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.

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.

Which Asian airlines might be interested to buy into Virgin America?

Photo courtesy Virgin America

Photo courtesy Virgin America

UP for sale, Virgin America has some suitors lining up. It has received takeover bids from JetBlue Airways Corp and Alaska Air Group Inc. In this era of the mega carriers (consider the mergers of United Airlines and Continental Airlines, Delta Air Lines and Northwest Airlines, and American Airlines and USAir), a tie-up with another carrier strengthen Virgin’s competitive ability. And while it is almost certain that the merger would be with another American carrier, with analysts placing bets on JetBlue as the best fit, apparently some unidentified Asian carriers have also expressed interest. Still, be that as a remote possibility, one cannot help but be curious and speculate who the likely candidates might be.

Two big names come to mind immediately because of their successes, networks and financial capability, namely Cathay Pacific Airways and Singapore Airlines. Both airlines are keen on expanding their US market. Cathay flies to Boston, Chicago, Los Angeles, New York and San Francisco while Singapore Airlines (SIA) operates to Houston, Los Angeles, New York and San Francisco. Both airlines have codeshare access to several other destinations. Cathay’s codeshare partners include Alaska Airlines and American Airlines while SIA already codeshares with Virgin and with JetBlue.

So it looks like SIA more than Cathay would be favoured on relationships alone. Since foreign ownership rules governing US airlines require the bid to be submitted jointly with a US partner. It would be convenient for SIA to join hands with JetBlue. Of course, Cathay may partner Alaska Airways, but historically Cathay is not quite interested in equity participation. Although it has a 20.3% stake in Air China and 49% in Air China Cargo, that could be a matter of expedience to secure its market in the growing China mainland market.

SIA on the other hand, limited by a hinterland market, tried in its early years to grow through acquisitions. In 1999, it bought 49% of Virgin Atlantic and subsequently 25% of Air New Zealand. Although both buys subsequently proved to be lemons, resulting in heavy losses, the misstep might be less strategic than circumstantial. Unfortunately that has hurt SIA deeply more psychologically than financially as the airline became more cautious about such moves. In subsequent years it failed in its seemingly reluctant bid for a stake in China Eastern Airlines, and the SIA Group was plagued by the poor decisions of its budget subsidiary Tigerair in joint ventures in Indonesia and the Philippines. In Oct 2012 SIA bought a 10% stake in Virgin Australia, joining tow other foreign partners namely Air New Zealand and Etihad Airways. In much the same way that Cathay needed to secure its market in China partnering with Air China, SIA needed to secure its Australian market against the competition by Qantas. Six months after, SIA increased its stake to 19.9%.

But is SIA even interested in a stake in Virgin when its codeshare partnership with JetBlue already places it in an advantageous position to benefit from a JetBlue takeover of Virgin? Would a bid jointly with an Asian partner jeopardise JetBlue’s chances if the powers that be preferred an all-American merger a la the big three of United, Delta and American?

Besides Cathay and SIA, one should not ignore the voracious appetite of the China carriers in the national trend to acquire foreign assets. And why must it be premised on full-service carriers that are already serving destinations in the US? What about a budget carrier with dreams of new frontiers? Maverick AirAsia chief Tony Fernandes who models himself after Virgin guru Richard Branson and who had been where others were hesitant, even afraid, to go may yet surprise with an expression of interest even if it is no more than just that. He is one of the few airline chiefs who, like Ryanair’s Michael O’Leary and Qantas’ Alan Joyce, understood what an opportune good dose of publicity could do.

All this, of course, is speculative. Asian carriers are likely to be less concerned this time than when the mergers of the American big three took place. Together with Southwest Airlines, the big three control 80% of the American market. Virgin and its alleged interested parties JetBlue and Alaska are all largely domestic carriers. Even if Southwest throws in a bid (but for its size that may not pass the antitrust law as easily), it is still the same scenario. SIA’s connections with JetBlue and Virgin will continue to stand it in good stead, but if it’s Alaska that carries the day, then it is Cathay that stands to benefit from the new, extended connection. Or does it really matter when there are already subset agreements across partnership lines that allow you to fly an airline of one alliance and connect on another in a rival group? That’s how complex today’s aviation has become.

What conclusions can you draw in an airlines survey?

SIA courtesy SIA

WE continue to be fascinated by rankings of the world`s best airlines, although the results of most surveys – take away some bias here and there – are quite predictable and almost similar across the board. The winners by and large boast excellent cabin service, great food, comprehensive in-flight entertainment and innumerable choices, more generous legroom than what their competitors offer, and frills such as complimentary champagne and brand name overnight kit. It is all about creature comforts. And the impressions are understandably almost always skewed by the luxuries of the upper classes.

Traveller magazine Conde Nast has just posted its list of the world’s best airlines, surveyed among some 128,000 readers. Of course this is not the definitive list of excellence to the detail, in the same way that no other list can be as definitive without considering factors such as the type of respondents involved, the scope of the survey and the criteria adopted, but there are nevertheless interesting conclusions to be drawn from them. So often it is more interesting to look at the omissions.

Long haul can impress or disappoint

Singapore Airlines (SIA) is a perennial favorite of Conde Nast readers, ranking top for 27 of 28 years. It is hardly surprising, which to be saying it seems even redundant. The airline has long earned the reputation as one of the world’s best airlines, and is frequently celebrated in other surveys as well. It was ranked second after Qatar Airways in the last Skytrax survey. It is hard to find a match that depicts consistency in excellence. The real clincher seems to be in its long haul operations – such flights that are likely to elicit the flaks when passengers are apt to become more stressed and demanding. Here is where SIA is able to make the difference by a well-trained crew that anticipates a passenger’s needs, always mindful the passenger’s comfort first and foremost in the service.

All the airlines in Conde Nast’s top ten are long haul operators, with the exception of Porter Airlines which is more a city shuttle that flies between Toronto in Canada and US destinations such as Boston, Charleston and Myrtle Beach.

While the long haul impresses, it can also take apart an airline’s reputation, which explains why some airlines are inundated with complaints about being handled like a can of sardines. Interestingly, the Conde Nast list of best American carriers is made up of short-haul operators to the exclusion of the big three of United Airlines, American Airlines and Delta Air Lines. Virgin America is ranked first followed by JetBlue, Hawaiian Airlines, Southwest Airlines and Alaska Airlines.

Dominance by Asian and Gulf Carriers

Again, it is not surprising that Conde Nast’s top ten ranks are dominated by Asian and Gulf carriers, which together were placed in not only in the top three ranks but also seven of the top ten positions. The Gulf big three of Emirates Airlines, Qatar Airways and Etihad Airways were second, third and fifth respectively. Qatar was tops in the earlier Skytrax survey, ahead of Emirates (5th) and Etihad (6th). Other Asian airlines in the Conde Nast list are Japan Airlines (6th), Korean Air (7th) and Cathay Pacific (10th). Both SIA and Cathay were also ranked among Skytrax’s top ten airlines.

Dominance by Asian and Gulf carriers means the stark exclusion of airlines of other regions. Only one European airline – Virgin Atlantic – was listed, and in fourth placing. One asks: Where are British Airways, Air France and Lufthansa although going further down the list you will find Swiss International Air Lines (17th) and Finnair (20th)?

That and the marked absence of US carriers demonstrate the superior service culture of Asian and Gulf carriers and their growing popularity that continue to put pressure on their rivals in the competition. The US big recently accused the Gulf big three of unfair competition supported by state subsidies. In truth, North American airlines are not inefficient, but they lack the soft pampering touches of their competitors. There is a host of pertinent questions. Can US carriers be as friendly or, to go one further, do better? And, ultimately, do they even see the need?

Luxury improves image

Etihad boasts the “residence” suite that comes with a bedroom, private bath with shower and lounge. That is for now the forerunner in the race for the ultimate luxury in the air, leaps ahead of SIA’s first class suites and all the other airlines’ flat bed allures. There are also the extras: Etihad provides a concierge service that will make a dinner reservation for you when you land, and some airlines offer door-to-airport limousine services. The slant towards premium classes is to be expected, for that is what makes news even as the perks are limited to a smaller but more lucrative market of the travelling population. If there is one airline that seems to be doing much more for coach than many others, it is Air New Zealand, which offers “Skycouch” in economy – seats that can be converted into a lie-flat double bed – but then again, this is limited to only three seats in the cabin, reminiscent of the days when EVA designates a small number of seats as the ill-defined premium economy before the subclass takes on an identity of its own today.

Comparison is the crux

In any survey, the crux is the comparison, particularly when they are all said to be providing good cabin service and excellent food amongst the creature comforts. The Conde Nast survey again surfaces the rivalry between SIA and Cathay Pacific in the top ten, favoring the former. Interestingly, Japan Airlines (6th) is ranked ahead of All Nippon Airways (11th), and Korean Air (7th) ahead of Asiana Airlines. That indicates a reversal of order that has been the reading of many past surveys, and may well portend how the competition may be trending.

In the case of Gulf carriers, the ranking rivalry among Emirates, Qatar and Etihad is very much a close call going by several international surveys. At the same time, we cannot ignore the inclusion of Turkish Airlines in Conde Nast’s top 20. Turkish was fourth in the Skytrax survey.

In the close rivalry between Qantas (15th) and Virgin Australia (19th), the former continues to enjoy an advantage over the latter.

What else matters? All the hype about going green as the world becomes increasingly conscious of the impact of climate change? That Korean Air prepares its food from humanely raised and organically grown produce. That El Al offers an iPad rental program. That Virgin Atlantic has a stand-up bar. That Qantas offers Select on Q-Eat that allows you to pre-order your meal. That Air New Zealand makes its safety presentation more entertaining than others. That British Airways allows you to log on to a movie as soon as you board and stay with it until the aircraft is docked at the gate on arrival. The list goes on. And one wonders.

This article was first published in Aspire Aviation.

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.