What's Up

Industry - The Department of Transportation today announced that it had canceled public hearings on the proposed alliance between British Airways and American Airlines after aviation trade discussions with Britain collapsed earlier in the week. Representatives for the U.S. broke off talks in London early on the third day when it became apparent there would be no chance of progress on issues they regard as important, including liberal rights for routes and open pricing. Transportation Secretary Rodney Slater added, "However, I remain hopeful that together we will find a way to resume productive discussions," after the suspension of the first formal talks on open skies in 20 months since the February, 1997 break-off in negotiations amid a lack of progress. (Reuters, Oct. 9)

Aeroflot - Germany is banning the Russian carrier from operating its B-737-400 aircraft at German airports. Aeroflot said it heard the reason for the ban was the registration of the planes in Bermuda instead of Russia, but the German transport ministry denied a ban is in effect, even though the B-737s cannot yet fly into Germany. To operate its 38 weekly flights to Germany, Aeroflot must now use older and noisier TU-154 and Ilyushin IL-86 jets. "We are losing passenger volumes due to the ban," Aeroflot general director Valery Okulov says, explaining that passengers "prefer to fly on Western-made planes." (AW&ST, Oct. 5)

AirTran - After incurring third-quarter losses of nearly $11 million, the airline laid off an undisclosed number of employees in all categories, including pilots, flight attendants, and maintenance workers, as well as employees at its Orlando headquarters. AirTran spokeswoman Cara Maruskin attributed the layoffs to two main reasons: the nonrenewal of leases on two planes and stiff competition from Delta, its largest competitor. (The Wall Street Journal, Oct. 23)

AirTran blamed its third-quarter loss on both the Department of Transportation and Delta, saying DOT’s "reversal of their position on predatory pricing "has" encouraged our major competitor to increase their predatory activities." Financial results were also affected by higher maintenance costs, preparations for a threatened strike by flight attendants, and the expansion to a fleet of 50 jets and 130 daily departures from Atlanta. (Aviation Daily, Oct. 15)

America West - The carrier reported a 22 percent increase in third quarter net income over last year, earning $21.9 million on $499.2 in operating revenues. Results were favorably affected by lower fuel costs and reduced travel agent commissions. (Aviation Daily, Oct. 23)

America West introduced the first new model to its fleet in seven years, the Airbus A319. It joins the A320, introduced in 1991, and will become an increasingly important part of the fleet, with three by the end of the year and a total of 22 A319s in service by the end of 2001. William A. Franke, chairman of America West, said, "The A319 ...will allow the Airline to continue to efficiently and cost effectively add service on long-range, nonstop routes and increase flight frequencies to major business markets." (PRNewswire, Oct. 12)

American - AMR Corp. posted a record third-quarter net profit of $433 million, but Chief Financial Officer Gerard Arpey said the airline may scale back next year’s growth by as much as one-third. The initial growth plan for 1999 had more than 10 percent in international markets and just 3 percent domestically. The current target is to limit "some of the international growth we had planned on launching in 1999," Arpey said. "International markets look softer than domestic markets." (Aviation Daily, Oct. 22)

Although American will accept applications for pilot jobs Nov. 2-30, Chief Pilot and VP-Flight Cecil Ewell said prospects can stop hanging around his office, since American will accept applications only by mail. In a recorded message to pilots, Ewell said resume-toting applicants are lined up when he arrives at work at 5:30 a.m., and he asked them to "quit flying over my house dropping resumes out of the speed brakes" and cautioned that "roasting marshmallows" outside his office won’t work, either. (Aviation Daily, Oct. 12)

The stock market slump and a benefits provision have caused pilots at American to leave in droves, forcing the carrier to cancel flights. Pilots who retire get most of their money in a lump sum from a company mutual fund, and their contract allows a three-month window to retire at a set share price, meaning a retiree in October will have his distribution based on July’s stock prices. With some pilots recently receiving as much as $3 million, and the value of the fund down about 10 percent since July, some pilots could lose up to $300,000 if they had to retire at today’s stock prices. The average of 20 retirements per month more than tripled to 63 in September, and the airline expects 65 more in November. In response, American has reduced the frequency of flights to Latin America, something that would have occurred next year anyway due to slowing demand. (Associated Press, Oct. 8)

Boeing - The airplane manufacturer, in an attempt to boost profits and improve its efficiency, has announced a restructuring of its commercial aircraft division into three units. Responsible for Boeing’s wide range of commercial aircraft products and services, the three new units are the single-aisle airplane business unit, the twin-aisle airplane business unit, and the customer services business unit. Boeing commercial aircraft group president Alan Mulally said, "the fundamentals of being able to produce airplanes on your schedule [are] starting to come back." Boeing’s first priority, according to Mr. Mulally, is to restore customers’ confidence in the aircraft manufacturers. (AW&ST, Oct. 5)

British Airways - The carrier has decided upon a looser alliance with American Airlines, rather than accept the terms proposed by the European Commission. A BA spokesman said it could not accept demands by European competition authorities to immediately give up 267 weekly slots at London Heathrow to make room for competitors, and would, instead, only settle for a gradual opening up of the world’s busiest international hub. (Reuters, Oct. 30)

Continental - The carrier has recorded record earnings for the 14th straight quarter. Despite $122 million in pre-tax charges to retire four B-747s, 13 B-727s, and 32 Embraer turboprops, Continental reported a net income of $73 million. Continental continues to experience strong results. "We’ve seen no weakness in any market or any region we serve," said President Greg Brenneman, adding that fourth quarter bookings "look strong in every geographic area." (Aviation Daily, Oct. 20)

Continental and Northwest have have talked with European carriers Air France, Italy’s Alitalia, and KLM Royal Dutch Airlines about forming a larger global alliance. Such a worldwide partnership would help Continental and Northwest compete with other international alliances. "We’ve had some very preliminary discussions about forming a global alliance," Continental spokeswoman Sarah Anthony said, adding, "certainly, KLM, Air France and Alitalia are among those carriers included in the possibility of a larger alliance." (AW&ST, Oct. 5)

Delta - Delta Express has operating results "the same or slightly above the mainline" carrier’s, said Delta Chief Marketing Officer Fred Reid. The carrier is shifting its focus to the northeastern U.S., most recently adding service to upstate New York, and will increase its fleet to 38 by the end of the year. (Aviation Daily, Oct. 26)

New nonstop service from Atlanta to Tokyo has load factors averaging 90 percent despite Japan’s depressed economy. Chief Executive Leo Mullin says the new service has "taken off like a shot." (Aviation Daily, Oct. 26)

Pilots ratified an agreement on Oct. 16 providing pay rates, rules, and working conditions on new-generation B-737s. About 60 percent of pilots voting approved the agreement, which covers aircraft that Delta began operating in July. (Aviation Daily, Oct. 19)

Delta reported a net profit of $327 million for the third quarter, an improvement of 29 percent from last year. "Any way you slice it, this is a strong performance for Delta," said Salomon Smith Barney analyst Brian Harris. "They are reclaiming their place at the top of the industry’s quality rankings ...[and have] more internal change going on than any of the major airlines, so there are some positive gains yet to come." (Aviation Daily, Oct. 19)

Federal Express - The carrier and its pilots union, the FedEx Pilots Association (FPA), will resume discussions on a contract today in Memphis, even though they remain far apart on important pay and work rules, according to the FPA. The union says it is committed to an agreement, but will not back off from a holiday strike if the talks fail. FPA implemented a no-overtime provision policy as of Nov. 9, and is prepared to deal with any court action if the company opposes its right to strike.
(Aviation Daily, Oct. 28)

The FedEx Pilots Association’s board of directors voted unanimously on Oct. 18 to request a strike authorization from the carrier’s 3,200 pilots. More than 94 percent of pilots at FedEx are FPA members, and two-thirds of the membership must approve a strike authorization for such labor action to proceed. The union expects the results to be tallied around Nov. 20. (Aviation Daily, Oct. 20)

Northwest - The airline reported a loss of $224 million for the third quarter, paying a heavy price for September’s pilots’ strike, including $84 million in retroactive pay due to new contracts, $17 million in strike expenses, $30 million in additional maintenance costs, and $50 million in other expenses related to strike and labor issues. The company is not out of the woods yet; it still has labor contracts pending with the machinists and flight attendants and three other smaller unions. Also, business yields have not bounced back yet. "Business traffic has been slower to return to the airline than leisure traffic," said Mike Levine, executive VP-marketing and international, "but we expect that to return to normal." (Aviation Daily, Oct. 21)

Long-term survivability of the alliance with KLM is threatened by Dutch government restrictions on operations at Amsterdam Schiphol airport, according to a Northwest executive. Although not currently hampered, recent flight expansion difficulties and annual aircraft movement figures have caused Northwest to regard the airport’s current capacity as the most that the government will allow. "I’m not guaranteeing that we will terminate our alliance over this," Mike Levine, executive VP-marketing and international, said. "But as of right now, it is a concern."(Aviation Daily, Oct.9)

Northwest lost three million passengers due to the strike in September, carrying only 1.4 million passengers compared to 4.4 million in September, 1997. Credit Suisse First Boston analyst Tom Schreier expects Northwest to post lower year-over-year traffic figures through the rest of the year and lose $1 per share - $90 million net - in the third quarter. "The spoolup process will take several months after a strike like this," he said. (Aviation Daily, Oct. 7)

Philippine Airlines - Barely two weeks after shutting down, the carrier resumed operations with domestic flights on Oct. 7 and a gradual phasing in of international operations, starting with flights to the United States on Oct. 15. Two days after Philippine Airlines ceased operations, unions signed an agreement surrendering their right to collective bargaining for the next ten years for a 20 percent share of the company. In effect, the unions accepted the creditors’ conditions to keep the carrier flying, something they had not done earlier. (AW&ST, Oct. 5)

Southwest - As a result of a strong domestic economy and very low fuel prices, Southwest saw a better than 40 percent increase in third quarter profits to more than $129 million. While yield fell slightly, unit costs dropped as well. "We kept the same proportion of business passengers but incrementally had more leisure passengers," said Gary Kelly, VP-finance and chief financial officer. "At the same time, we were trying to stimulate longer-haul traffic." (Aviation Daily, Oct. 21)

TWA - Fixed costs did not shrink in the third quarter as fast as overall capacity, illustrating one of the basic issues that TWA still faces in its quest for profitability. Other issues that still need to be addressed are inefficiencies in administration, maintenance, reservations, and head count, including the number of overseas employees, unresolved 10 months after the trimming of international routes. The carrier moved too quickly from an overreliance on low-yielding leisure passengers to a new overemphasis on high-yielding business passengers. "We need the right balance," Chief Financial Officer Mike Palumbo said. TWA’s goal is to achieve a breakeven passenger load factor in the low 60s, but it still is in the "high 60s rounding to 70 percent," he said. "At this point, we need five to seven percentage points" of improvement. (Aviation Daily, Oct. 28)

TWA reported a loss of $5.3 million for the third quarter, compared to a profit of $6.3 million last year. The carrier appeared to misjudge its ability to attract business passengers and their higher yields. "We reduced the number of seats in our advanced purchase fare category," Chairman Gerald Gitner said. "This seems to have adversely affected our load factor versus the industry." By limiting advance sales of seats, TWA made more seats available for last-minute travelers who never materialized. (Aviation Daily, Oct. 22)

United - Benefiting from the Northwest strike, United posted a record third-quarter profit $516 million. As did seven other U.S. airlines reporting record profits this past week, United cited the strength of the domestic economy as the underlying factor in its performance. "The demand for travel in the U.S. remains relatively strong," said Jim Goodwin, United president and chief operating officer. "We continue to expect [1998] net earnings to top last year’s record results." (Aviation Daily, Oct. 22)

Chairman Gerald Greenwald said yesterday that United has started a search for his successor, but he has not ruled out staying beyond next summer’s planned retirement deadline to ensure a smooth transition. He said the ideal replacement would have experience in the airlines and other industries, and would understand union issues. (Aviation Daily, Oct. 14)

What's Up
	Tom Borkowski (BOS) US AIRWAVES Staff