Humanizing the airline business

Never before was there so much publicity given to customers’ complaints about mistreatment by the airlines in North America ever since the David Dao incident when the seated passenger was forcibly removed from an United Airlines flight by security personnel. Stories of being bumped off a flight abound, and added to these other stories that include flight cancellations and misconnections, checking into an incorrect flight that took the passenger half way around the world, and death of a treasured animal in the cargo hold.

The beef is more about the way such a situation was handled by the airlines than the fact that it did occur. Take, for example, the incident of a 15-year old boy, technically classified as a minor, who was travelling from Denver to Thunder Bay via Toronto on Air Canada. He missed his connection when the flight out of Denver was delayed, and Air Canada duly rebooked him to fly to Thunder Bay the following day but did not offer any accommodation or vouchers for food.

Courtesy Air Canada

In an interview with BC News, Derrin Espinola said he felt “trapped… very hungry, very tired, very scared.” No one helped, even as he went from counter to counter to explain his situation. While Air Canada had issued a statement to say it was “truly sorry”, the blame appeared to have been placed on runway construction works at Toronto’s Pearson Airport and “exacerbated in this case by adverse weather”.

Was this really Espinola’s fault for having faith in the airline’s trusted his service? His mother, Karin Patock, who tried in vain to reach the airline by phone, said she chose Air Canada for its policy about flight delays as stated on its website: “Youths travelling alone (ages 12 to 17) will be taken care of by our agents. We will also arrange for accommodations, meals and transportation if needed.”

The spate of stories now made possible by the power of the social media may have caused many travellers to not believe that airlines in pursuing the dollar do really care for all that they boast to be better than their competitors. But they are beginning to listen, or so it seems as each time a nasty incident like this happens, they apologize readily and are said to be reaching out to the affected passengers and even compensating them as some form of amelioration for their distress, however irreparable.

In the case of denied boarding, which will continue to be practised by most of the airlines with the exception of JetBlue Airlines and Southwest Airlines in their stated policy, the major airlines have vowed to reduce overbooking and increased their compensation for volunteers who give up their seats.

Certainly the authorities have also taken note of the frustrations of passengers within the purview of their legislative responsibility to protect the rights of travellers.

Airline advertisements generally paint the romance of caring crew and other personnel to reduce the stress of travelling. Mind you, many of them do live up to their word. Recent incidents could signal a timely re-focus on procedural constraints and methodology in tackling difficult situations. The social media has given voice to travellers, and what is happening is a humanizing of the airline business as a reminder to carriers that they are dealing not with mere business numbers but people who deserve to be treated with dignity.

Southwest will follow JetBlue: Better a policy of no overbooking than compensation

Courtesy Getty Images

AFTER the fallout of United Airlines in an ugly overbooking situation, Delta Air Lines said it would pay any volunteer who gives up a seat close to US$10,000, which United now emulates. But Southwest Airlines does it better with the assurance it will not overbook seats.

Southwest CEO Gary Kelly said the airline “had been thinking about ending overbooking for a long time”. Thanks to United, it is now looking to implementing the new policy sooner with “better forecasting tools and a new reservations system coming online next month.”

In fact, JetBlue Airways already has the policy in place. In a published “Customer Service Plan”, the airline states: “JetBlue does not overbook flights.” There may be exceptions to the rule. The statement goes on to state: “However, some situations, such as flight cancellations and reaccommodation, might create a similar situation.” In which event, affected passengers will be paid denied boarding compensation of US$1350.

Courtesy JetBlue Airways

In the present climate when travellers are weighing in on the issue, JetBlue CEO Robin Hayes reaffirmed the airline’s policy. “We are committed to our policy of not overselling flights,” he said. “And our crew members have always been in power to make decisions in rare cases where we have to put someone on a flight.”

Last year, according to the Transportation Department, JetBlue bumped off 3,176 passengers involuntarily while 1,705 passengers agreed to take another flight, out of 34.7 million passengers.
This, Hayes said, was largely the result of downsizing planes.

Ironically, Southwest had the highest total number of involuntary denied boardings last year – at 0.99 per 10,000 passengers,. JetBlue was not far behind 0.92. The rates for both airlines more than double United’s 0.43.

One badly handled incident, so it seems, can really do more damage than the number of incidents added up might suggest.

Budget and transatlantic competition heat up

Courtesy Vueling Airlines

Courtesy Vueling Airlines

International Airlines Group (IAG) announced plans to commence low-cost transatlantic flights from Barcelona to the United States by budget carrier Vueling. IAG also owns British Airways (BA), Iberia and Aer Lingus.

Legacy airlines (and airline groups) are increasingly recognizing the competition posed by budget carriers, and it is not new that some of them have set up budget operations such as Lufthansa’s Eurowings, Qantas’ Jetstar, and Singapore Airlines’ Scoot. In the US, the Big Three airlines of American, United and Delta are introducing no-frills fares on normal services to compete with low-cost counterparts such as Southwest, JetBlue and Frontier.

Where the competition is most felt is the transatlantic sector, which has seen a surge of cheap fares offered by operators such as Norwegian Air Shuttle and Iceland’s WOW Air, discomforting both US and European counterparts.

WOW Air is well-known for its $99 fare for travel between the US and Europe – destinations such as Copenhagen, Stockholm, Edinburgh and Bristol – with a free stopover in Reykjavik. It has begun enticing US Westcoasters with fares as low as $65.

Norwegian also offers $99 fares with promotional offers as low as $69.

Budget doyen Ryanair has long announced its ambition to also ply the transatlantic routes.

While home-based US airlines are protesting the entry of Norwegian, European airlines are taking a more active approach to compete head-on. IAG will be able to advantage Vueling with the network of partner airlines. Eurowings is already operating nonstop from Cologne and Bonn to the US, and it has plans to add more destinations.

In a price-sensitive market for as long as the current situation holds, budget carriers may be driving the trend. Legacy airlines will be challenged to make their advertised difference in product worth the additional dollars in fares, at the same time keeping their budget rivals at bay in a two-prong approach to the competition.

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.

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.

United Airlines steals a march on Singapore Airlines

Courtesy Alamy

Courtesy Alamy

United Airlines has stolen a march on Singapore Airlines (SIA) when it announced its launch of a non-stop service between San Francisco and Singapore in June. This will be the first non-stop service between Singapore and the United States after SIA terminated its services to Los Angeles and New York in 2013. United`s announcement came soon after SIA made known its plans to resume non-stop services in 2018, if not earlier in 2017.

You may wonder why United has moved so quickly to fill the void left by SIA when the poor loads experienced by the latter contributed to its suspension of the non-stop services. Apparently the passenger traffic between the two markets has since improved and is growing by an average of 4 per cent annually. Of course, this is good news for Singapore Changi Airport, which is hoping that United could potentially bring more tourists to Singapore. Understandably, it does not matter which airline brings in the load. And since it is believed that capacity will help grow the traffic, then United has made the right move while SIA waits. The business climate changes so fast that the right time is as good as anybody`s guess.

For SIA, it is an opportunity cost. Or, an opportunity lost. When it terminated its non-stop services to New York, regional rival Cathay Pacific moved in quickly to fill up the void, flying non-stop between Hong Kong and New York. That also pits Hong Kong International Airport, which is only some four hours away from Changi, as an Asian gateway for onward connections. It also provides opportunities for Middle Eastern airlines, notably Emirates, Qatar Airways and Etihad Airways, to better compete to carry more traffic through their Gulf hubs as they expand their connections within Asia and services direct to the US.

Changi`s euphoria over United`s decision is understandable, since connections are key to hub operations. With a non-stop link between Singapore and San Francisco, it will mean more regional traffic feeding into Changi to take advantage of the trans-Pacific connection and the support of United`s extensive network within the US. United vice-president of Atlantic and Pacific sales Marcel Fuchs said: “Those arriving in San Francisco will have dozens of options to connect to other cities across the Americas.” Changi Airport Group senior vice-president for market development Lim Ching Kiat echoed the same sentiment, adding that it will strengthen Changi’s position as the preferred gateway between South=east Asia and North America.

United’s domestic network may be its edge over SIA when the time comes for the latter to mount its planned non-stop services. But SIA can always rely on its partnership links with US carriers such as JetBlue, not excluding too United which is a Star Alliance partner. And SIA has always competed on the strength of its superior service. For the long haul, especially for one that flies such a great distance, it is an important customer consideration.

United’s non-stop flight from San Francisco to Singapore is an estimated 16-hour-20-minute journey. Singapore’s erstwhile non-stop flight in the same direction but from Los Angeles to Singapore clocked 17 hours 30 minutes, and from New York (Newark) non-stop to Singapore, 18 hours or longer. United will be flying the B787 Dreamliner for the new non-stop route. In the past, SIA was operating the Airbus A349-500 but will be converting seven of 63 A350-900s on order to the A350-900ULR variant for the resumed services – the reason for the delayed plan. Referring to the new variant aircraft at the time of its announcement to resume the services, SIA chief executive Goh Choon Phong said: “We are pleased that Airbus was able to offer the right aircraft to do so in a commercially viable manner.”

Perhaps too, little did SIA suspect that United would spring ahead to operate its service using the Dreamliner. According to travel magazine Conde Nast, the Boeing 787 could possibly be the most comfortable aircraft by far to travel the ultra-long distance of 8,446 miles, said to be designed to limit jet lag. Among the reasons cited: the 787 has a better air filtration system and more humidity than comparable planes, so you’re less likely to land with chapped lips or dried skin and nasal passages; the windows are larger so the cabin looks brighter and roomier; and the ride is promised to be smoother and quieter. United vice-president Ron Baur said: “Our passengers will arrive less fatigued, and most experience a significant reduction in jet lag,”

We will have to wait to see what SIA has up its sleeves. There may be surprises yet. SIA’s previous services were configured as an all-business-class flight, and while the target market is still very much corporate and business travellers, SIA is not revealing details about how many seats the new business class cabin will have. However, weight limitations are likely to suggest more leg room, if not fewer seats.

High fuel costs were a major reason why SIA suspended its previous non-stop operations. Fortunately for United, today`s low oil price favours its early move and affords the American carrier precious lead time to consolidate its market. Until SIA resumes its non-stop operations, the game belongs to United.

This article was first published in Aspire Aviation titled “United Airlines vs Singapore Airlines: The race for non-stop US-Singapore connections”.