck....
Doug Parker the youthful genial chief of US Airways got himself some unwanted publicity the other week, when Arizona police pulled him over for speeding and then decided that he as also driving while under the influence. Airline Business didn't say anything in large part because it's not really a job-performance issue and in any case Doug is a straight-arrow and has shown himself to be a straight-laced guy for years.
But now as the airline prepares for its first media day since its bid for Delta Air Lines fell through, we couldn't help but notice that the US Airways PR department had sent out invitations to the press for a little entertainment the night before. The centrepiece of this entertainment: youthful, genial Doug Parker and other top US Airways executives will gather with the press for food and drink at a miniature-car racing park, don crash-helmets and fireproof suits and get into little go cars and drive around as fast as they can. Here's the race-track's site, as sent out by the airline: http://f1racefactory.com
AB officially believes in jollity as much as the next big media organisation, but for a company trying very hard to help people forget that its chief executive just pled guilty to driving violations, are they sure that driving very fast in little (or even big) cars sends the right message?
Got your attention? Seriously, folks this item IS about sex. Sex and virgins. One of our favourite gossip columnists, Cindy Adams of the New York Post, is reporting that Virgin Atlantic has signed up three sex symbols, one of them from the twenty-first century, to do a five-year, $36-million media campaign touting the virtues of Virgin.
Among them is Uma Thurman, still a hot property, but the others are alleged to be Pamela Anderson and Kate Moss, the former unheard of, except for her husband's must recent drugs arrest, the later unheard of, except for her own most recent drugs offence. As Cindy says, it "must be real hard to find a decent virgin in Hollywood these days". http://nypost.com
Perhaps a serious note is in order: Virgin Atlantic has always been a 'sexy' brand because it's 'cool' as in 'Cool Britannia', relying on the sly hint in its name, clever jokes about products and services, and occasional personality tie-ins such as the time fashion model Claudia Schiffer christened Virgin's new A340-600. But this had better be a clever campaign, because if it's not and it's just trotting out some ageing models, Virgin runs the risk of prompting the question, 'is the brand getting tired?'
Russ Chew, the former American airline flight operations director who spent almost four years trying to make the FAA's Air Traffic Organisation run or at least run better, said a few weeks back he would leave for the private sector. And a few weeks after he said he'd be leaving the FAA, he announced what would seem like dream job: going to Hawaii to run Hawaiian Airlines daily operations as executive vice president. Alas, paradise wasn't good enough for Russ, 54, who now says that he will forsake the fair isles of the Pacific for a somewhat less sunny shore: he's going to Queens, New York, home of troubled JetBlue, to run the low-cost carrier's daily system as chief operating officer.
Chew starts 19 March, about a month after the now infamous meltdown that left JetBlue planes on the runway for hours, stranding hundreds, delaying thousands more and getting seven-year-old JetBlue the worst kind of public attention. The fiasco, which lasted for days, forced jet blue chief executive Dave Neeleman to go on an apology campaign (Neeleman was still apologising, last we looked) and spurred a national move for passenger bill of rights. Chew will report to JetBlue's number two, president Dave Barger, who had held the chief operating officer title.
Whether this will be enough to put the shine back on the airline's reputation as a darling of Wall Street and a passenger favourite is far from clear. The carrier has lost money as it struggles with increasing competition on its Northeast-Florida routes and on its transcontinental routes, competition from reinvigourated legacy carriers such as Delta and US Airways on the north-south routes and from United and Continental on the east-west routes. Its plan to add smaller cities to bulk up network synergies has stumbled as the new aircraft type it introduced for that strategy, the Embraer E190 100-seaters, have suffered significant teething pains, including software problems that have forced JetBlue to take its 25 E-Jets out of service two at a time and send them to an Embraer facility in Nashville for software fixes. It expects the planes to be back in service by May, when business really gets busy. Until then, JetBlue has arranged with ExpressJet to serve some of its routes such as Boston Logan and both Buffalo, NY, and Washington Dulles; and flights between its New York JFK hub and both Columbus, Ohio, and Richmond, VA. The ExpressJet fleet is composed of little Embraers in the 50-seat range, which - unlike the bigger E-Jets - are just plain not liked.
Everyone talks about getting more money from the passengers. Airline thinkers have spoken and speculated for a long time about the a` la carte model of airline faring and pricing, and a few carriers have begun to adopt this philosophy; RyanAir, Aer Lingus, and Air Canada have shown it works. It does bring in money, and one carrier, Allegiant Air, told Airline Business's Network 2007 conference this week that its business model is based on ancillary revenues that it brings in by unbundling the traditional all-for-one-price vacation package model. Allegiant's chief executive Maurice Gallagher told network that the carrier derives almost $19 per passenger in ancillary revenues, from such add-ons as a hotel room or rental car.
Now a fairly significant low-cost carrier, Spirit Airlines, has taken the step in a little different direction with what it calls "a customised travel experience". The South Florida-based low-cost carrier, which serves some 30 airports in the US, the Caribbean and Latin America, now offers its "Standard Ultra Low Cost Carrier" product and its new menu of options. http://www.spiritair.com
Both menus come in the company of much lower fares, fares that will be as much as 40% lower on many longer distance and international routes. Starting in mid June, the airline will charge for seat preferences in its BIG FRONT SEAT program, charging for all checked bags and for anything people eat or drink on board (beyond water). People who book on line will have to pay $5 for each of their first two checked bags while those checking in at the airport would pay $10 a bag; and after that, a third, fourth, or fifth bag will costs $100 each to check. Right now, Spirit allows a first checked bag for free and charges $10 for a second checked bag. The carrier, which started out in wintry Detroit but moved to South Florida in at the turn of the century, will also offer discounted airport parking, travel insurance and other services - for a fee. This is the farthest any US carrier has taken the concept, says consultant Bob Mann of R.W. Mann and Associates. He says, "If the Southwest model was exported to Europe to inspire RyanAir, then this represents a reimportation of the RyanAir thinking to the US". Mann notes that American Eagle had tried charging a dollar for the traditionally free soft drink on flights within California but gave up on the program, while America West, at the time it was integrating the US Airways system and taking on its name, considered imposing a charge for kerb-side check in of bags. Even though passengers may very well resist paying for a soda or coffee, the larger a` la carte thinking is here to stay, he says. http://rwmann.com
Allegiant Air chief executive Maurice Gallagher had good news for the over 100 airports attending this week's Network 2007 route planning event, organised by Airline Business.
Gallagher revealed at Network plans to add 50 cities over the next five years. Given Allegiant's unique model of flying where no one else flies, Gallagher's promise should translate into critical new business for dozens of small US airports that are eager to attract more services.
Peter Davies thinks he has a solution for the continuing financial woes of Caribbean carriers.
The chief executive of Caribbean Airlines, which in January succeeded BWIA West Indies Airways as the flag carrier for Trinidad and Tobago, would like to see one airline for the entire region. And he used Airline Business' Network 2007 route planning event to air for the first time his bold plan to lead an initiative to establish one carrier for the entire region.
"There should be one airline," he told airlines and airports attending the opening session today of Network 2007 in the Tampa Bay region of Florida.
Well, maybe there's news and maybe there's not. It's hard to tell when stories come across the wire screaming 'breakthrough' and 'landmark' but have no details. That's just what happened the other morning when stories from Brussels - long, fully developed stories, not news flashes - popped up saying that the US and the EC had broken through objections and signed a landmark open skies deal. No details. As they day wore on, few details emerged, and the reactions that came were 'sounds-like reax'. (As in "it sounds like it's OK").
Giovanni Bisignani of IATA said it sounded OK but he'd like to see details, http://www.iata.org, while Jim May of the Air Transport Association said it sounded good and he looked forward to "developing a more complete understanding of what is envisioned". http://www.airlines.org Association of European Airlines Secretary General Ulrich Schulte-Strathaus was more blunt: "Bearing in mind that this is the eleventh round of these talks, it is clear how delicate the negotiating process has been. Some fairly fundamental issues needed to be resolved". http://www.aea.be
When you get reax like that, you know that no one knows what's going on. A few details have emerged but even they are far from detailed; while Fifth and Seventh Freedom rights are involved, the thorny issue of foreign investment in US airlines, the issue that scuttled the last breakthrough landmark deal, remains largely open and to be resolved, as best we can tell.
The Midwest/AirTran takeover battle is getting more and more spirited, and that's a polite way of saying its getting dirty. The other day, AirTran promised to build up its Milwaukee operation if it wins its $345 million takeover for Midwest; Midwest chief executive Tim Hoeksema said he would set the record straight on AirTran promises and got quite pointed in the analysis, accusing AirTran of breaking promises left right and east and west. AirTran, he said, had made promises to communities such as Dallas/Fort Worth that it would come in strong and stay strong, only to pull down flights; this, the Midwesterners argued, proved that AirTran at best over-promised and at worst had left a "trail of broken promises".
Well, AirTran has found one defender, and an unsolicited one at that, in Fred Krum, the genial director of the Akron/Canton Airport in North-eastern Ohio. Fred called up AB to tell us that AirTran was run by "honourable guys and great partners. They have kept their word to us on everything they've promised and they have been great to work with." AirTran is the largest airline at CAK, as the airport is dubbed in its FAA code, and is largely responsible for making the airport a strong and surprisingly successful competitor to the giant Cleveland Hopkins airport just 50 miles away. "They've made this airport", Fred says, noting that none of the AirTran routes had been subsidised.
Fred has a blog (www.akroncantonairport.com) in which he makes an interesting point about the airline/airport relationship: "We have never interpreted starting a new market from CAK as a guarantee to continue it forever. Sometimes they don't work. The only guarantee we have from each other (airline and airport) is the promise for both of us to work hard to make it work. AirTran has always done this. Making air service a success is the obligation of both the airport, the community and the airlines. The airline bears all the risk if it doesn't work out. If the community doesn't support the service, then who didn't deliver on the promise, the airline or the community? No airline has a duty to continue something that loses money".
And Fred stressed that no one at AirTran asked, sought or solicited his help in the dogfight. CAK went so far as to put a statement out there on the Web, noting that it wasn't taking a position on the merger proposal, but just wanted to set the record straight on how one airline sets the record straight. From our point of view, taking a stand they way CAK has, or indeed the way the Milwaukee community has, is the way an airline relationship with its airport and its home town is supposed to work, and maybe standing up for what you believe is as important as what you believe.
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