American Airlines is the one to watch in 2010

by Tom Johansmeyer on

Could 2010 be the year for American Airlines?

Well, it’s hard not to see the light at the end of the tunnel after a decade of unusual airline severity. The market was shaken several times by terror attempts – including the attacks of 9/11 – economic pressures from the dotcom meltdown and the recent financial sector only made matters worse. Energy prices hit some peaks along the way, which, according to Joseph Lazzaro of our sister site, BloggingStocks, determines the fate of the U.S. airline sector.

But, AA in particular? The guys with the flight attendant who through a nutter over orange juice?

The stock is up 90% since June. To most travelers, this is not just irrelevant, but boring … until you think about how these matters can impact your experience on an airline. When a company is profitable, it has an easier time serving its customers. And, employees tend to relax a little bit, as profits and stock prices tend to be good signs that jobs won’t be disappearing (at least not in large amounts).Also, I use stock price as a proxy for intangibles, like brand strength, customer loyalty and other factors that are hard to quantify. At the end of the day, the price determined by investors takes all this stuff into account, giving customers and passengers a feel for how the airline is likely to treat it.

So, cast aside the recent high-profile debacles of this airline, including its recent runway faux pas in in Kingston, and think to the future. After all, everyone’s screwed up. United has its guitar-playing victim, and Northwest (and, as a result, Delta) watched a plane overshoot a destination. In a business where every player is scraping the bottom of the barrel, American may rise above, even if only slightly.

An inside look at off-the-books elite airline programs

by Tom Johansmeyer on

Imagine an airline experience free of middle seats, standing in line or dealing with nut-job flight attendants who withhold orange juice, water and any other service not related to “safety.” Tom Stuker, it seems, doesn’t have to close his eyes and pretend: he lives the dream. He’s spent 700,000 in non-middle seats this year alone, with complimentary cocktails, a hidden check-in process and a taste of luxury not present even in first class having become the norm for him.

Now, with 8.8 million miles racked up on United over his travel-intensive career, Stuker has been admitted to an elite frequent flier program, of the sort we covered here at Gadling not to long ago. This is the type of secret society noted in George Clooney‘s new flick, “Up in the Air.” Airlines don’t like to talk about it, but they actually do treat people well on occasion. You just have to spend a fortune to matter enough to them.

United spokeswoman Robin Urbanski Janikowski likens the airlines super-duper-premium offer, Global Services, to Yale’s Skull and Bones society. Like the elite underworld of the Ivy League, its members include CEOs, senators and other people envied by the rest of us.

So, how does this work?

1. You get a special check-in area. Avoid the great unwashed, and get greeted by name, as a concierge, of sorts, dispatches with your bags quickly. Your boarding passes will be waiting for you. At some airports, you’ll be able to pass through a hidden door to the front of the security checkpoint.

2. You’ll be watched. When? Well, when you move to the front of anything. We are all aware of those guys who occasionally are allowed to board before the elderly – before any announcements are made.

3. You’ll choose first. For everything, all the time. The meal will come to you before anyone else even knows there’s food on the plane.

4. Your lost luggage is scouted. If the airline loses your luggage, they actually try to find your luggage. Actively. A special team takes care of this.

None of this is truly life-changing, though, except the security piece. The real value of being a member of this type of secret society becomes apparent when something goes wrong … not unusual when airline employees are involved.

If you have a connection that’s too tight, the airline will rebook you on the next available flight – while you are still in the sky. A special agent will meet you at the gate with your new boarding pass, and a set of wheels will be furnished to take you to the next gate. If you need to go through security again, you’ll be escorted personally. In rare cases, a car will be waiting for you to dart you across the tarmac to your next plane. Terminals are for prolie scum.

Thinking back to Stuker, he’s got insane props with several airlines, but his favorite is United, because, “I am treated like a king.” Simply, he notes, “If I was in coach, I would shoot myself.”

Travel insurance for a recession-plagued world

by Tom Johansmeyer on

The woes visited upon the travel industry this year have forced consumers to cope with a variety of risks that simply weren’t an issue a few years ago. With hotels struggling to pay their mortgages and airlines struggling to … well, exist, as usual … travelers need to think about what happens if one of these companies shuts its doors.

Direct Line travel insurance policies, it seems, are adapting to this new reality. If your hotel shuts its doors, car service can’t afford the gas to pick you up or airline calls it quits, you’ll be able to get some relief. The insurer also covers villa rental companies, theme parks and other travel service providers in the event of a financial failure.

And, it looks like the extremes are addressed.

If you are stranded someplace because an airline screws up while you’re on your trip, the company will pick up the tab for a flight home – a level of protection not currently included by credit card companies under the Consumer Credit Act.

Jennifer Thomas, spokesperson for Direct Line, said, “Holidaymakers are understandably looking to spend less on travel these days, and booking directly with airlines and hotels can be a good way of getting more while spending less.” She continues, “This means that it is now more essential than ever to have insurance in case these firms fail, as there is no protection from schemes such as ATOL or ABTA if booked direct. With our updated travel insurance policies, our customers can now travel with increased peace of mind, knowing that they will be covered in the unfortunate event of a supplier’s collapse.”

Airline recession will continue into 2010, good news for passengers

by Tom Johansmeyer on

The airline industry must be excited to see 2009 coming to a close. It was a year of route cuts, perk cuts and abuse from passengers over all kinds of sacrifices in the cabin … and a genuine commitment to fees for extra bags. The global financial crisis triggered in September 2008 hit the travel industry with extra severity, forcing airlines, famous for not being able to generate easy profits anyway, to scramble to keep their heads above water. But, at least there’s next year … not really.

While nobody with even shred of sense expected 2010 to be the year the airline industry went wheels up, the latest prediction from the International Air Transport Association is pretty grim. IATA expects the sector to lose $5.6 billion next year, thanks to higher fuel costs and revenue declines because of lower fares. This is worse than the $3.8 billion it originally forecasted. The number of passengers filling seats, IATA believes, will increase, but it won’t be enough to make a difference.

There’s good news in here. Continued brutal competition will keep fares low, so if you missed your chance to take that dream trip this year, you’ll have another bite at the apple in 2010. For the airlines … well, there isn’t any good news. But, is there ever?

[Photo by emrank | counting days | via Flickr]

Virgin America: Financials prove service makes a difference

by Tom Johansmeyer on

We’ve all gotten used to bailing out airlines that can’t figure out how to take care of their paying customers, operate profitably or otherwise get their respective acts together. And, there really isn’t much hope of this situation changing. To be an airline, in general, is to be dysfunctional … until you look at the new entrant, Virgin America. The privately held carrier announced on Friday that its revenue surged 38.3 percent from the third quarter of 2008 to the third quarter of 2009.

The airline has amassed a collection of awards to back up its commitment to customer service, including “Best Domestic Airline” in Travel + Leisure‘s 2009 World’s Best Awards and “Best Business/First Class” among domestic airlines in Condé Nast Traveler‘s 2009 Business Travel Poll. And, the fact that the 1,500-person company is adding jobs in this market — beating both the recession and its worsened form in the travel business — suggests that it is possible for an airline to not just survive but actually succeed.

David Cush, Virgin America’s President and CEO, says, “Despite an uncertain economic climate since our 2007 launch, we’re pleased to report steady and strong financial performance and our first quarterly operating profit.” He adds, “At a time when flyers are more discerning than ever, it is clear that our low fares, award-winning guest service and innovative amenities continue to convert a growing network of loyal travelers. We look forward to bringing our unique value proposition to more travelers as we grow in 2010 and beyond. ”

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But, enough of the soft stuff — let’s turn to the numbers. That’s where you’ll find the truth in these matters. Cost containment and operational efficiency helped Virgin America post a record load factor of 86.6 percent, an increase of 5.2 percentage points year-over-year. Costs per available seat mile were pushed down 33.9 percent (24.4 percent ex-fuel), and operating income swung from a $54 million loss in the third quarter of 2008 to a $5.1 million gain this year. Along the way, Virgin America realized a mishandled baggage rate of 1.18 per thousand — three times better than the industry average. And, it attained an on-time rate of 87.2 percent.

Sorry to go “quant” and dwell on the numbers a bit, but they speak to a common theme here at Gadling: whether the airlines are doomed to fail … and be propped up by the government taxpayers and fail again … and so on. Virgin America’s proved that an airline can amass 1.1 million loyalty program members and fly 5.8 million passengers in just over two years and still find a way to get into the black. There is probably market share gain in this airline’s future, but it is making a big mistake: by not screwing up, it’s taking a pass on all the free money the feds are more than willing to give to an industry that refuses to help itself.