Virgin America tops, according to Conde Nast

Courtesy Virgin America

Courtesy Virgin America

Virgin America is the best airlines in the US according to a readers survey by Conde Nast. It is a credible list.

The top five airlines are as follows:

1. Virgin America, for its service and roomy cabins that include such features as touch-screen menus ordering, seat-to-seat messaging, no shortage of power outlets, Netflix streaming and mood lighting.

2. JetBlue Airways, for its ten-inch seatback screens, entertainment streaming options, free internet, unlimited blue chips and snacks.

3. Hawaiian Airlines, for its lie-flat seating in the premium cabin, welcome mai tais and guava cookies, and reputation for punctuality.

4. Alaska Airways, for its friendly staff, comfortable seats, reliability and guarantee that checked luggage will arrive no later than 20 minutes after touchdown.

5. Southwest Airlines, for its fun staff, affordable fare, two free checked bags allowance and any change of ticket without penalty.

Worthy of note is the ranking in the top five positions of both Alaska Airlines and Virgin America, which have since merged but continue to operate under their different names for the time being. Their merged identity is set to be a major aviation powerhouse in the US,

Also worthy of note is the absence of the big three US airlines: American Airlines, United Airlines and Delta Air Lines. Size is not a plus in this case, it seems.

Advertisements

Confirmed: Alaska Airlines acquires Virgin America

Courtesy Alaska Airlines

Courtesy Alaska Airlines

IT’s confirmed, subject to final approval by the relevant parties, Alaska Airlines will acquire Virgin America.

Alaska has that personal touch that many airlines lack. As a registered customer of the airline, it is nice to receive this message :

“As one of our most valued customers, we wanted to be the first to share with you some exciting news that Alaska Airlines is acquiring Virgin America, combining two leading airlines both known for low fares and award-winning customer service. With complimentary West Coast-based networks, operational excellence and a strong commitment to innovation, the joining of Virgin America and Alaska will expand our existing California footprint and grow our transcontinental network, giving you more travel options with 1,200 daily departures nationwide.

We’ll keep you updated on the timing and plan for integrating our two airlines.”

So, congratulations, Alaska Airlines!

Both airlines will continue to fly their individual identity until the single operating certificate is issued when the combined entity will be known as Alaska Airlines.

Alaska Airlines pips JetBlue for Virgin America deal

alaska airlinesWHILE it was initially speculated that JetBlue would win the bid for Virgin America, now it looks like it is Alaska Airlines that will emerge the victor. The Seattle-hub airline is expected to pay US$2 billion for the deal.

Merging with Virgin will enlarge Alaska’s base on the west coast, more specifically its share of traffic out of San Francisco from 4 per cent to 15 per cent and Los Angeles from 5 per cent to 11 per cent. Alaska, currently ranked 6th by traffic in the US behind JetBlue, will now be bigger than its rival.

A point in favour of Alaska, which also owns Horizon Air, is that it has fewer overlapping schedules with Virgin.

As American aviation continues to spawn mega mergers that shrink the number of competing carriers, the authorities will have to grapple with concerns that this may lead to higher airfares. However, there is the glimmer of hope that both Virgin and Alaska as one airline will continue to offer lower fares with fewer add-ons competing with the other airlines.

A conscionable call as oil price plummets: Will airlines reduce airfares?

AS the oil price plummets – some 55 per cent since June last year – the question topmost in the mind of the consumer must be: Will airlines reduce airfares?

Many of them have chosen to be silent on the subject, the excuse being that the historical volatility of the market is such that the trend can turn any time. But it has taken a while, and long enough for some conviction from the airlines, now that analysts are convinced that the cost of fuel is likely to stay low for at least another year.

Travellers on American carriers can stop wishing to share in the bounty, even as US carriers are reporting hefty savings as a consequence. Southwest Airlines estimated it would save US$1.7 billion on fuel in the current year, and Delta Air Lines more than US$2.0 billion. Other airlines that include Untied Airlines and Alaska Airlines are forecasting similar cost reductions. But, say the airlines, fare reduction is not on the card. Instead, shareholders will reap the benefits while the airlines themselves see this as a well deserved windfall and respite to recoup past losses and pare down debts.

Courtesy Getty Images

Courtesy Getty Images

United Airlines spokesperson Megan McCarthy delivered the cold reality of the business when she said: “It has been our position all along that fares are not cost-driven. They are demand-driven.”

That, we all know, is the simple economics of the law of supply and demand. So consumers have themselves to blame. Airlines are enjoying near-full loads that there is no incentive for them to want to lower the fare. In Europe, even budget carriers such as easyJet and Ryanair are looking forward to even higher profits from not only savings on fuel costs but also higher fares. So McCarthy was darn right there. But airlines too have learnt to make the formula work better for them, ceteris paribus, as they reduce capacity particularly in the US with merged operations to hold up demand and maintain airfares.

The consumer’s best hope lies in competition as how it should work in the liberal world, but with consolidation which has seen the merger of big entities in the US, raising questions about the assumed competition itself. Today four airline companies control more than 80 per cent of the US market. Little wonder how US carriers have collectively signalled that airfares will not fall in response to the falling fuel cost.

Where competition does not work, the consumer can hope that some conscionable authority will be able to address the fair fare issue. On that second score, you might fault McCarthy for turning a blind eye, but United, like any other, would contend with some validity that it cannot be both operator and watchdog. Company with conscience is a preacher’s prerogative, more idealistic than operative.

Still, the likes of United may be reminded that back in the days not too long ago when the fuel price reached giddy heights, airlines were raising fuel surcharges as many as four times within a year. Strange as it sounds, they have always maintained that the surcharge is not part of the fare, but not as far as the consumer is concerned. Even so, the corollary must apply as the fuel price dips. No lesser a person than Toby Tyler, director general of the International Air Transport Association (Iata), has said that airline fuel surcharges should begin falling as the drop in oil price works its way through the aviation fuel system. Tyler said: “In many cases, airlines operates now with a basic fare and a fuel surcharge of some kind and the fuel surcharge in many airlines is directly linked to the price they’re paying for fuel.”

Courtesy Airbus

Courtesy Airbus

But it looks like it is not happening quite as quickly as Mr Tyler was convinced that it would when he said in October last year: “You’ll see the fuel surcharge very quickly come down.” Still, better late than never. Better somewhere else if not in the United States. Japan Airlines (JAL) announced lower fuel surcharges for international flights from February 1, recognizing the genesis of introducing such levies back in February 2005 in response to rises in the cost of fuel. Now that is one conscionable airline. JAL said it would revise the surcharge, whether upward or downward, if the fuel price fluctuates further. Fair enough. American and other carriers waiting on the sideline, take note.

Qatar Airlines has also announced it will reduce the fuel surcharge although it has not committed to a date for implementation.

Courtesy flyertalk

Courtesy flyertalk

Australian airlines are among the first to drop airfares in response to the falling oil price. Two forces are at work: competition and the authority. Nowhere else in the world is there more bitter rivalry than that between the two Australian carriers of Qantas and Virgin Australia. Virgin took the lead, and Qantas followed suit. Virgin said it would not get rid of the fuel surcharge altogether, but incorporate it into the fares; however it is packaged, the bottom line should see a reduction. Virgin said the “reductions reflect the benefits of the decline in global oil prices” following monitoring over recent months and “in anticipation that fuel costs will continue to remain at lower levels than the record highs seen in recent years.”

At the same time, the Australian government is putting pressure on the airlines to respond to the drop in fuel costs. Rod Sims, chairman of the Australian Competition and Consumer Commission (ACCC) said: “It is not against the law to introduce a surcharge – what is against the law is to mislead customers.” The ACCC announced it was investigating the matter. In a statement that it released, it said: “The ACCC has confirmed that it is considering whether representations made by airlines imposing fuel surcharges, following the fall in wholesale aviation fuel prices, are misleading. Under the Competition and Consumer Act 2010 businesses must not make misleading, deceptive or false representations about the price of goods or services. This includes when making representations about the reasons for rising fuel costs.”

In this connection, Qantas said: “The bottom line for consumers is that Qantas fares already in the market are some of the cheapest in years. Fuel surcharges are already included in the advertised price and those fares remain extremely competitive.”

The issue is not about the fares already being the cheapest in the market but rather whether they should be even cheaper as a result of lower fuel costs that have saved the airlines millions to billions of dollars.

Meantime the British government is studying the need for intervention. British Airways circumvents the issue with no clear commitment, saying it has launched several sale initiatives. Virgin Atlantic said it has reduced the fuel surcharge before last Christmas and will “continue to monitor the situation and fuel surcharges under review to make them as affordable as possible.”

Courtesy Delta Airlines

Courtesy Delta Airlines

It is a world of ironies. The consumer may as well confront the hard truths about the market. The door does not always swing both ways. As the global economy improves, the demand for seats picks up. And when demand exceeds supply, the game belongs to the airlines so much so that Delta CEO Richard Anderson has suggested to passengers who are looking at reduced fares to “shop around”. He said: “The marketplace is incredibly competitive, and there are always differences in fares.” The consumer can only hope that competition is well and alive without the need for state intervention. If Anderson had come across as being somewhat arrogant, he probably knew he could afford it. But heed his advice anyway.

This article was first published in Aspire Aviation.

Flying across North America: Peanuts are a big deal

FLYING the short 50-minute leg from Seattle to Vancouver aboard Alaska Air (the flight was operated by Horizon Air) , I wasn’t really expecting much of inflight service and was quite content with a cup of water and the roomy Q400 seat. But when I flew six hours from New York to Seattle aboard American Airlines, I did wish there was a complimentary packet of peanuts (or pretzels or mixed snacks) to go with my soda.

Gone were the days when these tiny packets whose contents could be consumed in less than a minute would be handed out more as a welcome gesture than as meaningful victuals to satisfy the stomach, something perhaps to soothe the nerves or for a brief respite to take your mind off the dread of boredom on a reasonably long flight across the continent. You see, not handing out the peanuts has become a big deal on North American flights or else you might not dish out your credit card for a packet of chips.

So it was when I flew Air Canada from Vancouver to Toronto, but what an impression the smaller Air Canada Express made on my short onward journey of an hour or so to Pittsburgh. There was only one flight attendant in the small propeller aircraft and she had to walk back up the aisle to the head of the aircraft if someone wanted coffee as that was where the urns were installed. And you get a snack pack of pretzels to go with your coffee (or soda or juice).

Courtesy Delta Air Lines

Courtesy Delta Air Lines


But not all North American airlines are stinging on the peanuts. Flying from Pittsburgh to New York on Delta Air Lines, an equally short journey, the flight attendant came round with a snack basket for you to pick what may tempt you from bananas to granola bars to peanuts. You cannot deny that it makes a difference.

The good news for globetrotters is that outside North America, particularly in Asia, many airlines have kept the customary complimentary gesture which you no doubt appreciate even if you don’t really like peanuts.

Frequent Flyer program: Airlines go for the big spender, not frequent flyer

AS the global economy recovers and more people begin flying, airlines do not have to work as hard to retain old customers or entice new ones. There appears to be a rethink of the flyer program to base its rewards not on frequency of travel or the miles travelled but how much you spend on a ticket. The name of the frequent flyer program is apt to become a misnomer as airlines shift their preference from frequent flyers to big spenders. The new Qantas Frequent Flyer program does exactly that, moving from a miles-based system to a zone-based system whereby flyer points and status credits are based on the cost of the ticket. There is also a shift in downgrading rewards for travel on partner airlines to encourage customers to fly Qantas first and its partners second.

Courtesy Delta Air Lines

Courtesy Delta Air Lines

The trend is also catching up in the United States. Delta Air Lines and Southwest Airlines (though a domestic operator) already have such a system in place. The American Airlines Group comprising the merged entity of erstwhile American Airlines and US Airways is following suit. Alaska Airlines is mooting over a “Sphere” program to award points based on spending rather than just flying. Delta’s SkyMiles program vice-president Jeff Robertson said: “The travel industry, including nearly all hotel and credit card programs, has already moved to a spend-based model. The introduction of a new model for earning miles will increase rewards for those who spend more as well as differentiate the SkyMiles Frequent flyer program for our premium traveler.”

Is this a sign of the premium market recovering or merely yet another push to energize that segment of travel that in better days make up the bulk of a legacy airline’s earnings? However you look at it, it makes economic sense to reward those who spend more. What price then is loyalty for those who fly frequently but do not splash to drink champagne and feast on caviar? The base may shift, particularly when you can join any one of so many airline programs for a fee, such as Cathay Pacific’s Marco Polo Club, just to enjoy priority check-in and boarding, access to an airport lounge in some cases, and possibly an upgrade. Who needs to fly frequently thus or even spend the big bucks?

Alaska Airlines considers fee for choice seats

THE next time that you book an air ticket, be aware that the fare may not come in the usual package when you last travelled. And I’m not talking about just budget carriers, known for their add-on model that charges a base rate and customers pay additionally for options such as meals. Full-service airlines (the appellation is becoming a misnomer) have adopted this same principle to beef up revenue.

Some legacy carriers are already charging for meals and in-flight entertainment. More airlines have followed the United Airlines example of levying a fee for checked baggage. Singapore Airlines levies a fee for preferred seating with more legroom. And now Alaska Airlines is considering going down that same road, considering a fee for “choice seats”.

Ancillary revenue has become a significant source of boosting profitability for these airlines – as if it is really a new income stream for providing new and additional services to their customers. According to Alaska Airlines CFO Brandon Pedersen, this amounts to about US$300 million annually for the airline, 40 per cent of which is derived from checked baggage. He felt Alaska Airlines was somewhat a laggard in the game. Mr Pedersen said: “We recognize we haven’t done as much as other carriers… We think there is more to do here.”

Alaska Airlines is even considering upping its checked baggage fee from US$20 to US$25 for the first bag – to be in line with the industry norm – and why when it looks like many passengers will travel with at least one checked bag? At the current rate, this is already contributing US$120 million annually.

Lest it be too hasty, Mr Pedersen warned that Alaska Ailrines’ major rival Southwest Airlines does not charge passengers for checked baggage. So how far can Alaska Air go before its customers decide to switch allegiance?

What next, you may ask, and wish for the good old days when the airfare was less complicated and entailed certain basic services without your having to stuff down an early meal before boarding or agonize over what you should throw out of your only bag that is allowed as a carry-on?

Indeed, competition is the air traveller’s last bastion of hope for a fair fare deal. And it behooves upon the authorities to ensure that that stays alive and is not abused through collusions and fare-fixing. Airlines should know that what has happened in recent times is that travellers have become more conscious of the numbers. And that more of them are shopping around than they used to, especially when the product becomes increasingly uniform and the only reason for travelling is to get from one point to another.