British Airways, American Airlines, and Iberia in transatlantic tie-up

by Sean McLachlan on

British Airways has signed a “tie-up” deal with American Airlines to share passengers and costs between the European Union and North America. Two non-EU nations, Switzerland and Norway, are also covered in the agreement.

BA says the deal will be worth $7 billion a year and will give passengers greater access to discounted fares. They’ll also get better connections and access to the airlines’ global network.

The deal, which has been in the works since 2008, only received regulatory approval this summer after rival carriers complained that it would create a near-monopoly. BA and Iberia merged last year. The current tie-in deal with AA is not a merger, but instead a close cooperation agreement to integrate ground operations and other aspects of the airlines. This will reduce costs by getting rid of overlapping services, and if these savings are passed on to the customers then there could indeed be a reduction in fares. With competition as fierce as ever, BA, Iberia, and AA will want to make this deal as marketable as possible.

The joint venture will being in October. Stay tuned to see how it turns out.

[Photo courtesy Fly For Fun via Gadling’s flickr pool]

Southwest uses AirTran for access to business travelers

by Tom Johansmeyer on

The key to success in the airline industry is the business traveler. This category flies often, has less flexibility in pricing and spends more on flights than a leisure traveler could possibly imagine. So, it’s hardly surprising that Southwest‘s acquisition of AirTran – a $1.42 billion transaction – could help deliver greater share of the white collar travel crowd to the low-cost carrier.

According to MSNBC:

Southwest – which currently serves key cities such as Dallas, Chicago, Denver, Phoenix and Baltimore – has long been considered a vacationer’s airline. But it has lured corporate road warriors with offers like Business Select fares that cost more but promise priority boarding, extra frequent-flier credit and a free drink.

So, we’re looking at an expansion of Southwest’s strategy into a more lucrative market. Southwest has already proved that it can thrive in the volatile leisure market, ostensibly more challenging than catering to the business crowd. It seems as though this strategic shift is as close to a “sure thing” as one can imagine in the airline industry.

The acquisition also provides Southwest with international routes, as it picks up AirTran’s access to Mexico and the Caribbean.
[photo by AGeekMom via Flickr]

Airline mergers could lead to fare “creep”

by Tom Johansmeyer on

The Southwest/AirTran merger isn’t expected to push fares much higher. The disappearance of seats that comes with airline consolidation would make you think that prices are about to rise, as the fundamental commodity of the airline industry becomes increasingly scarce. But, we’re not close to that point yet, notes USA Today:

“We’re not at the tipping point,” says George Hobica, founder of Airfarewatchdog.com. “I don’t think fares will be impacted much until we have three legacy carriers and one discount carrier remaining.”

The number of seats, however, is shrinking across the airline industry. Since September 2007, the number of domestic seats available has fallen 10 percent.

According to Hobica, look for fares to “creep upward,” but not at a rate that will horrify customers, a position supported by Frank Werner, associate professor of finance at Fordham University. He tells USA Today: “Generally, airline mergers remove competition from the skies, leading to higher prices. This will happen in markets where the combined Southwest/AirTran will not have a dominant market share.”

[photo by SkilliShots via Flickr]

Customer service supreme, even on a bad day

by Tom Johansmeyer on

Whose bad day matters more? When a customer and an employee are both struggling with foul moods, endless work headaches or even distracting personal problems, the tie always goes to the person paying – not the person being paid. For most businesses, this is a common sense approach to managing customer relationships. I know that when I was frustrated or annoyed with a client, back in my corporate days, even hinting at my mood would invariably make my day far worse … as I’d wind up on the receiving end of my boss’s ire.

We routinely avoid restaurants and bars, hotels and professionals (e.g., doctors, lawyers and accountants) because of both actual and perceived slights. For this reason, especially in the professional services space, every effort is made to hide the symptoms of a bad day – and to tolerate those shown by clients. It’s the nature of the beast: making money matters more than expressing your frustration.So, I do find it strange when airline employees use this as an excuse for poor service. There have been plenty of examples of frustrated airline employees who have garnered support from their peers, from the orange juice meltdown on American Airlines to Steven Slater‘s recent slide to infamy. The level of sympathy in the industry, it seems, ranges from “bad day” to “I’ve always wanted to do that but never had the nerve.”

It’s time for the airlines to do what the rest of the business world has endured for years: deal with it. Everyone who’s worked in a customer- or client-facing position has had to soldier through a tough day when his client is unhappy. It may be painful, and we may know that we’re right … but ultimately, the business relationship comes first. Eventually, the customer emerges from his funk, and the investment made in tolerating the temporary difficulty pays off.

The first step toward being treated like a professional is acting like one. Endure customer madness with a smile, even if you’re having an awful day too, and the world will start to change.

[photo by Maks Karochkin via Flickr]

Five reasons airline fees up 50% year-over-year

by Tom Johansmeyer on

Does your wallet feel a little bit lighter? A new USA Today analysis reveals that airline fees are on the rise, with some up more than 50 percent relative to a year ago. The study compares the extra fees (not to be confused with fares) of 13 airlines and shows just how important this revenue source is to the airline sector.

According to USA Today, “The numerous fees are a sore subject for many fliers, but their dissatisfaction hasn’t deterred airlines from bringing in record revenue from additional fees.”

The fees were good for $2.1 billion last quarter, with $893 million of it coming from checked bags and $600 million from changed reservations.

So, where did all this money come from? Here are five ways airlines have turned those extra charges into a big business:

1. First checked bag: most airlines in the United States hit you for up to $25 for the first bag you check, with only Southwest and JetBlue abstaining. Most charged $15 a year ago, according to USA Today, with four not playing this aspect of the fee game.

2. Change fee spikes: a year ago, the most expensive coach change fee was $250, charged by Continental, Delta, United Airlines and US Airways. This year, it surged to $300, an increase of 20 percent, charged by American Airlines for some international flights.

3. Pay to call: still resisting the internet? Booking by phone costs an extra $35 on US Airways, while Allegiant Air hits you for a $29.98 round-trip booking fee and another $14.99 for “convenience.”

4. Preferred seating: United asks for up to $159 for preferred seating, which can give you up to five more inches of leg room. A year ago, it would have set you back only $119.

5. Get a receipt: Continental (for which this isn’t new) – along with American, Hawaiian and US Airways – have an extra fee for passengers who want a receipt after they have taken their flights.

[photo by Deanster1983 via Flickr]