It’s December, which means it’s mileage running season for many frequent fliers. Not familiar with the concept? This is when some folks schedule extra trips just so they can reach the elite level of an airline’s frequent flier program.
We learned Tuesday that US Airways and American Airlines have settled their antitrust lawsuit with the U.S. Department of Justice and several state attorneys general.
The deal, as expected, requires the combined carrier to divest itself of assets in some major business markets — mostly New York and Washington, but also other places, like Chicago, Boston and Los Angeles. Many experts believe American and US Airways did pretty well in the deal, and I agree. The new American should be at least as strong as competitors Delta and United. The biggest divestiture comes in the form of slots — or takeoff and landing rights — with the new airline losing 34 slots at New York La Guardia and 104 at Washington Reagan.
My job is to focus on West Coast aviation. So let’s take a look at the nuts and bolts of what the DOJ Settlement means for LAX.
I linked to it earlier today, but I think it’s worth taking another look at Brett Snyder’s interview with Daniel Shurz, Senior Vice President – Commercial for Frontier Airlines.
In one of the most interesting parts, Schurz says the U.S. market needs more ultra-low cost carriers, like Allegiant and Spirit. He says the airlines we now view as low cost — Southwest and Jetblue among them — are not really LCCs in the European model.
Into and out of the UK on intra-Europe flying, ULCCs account for over 50% of capacity. In all of Europe, it’s just over a third. Spirit and Allegiant represent slightly below 3% of US capacity. Even if you include Frontier, we want to get to the ULCC point, it’s still under 4.5% of the capacity. I think that leaves a significant opportunity for ULCCs in the US market, and I think it leaves an opportunity for differentiated strategies across the ULCCs.
Frontier has been making a play not only in its long-time home of Denver, but also in smaller airports in the Northeast, such as Trenton, N.J. Shurz tells Snyder that the region is ripe for an ultra low cost carrier.
And the world has changed. I think you’ve done work, Brett, to show how much domestic fares have risen notably on one airline, but also generally. And that’s what’s creating opportunity for ULCCs in the country. It’s that fare umbrella. The northeast never had low fares to the same extent since Southwest was never that big in the Northeast. And their failure to succeed in Philadelphia has led to fares rising. One of the things about Wilmington is that even though Baltimore fares are lower than in general in the northeast, they’re significantly higher than they were 5 to 10 years ago.
I’m not sure whether Frontier will be successful as the third ultra low cost carrier in the United States. But I do think the market needs more low-fare airlines to undercut carriers like United, American, Delta and even Jetblue and Southwest. It’ll be interesting to see what happens.
Do you think Frontier can make it? The airline likely will be sold in the next few days to Indigo Partners, a Phoenix investment firm.
It’s been a busy last few days on the aviation beat here in Los Angeles. But here are some of the best stories from elsewhere during the past week:
U.S. Attorney General Eric Holder said he wants to resolve the American Airlines/US Airways lawsuit short of trial, writes Ben Mutzabaugh of Today in the Sky. A sticking point, apparently, are the slots the combined airline would own at Washington Reagan National, New York JFK and New York LaGuardia. Justice does not want the combined carrier to be too strong at those airports.
Here’s another take of Holder’s preferences from David Koenig of the Associated Press. ”We will not agree to something that does not fundamentally resolve the concerns that were expressed in the (lawsuit) and do not substantially bring relief to consumers,” Koenig quotes Holder as saying.
The standalone US Airways is growing its traffic, but its revenue is not rising accordingly. That’s according to this Associated Press story posted on Skift.
In light-hearted news, Jaunted takes a look at how 4 airlines are celebrating “Movember.” This has become the month, apparently, in which men grow mustaches.
“Airline Lost Your Luggage? Let Your Phone Find It.” An interesting story about the possibilities of baggage tracking services by Bloomberg Business Week’s Justin Bachman.
And finally, Brett Snyder of Crankyflier.com interviews Frontier’s Senior Vice President — Commercial about the airline’s strategy going forward. There’s some inside baseball stuff here, but if you want to delve into the issues of what it takes to run an airline, you should read this.
US Airways, which was slated to switch terminals next month at Los Angeles International Airport, will not move until at least February 2014, an airport official told me this week.
US Airways will go from Terminal 1 to Terminal 3 to allow Southwest Airlines to spend $400 million on a Terminal 1 renovation project. Eventually, if US Airways is permitted to merge with American, it could move into American’s Terminal 4.
It turns out that playing musical terminals is not easy. No major airline will be moving out of Terminal 3, so with US Airways in there, it will be a tight squeeze. (Virgin Australia is moving out of Terminal 3 for the Tom Bradley International Terminal, but it is a relatively minor player.)
Virgin America is currently the top tenant at Terminal 3. Here’s how Virgin America could be impacted, according to airport spokeswoman Nancy Castles.
Virgin America currently has 6 preferential-use gates to schedule its flights at T-3. Virgin Australia’s consolidation of its departures and arrivals at TBIT improves gate availability at T-3. However, daily operating fluctuations may impact gate availability and airlines may be assigned to remote gates on an equitable basis whenever there are more planes on the ground than available gates.
“Remote Gates” sounds like a relatively innocuous term. But fliers hate them. They’re usually gates far away from the main terminal, and they require passengers to board a bus to reach them.
UPDATE 2:15: A Virgin America spokesman just emailed:
”We have been working in close coordination with Los Angeles World Airports (LAWA) on this issue and we are confident that the interim solution reached with LAWA will result in minimal disruption — if any — for Virgin America guests and our operations at LAX.”