Eric Joiner's Freightdawg.com - The Logistics and Supply Chain Blog!

Welcomebigwigs.com

Ok,  I have to give big kudos to JetBlue Airways.   In the face of the AIG debacle, the stock market meltdown(s), mortgage crisis, and whatever else you want to tack on,  The good folks at discount air carrier JetBlue have figured out how to market specifically to corporate CEO's.   The tactics are tongue in cheek, but the videos are quite on point.   check it out...

http://www.welcomebigwigs.com/

 Eric

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Give me Liberty...(or at least less regulation!)

My friend Rob Mark runs a great aviation related blog called jetwhine.com.   Rob is an authority on both general and commercial aviation as well as a pretty good writer. Yesterday I got an email from him that was positively "agitated".   It seems our friendly Transportation Security Administration (TSA) has decided that the same security standards that apply to commercial jetliners should also apply to your neighbors Cessna 172. 

The TSA considers both potential weapons of mass destruction and they have issued intent to create rules to impose screening of all general aviation flights, cargoes and passengers just like the big jets.   This is utter nonsense.   Rob thought so too, so he asked all his blog roll participants to write about the issue.   Whatever noise the blogosphere generates has to help the general cause right?

The cost of the program would approximately $44 dollars per flight to every general aviation flight in the United States.  In return, general aviation passengers, pilots and crew and FBO operators will have to contend with unnecessary inspections,  delays in flight time, and other unnecessary expenses.    Face it, a general aviation airplane, even if fully loaded with explosives, and crashed into a building is not the same threat as a 350,000 lb B767 fully loaded with jet fuel.   Terrorists just do not use GA airplanes in this way, otherwise, they would have already!  Access is much easier and there is no current security screen.

The TSA has shown no capacity to understand the General Aviation market, therefore some "rebellion" from those of us who are AOPA members and general aviation fans, is necessary to make the former Burger King employees at the TSA pay attention.  If you are a pilot or user of General Aviation, write your congressman and do it today.  This is an important issue.  The Obama administration has shown no capacity for understanding or prioritizing transportation issues.  Your voice needs to be heard.

Eric

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A Good Pilot and a Good Airplane Save the Day.

US Airways flight 1549 was scheduled to fly today from New York  Laguardia airport to Charlotte NC. The flight was equipped with an Airbus A320 and an experienced crew lead by Captain Chelsey Sullenberger.

After an apparent bird strike shortly after take off, the aircraft was ditched in the Hudson river due to loss of engine power resultant from the bird strike. The flight contained 155 passengers, all of which survived the crash.

Observers on the ground indicated that the airplane flew low over the Hudson then settled in in a controlled way.   Passengers disembarked through emergency exits and were later evacuated by local ferrys and boats that came to the rescue.  Today was an extremely cold day in New York and New Jersey, with temperatures in the 20's or below.  Passengers were taken to New York area hospitals complaining mainly of the cold and potential hypothermia.

The video below shows early content today from WNBC in New York.  The knucklehead reporting doesn't know the difference between an A320 and a regional jet.  This was a full Airbus jet with 155 people aboard. There ARE no regional jets that hold that many people.  Nevertheless, the film footage is interesting.  

The naievete of TV reporters amazes me. They get away with a lot of sensational stuff just because they are on the spot first. The guy reporting is clearly making this up as he goes along.

 

New York City Mayor Michael Bloomberg personally complimented US Airways Captain Sullenberger for the orderly way the aircraft was evacuated and the leadership his crew displayed in taking care of the passengers aboard.

Eric

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Air Transport: Hard Times Now? Just wait until the Fall.

Best of Freightdawg.com article

Now that fall is upon us, the airlines are cutting back capacity.  While fuel is cheaper than expected, capacity is still being restricted.  I published this article back in June, 2008.  The impact shown here will now hit us in unexpected ways. 

One of which is pressure on airline upgrades for frequent flyers.   With fewer flights, there will be more platinum elite business customers competing for the available first class seats.  I saw that one personally last week on a flight to Newark.  Over 100 platinum customers on the same plane as me.  Despite my Y class ticket and status, I was number 24 for an upgrade!

Anybody who follows the airline business in the US reads daily about job cuts, capacity cuts and grounded aircraft. Anybody actually flying feels it in delayed flights, reduced amenities and increased fares. Face it, its not a fun time to be in the airline business. It has to be absolutely horrible for airline employees and their families.

Here's a snapshot of some of the major North American airlines and the impact that the weak dollar and higher fuel are having. Frankly it is a fiasco. Once the peak season this summer is over, the following cuts in people, planes and capacity have been announced.  No doubt more will be coming.  

The interesting thing is Southwest. Southwest will be growing their business by 4% as they take advantage of abandoned markets. Southwest has always been very aggressive on fuel hedging and is benefiting from that practice yet again. All carriers hedge fuel to some degree, but buying fuel on forward contracts takes cash.  With so many major carriers fighting just to make payroll every week, the liquidity isn't what it used to be. JetBlue and Airtran stand to also benefit though those carriers have made steps to delay delivery of new aircraft to help manage the stress.

Some of the ways the airlines are attempting to cope with the crisis are

• Increased fares! 
• Increases in peak season fares and surcharges. 
• Increased fees for baggage 
• Eliminating older aircraft 
• Increased use of Regional Jets 
• Postponed or canceled receipt of new aircraft orders 
• Eliminating unprofitable domestic routes 
• Eliminating less profitable international routes 
• Employee layoffs 
• Urgent work to convert to biofuels when possible 
• Fewer and fewer on board amenities 
• Increased service to higher margin international routes 
• Reduced number and hours of operation of Airline Clubs

Its not just the carriers here in the US that are struggling.  Qantas is having major problems in Australia and the Pacific as well. They've eliminated a number of routes between Asia and Australia as they refocus their aircraft on more profitable markets.

The Cargo Airlines aren't flying above the clouds either.

CargoItalia has returned it's aircraft to the leasing company. They may not return. Other carriers like Polar, Air Canada Cargo and Cargolux have reduced their capacity to Europe.  Singapore Airlines, EVA, Northwest Cargo and Air China have all cut capacity on the Asia to US tradelane.  Even on trades with high demand like the Latin American trades, carriers like Arrow and Centurion have been reduced to flying only on the weekends.

Air Freight Forwarders are receiving letters almost daily on new peak season surcharges and increases in fuel surcharges from the air carriers. These get passed along to the customer who in turn either has to adjust his sales price on his goods or seek alternative modes of transport. Any wonder why the ocean carriers are completely FULL?

For folks like me, there is opportunity and pain in this mix. The pain comes from my weekly air travel. I hate getting beat up every week just like the next guy.The benefit however is that shippers are more willing than ever to consider new supply chain ideas. Creativity and opportunities to shift the status quo are always fun. Lately that has taken the form of modal shifts to ocean freight and expedited LCL, strategic placement and allocation of inventory. Considerable focus takes place on green use of trucks/trains and planes as well as how to balance speed, shipment size and transit times across multiple supply chains within a conglomerate environment.

How are you managing both the stresses of fuel prices and the weak dollar in your business?

Eric

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DAL/NWA Merger Takes Next Step

Back in April of this year Delta and Northwest Airlines announced their intent to merge their two airlines into a single entity still called Delta.

Today, the FAA approved a transitional plan to merge the air operations of the two airlines into a single network. Ultimately that will result in a single operating certificate. The process should take about 18 months.

Delta is holding its annual shareholders meeting in New York this week.  Delta Shareholders are expected to approve issuance of new shares to buy Northwest.  Northwest Shareholders will be asked to approve the acquisition.  DAL hopes this whole thing is done and dusted by the end of the year.

As a long time Delta passenger, native Atlantan, former DAL summer employee, and general fan of the airline, I'm not so sure this whole thing works to my benefit as a passenger.  However, as a freight carrier, Delta will clearly benefit from Northwests experience in cargo operations and extensive Asian routes. (at least the ones they haven't killed off yet.) Professionally I like that.

We will see. 

clipped from minnesota.publicradio.org FAA approves transition plan for Delta, NWA merger September 22, 2008 Atlanta — (AP) - The Federal Aviation Administration has approved a transition plan designed to combine the operations of Delta Air Lines and Eagan-based Northwest Airlines, and to achieve a single operating certificate after they merge. Airlines are required to have an operating certificate, which means they must prove to the FAA that they have the financing and management expertise to run an airline. Delta and Northwest each have their own operating certificate right now. The plan they submitted to the FAA outlines the methodology, processes, tools and timing they will employ to maintain the safety of their day-to-day operations during the transition period. The FAA's seal of approval for that plan means the two airlines can move forward with the transition process. Their goal is to achieve a single operating certificate over the next 15 to 18 months.

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Airline Fuel Hedging is Risky Business

Airlines buy fuel hedges in an effort to balance current cost of fuel against what they think the price of fuel will be in the future. That's an excellent strategy when the price of fuel goes up.  Southwest Airlines and Alaska Airlines are both famous for doing this very well.  In a number of fiscal quarters SWA has claimed that the only reason they made money was that they had a competitive advantage in the price of fuel because they hedged well.

Typically airlines hedge by buying forward contracts on kerosene, or home heating oil because Jet fuel isn't actually a traded commodity.  Kerosene however moves at about the same price levels as Jet Fuel.

Now, while aviation fuel remains high, the price for crude oil is falling.  United, Northwest and Delta are feeling the pinch and stand to lose money on their hedges.   Hurricane Ike took a number of refineries off line so supply is keeping the price of Jet A high even while the kerosene or heating oil the airlines used for hedges falls. 

clipped from seattletimes.nwsource.com By JOSHUA FREED The Associated Press MINNEAPOLIS — Airline bets that oil prices would rise looked like a no-brainer this summer. But with oil prices falling, those hedges against rising fuel costs are getting expensive. United Airlines said today it is on track to lose $544 million on fuel hedges this quarter. That included $72 million in realized losses and another $472 million in unrealized losses. Those positions forced United to put $400 million into restricted cash for the parties on the other side of its oil price bets. Other airlines have not disclosed their hedging losses or gains for the third quarter, but it is likely that United was not alone in underestimating oil's dramatic fall. Oil settled at $97.16 a barrel on the New York Mercantile Exchange today, down from a July peak of $147. Northwest Airlines said in July that its hedges require it to pay if crude falls below $108. Its hedge for 10 percent of its fuel for next year requires it to pay if crude falls below $112. Of course, rallying oil prices could make those hedges look smart again. And — importantly — even if United loses money on fuel hedges, it will save money because the fuel itself is cheaper. JPMorgan analyst Jamie Baker wrote in a note that oil's fall over the space of just one week will save airlines $3 billion. Fuel has become the biggest expense at the big airlines. United's 2007 fuel bill was $5 billion, which was reduced slightly by an $83 million hedging gain. "Yes, hedgers are under water on their hedges, but they are seeing some relief on the cash market side. That's how it should work," said Jonathan Leak, a senior vice president for risk management at World Fuel Services, which puts together fuel-hedging programs for airlines. However, fuel prices have not fallen as much as crude in the short run because refiners are at capacity. Hurricane Ike made that worse because 12 of the 14 jet fuel refineries in its path are still shut down because the power is out, Leak said. Those 14 refineries make 19 percent of the nation's jet fuel.

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"No Way BA-AA"

For years, Sir Richard Branson had the slogan above painted on the B747's of Virgin Atlantic Airlines. Virgin Atlantic opposed the tie up of American Airlines and British Airways because Virgin believes that such a union would dominate the US-UK passenger market.

Now that the Open Skies agreement is in place between the EU and United States, such a tie up is now even more possible than ever.   Fuel costs and a weak dollar make a joint venture very interesting.   

American is the USA's largest air carrier. BA is the largest in Europe. A JV between them would create a very powerful alliance in the trans Atlantic market. Virgin rightly believes that such a tie up could damage them competitively.

Given the competitive threat, Sir Richard has written to US Presidential candidates, Senators Barrack Obama and John McCain, looking for relief.  In my opinion, neither candidate either understands the issue nor will be able to do much about it in reality. Obama in particular has shown little in terms of international market understanding or concern.

Sir Richards argument is that the Open Skies agreement hasn't created much in the way of increased competition nor lower prices.  My thought is that's not so much the fault of the Open Skies agreement as it is a factor based on fuel costs and weak dollar.

British Airways and American have almost half of all takeoff and landing slots at London's Heathrow airport. BA/AA will likely file an application this week for permission to coordinate rates and schedules and share revenues and frequent flyer details, on their networks. That's a pretty specific threat to competition.  British Airways is prepared to sacrifice US routes to make this deal happen.

Doubtless Virgin's westbound flights are full and money is being made, but on the eastbound flights from the USA, where tourists are not going to Europe in great numbers, competitive factors are being felt.  Virgin Atlantic is right to fear a BA/AA tie up, but as long as Virgin Atlantic continues to offer great service at a fair price with 25 year old blond welsh flight attendants, I think Sir Richard should focus on his brand value at the same time he fights a legal battle.   

This battle will be won with the passengers, not with the politicians.  My personal opinion is that both these Presidential candidates are weak.  I think Sir Richard better be placing covering bets in other places to make his point.  Competitive quality of service and value for ticket prices will win the day.   

clipped from news.bbc.co.uk

Virgin challenges BA's US tie-up Sir Richard Branson has written to both US presidential hopefuls, warning against allowing a merger between British Airways and American Airlines. Such a deal would damage transatlantic competition and mean customers lost out, the Virgin Atlantic boss claimed.BA declined to comment, but told the BBC that it would make an announcement on the tie-up within the next few days. Reports say BA would be prepared to sacrifice "hundreds" of transatlantic flights to allow the deal to go ahead.The carrier has tried to secure a pact with its US rival twice before but has so far refused to meet US authority demands that it gives up a chunk of flight slots. However The Mail on Sunday says that BA now sees this as a price worth paying, and reports that the airline will make the offer to US Department of Justice officials this week. BA also believes that relaxations in regulations under the Open Skies agreement may make this more likely. 'Red herring' With aviation fuel prices at record levels and spending on air travel slowing, airlines are looking for ways to cut costs. But in his letter to Senators Barrack Obama and John McCain, Sir Richard said that the solution to the problems of airlines "should not lie in an anti-competitive agreement which will inevitably lead to less competition and higher fares". Six routes from London Heathrow - including New York JFK, Chicago and Los Angeles - would be dominated by a BA/American Airlines merger, Sir Richard said. The argument that the competitive environment had changed with the Open Skies accord was "a complete red herring" he added, saying there had been no significant increase in competition and that ticket prices had not fallen.

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A380 Lands at JFK for First Commercial Flight

On August 1, an Emirates Airlines A380 landed at New York's John F. Kennedy Airport. The flight from Dubai to JFK was the first commercial A380 flight to touch down in the United States.

Emirates only took delivery of the new aircraft on July 28th in Germany. These are heady days for both Airbus and those airlines who are emerging as early adopters of the A380.

Check this page out on Emirates and the A380.  Flights from New York to Dubai will take place on Sundays, Wednesdays and Fridays as flight EK202.

clipped from www.usatoday.com Airport workers crowded areas near the taxiway to catch a glimpse of Emirates A380 after it landed at New York's JFK Airport this afternoon. The flight was A380's first-ever regularly scheduled commercial flight to the USA. Following the flight, Emirates President Tim Clark addressed a crowd of journalists and airline VIPs that were on hand for the event. Clark says it is "very likely" that Emirates will eventually fly all of its New York flights on the A380 superjumbo. He says other U.S. cities are likely to be added by Emirates in the coming years, adding that cites such as Chicago, Atlanta, Dallas/Fort Worth and Washington would be among a list of obvious possibilities. Here's one picture from today's ceremony, but come to Today in the Sky back Monday to see more pictures from the event, including shots of the jet's much-ballyhooed showers. Also check back on Monday for additional write-ups from the A380's Friday debut.

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Dreamliner Update

Jon Ostrower's flightblogger has a great article updating the construction of B787 Dreamliner 4.  This is the fourth test aircraft for the 787 program. Jon's got some good pictures too. 

Flightglobal.com is a great site with several commercial aviation related blogs. Very good stuff.

clipped from www.flightglobal.com Two 747s touched down yesterday evening at Paine Field in Everett carrying the nose section and center fuselage for Dreamliner Four, marking the commencement of the next phase of assembly of the flight test 787s. The center fuselage, which spent almost eleven months in Charleston, arrived with a greater completion of assembly than was previously forecasted, sources confirm. Delivery was supposed to take place in late June, though damage sustained on the center fuselage forced a re-evaluation of Boeing's schedule to both repair the damage and continue to reduce the amount of traveled work flowing to final assembly in Everett. When Boeing outlined its revised schedule in April, the beginning of final assembly of Dreamliner Four was identified as a significant program milestone. Boeing has lost roughly five weeks of assembly time on Dreamliner Four, though the reduction in traveled work may end up putting Boeing ahead of where it otherwise would have been had the section shipped on time.

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A380 Model Installed at London Heathrow

A friend of mine sent me a link to this video on the new A380 model installed at LHR this past July.  For years, London Heathrow sported an impressive British Airways Concorde model. Huge in appearance and an impressive representation of the top of luxury flying for Great Britain's biggest air carrier. Alas, Concorde is a museum piece now, doomed by economics and a fatal crash in France. So, it should be a happy thing that Heathrow should get a new model, this time an ultra modern Airbus A380. The A380 is the worlds largest airliner and is now (slowly) entering service with global air carriers.

What struck me as odd about the new model?  It carries the colors of Emirates Airlines. Heathrow is the home of British Airways, yet a foreign competitors livery dons the icon in front of the airport. Emirates is a fine global carrier and a primary buyer of the A380.

How ironic that a country such as England, which has a pioneering history in global transportation, would allow the prime real estate in front of London's main international airport to be occupied by a representation of a non British carrier.

I guess this comes down to the fact that Emirates has more money and (apparently) smarter marketers.

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