Archives - October - December 2009

Hot Flash  - December 28, 2009
More Proof The 9/11 Bad Guys Are Still Winning

They bang on our cage. We chase our tails and jump into the water dish.

If we keep this up, we may really put Bin Laden down. He could die laughing.

Sorry if it goes against the consensus. Sorry if it isn't pleasant. But not sorry if illuminating common sense offends a confederacy of insiders in Washington who have tolerated years of klutz decisions, sloppy bureaucracy, and made billions pandering to policies that they know are stupid.

Unfortunately, The Obvious Isn't. Let's get this straight, and underline a couple of pertinent points. A clown who was known to be a suspected terrorist is allowed to board a Delta flight at Amsterdam. We're talking about the Dutch Amsterdam, not the lovely little town in the Mohawk Valley west of Albany. We're talking about a place in a foreign country. We're talking about a security failure in a sovereign nation across the sea. (Note well: a security failure. Not a screening failure, which is what seems to be the myopic focus of the media stories and, apparently, the oh-so-concerned politicians in Washington.)

Reportedly, this suspected terrorist took his comfortable seat on the A-330. On approach to Detroit, he attempted to set off an explosive device strapped to his leg. He was subdued. The airplane landed.

Okay, Let's Find Our Tails & Start Chasing. Immediately, the international consortiums of security organizations jumped into action.

• Passenger screening was to be stepped up. Presumably, more pat-downs. More trace detection.

• Passengers were to be confined to their seats within an hour of flight arrival.

• Depending on airline and country, some carriers immediately restricted carry-ons to one piece only.

• At least on Lufthansa, the policy as of yesterday was nothing on passenger laps - even a pillow - an hour out.

• Some carriers turned off the in-flight map displays - mustn't let terrorists who idiot "security" processes in Amsterdam let on airplanes know their celestial address when they decide to launch off to meet the 29 virgins. (Yes, while it's politically incorrect, they guy was a terrorist-intent Muslim. Same with the guy at Ft. Hood, regardless of the fact our transparent president went out of his way to obfuscate it.)

• Two members of Congress - one in each house - immediately called for hearings into the event. Yessir, that'll have the bad guys looking for a safer cave in Pakistan. "Golly, gee, Achmed! Head for cover - Senator Rockefeller's on the case!"

Okay. Meanwhile Back In Amsterdam. Let's again illuminate the event: A known terrorist successfully got an explosive device onto his smarmy body, and got onto a flight to the US, boarding at Amsterdam. Now, think this though:

• Ya really think a guy who was smart enough and connected enough to get his paws on PETN explosive was dumb enough to take the risk of sneaking it through security screening, strapped to his leg? Or in his carry-on? Remember, the guy is a suspected terrorist, and it's not unlikely he knew it.

•  Ever think maybe, with all this in mind, it wasn't a screening failure - but a major airport security failure? He didn't just go down to Radio Shack and buy a handy-dandy amateur Blow-Up-The-Airliner kit. He didn't do this alone. And it's not outside of possible that he had inside help at the airport. Not real sure about AMS, but back-door security at large US airports isn't anything to write home about, either.

But instead of looking to harden all areas of security, our glorious leaders are calling for more stringent screening. The idea is to make it as hard as possible for passengers to travel, in - here's the latest buzz-term - "an abundance of caution" to make things safe.

Whatever We Do, Don't Learn From The Past. More correctly, it's abundance of the ineffective reactive bureaucracy we've seen since well before 9/11 - the same unaccountable bureaucracy that allowed 9/11 to happen. Instead of dealing with real security issues, aviation is being protected by a Charmin-thin charade of passenger screening, with insufficient reliance on thinking like a terrorist.

Taking blankets away from passengers an hour out of Motown ain't going to do diddly to fix the issues that let a suspected terrorist with a bomb on board a flight at Amsterdam. It ain't going to do anything to get to the real problems. But it's great eyewash that the public and the media swallow like goldfish at a drunken fraternity party. We've got over eight years of successful tail-chasing.

Who can forget the more stellar performances:

• Norman Mineta, DOT Secretary, dithering immediately after 9/11, "ordering" airliners out of the skies only after some airlines had unilaterally done so.

• Mineta, again, not having any clue on what to do, demanding wider powers from congress. A regular latter-day Wesley Mouch. (Google it if you have to. And then catch up on your reading.)

• George Bush, taking charge. Stationing National Guard at airports. But no, not out on the field, checking perimeters. No. Standing like easy-target mannequins at security checkpoints with rifles - not real great close-proximity weapons, but hopefully un-loaded. Wasted money, useless security. But the public and the media just loved the symbolism.

• Secondary gate screening - random. Got Al Gore twice one day, according to reports.

• TSA Administrators that re-defined the concept of political appointee. The first guy - a buddy of W's daddy - immediately spent $400K. Decorating his office. Another disappeared from view after a teenage kid slipped demo stuff in a lav on a Southwest plane, e-mailed the TSA, and was ignored. The last one in the Bush regime ran a horrid show, based on screening failures and GAO reports. He just cleared his mantle for a trophy awarded by some consultant consortium, lauding his "excellent work". Great standards guys. Don't bother to ask why consultants are sometimes considered to be the business equivalent of an organ grinder's monkey.

• Jane Garvey, the FAA administrator, was found red-handed ignoring security problems, and went through the 9/11 Commission hearings doing the worst stumble-bumble since Frank Pantangele's Senate performance in Godfather II. Testimony from FAA Red Team inspectors regarding Garvey blowing off security warnings was left out of the final 9/11 report. Don't want to embarrass any political parties, see. But the Co-chairmen did cash in on a book deal.

• Know where Garvey is now? She done real good, as they say on the farm. She's on the Board of Directors of one of the very airlines that had two airplanes hijacked on 9/11. Not a peep from the carrier's employee groups, either. Sure, 9/11 victims are just so respected.

• The TSA? It's now a huge bureaucracy that can't maintain security of its own sensitive manuals.

• And now, since Amsterdam had a security problem, we're going to increase the pointy-object patrol.

No, friends, we are not safer. And the reasons are that we don't learn from the past. And we tolerate incompetence.

Just like before 9/11.

 

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Update: Airports:USA DataFlash

The DataFlash reviews the pitfalls of letting T-100 load factor data fall into amateur hands, and reviews data regarding US-LHR traffic. Click here to review.
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Hot Flash - Monday, December 21, 2009

LaHood's Tarmac Delay Dictum

Not worth much comment. Except, a) most "tarmac delays" are due to conditions outside the control of airlines, b) if LaHood had the integrity to state the facts, he'd note that most "tarmac delays" are the result of the inability of his ATC system to handle the nation's air transportation needs, and c) there are very few such incidents.

But the most important point to make is that the airline industry failed miserably to articulate the facts. This new set of expensive regulations are a direct result of the industry not protecting itself - instead of knocking on congressional doors for the past 15 years politely asking that the FAA fix the ATC system (which hasn't happened) airline CEOs should have done what we recommended during congressional hearings in 1994 - form a Conga-Line into the FAA Administrator's office and demand results.

Now it's official. The airline industry is responsible for tarmac and other delays. By not standing up, they've copped to a plea. And it's just the start.
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There's A Reason Foreign Governments Want A Piece of The Action
Airline Health: Better In The USA?

IATA last week predicted that the global airline industry in 2010 would produce another $5.6 billion in red ink, while seeing a jump in passenger traffic of 4.5%. These are sound numbers.

A lot of media stories understandably assumed this applied to the US airline industry, too. In fact, it doesn't. The fundamental revenue structure of US airlines - and hence their fleets and operational strategies - are very different from most carriers elsewhere in the world. Unlike other regions of the world, US airlines are postured to make a dollar or two in 2010, while still carrying fewer passengers than in 2009.

We've Got Fresno, Bangor, Tulsa, and Lincoln. They Don't. The reason for the stark difference between the forecasts for US carriers and airlines elsewhere in the world is simple. The USA domestic market. No other country has anywhere near the domestic traffic flows as does the US. Eventually, China will, but that's a long time off. Carriers in most other parts of the world are far more dependent on international - and predominantly long-haul international - revenues. So that means they are vulnerable to a whole set of market variables - high sector costs of bigger jets, more exposure to the effects of things like SARS and H1N1 scares, and the need to operate into airports that have costs and landing fees that would make a loan shark blush.

We've Got A Domestic Hub System. They Don't. Also, US carriers don't all face a one-for-one relationship between a capacity reduction and a like reduction in passenger revenues. When American cuts one of its LAX-ORD nonstops, for example, that doesn't mean it will lose all of those passengers. Many of the AA LAX-ORD locals may shift to one of the carrier's six or seven other LAX-ORD nonstops. Connecting passengers can also be shifted to AA flights through DFW. In short, US carriers can cut lots of capacity, and at the end of the day not take a huge revenue hit.

Compare and contrast this to AA's colleague carriers in other parts of the world. Typically, cut in frequency means a total cut in a market revenues because many long-haul international markets are low- or single-daily frequency. If China Airlines cuts out TPE-LAX, it leaves the spoils entirely to the competition, not to mention an expensive 747 all dressed up with no place to go. So they probably fly it, even if it's only half full, and lose less revenue, but still lose money on the deal.

More Flexible Revenue Streams. More Flexible Fleets. We can look at airline fleets in different regions of the world, expressed in average seat capacity. One region sticks out - North America.

North America includes the US, Canada and Mexico, but the number is primarily driven by US carriers. It's the result of the smaller units of capacity necessary to meet a US domestic demand of over 440 million passengers. (Note - that's passengers, not enplanements.)

US Airlines May Make Money Next Year. They Won't. Airports:USA passenger projections, and the Boyd Group International Global Fleet Demand Forecast, both point to US carriers seeing the opposite of the IATA global projections. Declining traffic, but bottom lines at or very close to being black, assuming fuel prices do not again head for the outer rim of Jupiter.

First, there are no fundamentals to indicate that passenger demand will increase in the US in 2010. Quite the opposite - unemployment isn't getting better. Banks are still failing (which can affect consumer confidence) and outside of funny-money government games, the economy is still faltering. The Airports:USA forecast: passengers down 3.2%, best case.

Second, the US airline industry has generally been cutting capacity ahead of falling demand, and managing yields downward to adjust the process. Hence, maintenance of high load factors. Hence, fewer airplanes in the fleet - about 200 fewer in 2010. So we come to this: there won't be capacity to accommodate an increase in demand, even in the off-chance it manifests in 2010. But there is plenty of additional capacity that US carriers can dump in the form of excess leased-in RJs and portions of the mainline fleet that can be cheaply parked. Japan Airlines does not have that luxury. Nor does Air France or Qantas.

Upshot: Deeper Alliances. The president of IATA made it clear that "consolidation" is necessary. What he's really saying is that a global airline industry more along the lines of the US model - where airline systems can be more capacity-flexible and fleet-flexible - is the goal, and do it on an intercontinental basis. Alliances that can perform like the Delta or AA  hub system, with the ability to cross-flow passengers. (Needless to say this conclusion threatens any number of Wall Street types and Luddite Midwestern academics who drink the hubs-are-bad Kool-Aid. Who cares. Most of them probably think the Wright Brothers are the authors of the Wright Amendment.)

Alliances: Good. Foreign Ownership: Really Dangerous. The message is that, as IATA is correctly predicting, there will be capacity consolidation among global carriers. But for any of this to work, US carriers must be a key part. This means that alliances may be just a start of the process. It may mean that foreign governments will be pressing for changes in US airline ownership laws, allowing other carriers to get some control over the revenue flows generated in Omaha, Tucson, and Sarasota.

That last part is not a good idea for US consumers. Regardless of what the deals may represent to shareholders, foreign control of US airlines means foreign strategic planning. That's sort of what that meeting in Philadelphia in 1776 was intended to undo.

Nevertheless, what we've seen from Washington over the past year indicates that US independence as a foundational concept is not in favor. Last week, we saw tin-horn thugs like Hugo Chavez and Robert Mugabe beat up and insult the USA and its core values in Copenhagen, without a peep of disagreement, outrage or response from Hillary Clinton, Barack Obama, Nancy Pelosi, or the rest of the Washington rogues gallery in attendance. That would indicate defending the independence of the US airline industry isn't on the agenda, either.

Year 2010 should be an interesting year.
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Updates:

DataMiner(TM) Subscribers:

Airline Schedules. For those with the Schedules option, the files are updated 52 times a year - weekly - and are available each Wednesday afternoon. The data are from our partner Innovata, which is the only "official" source to which IATA requires airlines to report schedules.

Airport Economic Impact & Opportunity Analyses. We have now completed the merging of Airports:USA Enplanement Forecast & Airline Trend data into the airport economic impact methodologies used successfully for our clients over the past decade. The new program now identifies both economic impact and the future opportunities for growth in the global economy. Tailored to airports of all sizes, the new program can be reviewed by clicking here.

New DataFlash: A new DataFlash is now posted, reviewing how the DataMiner Hub/Contribution Report can be a powerful accurate planning tool for new air service analysis. Click here to review.

Hot Flash - Monday, December 14, 2009

A New Wall Street Report Tells All:
Southwest's Really Just A Regional Airline!
They've Been Cleverly Hiding It From Us All These Years

Some of the fantasy airline "analyses" that come out of Wall Street make one wonder if these people are first cousins to Ken and Barbie. Sleek, attractive. And mentally inert.

It sure has no relationship with anything to do with reality. Or, as some of the latest "analyst" salvoes of amateur expertise would indicate, any knowledge of the airline business.

Recently, one analyst who claims to be a contributor to Fox Business, the Wall Street Journal, and other channels of information, let us all know that the airline industry has fundamentally and suddenly changed, right under our noses...

"...Whereas with the regionals, the domestics, I think they're going to be a lot more successful, like the JetBlues (JBLU), the Southwests (LUV), even the AirTrans (AAI)..."

"...I think you're going to see that these smaller companies are going to have much more room for growth. They're not really into this hub-and-spoke-type mentality; they're able to expand quicker, get more engaged even into the smaller cities and really turn a profit...."

Dig it, y'all. Southwest is now a "regional" according to some of the shamans on Wall Street. Silly us. All along we've been convinced that Southwest was the nation's largest passenger carrier. And we thought those cities it has expanded to in the past three years - like, Minneapolis, Philadelphia, and Boston - were large cities.

And now we have a new term for these airlines: "domestics." Wonder if they do windows?

Golly, too, we sure did think that AirTran's Atlanta operation looked like a hub. Ditto that of Frontier at Denver. And all that data that clearly indicated Southwest's increasing dependence on connecting traffic at Denver, well, it's such a relief to hear a Wall Street expert and advisor tell us it's all been a mirage. Let's plan to invest some heavy gelt on the basis of this insight and wisdom. Not./p>

And there's more wondrous news...

"...A lot of these larger airlines have these hubs around the country and then everything has to fly through there. So you're getting these extra flights that need to be utilized to get from point A to point B, whereas with the smaller, domestic, regional airlines, you're able to go direct from point A to point B. While you may have to pay a little more money for that individual flight, it costs the company less to operate that one flight than it would to go from a small town in North Carolina through Atlanta to then somewhere in Texas..."

Anybody have a clue as to what this stream of unconsciousness means? Those "regional" airlines? Like, Southwest? Like AirTran? And we had no idea that these carriers operated from small towns in North Carolina with point-to-point service to places "somewhere in Texas."

But this guy is not alone. Incredibly this intellectual pabulum got enormous amounts of me-too coverage. It would be funny, except that  this type of doggerel often gets repeated as gospel in the media. No telling how many gullible consumers make investment decisions based on this kind of misinformation.

Last week, the subject du jour in a number of stories was about how those "hub-and-spoke carriers" have been hammered by the point-to-point "discounters." The fact that most of these "discounters" have also shrunk over the past year is now forgotten with the November traffic reports. And by the way, just what are these carriers "discounting?" It isn't as if they're knocking a couple of C-notes off the window sticker.

Cautionary warning: really question the babble that's coming out of the financial world. And do note that some of the media types who cover airlines don't know the difference between a gallon of jet-A and a jar of Alberto VO-5.

Caveat investor.

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Hot Flash - Monday, December 7, 2009

Let's Not Just Touch That 3rd Rail: Let's Shake It Like A Dead Chicken
Copenhagen: The Apalachin Crime Convention Gone Global

In 1957, crime bosses from around the nation convened at a rural estate in the mountains of the Eastern United States near a small town named Apalachin. They arrived in big shiny limos - elegant Cadillacs, Packards, Lincolns, all dressed up and ready to discuss how they were going to split up the booty they were planning to get from their businesses that extorted money from innocent victims and companies and municipalities. Their approach was simple: pay up, or you'll be shut down. Or worse.

Fast forward to 2009: They're arriving in private jets, with shiny limos - elegant Mercedes, Bentleys and the like - waiting to zip their sleek occupants to a grand Copenhagen convention. The intent is to discuss how to divvy up the planned carbon fees (in '57 it was more honestly described) they're planning to charge citizens in "developed" countries in order to pass them on to poorer countries, no doubt with some intermediate middlemen to get a share. Like their forebears who met 52 years ago in Upstate New York, the intent, although wrapped in the guise of "just business," is to extort funds from hard-working people and pass them on for political gain. Ignore the sheep's clothing that the guys in Copenhagen want to "save the planet" - the naked truth is that they're in the extortion racket.

There isn't much difference. In both cases, 1957 and 2009, the intent is the same: take money from those who've earned it, and give it to somebody else. In the earlier case, it was to the crime bosses and their buddies. Today, it's to "less developed nations" - i.e., take it from the hard-working truck driver in Omaha, and give it to stellar-run "poor" countries, like say, Zimbabwe. The rationale is that that over-the-road owner-operator in Nebraska is responsible for the pollution and poverty in Harare, or Caracas, or where ever else.

'Course the connection between poverty in rural Africa or Asia, and the standard of living that hard-working Americans have earned is, simply stated, zip. (Unless you're ensconced inside some university, in which case facts and reason are useless.) But, the official line is, we are supposed to feel guilty and pay amends. Or else.

There are some great don't-dare-ask-questions statistics being tossed around. Stuff like only 8% of "global warming" is caused by poor countries, so it's clear that the rest of the world owes them something. Or, 80% (or whatever number) of all energy is used by greedy developed nations! (Yup that tends to happen when we produce 80% of the goods and services. That tends to happen when we can drive to work instead of having to walk down to the river to beat our laundry on a rock. That tends to happen when people in the United States have been free to build their lifestyles through hard work.)

Get Them Rich Passengers To Pay A Share. One of the key targets of this latter-day crime convention is the airline industry. The political mob-bosses have decided that air travel is not only a pollution-generator, but it's the choice of the well to do - those who have money, and, as such, fit the template as the logical prey for these clowns. They're suggesting a fee on every ticket (except, perhaps on flights to these "under-developed" nations.) The rationale is that upstanding folks running dictatorships and cleptocracies in the Third World need it more. You must understand that it'll somehow make bustling economies out of political systems that can't supply running water, electricity or bathroom tissue.

Like the 1957 Mob, these guys meeting in Copenhagen have the muscle to do it. Back then the modus operandi was threats and force. In 2009, it's threats and force, too, plus the new victimizing approach: guilt. Guilt that Americans are supposed to feel, after they cop a plea that they're responsible for global warming, or poverty in the Third World.

The Third Rail. It's not politically correct to question global warming. It's not politically correct to dare criticize Copenhagen. Other consulting firms actually concoct silly internet stuff about "how green" they are, mainly to show the powers-that-be that they're loyal followers. Facts notwithstanding.

But when something goes beyond the point where it's no longer intellectually acceptable to discuss, it becomes stale dogma, not rational thought. It becomes unsafe to question the Sacred Scripture, and if you do, you will be intellectually run out of town on a rail.

That's exactly where we are today. If you dare question Global Warming Dogma - even dare ask for additional data - you will be sneered at. And for crying out loud, don't criticize the reasoning that's being tossed around at Copenhagen. It has the status of lightning bolts direct from the Throne of Zeus. Or, Al Gore.

Start Sneering, Y'all. We're Questioning The True Religion. These political mobsters fully intend to slap hard working American consumers with confiscatory taxes to use as the Environmental Mafia sees fit. So, let's do what ATA and IATA seem to be failing at: asking hard questions. And openly questioning the credibility of this latter-day Apalachin Environmental Woodstock that's playing this week at Copenhagen:

• Question One: Just how will slapping "carbon" taxes on air travelers reduce emissions? Unless it's intended to deter people from flying , a.k.a. caveman-worship, it won't do dukey to make the skies any cleaner - not that airlines are major polluters, anyway.

• Question Two: How come nobody at Copenhagen is seriously considering recent revelations that some "scientific" studies were doctored to "prove" that it's man that's at fault for allegedly causing climate change? (Anybody remember "acid rain?") When a subject matter gets to the point that it's "beyond debate" as Al Gore claims, it's no better than a dictum from Don Corleone. Mobsters running the show.

• Question Three: Just how will these passenger "carbon fees" be used? A lot of these poor countries got that way because they're run by thugs. So just what is the criteria planned by folks such as UK Prime Minister Gordon Brown to distribute this dough?

• Question Four: How will the fees extorted from air passengers (and that truck-driver in Omaha, for that matter) be collected? A big bureaucracy? That's nice. More make-work federal jobs.

• Question Five: What'll the effects be on the US economy if these political mobsters get their way? Siphoning off hard-earned dollars from US passengers and workers so that the UN or some other entity can dole them out in the Third World is the anti-stimulus. The feds are printing money faster than comic books to jump-start the economy, and we've got Obama over in Denmark encouraging a system that will send those dollars overseas.

There. Now, we are officially bad people. We've questioned the Sacred Dogma. Other consultants will hide under their safe rocks to see which way the wind blows, and re-double their website efforts to make them appear to be greener than Kermit The Frog. At Boyd Group International, we have a higher standard. We question "what everybody knows."

That's because in such cases, it's not usually a matter of knowledge. It's a matter of "what everybody doesn't dare disagree with," facts not withstanding.

In 1957, the mob convention was broken up by the feds. No such luck this year. Obama's there lauding these guys. But make no mistake, 1957 or 2009, the morals and ethics and intentions of these people are all fundamentally the same:

Take money from US citizens who earned it, and give it to the UN or whoever to dole it out to those that haven't.

It's still called extortion.
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Hot Flash - Monday, November 30, 2009

May The Farce Be With You
LaHood Threatens Airlines With The Dark Side

All we need is a musical score and we can make another Star Wars episode from what's going on in the airline business in general and the DOT in particular.

We have the Evil Empire and the Dark Side of The Farce - the DOT's NextGen cabal. We've got Darth Vader - portrayed brilliantly by DOT Secretary Ray LaHood. And we have the DumbStar - a contraption of breathtaking ability to inflict inconvenience and chaos on living species across the galaxy, a.k.a. the Air Traffic Control system.

Any who dare get in the way of the Empire will feel the wrath of Darth LaHood. We saw it last week, when his Imperial Darkness inflicted heavy fines on Continental, ExpressJet, and Mesaba for an incident where an RJ got stuck at Rochester, Minnesota late at night, and the passengers were not allowed off the airplane until dawn.

There are two distinct failures here. Darth LaHood has made sure we only focus on one - keeping passengers on a diverted airplane for hours. The other, and much more fundamental failure - how they flight ended up there in the first place - is not to be mentioned.

Skillfully Managing the Media. In proclaiming the fine, Darth LaHood declared: I hope this sends a signal to the rest of the airline industry that we expect airlines to respect the rights of air travelers.

And he went on: You can't strand people overnight without access to the basics. It's not right; it's against the rules; and I am proud of the Department's Aviation Enforcement Office for its investigation into the complaints of these travelers and for its responsiveness.

A Master at Inter-Galactic Chutzpa. The Farce, otherwise known has the incompetently-managed ATC program and its fast aging NextGen follow-on, is the real cause of the event, not a bunch of allegedly mentally-moribund airline employees.

Yet, Darth LaHood expertly turned the tables on the airline industry. He's adamant that airlines must respect the rights of air travelers. He's postured his Dark Side agency as the champion of the masses, responding quickly to these outrages. The fact that it's his ATC system that causes events like this was totally obscured.

One might think this would be a clue for the airline industry to strike back, But, unfortunately, the Rebellion against the Empire within aviation and the airline industry is fractured, poorly advised, and ill-prepared to react. They have said nothing.

Giving In To The Dark Side. Obviously fearing Darth LaHood's majesty and power, not one airline, not one media reporter, and not a single Washington alphabet group dared to point out that it was LaHood's DumbStar - the baling wire ATC system - that necessitated the RJ in question to get stuck at Rochester, instead of being able to proceed to MSP.

To read the media stories and the sounds of silence from the airline industry, one could get the impression that Continental and ExpressJet fully intended to divert to RST and enjoy entrapping passengers on an ERJ, like circus animals in a cage.

True, it's an embarrassing situation when nobody among three airlines can make a decision. But, looking at the big picture, nobody has asked how a jet can get stranded at an airport, with or without passengers on it, for six hours. Or, why it had to divert in the first place.

Face it, the cause of the stranding was due to the Evil Empire's on-going incompetence over the years in accomplishing a true bottom-up re-build of the Eisenhower-era approach to air traffic control. The airplane got stuck at RST because of Darth LaHood. The sad fact the carrier couldn't figure out what to do after that to let folks off the plane is important, but secondary. The real anti-consumer entity here is LaHood and his DOT.

Remember, even if those passengers were allowed off the airplane, they still would have been stranded, albeit more comfortably. The open and honest question that the media and the airline industry are running from is why we have an ATC system that fundamentally is no more efficient than ten years ago.

It's The Empire That Needs To Be Tossed Out. Whether people are allowed off the plane in 15 minutes or 6 hours is not the real issue - that can be addressed. But the core cause isn't being addressed. The majority of "tarmac delays" are caused by the ATC system's inability to handle the nation's air traffic volume, particularly when weather represents a challenge. The reason it has not been upgraded is because Darth LaHood, Darth Peters, and Darth Mineta and a whole Imperial Parade of inept political-player predecessors failed to do their jobs.

 Darth LaHood is "proud" of his department's "responsiveness" in slapping a fine on the carriers involved. Too bad he's also proud of his department's lack of responsiveness in getting any substantive progress to replace the current system.

Airline Industry: Join The Rebellion - Stand Up For Your Customers. How about maybe the airline industry counter-attacking Darth LaHood: "You can't continue having an ATC system that strands our passengers and airplanes across the nation, inflicts delays, restricts commerce, and in the past has indeed represented a safety issue. It's not right. It's against professional management. We and our passengers have been abused by The Empire for 20 years, and you refuse to address the fact you've failed, and your NextGen is a fraud that won't fix the problem..."

True, the RST episode was nothing for the airline industry to be proud of. But neither should they be proud of quietly sitting by and letting the Evil Empire continually abuse their passengers with an ATC system that inflicts $10 billion in excess costs and results in airliners having to divert for hours - with or without passengers deplaning - because the DOT has been an incompetent klutz in the ATC arena for the last 20 years.

Nah. Not going to happen. The airline industry is anything but in Rebellion. Instead, it's being advised to bang on congressional doors to demand more money for NextGen. It's flat bad advice. They really do need to engage in some resistance against the Empire.

But judging by this past week, Resistance is futile.
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Hot Flash - Monday, November 23, 2009

Revenue Indicators Are Still Falling.
Regardless of Surcharges & Fees...

Whatever is a consumer to believe?

We're hearing about how airlines are outrageously adding surcharges to fares. How greedy carriers are tacking fees on to everything. "Watch for higher costs this Holiday Season," is the mantra.

And we're still hearing the idiot media stories predicting the "typical" and "horrid" Thanksgiving airline delays. 'Course the reporters have never checked a shred of data, they only report that flights will be full, chocka-block, and, the favored buzz-term, "jam-packed." Yup, airplanes will be full. Not much different than last week. Or the week before. But because it's a holiday period, the story gets much more play when it portrays the local airport to look like Tan Son Nhut before the collapse.

Facts - So Depressing To Exciting Journalism. Okay, let's think this through. On one hand, airlines are seeing strong booking demand at certain periods of the year. But, according to some media stories, they're gouging the customer by raising the cost of getting to Buffalo.

Now, let's toss in a couple of other factoids. Average unit revenue domestically fell 13% year-over-year in October. Traffic for the year 2009 is tracking at over 7% down, too. Year 2010 isn't going to be a growth year, either. Banks are still closing. Consumers are spooked. Unemployment continues up - financial gerrymandering by the feds notwithstanding. Jet fuel isn't likely to come down materially from prices driven by $80 oil.

Another Myth: Higher Fares. Sorry to inject facts into the Holiday fun reporting, but fares (including taxes, fees, federal extortion, etc) have been going down, not up. Below are comparisons of average O&D fares paid by passengers in the 2Q 2008 v 2Q 2009. The eight markets shown represent over 36% of all US O&D passenger traffic. (Translated: these markets drive over one-third of all passenger trips.)

Average Fares For Consumers Are Dropping
O&D Market	2Q 2008	2Q 2009	Change
LAX	$220.88	$190.73	-13.6%
LAS	$170.08	$151.65	-10.8%
MCO	$158.20	$143.87	-9.1%
ORD	$202.45	$176.43	-12.9%
ATL	$199.41	$166.29	-16.6%
DEN	$180.78	$157.07	-13.1%
SEA	$204.70	$178.16	-13.0%
SFO	$235.43	$188.92	-19.8%
© 2009 Airports:USA

These data from Airports:USA DataMiner show that even with massive capacity reductions, fare traction is proving elusive. Note that these numbers are for 2Q 2009, and do not reflect the continuing declines in unit fare revenue through October. So if airlines tack on a surcharge, even combined with other ancillary revenues, it's going to be tough to be even, let alone ahead of 2008.

Conclusion: Santa May Miss Airlines This Year. Even with the increase in fees and periodic surcharges, the airline business is not going to be wallowing in extra cash this year. To be sure, they are adapting. But a $30 surcharge and a bag fee isn't a situation that's gouging passengers.

It's called supply and demand. It's also called trying to get a return on investment.

___________

Alphabet Groups: Some Working For FAA More Than Members?

A Washington Alphabet Organization is planning a media relations seminar in the next several weeks. The usual stuff is covered - dealing with the press, touting new facilities, social media, etc.

But what's astounding is that they're including session that will teach the attendees on how to "pitch the NextGen program to the media like a pro." A "pro" what? Pro confidence man? Pro used car salesman? Why is a supposedly independent group, looking out for aviation interests, teaching its members to be cheerleaders for the government?

Values Count? But there's lot to tout - particularly if the members have any experience selling Florida swampland, bridges in Brooklyn, bogus investments to retired widows in Boca, or have a close personal relationship with Bernie Madoff. Here are just some of the points this seminar can bring our regarding NextGen:

- It's years late.
- It's way behind schedule. All FAA has done has reschedule it to meet their failing timelines.
- It has no hard projections on how it will meet the nation's future air service needs.
- It will be incremental, not fundamental, in improving air traffic control capacity.(If it ever gets installed.)
- There is no accountability whatsoever for failure or results in the program.
- The price tag has been increasing faster than the exchange rate in the Weimar Republic

Yessiree. There's lots to pitch. But the first thing to "pitch" is whoever at the Alphabet Organization even suggested this. It cheapens them, and makes them look like water-carriers for the FAA, instead of a professional organization trying to improve aviation, keeping an arms-length impartiality from the government, which has a firm track record of ineptitude when it comes to ATC programs. NextGen should be professionally questioned by aviation leaders, not made the subject of a propaganda campaign.

But, do be good little followers, attendees are urged. Don't think for yourself. Don't question about the past and continuing failures of the FAA in the ATC realm. Don't, for heaven sakes, ask for proof that the FAA has a clue.

Just go out there and show your support for the party line. Regardless of track record or facts, you can be a loyal party member and "pitch" a program that's already a national embarrassment. And, don't tell anybody that at last count, the project is $35 billion and climbing. Do not bother with the fact that the current system costs the US consumer at least $10 billion a year in excess travel costs, yet NextGen promises no hard data to fully meet the growth needs of US aviation.

Please do not recount all the FAA's promises and commitments missed over the past two decades. But do go out there and "pitch NextGen to the media like a pro."

There is the valid issue of trying to work with federal agencies. But being toadies, being docile followers instead of active, independent participants, steps over the line. Doesn't aviation deserve better leadership than this?

One has to ask, just who are these Alphabet Organizations looking out for? The members that pay them to represent their interests - which include pressuring the FAA to produce the results it's promised over the past 20 years? Or is the goal to pander government bureaucrats who don't perform? Instead of trying to convert their members into wind-up toys for the FAA, one might think they'd be pounding on the Agency's door to get professional results. Results that have been promised for 20 years and not delivered.

It's one more reason that our ATC system won't be improved. If the industry doesn't demand better, it'll never get done. It's nothing new. We pointed this out 15 years ago, and the beat just goes on.

Pitch the program, guys. But don't complain next year, or five years from now, when nothing happens.

______________

 

 

Hot Flash - Monday, November 16, 2009

More Signs Of A Pulse In The US Airline Industry...
And More Signs LaHood Is Playing Martinet

The smoke signals from the Department of Transportation indicate that the political natives are restless - and fixin' to get on the warpath. One that isn't going to be fun for consumers.

Let's look at the wider picture. According to press reports, now they want to nationalize oversight of local subways and light rail. Great. They can't manage an air traffic control system, so why not take on the 7th Avenue subway, too. It's a lead-pipe cinch this is part of a more comprehensive plan to get control of more of the US transportation system under the thumb of Washington and their special interest supporters.

It's starting for the airline industry, too. Three weeks ago, Secretary LaHood announced a command performance, summoning airline CEOs to a closed-door meeting to discuss the "problems" facing the industry. He wants a panel to discuss how to fix the industry. Or, as we found out, one to assure that the special interests to which he's beholden get their way, regardless of what's best for the industry or the consumer. After all, government panels have such a great track record of results.

As it turns out, the planned meeting was closed-door because LaHood, consistent with much of what we see coming out of this "transparent" administration, didn't want the public to know that this event was really spark-plugged by the AFL-CIO, not by the DOT. To be clear, there's nothing wrong with the AFL-CIO, but a cabinet secretary is way off-base calling closed door meetings for them. They are one of many stakeholders he is responsible to. And that includes the American public - the folks he wanted not to know what was going on behind those closed doors.

LaHood was effectively playing the administration Howdy Doody to labor's Buffalo Bob. He didn't want the public to be aware that this was intended to be a tell-'em how-to-do-it-or-else meeting, on things like labor, card-check, and cap and tax legislation. Do what you're told, go along, and shut up, if you know what's good for you, was likely going to be the message.

Secret Meetings = Special Interests In Charge. One has to consider that this was not a security-related meeting. It in no way could have involved things that would threaten national security. It was about the airline industry. And, it was called at the behest of the AFL-CIO. So, to keep it confidential from the public only can mean it was a political meeting - one that LaHood would not want John Q. Public to know about. When DOT Secretaries hide things from the public, bad things happen.

When a government tries to keep meetings like this secret, it means that it's all about political shenanigans. That's called Third World government. But it's not surprising. LaHood did make it clear when he was selected for the job that he was going to "take his cues" from others in the administration, and be a "good soldier." Great. We need a four-star general in the job. What we got was Beetle Bailey.

Airlines Stepping Out And Telling The Public The Truth. Apparently, airline CEOs didn't take LaHood's bait. Most did not attend, sending instead their government-relations types.

But, clearly breaking with the past, we had Doug Parker, US Airways CEO, summing up the airline industry's position in a letter to the DOT simply and directly. Unlike LaHood, he wasn't afraid to make his comments open to the public, too.

"First, please do not impose any additional taxes, fees or unfunded mandates on this already over-taxed industry. Second, please allow us the ability to fix our industry through rational business decisions and actions and self-help mechanisms."

" ... However, if the cost of deploying NextGen has to be covered by even higher taxes or fees imposed on the airlines, we prefer to live without it at the current time..."

Fear not. Living without NextGen for the next decade, let alone for the current time, is an absolute certainty. Elvis will show up before NextGen does. But this is the first time an airline CEO has stepped up and told it like it is. We can hope the rest of the industry steps out from behind Washington insiders and does the same.

Mr. Parker, gently and professionally, made a point that the airline industry has been silent about for years. NextGen as it's structured simply represents more hurt than benefit. It's about decades of mis-management at the FAA.

"Stupid" a.k.a. dimbulb federal policies, can't be fixed by more taxes on the consumer. And given the near-total lack of real progress of substantive ATC improvements over the last 15 years, and the fact that "NextGen" is at best a marginal improvement (assuming they can implement it, which history shows they cannot), increasing taxes on air travelers for that purpose is nothing short of just that - stupid.

Airline Fees Are Evil. But More Taxes Are Fine? Along these lines, Mr. Parker also cautioned against adding taxes to ancillary fees. True, there is a strong airport industry feeling that these funds are just like air fares, and should be taxed accordingly, to pay for airport and airway infrastructure. It's not an invalid point.

However,  it might be nice for the alphabet groups representing airports to start demanding accountability and results for the billions the FAA gets every year. They don't. So, until the airport industry gets the gumption to demand the FAA show something for the bucks they already get, taxing ancillary fees will do nothing but harm air travel demand by additionally gouging the customer several hundred millions more each year. Higher costs of travel negatively affects airports - and a lot more than the $200 million or so that taxes on ancillary fees will supposedly bring in to airports across the nation.

Congressional "Stupid" - It's Always Ready. But that's not what congress may have in mind. In a statement typical of the guy's bias against clear thinking, we had the ever-present Rep. Oberstar (D-MN) make the idiotic statement:

“Maybe we have to teach them (airlines) a lesson, and make them pay their fair share.”

Washington alphabet groups can suck up to this guy all they want, to the long-term detriment of the industries they represent. But it's high time somebody called Oberstar on his bluster. That comment is a poster-child for stupid.

Don't get fooled. Oberstar is just playing to special interests, not the US air consumer. "Teach airlines a lesson?" For what? Pricing their product as they need? Doing so consistent with the law? Not charging all passengers for services they don't use?

It's Consumers That'll Get "Taught A Lesson." Message to Oberstar: Airlines don't pay "their fair share." Consumers do, pal, and your intention to make passengers pay more into a system you have no intention of making accountable is nothing short of, again, stupid - something the taxes won't fix.

It's A Different Industry. Different Revenue Streams Are Consistent With That. As one airline executive pointed out at the 14th Annual Aviation Forecast Summit last month, airport facilities are more and more focused on baggage-handling. That 50-feet of linear space for a ticket counter has declining utility when there aren't any tickets, anymore, and a small computer kiosk can do what humans did 20 years ago. The machinery, facilities, and labor involved in handling baggage is what airport facility costs are increasingly about. It's a valid argument that passengers who require its use should pay for it.

The Beltway "Experts" Need To Be Questioned, Occasionally. Traditionally, we've watched alphabet organizations in Washington guide the positions that airports and airlines should take on legislative issues, and regarding the care and feeding of the Wild Kingdom, a.k.a. Congress. Not all bad. These organizations are necessary and valuable.

But it's time that airlines start standing up for themselves, and modify their reliance on those alphabet groups, whose advice may sometimes be colored by the need not to offend political wind-tunnels like Oberstar, who, when it comes to dancing for special interests, has more moves than Michael Jackson.

This is just starting. When the government doesn't want the people to know what it's planning, that's not democracy. And it should be a warning flag for what may come from these people.

______________

 

Hot Flash - Monday, November 9, 2009

Maybe Some Bah-Humbug Might Be Valuable...
The Wondrous Holiday Travel Fantasies

The Holidays are just around the corner.

It's time for the wonders and fantasies of the Season.

It starts with the Macy's Parade on Thanksgiving, where bored TV news anchors like Katie Couric, only there because her contract says so, read abominably stupid script as giant balloons pass by, representing stuff like the health wonders of mayonnaise.  And marching bands from rural high schools all over America, made of happy students ever so grateful to get the heck away from East Upchuck, if even for a couple of days. Then the has-been entertainers riding floats and trying to lip-sync Rudolf The Red Nose Reindeer - a song describing a forest animal with an electric schnoz, which one might assume is somewhat of a drawback during hunting season. It's weird, it challenges reality, but it's part of the fantasy of the Season.

There's Santa Claus, too, a creature somebody dreamed up who makes toys in Third World sweatshops and then peddles them across the world by forcing reindeers fly so he can dump them down peoples' chimneys on Christmas Eve. More weird lore that isn't particularly credible in the real-world, but it's part of the fantasy of the Season.

Media Holiday Fantasies. And, of course, there's the media fantasies of the Season. Like the inevitable cub reporter, just out of J-school, reporting live at the local airport on the day before Thanksgiving. She's breathlessly describing the incredible crowds huddling to get on "jam packed" airplanes, as if they're all refugees in box cars trying to escape East Germany before the Stasi arrives. Not particularly credible, but it's part of the fantasy of the Season, too.

Plus, the network correspondent, alert and on-the-case, live at the FAA's Herndon ATC center, posted in front of the big screens of airplanes tracking across the electronic skies, earnestly reporting back, "I'll be here all day, Bob. When delays start, we'll be on it..."  More of the fantasy of the Season.

Some years, we even have the White House join in with the Spirit of the Season. Who can forget President Bush in 2007, reading staff-provided cue cards and obviously auditioning for Leslie Neilson's role in Scary Movie 3, declaring that he was going to end holiday flight delays by opening up military airspace - space that was not uncommonly open anyway. And doubling the penalty for airlines overselling passengers. What that had to do with flight delays was, apparently, another part of the fantasy of the Season.

Time For Some Bah-Humbug. At Least For The Media. It's great to watch big balloons make their way down Broadway. It's really okay to believe that Santa Claus is flying around in a sleigh, at least as long as he doesn't get distracted by his laptop.

But it's not okay for the media to convey to the public the fantasy that travel during the holidays is an experience not much short of wildebeests having to trek across the dry Serengeti, harassed by lions, crocodiles, deer flies, and gate agents demanding baggage fees. Let's hit a couple of the most popular fantasies:

"Flights Are Jam-Packed." Wrong. Airplanes get full, not jam-packed. Memo to Angie Airhead, cub reporter out there at West Nowhere Municipal Airport: the US airline industry has been running commonly at over 80% load factors for years. That means the 5PM to ORD has been full routinely for years, too. So if it's full the day before Thanksgiving, sorry, Angie, it ain't no above-the-fold breaking story. No difference from any other day. Sure, there will be some increase in passengers, but it can't be much, because full is full, and flights have been that way for months.

"The Skies Are More Crowded." The myth is that air transportation is like ground transportation. Over the holidays, more people do in fact jump in the car and travel. That means I-95, I-80, and I-75 will have more machines driving across them. But airlines do not materially add extra sections over holidays, as the logistics tend to be revenue-negative. Unlike the Interstates, there is not a crush of additional airliners suddenly blackening the skies on holidays.

In fact, there are essentially no more airplanes in the sky the day before Thanksgiving than any other Wednesday. And there are fewer airplanes in the skies over that weekend than other times of the year, because airlines cut frequencies on the Friday and Saturday after Thanksgiving. Then comes Sunday, and it's a normal schedule.

So, memo to the network correspondent bunking in at Herndon: go home, and stop with the heroic on-the-scene stuff, as if you're an imbed with the Third Armored Division. You look silly and you're misinforming the public.

"There Are More Delays During Holidays." On the George Washington Bridge or the Long Island Expressway, that's true, probably. But due to the facts above, there are essentially no more flying machines in the skies over the Holidays, so the propensity for flight delays is no greater or less than any other day.

The argument can certainly be made that the mix of passengers is different on certain days of the holiday season. More kids. Maybe more bags. Less erudite travelers, on the whole. But those are not factors that toss a lot of sand into the on-time works.

Nevertheless, Plan On Really Fun Reporting. We can count on this year being no different than past holiday seasons. We can plan of missives from Ray LaHood, regarding how he and is team are in full metal jacket mode to assure we'll all get to see Grandma for Thanksgiving. Alphabet groups will be issuing press releases on how the airline industry is ready for the "holiday crush" that really isn't going to happen. Talk shows will have the usual-suspect consumerist morons railing against a host of airline outrages, real and imagined. It's part of the fantasy and wonder of the holiday season.

Bottom line, these are versions of another holiday tradition: fruitcakes.

________________

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___________

Hot Flash - Monday, November 2, 2009

At Least The US Airline Industry Isn't Buying It.
Recession Over? Somebody Please Inform The Economy

Huzzah! The economy grew at 3.5% last quarter, according to the feds. That means, we're told, that the recession has been finally vanquished.

Funny, but they forgot to tell the US economy the great news.

Since that wondrous news was reported, nine more banks failed  - for a total of 115 this year. Consumer confidence continues to fall, along with consumer spending, and unemployment remains at nearly 10%.

The panting media stories about the glorious 3.5% jump usually leave out the leetle fact that the increase is mostly due to government spending. Like. with printed money, not the result of real economic growth. Not due to a the folks out here in the Provinces seeing a better future, but due to data manipulations inside the Beltway.

Boyd Group International has re-visited its five year Airports:USA enplanement forecasts, which encompasses all drivers of passenger demand - economics, airline strategies & structure, fleet mix, capacity, and schedules. Contrary to any alleged 3.5% economic expansion, the data all point to a continuing contraction in air travel demand.

The Airline Business Operates On Reality, Not Treasury Department Press Releases. Three basic factors are the foundation of air travel demand: a strong jobs picture, availability of disposable income, and consumer confidence. The current economic picture scores a solid bupkus in all three categories. So, here's a politically-incorrect observation: the recession isn't over. In fact, the US airline industry can expect at least another year of declining passenger demand.

That's the bad news. The good news is that the US airline industry as a whole isn't buying the political pap. To the contrary, it is anticipating and preparing for a continued downturn in 2010.

• US Airways just announced a major re-structuring, pretty much circling the airplanes around their hubsite airports, and deleting a whole lot of international flying to secondary points, like Dublin. They are addressing high costs and abominable load factors on the East Coast Shuttle by yanking A-319s and replacing them with E-190s. They're reducing non-hub Express flying, too.

• American is eliminating what they view to be excess maintenance capacity, not to mention restructuring its Eagle feed operation.

• Delta, apparently, is taking a magnifying glass to virtually every market operated with a Widget-painted airplane.

• AirTran is shifting resources, as witnessed in the recent deletion of CHS in favor or LEX service.

None of this is comforting to employees who are losing their jobs or being displaced. But it does indicate, if painfully, that the US airline industry does have a planning pulse. One can argue with the various strategies, but it cannot be argued that the industry is buying into the Official Drivel that happy days are just around the corner. They are planning for the future.

It's A Smaller Airline Industry. Period. This tracks with the Airports:USA Enplanement Forecast for 2009 - 2014. At this time, there are no dynamics in play or on the horizon that show any strong rebound in air passenger traffic. As is clear to anybody awake and sober, this recession is not over. Plus, fleet plans show that even if demand sparks in 2010, it will be a slow ramp-up period in regard to airlines adding back capacity.

The jury's still out on the baseline forecast of a 7.3% passenger decline in 2009. It could be as much as 8.5% depending on airline strategies in November and December. What is near-certain is that 2010 is going to be another down year, and it will be a very slow return to 2008 levels.

One disturbing datapoint is the passenger forecast for small and mid-size regional airports, where evolving airline economics and fleet dynamics will combine to result in a much greater hit than will be seen at hubsite and large non-hubsite airports. This doesn't mean that lots of rural airports will lose air service, just that the basic economics of the airline business will mean less service. It's not a new trend - it's been going on for the past three decades.

Five Key Indicators To Watch... Boyd Group International is advising its clients to carefully monitor the following factors, each of which can have material effects on air service demand:

• Oil Prices. Inflationary spending funded with printed money shows no sign of abating. That will drive up oil prices denominated in greenbacks. The issue is how fast and how far. There will be bounces between $60 and $80, but it doesn't take an MBA from Wharton to figure where this boat is headed. At current levels, small and mid-size communities should be developing contingency plans to counter or mitigate potential loss of RJ access to more distant connecting hubs.

• Taxes & Onerous Regulations. Particularly on Small Business. Taxes take money out of the consumer economy. That includes dollars available for both business and leisure air travel. The prognosis here isn't good for air service. Virtually every one of the creatures running key committees and sub-committees in Congress is hot to increase taxes and regulatory burdens on everybody, save perhaps their own special interest friends. But of great concern is the attack on small businesses, which are a major driver of air travel demand. Don't buy into the Official Line coming from the administration that they simply adore small business. What's being planned in health care, business regulations, new taxes, not to mention recent dictums coming from the IRS, doesn't show much love. Hitting small businesses will disproportionately hurt regional airport traffic.

• Local Economic Shifts. The pull-down or closure of a local or regional industry may result in material changes in airline revenue streams. This means monitoring regional economic changes. A hard understanding of the current O&D generation and their drivers will be critical in anticipating such effects, as well as in developing air service contingency programs.

• Cap-And-Trade. If this scam is perpetrated on the American public, places like Hibbing, Bismarck, Ithaca and others can kiss a lot of their air service good-bye. It won't do anything to clean the environment. It will only make a lot of air service financially untenable. Of course that is exactly the intent - jack up costs to force people to fly less. You can guess where that will hit first. Anybody at AAAE notice this yet?

• Airline Strategic & Tactical Decisions. Identifying emerging strategies on the part of incumbent carriers is critical. The recent decision by United to early-terminate a contract for leased-in 37-seat turboprops will have an effect on the hub-reach of the carrier in certain regions. Every airport should have hard data in regard to the sector performance of its current air service, so as to be able to have aggressive responses should a carrier call with a route pink slip. And don't assume high load factors by themselves mean diddly. US Airways just dropped ICT-PHX, which had  80%+ load factors.

Watch Out For Witch Doctors Peddling Magic Potions. For some small communities, these are desperate times in regard to maintaining air service access, and that can be fertile ground for schemes that have no earthly chance of success. We already had the JetAmerica debacle, where communities were misled into believing a paper scheme was something a whole lot more. There are no magic potions or silver bullets to create air service where the economics won't support it.

In particular, we'd urge extreme caution before small communities pony up millions to guarantee a whole year's worth of new fully at-risk RJ service, unless they have very hard data - not smoke and mirrors peddled on the come line. There's a reason that Delta, United, Continental and other mega-carriers are dumping large numbers of RJs out of their fleets. And it's not because these airplanes were putting them into a higher tax bracket. Any "forecasts" that indicate communities will actually make a profit in "buying" their own air service should be taken with a grain of salt, if not the entire shaker.

So, while the Washington bureaucrats are congratulating each other on the great job they're doing, life in the real world goes on. And that includes declining demand for air transportation in the coming year.

Regardless of the hype.

 
_____________

_______________

Hot Flash - Monday, October 26, 2009

On A Cultural Note:

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We'd like to introduce A.B.B.Y - or, Abby for short. She's a new resource that can save airlines millions of dollars in customer interface costs, while concurrently improving the quality of service. Heretofore, much of the automation in this area has been focused on reducing costs, not in improving airline service.

If your airline doesn't have Abby, it's going to find itself increasingly non-competitive. In the future, brand loyalty and alliance loyalty will be critical to profitability. That means impersonal IT systems that don't focus on enhancing customer satisfaction will increasingly become revenue drains, driving passengers away.

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_____________

It's Very Distant, But Possible
The 2010 Airline Doomsday Scenario

Three weeks ago, at the Boyd Group International Aviation Forecast Summit, the projections for the airline industry were solidly in the positive column:

• Major carriers were trimming capacity faster than the on-going recession was draining demand...

• It clearly appeared that even with $60+ oil, the industry was moving toward at least a break-even and possibly profitable fourth quarter...

• The industry was showing a strong planning pulse - the DL/UA slot swap, the lack of consumer downsides (not to mention demonstrated benefits) resulting from the DL/NW merger, and numbers of RJs were smoothly being culled out to match the decline in their effective mission envelopes...

• There were no squirrels entering the airline business. Aside from a doomed-from-the-start JetAmerica-type scheme or two, possibly huckstered by consultants-on-commission, there simply have been no Bozoland airlines in the start-up phase...

• Airlines are getting pricing traction, finally. That means that the capacity/demand equation is moving in the right direction...

• Almost on cue, carriers began filing 3Q results. Cutting through the "special items" on the whole carriers reported operating profits, give or take an exception or two.

On the whole, the US airline industry, quite the opposite from its colleagues in other parts of the world, seems to have a positive future.

Suddenly, A Disturbance in The Force. But now, three incoming economic missiles have appeared on the radar screen, a long way off, but headed this way. If they all hit, the US airline business could be looking at a 2010 that will leave it in a shambles by the end of the next 12 months. Understand that these are not certainties, only factors that, under the right circumstances, could combine to be an economic Hiroshima for the business as we know it.

Missile One: The Trashing Of The US Dollar. Regardless of the pros and cons tossed around about the dollar by business-channel economists acting like a bunch of old coots sitting on the front porch, the fact is that oil is denominated in US dollars. The dollar is being savaged by out-of-control spending and amateur-act economic policies coming from inside the Marble Playpen, a.k.a. Congress. OPEC nations are reportedly getting nervous about using the dollar as the baseline currency to price their product. China is getting frisky in regard to playing currency games. Congress is proposing and implementing spending programs that will make printing currency the next growth industry.

Deal with it: Oil is now above $80. It's a near-certainty that as the dollar continues to sink against the Euro, the Yen, the ren min bi, and, for all we know, Monopoly money, the price of fuel in dollars will go up. It's not due to speculation this time. It's due to falling currency, namely, the greenback. Point: if oil were at $80 throughout the 3Q of 2009, it's likely airlines would have lost money on an operating basis by the planeload. And it's above that now.

Missile Two: The Recovery Emperor Ain't Wearing A Stitch. Let's stop acting if we're all a flock of ostriches with our heads in the ground (or someplace else). Reality is reality, even if it's reported differently. Heck, one network recently ran a story that national unemployment had again ticked up, and then stupidly followed it with a report where their White House correspondent parroted some drivel he'd been given that the "stimulus package" had shaved three points off of unemployment. Say what? Regardless of the great news being reported in regard to the Administration's Glorious Victories in the war on the Recession, more banks are failing and unemployment is going up. That doesn't point to stronger passenger or air cargo demand. When daddy's lost his job and can't find another, that trip to see Grandma gets 86'd.

If this trend continues, capacity will need to be trimmed even more aggressively. But each carrier system has a point beyond which capacity cuts begin to push the bottom line in the wrong direction. There is an equilibrium point beyond which off-the-top variable costs are no longer there to eliminate. If this recession continues to deepen in regard to consumer spending and job elimination, the airline industry will eventually be facing a real revenue/cost crunch.

Missile Three: Congressional Stupidity. The cap-and-trade lunacy continues in congress. It makes no difference if you buy into the global warming stuff or not. The fact is that cap-and-trade is nothing more than a Luddite program to tax people for wanting to live better. It won't do diddly to improve the quality of the earth. It'll improve the quality of some big corporations who've set up elaborate carbon-credit trading programs to profit from the scheme.

But, for the airline industry in particular, it'll jack the cost of fuel into the ionosphere. (Call the ATA for some very disturbing numbers.) Remember, there are some MPs back in the Mother Country that are openly and actively calling for onerous taxes on EU consumers who insist on engaging in travel. These clowns have lots of buddies in this country.

Then there are the proposed revisions to airport ARFF requirements. Unless an airport is lucky enough to have an F-16 or C-130 squadron on the property, what some in congress want to do will jack airport costs to the point that there is no way that airlines will be able to serve a lot of small and mid-size communities. If per-passenger costs go up from $5 to $25 bucks, as some airports have reported, carriers will be hard pressed to continue service at some points. (No, it's not the same as a $20 bag fee, so don't go there.) And, what folks like Rep. Oberstar are pushing in regard to ARFF won't improve safety or anything else, except for his votes from special interests.

No Need To Go To Red Alert. Yet. These missiles are out there. They've been launched, but looking at the people behind them, they aren't very well guided or aimed. There's no certainty that they'll combine, or even that they'll continue in this direction. Given the uncertainty in financial markets, the dollar could continue to wallow at its current exchange rate. The economy could turn around - although as far as the dynamics that support air traffic go, that's not in evidence. And, according to a number of sources, the cap-and-tax stupidity is a long way from being a potential reality.

The Best Surprise Is Not Having One. But, it does call for some attention to build contingency plans. Air service could be substantially wounded by what these dynamics represent. Airliner demand will go into rewind. Consumer spending on air travel will shift into good-bye gear. Concession and other airport revenue streams will be affected. A safe approach: what would be the fallout if air travel fell another 20% next year, and what would be necessary to deal with it?

Boyd Group International is assisting some of its airport clients by looking at where their current air service is vulnerable - which routes are making money on a fully-allocated airline basis, and which could turn really red, and we're formulating tactical plans that could mitigate the hit to the carrier. For financial clients, we're reviewing aircraft demand and airline fleet plans. We're ascertaining the effects on fleet planning and facility needs - which aircraft are most vulnerable to the effects - individual or combined - of these economic missiles heading this way.

It's distant, to be sure. But the dollar is falling. The economy isn't turning around in a manner to build air traffic. And there are some pretty weird programs being talked about in Congress. These are not political observations. Just factual ones.

Forewarned is forearmed.

 

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Hot Flash - Monday, October 19, 2009

Ghost Fleets & Ghost Markets

Western ghost towns are fascinating. Some, at one time, were among the largest cities in the state they were in. They had banks, schools, even opera houses. Vibrant communities, they were.

And then they died. Gone. Empty. Nobody there.

Air service has seen a similar phenomenon. In our Air Service Dynamics consulting, we call them ghost markets. Point-to-point markets where 20,000, even 40,000 consumers at one time happily traveled annually. And then, just like those once-booming western towns, these markets died, too. And like ghost towns, there are valid reasons why they died. And why they cannot be resuscitated.

Unfortunately, airport forecasts accomplished by Boyd Group International indicate that we're going to see more ghost markets in the coming year. Most will be hub feed - we have already witnessed the loss of once-strong markets like AZO-ATL - and there will be more to come.

Don't Get Too Comfortable With That New IAD Service. Let's start with the basics. Oil prices are getting frisky - pushing $80 a barrel - and while that's not good news for airlines, it's very ominous for small and mid-size communities. High fuel prices disproportionately affect the dollars-and -cents part of RJ flying. The same RJs on which these airports depend upon for access.

For the past nine months, the air service trend had been generally positive. Declining - or at least stable - fuel prices combined with strategic shifts, were combining to result in additional hub access for a number of small/mid-size airports. As a result, we've seen AA, DL, and UA aggressively adding more RJ feed flying into their connecting hubs.

That was then, this is the future: With fuel edging up, and indications that the fundamental strength (or lack of same) of the US dollar may mean permanently higher jet-A, it's a lead-pipe cinch that the red pencils are being sharpened in airline planning departments. A number of the new hub-feed RJ markets announced in the past three months may be very short-lived. Watch for February - March announcements.

Ghost Fleets Are Coming, Too. A few months ago, in the process of a project for a financial industry client, Boyd Group International looked at American Eagle ERJ markets with stage lengths over 600 miles. Based on $1.85 per gallon fuel prices, this flying generated buckets of red ink on a fully-allocated system basis. If, as it appears, oil prices denominated in US greenbacks go to above $80, the mission reach of 50-seat jets is going to decline like a burned-out bottle rocket.

Because of this, we're revisiting our 2010-2019 Global Airliner Fleet Demand Forecast. The current forecast indicates that by 2019, over 600 RJs will be out of the system, and that includes the addition of the 315 new CRJ-900/1000s that Bombardier is expected to sell during the early years of the forecast. If oil stays high, the retirement rates are going to go up like a moon launch.

Ghost Markets Aren't New - The Trend Is 30 Years Old... One of the counterpoints made - mostly by at least one RJ manufacturer - is that airlines really can't delete this much RJ capacity. That's not the point. It's not a matter of having seats out there - it's a matter of whether they can be sold at a profit. Which, as fuel prices are dictating, they can't in an increasing number of current mission applications.

It's effectively airline evolution. The hard fact is that raw economics are continuing to change the types and levels of air service that can be economically supported. It's a reality: in terms of regional O&D flying, the US airline system has been shrinking for 30 years. Twenty five years ago, there were over 300 19-seat airliners in the US scheduled service skies. And a like number of 30 - 37 seat turboprops. The increasing costs of airline service have resulted in these aircraft being mostly retired, contributing to material changes in consumer and business travel patterns.

At the 14th Annual Aviation Forecast Summit held this month in Lexington, the Air Service Dynamics Workshop - attended by over 100 delegates, we went over just a couple of the many city pairs where once-strong O&D has simply and permanently disappeared. Gone. Evaporated. Like a western ghost town. Reason? The air carrier system that carried it was simply overcome by the march of airline economics. Like they say down on the ranch - there ain't no economic way of flying some markets, not no more.

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One example we outlined was Albany. Twenty five years ago, ALB had robust air commuter traffic to Boston, Buffalo, and LaGuardia, operated by, respectively, Bar Harbor, US Air Express, and Command. Rummaging around old CAB reports, it's indicated that the total markets combined in 1984 were approximately 102,000 passengers. In the full year ending 1Q 2009, the passengers in these O&D markets are down by 90%.

It's not the cities that are the cause. It's not that these passengers are all waiting at a gate for an airplane to arrive. Overall, Albany's seen growth in the past 25 years. Ditto Buffalo and Boston. But these three markets are now pretty much sleeping  with the O&D fishes. So how come? Maybe it's because the entire US airline system has changed. Maybe it's the fact that the Beech-99A's, the Shorts-330's, and the Twin Otters that were blackening the Upstate skies are gone, victims of economic reality.

It's The Cost Of Assets. This is one of the realities that some want to ignore: travel demand is the result of a range of drivers, one of which is the cost/value continuum - when the cost goes above the consumer value, the demand drops. And the sheer costs of air service today - like the difference between that clapped-out $250,000 Bar Harbor B-99A v the $18 million CRJ - has shifted where air transportation works and where it simply can't any longer.

The fares that airlines would need to charge on these routes - even adjusted for inflation - have gone through the roof, and the ROI for today's airliners doesn't measure up in (relatively) small intra-regional point to point markets. The result, travel has atrophied in a lot of formerly strong O&D markets. It's been seen around the nation - intra-California, intra-Florida, intra-Texas, the Nebraska River-run, etc. Like ghost towns, the economic underpinnings of this kind of airline service are gone.

Less Access. But Not Zero Air Service. As more RJs are yanked out of fleets, we won't necessarily see communities lose air service. Just some of their hub access. The regional point-to-point markets such as ALB-BOS and ABI-AUS are gone or decimated. The next phase is continued reduction in hub reach - including some of those new hub access routes added over the last six months.

But hope and charlatan cures spring eternal. We've seen it peddled in regions across the nation - that intra-state air service plan that looks so great on paper. The local community college survey. The expensive feasibility analysis concluding that the deal is a slam-dunk, with the recommendation that airline negotiations start, toute suite.

Yet when the propeller turns or the CF-34 starts to spool up, the consumer somehow isn't there. The reason is simple - the community got fed a line of jive - the cost/value equation is no longer there. This isn't the 1980s anymore.

When airports are presented with one of those crackpot "innovative" schemes to resuscitate once-viable flying, we'd suggest two things: Keeping your wallets in your pockets and keeping in mind those Western ghost towns. There's a reason they're gone.

And why some once-viable airline markets are gone, too.

© 2009 Boyd Group International, Inc. All Rights Reserved.

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