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THE BRIEFING FOR APRIL 19 TO 30, 2012
By Joe Brancatelli
· The Chaotic Week That Was at Delusional United
· Hilton Garden Inn Adds a Hotel in Central Rome
· Southwest Delays AirTran Integration Until 2014
· American Will Launch a Seattle-Miami Red-Eye
· United Will Fly From San Francisco to Raleigh · Legacy Airlines Try to Raise Close-In Fares
· JetBlue and JAL Code-Share at Logan and JFK
The Chaotic Week That Was at Delusional United Airlines
It was another eventful week at United Airlines, where the chief executive not only dissed the airline's hometown of Chicago, but he also claimed that there weren't glitches in its March 3 data transition, just predictable problems that the carrier knowingly inflicted on customers. (Really, folks, I ain't kidding.) Also, United's chief financial officer abruptly resigned for a non-financial job at Apple just days before the airline reports a gigantic first-quarter loss. United also announced that it will book a large one-time charge for the computer transition. Meanwhile, ticketing issues, upgrade problems and long telephone hold times continue with very little sign of mitigation.
Chief executive Jeff Smisek made his astonishing claims in a story that appeared in the Chicago Tribune today (April 19). Read the amazing comments for yourself here. Notice how he focuses on the trivial (frequent flyer flight credits) rather than the substantive shortcomings in ticketing, seat assignments and upgrades.
Chief financial officer Zane Rowe bailed on the carrier on Monday (April 16) to take a vice presidential sales gig at Apple. Coming just before United's first-quarter results are released next week, the move is even more intriguing since Rowe had been Continental's CFO before the merger.
United said today (April 19) that it would take a $134 million charge to cover "integration-related costs." It wasn't specific about how much of that total was due to the screwups that have come with last month's data transition. Analysts predict that United will report a 1Q operating loss of $300-$350 million, more than even bankrupt American reported this week (see below).
American and United Add Transcontinental Routes
Bankruptcy is forcing American Airlines to shrink its route network, but it is adding one notable new run: a nonstop between Seattle/Tacoma and its Miami hub. The service begins on June 14 with Boeing 757s. The eastbound run from Seattle is a red-eye that will arrive in Miami at 6:25 a.m., in time to make morning connections to American flights to the Caribbean and Latin America. The westbound flight from Miami departs at 8:25 p.m. ... United Airlines will launch daily flights between its San Francisco hub and Raleigh-Durham beginning August 14. United will use Boeing 737s on the route. ... Frontier Airlines, which is already a huge mess, seems intent on confusing its few remaining passengers even more. Effective July 11, it'll move its Denver-Houston route back to Intercontinental airport. It originally served Intercontinental, but moved the service to Houston/Hobby in November, 2010.
A New Place to Burn Those Nearly Worthless HHonors Miles
Frequent devaluations of the Hilton HHonors program have many members looking for alternate plans--and searching for places to burn off their HHonors balances. There's good news on that front, at least. Rome's Hotel Claridge in the Parioli neighborhood has been rebranded as a Hilton Garden Inn. Better yet, the 93-room property is available for only 30,000 points a night. It's also the only Hilton property in the core of the city. Other Hilton properties in Rome are either at Fiumicino airport or located a longish shuttle ride from centro storico. ... Speaking of places to burn points, Hyatt Gold Passport players take note: The Hyatt Place in Waikiki, which opened late last year, has added a second tower. That brings the total room count to 426. ... A 129-room Hyatt Place opened in downtown Riverside, California. ... Marriott opened a 340-room Renaissance in Guiyang, China. ... Radisson has opened the 195-room Radisson Blu Istanbul Asia. It's located near the Atasehir Shopping District.
Southwest Delays AirTran Integration Until at Least 2014
Computer issues--or, more specifically, a lack of a data system that won't melt down à la United--continue to force Southwest Airlines to slow down the integration of its AirTran Airways subsidiary. Southwest chief executive Gary Kelly says it'll be at least 2014 before AirTran is fully a part of a Southwest and drops its baggage fees and charges for ticket changes. Even simple code-shares between the two carriers won't happen until sometime next year. Speaking of computers, Southwest has signed with a major GDS system to help it implement international flying. But that, too, won't happen until 2014. Meanwhile, Southwest is trying to get support in Houston for new gates and a customs-clearance facility at Hobby Airport. Guess which carrier is opposed? United Airlines, which operates its largest hub across town at Houston/Intercontinental. United claims that allowing Southwest to build an international flight schedule from Hobby would force United to downsize its Intercontinental hub. ... JetBlue Airways is launching a code-share with Japan Airlines. The two carriers will link up at New York/Kennedy and at Boston/Logan. JAL launches nonstop flights from Boston to Tokyo/Narita on Sunday (April 22).
American Loses $1.7 Billion in 1Q, But That's Progress. Honest.
In its first full quarter operating in bankruptcy, American Airlines reported a net loss of $1.7 billion. Believe it or not, that's considered progress. After all, excluding special items, its loss on operations was $248 million compared to a 1Q 2011 loss of more than $400 million. Another bit of good news: American was cash-positive for the quarter and was able to add about $800 million to its cash on hand. (Unlike most airline bankruptcies, AA did not secure debtor-in-possession financing and is funding daily operations from a cash horde that now exceeds $5 billion.) ... Pinnacle Airlines, the bankrupt commuter carrier that flies mostly for United and Delta, is having trouble escaping its past. In a rare occurrence, a relative of a victim of its 2009 crash near Buffalo has won a seat on the carrier's creditors committee. Pinnacle's bankruptcy filing sidetracked several dozen wrongful-death suits filed against the company, but a family representative on the creditors committee is sure to keep the legal action near the metaphoric front burner. Separately, Pinnacle's chief executive quit this week. He'll be replaced by the chief operating officer on June 1. Both executives were given huge raises just days before the carrier declared Chapter 11 on April 1.
Business-Travel News You Need to Know
Delta Air Lines this week raised airfares purchased fewer than seven days before departure by $10-$20 roundtrip. United and American have matched, but Southwest Airlines hasn't. That probably means the increase will fail, so try to avoid buying close-in tickets now. ... Air Canada cancelled about 40 flights last weekend and the airline is blaming its unions for an illegal job action. The unions deny it. It's all part of a fabric of union strikes, management lockouts and Canadian government intervention that has hobbled the carrier for the last year. ... Iberia cancelled about 300 flights last Friday (April 13) and on Monday (April 16) due to an ongoing skirmish with pilots over the creation of a non-union carrier called Iberia Express. The pilots are due to strike again tomorrow (April 20) and every Monday and Friday until mid-July.
When 'News' Breaks, Ignore It...
Don't waste a moment thinking about all the "news" being reported by the uber-credulous media about US Airways having cut deals with American's unhappy unions. It's meaningless--or as close to meaningless as is possible. Under the rules of Chapter 11 bankruptcy, American Airlines management has the exclusive right to try to reorganize the carrier. That period of exclusivity lasts until late September. And American management has approximately zero interest in doing business with US Airways, just as US Airways management was rebuffed when it tried to do a deal with both Delta Air Lines and United Airlines. Please also remember that the judge's job--his sole job--in a Chapter 11 case is to protect the estate, in this case American Airlines and its parent and subsidiary companies. US Airways claiming that it has a deal that would spare more union jobs and ask for fewer givebacks is basically irrelevant to a judge. Moreover, if you're a bankruptcy judge, would you believe US Airways? Seven years after its own merger with America West, the carrier still does not have unified contracts with its flight attendants or pilots. A merger that would throw American's unionized employees into the already toxic mix of former America West and former US Airways unions is truly bizarre to consider. It would be the height of financial cupidity. As I wrote months ago, no airline that has gone into bankruptcy since 9/11 has emerged and survived long as an independent. So the odds are that American will have to do a merger eventually. It might even be with US Airways. But it won't be on US Airways' terms or timetable. It'll be on American's terms. Besides, we already know what American chief executive Tom Horton really wants to do: limp out of bankruptcy and do some sort of proto-merger with British Airways and its parent company. This item was added at 2:30 p.m. on Friday, April 20.
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ABOUT JOE BRANCATELLI Joe Brancatelli is a publication consultant, which means that he helps media companies start, fix and reposition newspapers, magazines and Web sites. He's also the former executive editor of Frequent Flyer and has been a consultant to or columnist for more business-travel and leisure-travel publishing operations than he can remember. He started his career as a business journalist and created JoeSentMe in the dark days after 9/11 while he was stranded in a hotel room in San Francisco. He lives on the Hudson River in the tourist town of Cold Spring.
THE FINE PRINT All of the opinions and material in this column are the sole property and responsibility of Joe Brancatelli. This material may not be reproduced in any form without his express written permission.
This column is Copyright © 2012 by Joe Brancatelli. JoeSentMe.com is Copyright © 2012 by Joe Brancatelli. All rights reserved.