Fallen American Airlines could be next to merge … with JetBlue?

by Tom Johansmeyer on

American Airlines used to be the largest airline in the industry – now it’s third. Merger activity has narrowed the field, with Southwest–AirTran and United-Continental the latest deals that hit the sector. So, all eyes are on who will succumb to the urge to merge next, and American is being eyed as the next player.

According to a Forbes blog post, analysts from Morningstar believe that American Airlines “needs to make a big splash” to remain a player in an increasingly competitive market. The post continues:

“Once the industry’s largest carrier, [American Airlines] is now the third-largest…and any scale advantage it may have garnered is gone,” the Morningstar analysts write. “Ironically, AMR is at a substantial disadvantage, given that it steered clear of bankruptcy during the recession,” [Basili] Alukos and [Adam] Fleck say, pointing out that American’s labor rate is the industry’s highest on an equivalent basis.

So, who’s the right partner for American? The analysts at Morningstar are looking at JetBlue, especially given the latter’s “lighter cost structure.” Notes founder of Training the Street and former M&A investment banker Scott Rostan, “Three dominoes have fallen – Delta/Northwest, UAL/Continental and Southwest/AirTran.” He sees Alaska, Frontier and JetBlue as likely to make some noise.

[photo by Andrew Morrell Photography 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]

United Airlines flight attendants create new cocktails – passengers pick the best

by Scott Carmichael on

Last week, United airlines held an event for their most important passengers, and presented them with ten different cocktails, all designed by flight attendants. In total, United crew members submitted 64 different cocktails, and the top ten entries ended up on a table at Trader Vic’s in Chicago.

The ten finalists:

  1. Sunset-Sunrise : Finlandia Vodka, cranberry apple cocktail, splash of orange juice, lime wedge
  2. Sky High Delight : Finlandia Vodka, orange juice, cranberry apple cocktail, sprite, lime wedge
  3. Friendly Skies Spritzer : Finlandia Vodka, ginger ale, orange juice, cranberry apple cocktail, seltzer, lime wedge
  4. Cloud 9 Cosmo : Finlandia Vodka, Sprite, cranberry apple cocktail, lime wedge
  5. Jack and the Bean Stock : Jack Daniels, Ginger Ale
  6. My Style High : Courvoisier VSOP Cognac, orange juice, cranberry apple cocktail, sprite
  7. Bon Voyage! : Bacardi Rum, orange juice, cranberry apple cocktail
  8. Flirty Smile : Finlandia Vodka, cranberry apple cocktail, ginger ale, lime wedge
  9. Island Dream : Bacardi Rum, cranberry apple cocktail, ginger ale, lime wedge
  10. Gin Buck : Tanqueray Gin, ginger ale, lime wedge

The event was very casual and was attended by several members of the United Airlines management in charge of the in-flight service. As for the drinks, I actually managed to try all ten of them, and found it very hard to pick a favorite. The lime wedge was a very nice touch, and made for delightful drinks.

The winning cocktail will end up on all United Airlines flights with full beverage service towards the end of the year. In addition to drinks, United also served some of the newest food choices from their coast to coast P.S. service.

The winning drink as picked by members of Flyertalk.com and the United Fliers Community is drink number 1 – Sunset Sunrise. If you’d like to make one of these for yourself, here are the instructions:

  • Pour 25 ml Finlandia vodka over ice
  • Fill glass with Minute Maid Cranberry Apple Cocktail
  • Add a splash of Orange Juice
  • Finish with a Lime wedge

Sunset-Sunrise was created by LAX based flight attendant Tita Martin. Events like this show a new thinking within United Airlines, and I have to say that I’m quite impressed by the time and effort put into listening to their customers. Granted, the event was not really open to everyone, but an airline that is open to ideas from its customers is one that deserves a pat on the back, especially if it involves serving free cocktails.

Top five reasons you’ll pay more for flights

by Tom Johansmeyer on

It looks like flight deals are a thing of the past. The airline sector is starting to recover, as evidenced by an aggregate $1.3 billion in earnings for the six largest U.S. carriers last quarter, and more profits are said to be on the horizon. Of course, we’re still in the early stages, and those earnings do pale in comparison to the $22.7 billion in losses sustained in 2008 and 2009. So, the airlines are making up for lost time and taking advantage of a swing in the economy … that means you’re going to pay for it.

Good news for the airlines, of course, translates to a thinner wallet for you, but it indicates that you’re at least willing to handle the higher cost, since airlines tend to be price-takers rather than price setters.

Why are you going to pay more for flights? Here are the top five reasons:

1. Extra fees no longer “extra”: they’re part of the package now. Airlines raked in $13.5 billion from fees in 2009, a 43 percent spike year over year. They aren’t going away. As the industry recovers, this will help keep fares higher.

According to the Associated Press:

United and American led the way on “ancillary revenue,” including fees, at about $1.8 billion apiece last year, according to IdeaWorks. United Airlines President John Tague calls fees “an unequivocal success,” and suggests his airline could still double the amount it’s bringing in with baggage fees.

2. The market supports higher prices: airlines charge what they can get, as it is a consumer-driven market. So far, consumers are responding favorably to price increases, with fares up an average of 18 percent this summer.

3. Airlines to hold the line this fall: demand is expected to decline through the end of summer, and the airline will try to keep from offering deep discounts. In fact, many are offering deals to get passengers interested but are able to convert into higher-priced seats.

4. Shared armrests the norm: the planes are full. Delta filled close to 90 percent of its seats last month, with Continental at 87 percent and American at 86 percent. This means there are more fares covering the cost of the flight, which delivers favorable financial results.

5. Temptation to add flights resisted: rather than bring more planes out to handle this increase in demand, the airlines seem to be fighting the urge, because bookings are sluggish and the economic recovery is tenuous.

[photo by Ma1974 via Flickr]

Vegetarian child stranded in airport, fed burgers

by Tom Johansmeyer on

Julien Reid, at only nine years old, is used to air travel. He routinely flies between his parents in Ottawa, and San Francisco, so he’s seen it all … well, he has now. Reid was forgotten in a children’s waiting room in Chicago, where he spent eight hours waiting and hoping to be discovered.

According to the Ottawa Citizen:

He was in a “tiny, little room cramped with kids,” where they played the same video on a loop all day, he said. The only food he’d been given was McDonald’s, a less than satisfactory option for a vegetarian like him. He said he and the other children were yelled at “to stop being kids.”

Meanwhile, the flight left without Reid. How did it happen? Among the many calls made to find out what was happening, Reid’s mother, Genevieve Harte, spoke with the United Airlines attendant tasked with keeping an eye on the kids. According to the Citizen, “It was this frazzled attendant who let it slip, Harte said, that no one had come to fetch Julien to put him on his flight.”

Citing something of an airline “omerta” policy, Harte, who suspects her son was bumped from a crowded flight, told the citizen: “It’s a lot easier to have a kid that’s not going to say anything than an adult who has a business meeting that’s going to scream at you in front of everybody.”

United said it’s going to give Harte “a refund for the childcare fee and an undisclosed goodwill gesture.”

[photo by FHKE via Flickr]