airlines - Stephan Segraves

Fight Brewing Over O’Hare and Parallels with Intercontinental

May 10, 2012 ssegraves

There is a little bit of a fight brewing in Chicago over the future expansion of O’Hare.

Mr. Emanuel is at odds with airline boss Jeff Smisek over expansion of O’Hare International Airport. The CEO of United Continental Holdings Inc. jabbed at Mr. Emanuel recently, saying there’s no need to finish the multibillion-dollar project launched seven years ago.

Both men have the best interests of their businesses (Chicago is Mr. Emanuel’s “business”) in mind as they discuss the upgrades and expansion of Chicago’s O’Hare airport. Mr. Smisek is trying to control United’s costs by limiting their involvement in the expansion of the airport.

Mr. Emanuel can’t afford to let O’Hare fall behind rival airports. Mr. Smisek, on the other hand, has a different agenda. Unlike airline execs of the past, whose expansionist strategies dovetailed with the city’s desire for an ever-bigger O’Hare, he’s focused on the bottom line. He aims to boost profits by reducing capacity and competition in the airline industry, which has a long history of big spending, bloody fare wars and monumental losses. His merger of Houston-based Continental Airlines Inc. and Chicago’s UAL Corp. advanced those aims while creating an airline with unprecedented market power, the largest in the industry.

The interesting take away here is that apparently Mr. Smisek hates competition, yet none of this came up during the merger of United and Continental, which truly reduced competition. And why is no one bringing this up in the possible merger of US Airways and American Airlines? If competition is so important, then enforce it when carriers try to remove competition directly by merging.

All of this should be a warning sign to those looking at the airline industry from the outside. The airlines are struggling and they are trying to do all they can to survive. For some, that means merging, for others that means looking at operations and reducing capacity and for others it’s a combination of both. And this is not just a problem in the United States, just look at Lufthana’s announcements about reducing regional jets from the fleet, removing first class from some aircraft, etc.

Then there is this article I came across. What stuck out to me was this:

The terms of the debate are different in Chicago, but the bottom line is the same. What’s best for the city may not be best for United Airlines, and vice versa. There’s nothing particularly remarkable about a large company with near-monopoly control in a given market doing whatever it can to keep competition out. What is remarkable is that the argument to allow such competition would somehow be damaging to consumers is given any credibility.

We sure are getting lax with our throwing around of the “m”-word. United and American Airlines both have major hubs at Chicago O’Hare but that has not kept carriers from starting service to the airport. Virgin America has a number of new flights to and from Chicago. And neither airline has tried to limit Southwest’s operations at Chicago Midway. During the city council meeting in Houston the word “monopoly” was thrown around a lot as well. United does not control the Terminal D/E FIS facility. Other airlines are free to come and go as they please. Southwest used to even have gates at IAH. They gave those up to move to Hobby and in doing so, gave up their option to fly international flights. TACA, Aeromexico, and VivaAerobus all fly to Latin America from IAH, clearly, United does not have a monopoly. The other airlines’ operations are not huge but that isn’t because of a monopoly, it’s because IAH is not their hub. By this monopoly logic, American Airlines has a monopoly in DFW even though plenty of other airlines have flights there. Or, heaven forbid, Southwest has a monopoly at Hobby and Love Field.

Let me refer you back to the two posts in which my wife Tiffany Tyler analyzed Southwest’s proposal and the claims United was making at the time, which seem to have evolved somewhat. I understand United’s fear of this proposal. I understand their threats regarding Terminal B at IAH, though given the growth projections for IAH and the fact that they want to close down the former Continental hub in Cleveland it’s hard for me to take those threats too seriously – where else are they going to go? Unlike Southwest, which says it will go to San Antonio for their Latin American and Caribbean business if Hobby is not available to them, they’re pretty much locked in. What I don’t understand is how having more competition, even if it’s just for a handful of Latin American routes, can be bad for travelers. It makes no sense to me, and according to his press release it makes no sense to CM Andrew Burks, either. I hope in the end it makes no sense to the rest of Council.

The problem is not necessarily that there is competition, it’s the fact that the competition is based on false figures ($133 Houston-Bogota fares). Where will United go if Hobby is allowed to have international flights? Denver. They have plenty of gates there and can serve the connecting traffic just as well from there as from IAH. In fact, I’m sure the city of Denver would be happy to have more people flying through their airport. During the city council meeting Southwest offered to build the necessary gates and pay for the FIS facilities at Hobby. I say let them do that. If the city does not have to pick up the cost then there is no reason not to let them try to compete in the Latin-American markets.

Debunking United’s anti-Hobby Arguments

May 7, 2012 ssegraves

Tory Gattis with the Houston Chronicle debunking United’s stance regarding international flights from Hobby Airport →

What they are pretending will happen is that the fares and number of passengers on any given route are static, and that by splitting them with SWA, they will have to cancel IAH flights (because there aren’t as many passengers to fill their planes – SWA is “siphoning them off”). What happens in reality is the famous “Southwest effect”: SWA reduces fares, UA matches, and demand increases because the price dropped (simple supply-demand curve economics). SWA does not have to actually have lower costs than UA to reduce fares (although they do), they simply have to be willing to give up some of the fat monopoly profit margins UA currently enjoys on those routes. Even if their costs are exactly the same as UA, fares will come down and demand will be stimulated. This terrifies UA, of course, because not only do they lose the fat monopoly profit margins, but they have to offer more flights to meet the demand surge, pulling planes from elsewhere (either that or just cede market share to SWA). Of course, Houston wins all the way around: lower fares and more service.

What Mr. Gattis fails to mention is that Southwest has, in recent years, been less likely to lower their fares significantly over a long term when entering new markets. This was brought up by the city council when reviewing the Houston Airport System study, which, oddly enough, heavily favored Southwest. City council questioned the mentioned fare numbers due to their extremely low prices, something like $150 for Houston to Cancun. When the Houston Airport System and Southwest folks were put on the spot, they could only offer a rebuttal along the lines of “that is what we forecast in five years”. Unless Southwest expects fuel prices to plunge in the next five years, those numbers are unattainable. I cannot seem to find a mention of this anywhere on Mr. Gattis’ blog.

I do think that United’s arguments are a bit of posturing, but what do you expect? I do not think that demand will necessarily increase out of Houston if Southwest gets its way, simply because prices probably will not go down that much. Southwest will start flights at some rock bottom rate and two weeks later they’ll be close to matching what United has. Where Southwest will win out is one-way fares and last minute and walk up tickets.

The difference with “siphoning off” passengers in Houston versus say, New Orleans, is that Southwest is not sure they could fill the planes out of New Orleans, but they feel they could out of Houston. What Southwest is effectively doing is moving closer and closer to the legacy airlines by creating more and more of a hub-and-spoke system. If they wanted, Southwest could easily start international flights from any airport in the U.S. and in fact other airlines have done that; United offers seasonal service from Austin to Cancun, Raleigh-Durham to Cancun, etc. Instead, Southwest does not want to incur the costs of paying for immigration and customs officers at all of these airports, instead they want the city to split those costs with them.

I’ll end this by saying I do think international flights from Houston’s Hobby Airport are inevitable. The push for them is just too persistent for it not to happen. What I don’t understand is this anti-United sentiment. I read and hear comments about “losing the hometown airline” and if that is what is fueling this rage against United then it is in poor form. United still has one heck of a presence in Houston and it will continue to stay that way for a long time. Just as Mr. Gattis said, it’s about free markets, and that’s why United moved to Chicago, they have a better office/building agreement up there.

Delta Wants to Buy a Refinery

April 18, 2012 ssegraves

Delta Bid for Trainer Refinery Gaining Momentum (philly.com) →

When I first saw the news that Delta Airlines was looking at the former ConocoPhillips refinery in Philadelphia I had to do a double-take. An airline running a refinery is just that strange. At first I thought it was a move by Delta to stir up the market a bit but this most recent news makes me think the Atlanta based airline is very serious about buying the facility.

The Trainer refinery is configured to produce a higher yield of jet fuel – about 13 percent of its output, or 23,000 barrels a day (966,000 gallons). Delta could ship the fuel by pipeline or barge to New York, where it has a large presence at LaGuardia and JFK airports.

Delta would ostensibly receive all of the jet fuel from the facility, but would probably swap much of the gasoline and diesel for jet fuel in other locations near Delta hubs.

I am still trying to understand where Delta thinks they will save the money. They will still be buying oil at the market price, the difference now is that they will be a refiner of said fuel. Refining crude oil is not a “value-add” process, it is a necessity. You can’t fly a plane on crude oil.

“The objective would be to achieve a 10 percent price reduction on a large portion of its fuel needs – which, if were achieved, would represent significant savings,” reported Linenberg, the Deutsche Bank analyst.

How? How are they planning to achieve that much of a reduction? Are they simply offsetting their fuel costs by selling the jet fuel on the wholesale market? If so, then how are they financing the operation of the refinery? Refineries are not cheap to operate and certainly not cheap to maintain. As stated earlier, oil companies do not view them as moneymaking facilities but rather, as necessities to compete in the market. The margins in refining are so small that it is hard to make money from fuel alone. Now, maybe if Delta is going to sell chemicals from the facility they can make the revenue that the article hints at.

I would love to have a sneak peek at Delta’s game plan. They must have some kind of strategy up their sleeve to make this work, but they’re going to wait to make it obvious to the rest of us.

Dip That Wing at Intercontinental Airport

April 16, 2012 ssegraves

I had the chance to head to George Bush Intercontinental Airport during some really strong winds this past weekend. With wind speeds around 17-19mph and gusts to 35mph the landings were interesting. On this particular one, I decided to take a short video. It came out a little shaky since I was on top of one of the parking garages and feeling the effects of the wind myself. There is music, because I figured people didn’t want to hear wind blowing over the mic.

Around the 17 second mark is when the fun occurs. The pilot dips the right wing and kicks the left rudder to counteract the effects of the crosswind and keep the 757-300 on the center line.

United Boeing 757-300 Landing from Stephan Segraves on Vimeo.

I also grabbed a few pictures of landings, one of which is this Bombardier Q400 doing the same as the 757-300 above, dipping the wing and throwing in the left rudder to keep it straight.

You can view the entire set of shots from Saturday here.

In-Flight Wi-Fi Usage Numbers Increase

March 28, 2012 ssegraves

To Tweet From 30,000 Feet: Picking Planes Wired for Wi-Fi →

Scott McCartney on some interesting trends:

Airlines say Wi-Fi usage-the percentage of passengers paying for Internet access—is picking up, driven partly by the popularity of tablet computers and partly because more planes have the service. Currently about 8% of passengers use the service, up from 4% at the end of 2010, according to In-Stat, a research and consulting firm. That likely will reach 10% of passengers by the end of this year, In-Stat says.

In-Flight Wi-Fi usage growth is no surprise. We are addicted to being connected just about everywhere we are. Why should an airplane limit that addiction? My opinion on this is two-fold. Sure, it is great to get your e-mail, work on your website, post photographs, etc. while you’re in the air but as someone who travels for work, I relish being cut off from the outside world for a while.

Since United announced a push to install Wi-Fi on a number of their aircraft, I will see if my perception and opinion changes over the next year. I tried to use in-flight Wi-Fi on a trip from Seattle to Frankfurt on Lufthansa in December but it was inoperative the entire time. On a flight of that length, it would have been quite nice.

Swiss vs. Lufthansa – A First Class Comparison – Part 2

October 30, 2011 ssegraves

This is second half of this trip report.

After a few weeks exploring all of Germany it was time to make our way home. The last city we visited was Munich and we would begin our trip home from the city’s airport, Franz Joseph Strauss International. Our return journey was slated to be MUC–ZRH–JFK/EWR–AUS. The long-haul Swiss flight, ZRH-JFK, would be on one of Swiss’s newly retrofitted Airbus A330-300s. It is the only aircraft in their fleet to be fitted with their newest first class seat.

Swiss

One thing I failed to mention in the previous post was the fact that Swiss is actually a Lufthansa subsidiary and operates as a separate airline. As such, the ground services, onboard product, food, and lounges are very different from each other and it is obvious that Swiss is catering to a subset of the Lufthansa market.

Munich’s Franz Joseph Strauss airport sits a good 45 minutes away from the city by train and at €10.80 is one of the more expensive airport trains out there (I’m looking at you London Heathrow). Once inside the airport, Lufthansa handles the check-in and baggage movement for Swiss and as a first class passenger on their subsidiary, one is entitled to use the Lufthansa first class check-in, security checkpoint, and lounge. Check-in was fairly smooth, though there was a slight problem with Jessica’s ticket, but it was fixed and the agent was very apologetic. Security was just as smooth, though I did experience something I’ve never seen before. One of the security officers stopped me, had me remove my camera from it’s bag, take a picture and prove that a photograph was taken. While over the top, it makes more sense than taking a giant x-ray of me.

After a slight chuckle over that fun experience we walked to Lufthansa’s first class lounge and were promptly greeted and given a quick tour of the facility. We were also informed that since our flight would be leaving from a remote stand a car would be arranged to take us to the flight. The lounge is noticeably smaller than the first class terminal in Frankfurt but the same amenities remain. We decided to have breakfast in the restaurant and enjoyed a number of items, including their granola and yogurt, and eggs cooked just the way you like them.

Around 10:00am a Lufthansa assistant came and escorted us to the car, a Mercedes S-Class. A five minute drive later and we were at the aircraft with the driver taking our hand luggage onboard for us. This was a short flight, maybe right at an hour from gate to gate but Swiss managed to serve a continental style breakfast and I think the flight attendant was a little disappointed that I was not hungry and passed on the offering.

On arrival in Zurich we walked up some stairs and followed the sign to the Swiss First Lounge. It’s a modern, bright, and airy facility that one does not have a problem envisioning as “Swiss”. There are not as many amenities as the Lufthansa lounges but there is still a restaurant, a full service bar, a self-serve bar, showers and bathrooms. The check-in procedure to the lounge is a bit strange, you show the attendant your boarding pass and then they ask you what time you want to proceed to your flight. Not knowing what to expect I chose the second to last time available.

A couple of hours later and we headed to the desk where the agent told us to be at our designated time. We were five minutes early and the agent said they weren’t ready yet and asked if we could come back in a few minutes. This struck me as odd but we went and sat down for a few more minutes before once again walking back to the front desk. This time there was a driver waiting for us and another couple and she escorted us down an escalator to a security checkpoint. Our luggage was checked and then we were escorted to a van that took us across the airport and dropped us off outside of a second checkpoint. So we were able to skip the train ride (that is inside of security) and instead undergo two security screenings? Something just seems weird about the way Swiss has that van system set up.

About fifteen minutes later we were boarding the aircraft. A friendly Swiss flight attendant greeted us and asked if she could help us with any of our items. A few minutes later and she was back with an amuse bouche and a beverage. The amuse bouche consisted of poached leeks, a lightly fried cheese, and a savory torte. My stomach was already getting excited for what was to come.

Pre-departure Amuse-bouche — Pre-departure Amuse Bouche

The new Swiss seat is a great way to fly. It has a large ottoman and an enormous video screen. If you are in the middle section there is a large divider that can be raised to separate you from the person next to you. With only eight people in first, it is a very private cabin with a very personal feeling service.

SWISS First Seat — Swiss First Class Seat

SWISS First Legroom — Swiss First Class Legroom and Entertainment

Our flight was right on time and after a climb that gave some impressive views of the Swiss Alps the flight attendants were quickly going through the cabin making sure that every passenger was taken care of. A set of pajamas were handed out in case we wanted to nap and the same flight attendant asked us if we’d like to dine together. On Swiss’s aircraft, the first class seat’s ottoman also has a seatbelt that allows it to be used as a second seat for dining with your travel companion. The table was then set and lunch service began, with large menus being distributed.

Appetizers - Balik Salmon, Watermelon Gelatin, and Venison

The first two courses were great and I was having to pace myself. The flight attendants are constantly doing their rounds, filling up wine glasses, asking if we’d like more of a particular item, and just making sure everyone is happy. The soup was a cold gazpacho and it was flavorful, with a bit of heat at the end. For my main course I had chosen a Swiss specialty, Schnitzu. It is essentially schnitzel but the Swiss use pork rather than veal and bread it more delicately. Alas, they had only loaded two of that dish on board so I decided to have the rack of lamb instead. It was good, though a bit dry.

By far, my favorite course of the meal was the cheese course. The selection of cheeses was fantastic and the gruyere choice was particularly tasty. It was tart with that pungent bite that I love and I enjoyed it so much the flight attendant saved some for me for just before landing (I’m sure the immigration officer at JFK loved that).

The dessert course was nothing spectacular, a chocolate cake with raspberry mousse. It was flavorful and sweet and topped off the meal, but it was not something I vividly remember like the gazpacho or the cheese course.

Around the time we made landfall over Canada the flight attendant offered us ice cream and I gladly accepted, along with a cappuccino. The inflight entertainment system is loaded with a disappointing selection so I made due watching Wall-E. There is a hook-up for your iPad or iPod but you need to have an s-video connector as they only have one on-board for the first class cabin. When they came around with pre-arrival snacks, the flight attendant brought me more of that gruyere that I was so enamored with and I thanked her.

We landed right on time at JFK and that was pretty much the end of the Swiss experience. There is no escort from the plane to immigration or holding back of other passengers. I didn’t really care as we were still some of the first folks off of the plane and only had a ten minute wait at immigration.

Overall, I would say that Lufthansa’s ground handling, especially at their hubs, outshines Swiss without question. Swiss’s new first class seat definitely beat Lufthansa’s old style first class seat, though with Lufthansa receiving new first class seats fleet wide I’m sure it will be a dead heat between the two. Food wise, there were things I liked about both airlines but I thought Swiss’s presentation was better and enjoyed my meal on them more than Lufthansa. Both crews were equally fantastic and I never had a moment where I felt the service lacked on either flight.

If you are looking for a way to spend miles in the Star Alliance and especially if you want to spend some time in Europe either to or from Asia, it is a great value for a great experience.

If you are looking for some help with a reward booking or want more information on the Swiss or Lufthansa products, feel free to contact me.

The Future of Air Travel Thanks to the TSA

November 1, 2010 ssegraves

There is no soft spot in my heart for the TSA, in fact, I have posted a lot about my disdain for their methods. After reading Jeffrey Goldberg’s latest piece on The Atlantic, I can’t say I’m holding out hope that things are going to get better any time soon.

Here’s a small excerpt from the article, though the whole thing deserves a read.

The pat-down at BWI was fairly vigorous, by the usual tame standards of the TSA, but it was nothing like the one I received the next day at T.F. Green in Providence. Apparently, I was the very first passenger to ask to opt-out of back-scatter imaging. Several TSA officers heard me choose the pat-down, and they reacted in a way meant to make the ordinary passenger feel very badly about his decision. One officer said to a colleague who was obviously going to be assigned to me, “Get new gloves, man, you’re going to need them where you’re going.”

The take-away from this single paragraph and really the whole article, is that the new pat-downs have little to do with security and a lot to do with intimidating people into using the backscatter machines. When a traveler opts-out of going through the x-ray machines, they will be subjected to a verbal demoralization as well as a pat-down that can be best described as borderline fondling.

Does any of this really increase security? After last week’s events in which explosive materials were found in ink cartridges being shipped to the United States, I would say it is all show and little substance. From what has been reported, the bomb plot was foiled thanks to information from a former Guantanamo Bay prisoner. That’s right, it wasn’t some TSA agent taking away your bottle of water while you got the frisking of a lifetime, it was information. Imagine that.

It may feel like there is not much we can do but I plan on making the TSA agents as uncomfortable as they make me in these situations. Maybe if their own employees complain enough, we’ll see some changes in these new pat-down procedures. Me, I’ll be opting-out of the backscatter every time I am at an airport that uses one. When they ask me why I opted out (had this happen the last couple of times) I am thinking about replying with an overtly sexual remark. Is that wrong? Probably. What’s worse is being groped so much that you finally submit to the backscatter machine.

In all seriousness, the TSA has the upper hand. You and I have destinations to get to and they are the gatekeepers. I have no problem taking out my laptop or taking off my shoes, but this is bordering on the ridiculous. Wait, it is ridiculous. I am sure we could do a much better job of making air travel safe by actually asking questions when people go through security and analyzing facial expressions, demeanor, etc. rather than taking naked pictures of everyone or worse, shaming them in front of others.

Let’s start sending notes to the men and women who work for us in government and ask that a serious look be taken at the procedures used at airports and oversight of the TSA. If someone in either House wants to make this their pet project, I’ll back them 100%.

For those of you who fly out of IAH, you can technically clear security at any checkpoint so long as your airline does not require you to go through a certain one (some international flights do). A number of the checkpoints do not have the backscatter machines, feel free to use those.

NYT Article on Mileage Running

December 27, 2009 ssegraves

The New York Times has an article on mileage running, the practice of flying around just to attain a status with an airline. It is a good look at what a typical mileage run is like for me.

I am actually starting out 2010 with a couple of mileage runs, most notably a mistake fare that Continental filed between Washington D.C. and San Francisco for $78 one-way.

This Week’s Links | February 20, 2009

February 20, 2009 ssegraves

This week’s links are a real hodge-podge!

Single Google Query Uses 1,000 Machines in 0.2 Seconds – A neat look inside of Google search. To use that much processing power in such a short time span is unbelievable.
Yelp and the Business of Extortion 2.0 – If the allegations of Yelp using its ability to change results for reviews to sell services are true, shame on them.
Delta to Close 170 Gates – As a side product of the merger with Northwest, Delta will be closing 170 gates across the country. The airline landscape in the U.S. is about to look a lot different.
Easy Poached Eggs – This one is random. We have fallen in love with Eggs Benedict, which requires poached eggs. We’ll be experimenting with them tonight.
Slice of Stimulus Will Go to Faster Trains – Not enough money to buy a high-speed train though. So we continue down the same path we’ve been on before, one that is plagued with a nonchalant attitude toward the power of rail.
A Prayer for Archimedes – A long lost text shows that the mathematician had begun to discover the principles of calculus; Long before Newton and Leibniz.