Star Alliance News

[Pieter C. 5]

United, Continental Merge To Form Largest Airline

 

May 3, 2010

 

United Airlines parent UAL will buy Continental Airlines for USD$3.17 billion in an all-stock deal that will form the world's largest carrier and potentially prune excess capacity in the airline industry.

 

If approved by regulators, the new airline would be known as United Airlines and be based in Chicago. It will have over USD$29 billion in annual revenue and a work force of nearly 90,000.

 

The widely anticipated deal, announced on Monday after three weeks of talks, sent most airline shares higher, even though some analysts said the capacity cuts could be minor.

 

UAL said the acquisition will help it attract more business travellers because the merged company will fly to 370 destinations and have 10 hubs worldwide, with Houston as its largest.

 

"It's helpful," S&P analyst Jim Corridore said of the merger. "But it's not going to be the one thing that makes the industry fundamentally sustainable."

 

The airline industry has been hammered in the past two years by volatile fuel prices, low-cost competition and overcapacity.

 

A JP Morgan Chase analysis estimated the combined company will be able to lop off 8 percent of their capacity and cut expenses by 5 percent.

 

"By combining operations, it will benefit the airlines where it will solidify their ability to price," said Ray Neidl, an independent airline consultant. "But it also will benefit the whole system in that we'll have larger airlines to better serve their customers."

 

ALL-STOCK DEAL

 

The deal is expected to produce between USD$1 billion to USD$1.2 billion in annual revenue and cost benefits by 2013.

 

Much of this comes from USD$800 million to USD$900 million in incremental annual revenues. The combined company will also cut costs by USD$200 million to USD$300 million.

 

Continental shareholders will receive 1.05 shares of United common stock for each Continental common share they own. Based on United's USD$21.60 closing price on Friday, and Continental's 139.6 million outstanding shares as of April 21, United would pay USD$3.17 billion for Continental, or USD$22.68 a share.

 

That is a 1.5 percent premium over Continental's closing price on Friday. Based on current shares outstanding, the combined company would have 314.5 million shares and UAL shareholders will own roughly 55 percent. UAL stock closed 2.4 percent higher at USD$22.11, while Continental was up 2.3 percent at USD$22.86.

 

Continental chief executive Jeff Smisek will be CEO of the holding company called United Continental Holdings. Since he took the reins of Continental in January, the airline has added fees for meals and exit row seats -- changes the company might have baulked at earlier, analysts said.

 

UAL chief executive Glenn Tilton, who has been a long-time proponent of consolidation, will be non-executive chairman.

 

In a message to employees on Monday, Tilton said there would be "some reductions in the salaried and management work force" at both companies. But Smisek said rank-and-file staff would see little impact on their numbers.

 

The Air Line Pilots Association, which represents pilots at both United and Continental, has indicated tentative support for the deal. But the International Association of Machinists and Aerospace Workers said it was concerned about the effect of the merger on benefits and job security of its more than 26,000 members at both carriers.

 

Both ALPA and IAM have seats on UAL's board of directors.

 

One-time merger costs of about USD$1.2 billion are expected over three years. The companies expect to receive government approval and complete the transaction by the end of 2010.

 

"We do not believe there are any material antitrust concerns," Smisek said. "We have a high degree of confidence that this transaction will close."

 

Smisek, 55, will become executive chairman when Tilton steps aside, expected two years after the merger closes.

 

MORE CONSOLIDATION?

 

The deal is the first major US airline merger since Delta Air Lines' 2008 purchase of Northwest and caps months of speculation that more industry consolidation was ahead.

 

Experts said American Airlines, the No. 1 US carrier just two years ago, might eye Alaska Air or US Airways as a result of this deal. Alaska Air shares jumped 9 percent to close at USD$45.20 and US Airways ended the day 4.5 percent higher at USD$7.39.

 

UAL previously was in talks with US Airways. It was those talks that prompted Continental to enter discussions with UAL. But some analysts said US Airways may not be the fit for American that Continental is for United because US Airways does not have a robust enough international network.

 

"Eighteen months from now when you have a single carrier with United-Continental, maybe that would be time to bring in the remaining Star Alliance partner that would be US Airways," said airline consultant Robert Mann.

 

Morningstar equity analyst Basili Alukos said AMR might be a good match for JetBlue Airways after they announced a code-share partnership.

 

"I would imagine that's a first step toward a merger," he added.

 

(Reuters)

[Pieter C. 5]

SAS April Traffic Drops, Hit By Ash Cloud

 

May 7, 2010

 

Scandinavian airline SAS said on Friday April passenger traffic slid 24.3 percent from a year earlier, hit by the grounding of flights as a volcanic ash cloud swept across Europe.

 

SAS, which is grappling with high costs and weak demand due to the economic downturn, said costs related to the ash cloud had hit earnings by an estimated SEK650 million to SEK700 million kronor (USD$90.6 million to USD$97.6 million) up to May 7.

 

"Bookings in May and June have also been affected, but to a much lesser extent. The situation in the rest of Northern Europe has been similar and the disruptions represent a major hit to the entire aviation industry," the company said.

 

The airline said in a statement its passenger load factor fell 2.9 percentage points year-on-year to 69.6 percent in the month.

 

SAS said it also expects a negative change in Aril for its yield, a measure of profitability of flights showing revenue per passenger kilometre.

 

In March, the latest month for which figures are available, the yield fell 10.1 percent, SAS said.

 

(Reuters)

 

Holy Smokes: that's one quart less passengers !!!

[Pieter C. 5]

May 12, 2010

LOT converts four E-175 orders to E-195s

 

Embraer announced that LOT Polish Airlines converted orders for four E-175s into the larger E-195 with deliveries scheduled to begin in 2011. Aircraft are part of a follow-on order for a dozen E-175s placed in late 2007 at a time when the carrier already operated six E-170s and four E-175s. Four E-170s from the 2007 order were delivered in 2009 and four more will be delivered this year. LOT holds two options and 10 purchase rights for the E-175 as well. It took its first E-170 in March 2004, becoming the first European airline to operate a member of the E-Jet family.

 

On the other hand: All Boeing aircraft will leave the fleet within 2 years (and the 787 order will be cancelled)

[Pieter C. 5]

United/Continental Face Workforce Integration

 

May 12, 2010

 

If all goes according to plan, Continental Airlines and United Airlines will join together to form the world's biggest carrier in less than a year.

 

It could take much longer, however, before the merged operation fully integrates its 87,000 employees into one big happy family.

 

Although the behemoth may deliver its promised cost and revenue benefits without a blended workforce, labour integration is a key measure by which the merger will be judged.

 

Experts say it is the highest barrier to consolidation in the notoriously tricky airline business. It also is an important test for Jeff Smisek, the 55-year-old Continental Airlines chief executive, who is tasked with forming and then leading the merged carrier.

 

"This is one of Smisek's biggest challenges. I happen to think that the Continental labour/management relationship is probably unique in the network industry," said Robert Mann, airline consultant.

 

By most measures, Continental enjoys a much happier relationship with its workers than does United, which won labour concessions during a three-year bankruptcy that embittered workers and led them to call for the ouster of chief executive Glenn Tilton.

 

"How you would engineer (good will) among the United workforce is one of the objectives," Mann said. "But also it's one of the fairly difficult-to-achieve objectives."

 

Continental, the No. 4 US airline, and United, which ranks No. 3, last week announced merger plans intended to generate up to USD$1.2 billion in annual revenue and cost benefits.

 

Executives say the new carrier, to be known as United Airlines, will be positioned as a stronger entity with an unmatched global reach.

 

A chief selling point is that the two carriers have little overlap on routes. That means few if any layoffs, which holds great appeal for unions.

 

SCUFFLES OVER SENIORITY

 

Now comes the hard part.

 

Blending airline work groups can be difficult because their pay and professional perks often hinge on the seniority workers accumulate at their respective airlines.

 

For example, seniority dictates which routes pilots and cabin crew can fly. Some of those employees are bound to find themselves lower on the seniority list after a merger.

 

This issue has stalled the integration of pilots at the merged US Airways for nearly five years. On the other hand, the pilots at Delta Air Lines, which merged with Northwest Airlines in 2008, have already reached agreement on a single seniority list.

 

Management and some labour groups at United and Continental hope their merger more closely resembles that of Delta.

 

"There is a substantial amount of work ahead of us, and this will be a lengthy process. But we have taken some steps," said Captain Jay Pierce, chairman of the Continental pilots unit of the Air Line Pilots Association (ALPA).

 

"Management has committed to including us in the process and we expect to receive a detailed briefing on the business plan for the merged airline in the coming weeks," Pierce said.

 

The pilots at United and Continental -- both represented by ALPA -- have appointed a joint negotiating committee to bargain with the new airline.

 

"It won't move forward without us," Captain Wendy Morse, chairman of United's ALPA chapter, told reporters last week. "All we have to do is look in the recent history and we see a Northwest merger that was very effective. And we saw a US Airways/America West merger that was not very effective."

 

Before their merger, Delta and Northwest won the cooperation of the pilots. US Airways, however, did not have the backing of its two pilots groups, which eventually dumped ALPA as their union and which still blame chief executive Doug Parker for their disparate contracts.

 

Morse said ALPA intends to recover some of the compensation it sacrificed for UAL's bankruptcy that ended in 2006.

 

"We brought this day forward -- both us and Continental pilots. And as a result of that, we expect to share in the rewards and move the process forward," Morse said.

 

DIFFICULT NEGOTIATIONS

 

The thorniest negotiations could be between groups with separate union representation such as flight attendants, who eventually must decide which union will represent them.

 

United's flight attendants are represented by the Association of Flight Attendants. Continental's are represented by the International Association of Machinists and Aerospace Workers.

 

"The difficulty comes when you've got one union on one side and another union on the other side," said Jerry Glass, a consultant at F&H Consultants Group.

 

In the case of certain public-contact employees, those at United are represented by the Teamsters, while those at Continental have no union.

 

By contrast, the ALPA-represented pilots of United and Continental have an established protocol based on date of hire for merging seniority lists. The mechanics at both airlines also share a union.

 

Aside from contracts, the workers must negotiate with management on training requirements and operations manuals.

 

Although the new United is unlikely to resolve its labour questions before the transaction is complete, Glass said employee integration probably would not disrupt the merger or delay the revenue and cost benefits executives predicted.

 

"My expectation is that... there will be some bumps in the road, but at least from this distance, I don't think that we're talking about huge potholes," he said. "Ultimately this should get done with minimal problems."

 

(Reuters)

[Pieter C. 5]

Thai Airways Q1 Net Profit Jumps

 

May 14, 2010

 

Thai Airways posted a sharp rise in first-quarter net profit on Friday, meeting market forecasts due mainly to improving travel demand and huge gains in foreign exchange.

 

The national carrier made net profit of THB10.7 billion baht (USD$331 million) in the January-March quarter, up 36 percent from THB7.87 billion a year earlier.

 

Analysts expect the airline's second-quarter net profit to be hit by a drop in cabin factor as a result of the country's political unrest in April and the volcanic eruption which caused the airline to suspend its Europe flights for six days.

 

(Reuters)

[Pieter C. 5]

Turkish Airlines Q1 Net Falls 23 Percent

 

May 14, 2010

 

Profit at Turkish Airlines, Europe's fourth-biggest carrier, fell 23 percent in the first quarter as higher oil prices drove up costs.

 

Net income was TRY119.6 million lira (USD$79 million) in the first three months of the year, compared with TRY155 million in the same period of 2009, according to an income statement.

 

Sales rose 27 percent to TRY1.66 billion.

 

Operating profit, or earnings before interest, taxes, depreciation, amortisation and rent (EBITDAR), fell to TRY187.14 million from TRY194.5 million in the same period last year.

 

Global crude prices jumped more than 70 percent year-on-year, raising costs at Istanbul-based Turkish Airlines.

 

A stronger dollar in the first quarter of 2010 likely boosted the value of the flag carrier's fleet, which is measured in dollars. But the euro's 5.4 percent decline against the dollar in the first quarter hit income.

 

(Reuters)

[Pieter C. 5]

Surprisingly Hakan or Ilgaz didn't mention this before...

 

Turkish Air Eyes Carriers In Poland, Serbia

 

May 17, 2010

 

Turkish Airlines wants to buy troubled Polish air carrier LOT and already is in talks with Serbian JAT, the company's chief executive Temel Kotil told Rzeczpospolita daily on Monday.

 

Last month Kotil said the airline would rather focus on organic growth and expanding its own operations, although did not rule out acquisitions.

 

"Our expansion is inevitable, but we don't have to immediately buy majority stakes... Yes, we want to buy LOT," Kotil said.

 

"We are also talking to Serbian JAT. In Central Europe I am only interested in LOT, because it fits our business model."

 

Poland wants to sell its stake in the troubled Polish carrier in 2011 after first restructuring the airline which has suffered heavily from the industry's global crisis.

 

Turkish Airlines first wants to create a joint venture with LOT on selected connections and also wants to transform Warsaw airport into an international hub.

 

"Poland's capital has a great location and that asset has not been utilised before," Kotil added.

 

(Reuters)

[Pieter C. 5]

US Airways CEO Supports UAL/CAL Merger

 

May 19, 2010

 

US Airways does not need to merge to survive and supports the proposed deal between Continental Airlines and United Airlines, US Airways chief executive Doug Parker said on Tuesday.

 

Speaking to reporters after addressing the Washington Aero Club, Parker said he supports consolidation, even though the United/Continental deal only occurred after talks between United and US Airways failed to produce a merger.

 

"We're doing extremely well right now, better than most of our peers, and don't foresee any reason that we need to do anything," Parker said. "We are encouraged by the industry's improvements and encouraged by consolidation by others."

 

He publicly supported the Continental and United plan to form the world's biggest airline and hoped regulators would approve it.

 

"It makes the industry more efficient. We end up with less fragmentation. It makes the industry stronger and therefore makes US Airways stand-alone stronger," Parker said.

 

Some analysts have questioned US Airways' long-term prospects with its chances for a big merger slimmer now.

 

Parker has been a leading proponent of consolidation as a remedy for the industry's financial woes since he took America West Airlines into a deal with bankrupt US Airways in 2005.

 

US Airways said last month it expects to be profitable in the current quarter on stronger revenues. The company last turned a profit in 2007.

 

US airlines are posting better results this year as travel demand rebounds and from relatively stable fuel prices, higher fares, and stronger ancillary revenue from bag fees and other service charges.

 

The industry outlook brightened more after United and Continental announced their USD$3.1 billion all-stock deal on May 3. Analysts expect the merger to further reduce capacity, enabling carriers to make more money on fares.

 

US airlines shares closed lower on Tuesday amid broader market concerns. US Airways, United and Continental all fell more than 2 percent.

 

(Reuters)

[Pieter C. 5]

United, Continental Name Merger Integration Team

 

May 20, 2010

 

United Airlines and Continental Airlines, which plan to merge, said on Wednesday they have agreed on the structure and leadership of a merger integration team.

 

In messages to employees included in Securities and Exchange Commission filings, the two airlines said a six-member panel will make key decisions on the integration.

 

That panel's members will include Continental chief executive Jeff Smisek and UAL chief executive Glenn Tilton, Continental finance chief Zane Rowe and United Chief Financial Officer Kathryn Mikells, Continental Chief Marketing Officer Jim Compton and Pete McDonald, chief administrative officer at United.

 

The filings added that the companies expect the merger, which must be approved by regulators, to close later this year. The process by which the two carriers are integrated into a single operating entity is expected to be completed by the first half of 2012, Continental's filing said.

 

Smisek is expected to be chief executive of the new United Airlines, which would become the world's biggest airline ahead of Delta.

 

(Reuters)

[Pieter C. 5]

Turkish Air Union May Strike Over Pay, Hours

 

May 21, 2010

 

Workers at Turkish Airlines, Europe's fourth-largest airline, may strike if talks with management on wages and working hours fail, the head of the aviation workers union said on Thursday.

 

The two sides have been negotiating since January but have yet to reach agreement, said Mustafa Yagci, chairman of Hava Is which represents 11,000 workers, more than half of whom are pilots and flight attendants.

 

Turkish Airlines was not available to comment.

 

The union will on Friday present the airlines with an official notice of its intention to strike, Yagci said.

 

That notification will initiate a 60-day period of talks. Employees must give six days notice before striking, according to Turkish law.

 

Turkish Airlines' expansion into new markets has meant longer working days for pilots and flight attendants, and Hava Is wants to shorten hours to comply with European and US flight-safety standards, Yagci said.

 

"The biggest problem is that the airlines' rapid growth has increased the burden on its employees. This is as much of a problem for flight safety as it is for our members," he said.

 

AIRLINE EXPANSION

 

The Istanbul-based flag carrier has more than doubled the number of destinations it serves since 2005 to 149 international and domestic airports. It wants to become Europe's third-biggest airline by passengers this year after passenger numbers grew almost 50 percent since 2006. Revenue has nearly doubled.

 

The summer months from June to September are Turkish Airlines' busiest as millions of tourists travel to Turkey.

 

The government can postpone any strike at strategic companies, including Turkish Airlines. The state retains a 49 percent stake in the carrier.

 

(Reuters)

 

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Turkish Airlines Says Notified Of Strike Move

 

May 21, 2010

 

Turkish Airlines said on Friday it had been notified of a move by union members to strike over wages and working hours, triggering fresh losses in the shares of Europe's fourth-largest airline.

 

However, a strike was not imminent as notification of the strike decision by the Hava Is union will initiate a 60-day period of talks. Employees must give six days notice before striking, according to Turkish law.

 

Hava Is represents 11,000 workers, more than half of whom are pilots and flight attendants. The two sides have been negotiating since January without reaching agreement.

 

"Our company received official notification of the Hava Is union strike decision on May 21, 2010," the statement from Istanbul-based Turkish Airlines said.

 

Its rapid expansion into new markets has meant longer working days for pilots and flight attendants. Hava Is wants to shorten hours to comply with European and US flight-safety standards, union chairman Mustafa Yagci said on Thursday.

 

Turkish Airlines has more than doubled the number of destinations it serves since 2005 to 149 international and domestic airports.

 

It wants to become Europe's third-biggest airline by passengers this year. Numbers have grown almost 50 percent since 2006, while revenue has nearly doubled.

 

The summer months from June to September are Turkish Airlines' busiest, as millions of tourists travel to Turkey.

 

The government can postpone strikes at strategic companies, which include Turkish Airlines. The state also retains a 49 percent stake in the carrier.

 

(Reuters)

 

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Singapore Air Q4 Net Profit Up Nearly Seven Fold

 

May 21, 2010

 

Singapore Airlines said advance travel booking is encouraging and cargo demand will hold up after it posted a better-than-expected seven-fold jump in quarterly profit.

 

SIA, 55 percent owned by Singapore state investor Temasek, booked a net profit of SGD$278 million (USD$197 million) in the quarter, compared to SGD$42 million a year ago.

 

The major disruption on European airspace in April cost SIA SGD$50 million.

 

The fourth quarter profit recovery helped the company to avert its first ever annual loss, although growth in its more profitable first and business class remains hostage to global demand.

 

SIA, which ranks after Air China in terms of market value, posted annual net profit of SGD$216 million, 80 percent lower than it was in the 2008/09 financial year.

 

The company reported SGD$460 million of loss from fuel hedging in its full financial year, 50 percent higher from a year earlier. The loss was only SGD$16 million in the fourth quarter.

 

Although crude oil, which directly influences the price of jet fuel, is currently near an eight-month low, it remains high historically and a burden on the industry.

 

SIA said the it is expected to use 33 million barrels of jet fuel in the 2010-2011 financial year and plans to hedge at least a fifth of the demand.

 

The Singapore flag carrier and its Asian rivals, coming out of an economic downturn, are facing new threats from the European market where travel could be hit by volcanic eruption in Iceland and economic problems.

 

Traffic to and from Europe is estimated to contribute around 25 percent of SIA's revenue.

 

"Yields for both passenger and cargo should keep pace with the growth in demand. The sustainability of this improvement depends on developments in the world economy and on business and consumer confidence," SIA said in a statement.

 

Analysts are less confident because of growing concerns about the global economy amid the debt crisis in Europe.

 

"This year, a lot of things will be tough for everybody. You look at what happened in Europe - the ash, the economic situation - all will pose a bigger problem for the airlines," said Sukhor Yusof, analyst at Standard & Poors.

 

SIA shares have declined about 5 percent since the start of the year, under-performing its Asian rival Cathay Pacific which gained nearly 4 percent but fared better than Australian carrier Qantas which dropped 20 percent.

 

(Reuters)

[Pieter C. 5]

The perfect couple

 

When Continental Airlines chief Jeff Smisek phoned his counterpart at United Airlines, Glenn Tilton, in early April, the long-awaited merger between these two well-matched partners was finally set in motion. Now the task of building a beautiful relationship begins

 

Finally, two of the industry's most obviously suited suitors have popped the question. And for United Airlines chief executive Glenn Tilton, it all happened on 9 April, his birthday. With the celebration cake already in the oven for a rival United-US Airways deal, Tilton took a call on his Chicago-Houston hotline from a certain Jeff Smisek, his counterpart at Continental Airlines.

 

And this time, unlike two years ago when it was Continental's board that balked at the last minute on a United-Continental tie-up, it was Smisek begging to get together. Once jilted Tilton could be forgiven a punch in the air: United had got the partner it had really wanted. Now it was the turn of US Airways head Doug Parker to be dumped. Whether by accident or design, United's ultimately futile dance with US Airways served a brilliant purpose, flushing Continental out. "I didn't want him to marry the ugly girl, I wanted him to marry the pretty one - and I'm much prettier," joked Smisek. "The stars have aligned for what is a great strategic move."

 

A CLEVER MOVE

 

With Continental finally in the bag [barring unforeseen regulatory pitfalls], Tilton can pass United on to what many believe will be a predominantly Houston-originating management team and leave on a high.

 

Let's face it, being the man to at long last woo Continental deserves plenty of credit for an industry outsider brought into United in September 2002 from a career in the oil industry.

 

In fact, leaving solid ChevronTexaco for pathetic United did seem an act of madness at the time. United was in terrible shape. From being held to ransom by its pilots in 2000 to the horrific events of September 2001, when two of its aircraft were hijacked by terrorists, United was forced into Chapter 11 bankruptcy just three months after Tilton arrived.

 

It took United a staggering three years to exit bankruptcy - including the controversial cancellation of its pension plan along the way. With United being virtually the definition of a true legacy carrier, Tilton has worked to strip out the legacy layers of the much-maligned behemoth with mixed success according to observers. Some feel he should have done more in this period to prune the airline's bloated cost base, in addition to extracting major concessions on the labour side.

 

While that is now an academic question, there is no debate about how Tilton has radically changed the size and shape of United. That journey has been downwards, with United being touted as the incredible shrinking airline. But size is irrelevant to Tilton; his mission has been to drag United back to consistent profitability. That mission has palpably failed.

 

But during this decade Tilton has demanded an obsession with reining the airline back. "When I started United had over 100,000 employees, today we have 47,500," he said during a speech to the Aviation Club in London recently. Its revenues have fallen from $19 billion in 2000 to $16 billion in 2009. Passenger numbers and RPKs have shrunk.

 

Almost the only number lines on United's results to have grown are the wrong ones. In the past decade United has lost $16 billion [excluding a $20 billion reorganisation charge in 2005] at the net level. Only twice in these ten years has the airline made a profit.

 

Despite this picture, United has survived. And back in the early part of the decade that was not a given. Addressing the Aviation Club in late 2005, Tilton was typically frank: "We are here today and will exit Chapter 11 in February 2006 because we were not in denial three years ago about what needed to be done to fix our company, nor are we in denial about what needs to be done in the future to remain viable and competitive."

 

SURVIVAL MISSION

 

Five years ago Tilton was answering questions about whether United deserved to remain in existence. After his 2010 speech he drew comfort from the fact that the questions were not about survival anymore, but on his chosen topic of the elimination of economic barriers like foreign ownership.

 

And while he undoubtedly heads an airline that is heavily in debt and still unprofitable, he does lead one able to dictate terms when it comes to the shape of the US industry going forward. "We have exactly what we need," Tilton says of the merger with Continental. Certainly the route maps of the two carriers dovetail almost perfectly. "It is a thing of beauty from a network perspective," says one analyst. "United has been modelling this stuff for 20 years. They knew all that time ago that Continental was the partner for them from a route structure point of view."

 

However, while the logic for a United-Continental tie-up is self-evident, getting the stars to align is another matter. Tilton says it was "serious and sincere" about working with USAir, but he adds that the chance to bag Continental "trumps work you already have underway".

 

Now the hard work of making the merger work begins. In contrast to the management that forged the Delta and Northwest Airlines merger, Tilton and Smisek have not had time to pre-negotiate any agreements with labour. This is no small challenge. The fact that Smisek will be in the front line rather than Tilton, whose relationship with labour has been strained to say the least, should help.

 

CONTINENTAL'S STRONG TEAM

 

In fact, it will not only be the accomplished Smisek from Continental's executive ranks that are expected to run the new United. Most observers believe strong managers like financial chief Zane Rowe and head of marketing Jim Compton will be pivotal players in the merged carrier. The only worry for some is the potential for distraction at Continental that the merger will bring and the potential to spoil its strong corporate culture.

 

On the corporate sales front, the merger of their loyalty programmes redoubles the battle for business travellers with Delta-Northwest. "You would not be surprised that I tell you the two happiest sets of employees in our two organisations are our corporate sales teams," says Tilton.

 

As he sees out his tenure as non-executive chairman of United, Tilton leaves behind a battered airline on a slow upward trajectory, but safe in the knowledge that it is one with a cool partner that could put it on the real road to recovery. He has plenty of critics of his time at United, who say he has overseen the decline of a once mighty carrier. However, as one commentator puts it: "No matter how bumpy the ride, he has got United to where it needs to be."

 

So for all Tilton's detractors - ex-Continental chief executive Gordon Bethune famously described him as "clueless" about the airline industry - this polished and articulate executive will be remembered as the man at United who did the Continental deal. And that is something worth being remembered for.

[Pieter C. 5]

Continental Airlines Fine Sought On Concorde Crash

 

May 21, 2010

 

Prosecutors said on Friday that Continental Airlines should be fined EUR€175,000 euros (USD$218,800) for manslaughter over its role in the 2000 crash of an Air France Concorde plane which killed 113 people.

 

The Concorde, carrying mostly German tourists, caught fire as it roared out of Paris's Charles de Gaulle airport on July 25, 2000 and crashed just minutes later into a nearby hotel.

 

Investigators believe a Continental DC10 triggered the disaster when a small metal strip fell from it onto the runway. This punctured the Concorde's tyres during take off, spraying debris into the underwing fuel tanks and sparking the fire.

 

Prosecutors added they were seeking a two-year suspended prison sentence for Henri Perrier, an 80-year-old former Concorde director who headed the plane's testing programme.

 

Perrier, who was involved in the first Concorde flight in 1969, and US airline Continental have denied any wrongdoing. Continental has questioned the safety record of the ageing Concorde model as part of its defence.

 

"I will not accept being held responsible for this accident," Perrier told reporters on Friday.

 

Air France, which paid millions of dollars in compensation to families of the victims, has escaped blame from investigators looking into the disaster.

 

(Reuters)

[Pieter C. 5]

US Senate Committee To Examine UAL/CAL Merger

 

May 24, 2010

 

A US Senate subcommittee is set to examine the proposed airline deal between United Airlines and Continental Airlines on Thursday that will study the implications for airline consumers.

 

The Subcommittee on Antitrust, Competition Policy and Consumer Rights will examine the proposed airline merger between United and Continental on May 27, according to a Senate website.

 

Also on Thursday, the Senate committee on Commerce, Science and Transportation will examine the financial state of the airline industry and the implications of consolidation.

 

On May 3, United Airlines said it will buy Continental for about USD$3.17 billion in an all-stock deal that will form the world's largest carrier.

 

Antitrust experts believe the Justice Department will clear the deal since there is little overlap of common routes and no shared hubs. Antitrust enforcers, experts said, could require some divestiture to enhance competition.

 

(Reuters)

 

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Singapore Air Says CEO Succession On Track

 

May 24, 2010

 

Singapore Airlines said the process for finding the next chief executive of the company has been going "smoothly and on track".

 

Chew Choon Seng, chief executive of SIA whose term is expiring this year, said the company will make an announcement in due course.

 

Chew, 63, has passed Singapore's official retirement age of 62. He joined SIA in 1972.

 

He said the airlines sees recovery in business class demand over the next 12 months but warned that the carrier is "not out of the woods yet".

 

"We will exercise caution in putting capacity back because of this concern that the recovery is still fragile," Chew told a press and analysts briefing.

 

The airline avoided its first annual loss last year, when the industry was badly hit by global economic recession, by posting an annual net profit of SGD$216 million, or 80 percent lower than in the 2008/09 financial year.

 

The Singapore flag carrier and its Asian rivals, coming out of an economic downturn, are facing new threats from the European market where travel could be hit by volcanic eruption in Iceland and economic problems.

 

(Reuters)

[Pieter C. 5]

UAL/Continental Look To Business To Fuel Merger

 

May 24, 2010

 

United Airlines and Continental Airlines are betting their combined network will appeal to more companies, as demand for business travel rebounds from the 2009 recession.

 

By many measures, corporate travel is key to prosperity for major airlines and serves as a primary reason why United parent UAL and Continental sought earlier this month to create the world's largest airline.

 

"This is one of the unheralded, unexposed parts of the business, where the airlines are very eager to become the preferred travel provider for key corporations," said airline consultant Doug Abbey.

 

Air service accounts for 18 percent, or roughly USD$50 billion, of US business travel spending globally, according to 2008 figures provided by the National Business Travel Association.

 

IBM, Boeing, General Electric, Exxon Mobil and Lockheed Martin were the top five companies for travel on US airlines in 2008, according to the most recent survey data from Business Travel News.

 

Airlines closely guard their travel contract information, making it difficult to determine which holds the best deals.

 

But carriers with the largest presence in key business markets such as New York, Atlanta and Chicago will have an advantage over rivals when negotiating with companies.

 

"It really is a function of where the demand is for a particular company," Abbey said.

 

United has hubs in Los Angeles, San Francisco, Denver, Chicago and Washington. Continental has hubs in Newark, New Jersey, not far from New York; Houston; and Cleveland. The merged airline would fly to 370 destinations.

 

In announcing the proposed merger on May 3, UAL chief executive Glenn Tilton and Continental CEO Jeff Smisek, who would be chief executive of the new United, said the merger would make the combined carrier -- which would be known as United Airlines -- more appealing to corporate travellers.

 

"A single-carrier network is very attractive to high-yield corporate customers," Smisek said. "By being more efficient we will be even more competitive."

 

The carriers, which currently have a comprehensive global partnership designed to lure travellers, did not quantify the benefits they expect to receive by way of corporate travel contracts.

 

According to a Business Travel News survey last November, United and Continental received strong ratings from corporate clients for the strengths of their individual networks, partnerships and frequencies.

 

Continental also outperformed other major US airlines in other areas that are important to corporate customers, including its power to negotiate agreements, offer options and make decisions regarding price and service.

 

Service will be an issue pursued on Thursday, when senior executives of United and Continental testify before US Senate committees examining the proposed merger. United and Continental hope for regulatory approval by year's end.

 

Antitrust experts believe the US Justice Department will clear the deal, since there is little overlap of common routes and there are no shared hubs.

 

Kevin Mitchell, president of the Business Travel Coalition, said that once UAL and Continental fully integrated and began to realise the more than USD$1 billion in annual revenue and cost improvements they expect, they could pass savings along to companies that hold travel contracts with them.

 

"The more tightly integrated partners are, the better they can deliver a corporate discount programme," Mitchell said.

 

"In this case, an all-out merger will allow them to integrate all their sales and all their marketing. That is more attractive," he said.

 

Vaughn Cordle, managing partner and chief analyst at AirlineForecasts, an airline investment research and strategy company, said about 35 percent of total revenue for major US airlines comes from high-end, well-heeled business travellers, who often pay walk-up fares, fly first- or business-class and spend money on in-flight perks.

 

He said as businesses ramp up travel in the post-recession era, airlines are poised to collect as many corporate travel contracts as possible.

 

"It's a good time for corporations to negotiate new contracts," Cordle said.

 

(Reuters)

[Pieter C. 5]

NTSB: United 757 pilots doused windshield fire twice

 

The captain of a United Airlines Boeing 757-200 that was cruising at 36,000ft (10,973m) en route from New York JFK airport to Los Angeles the night of 16 May had to use a second halon fire extinguisher, brought forward by cabin crew, to douse a fire in the aircraft's lower front windshield.

 

Earlier the captain put out the fire with a halon extinguisher located in the cockpit but the fire then reignited, according to the US National Transportation Safety Board (NTSB), which issued an update on the incident today. The fire did not reignite after the second bottle was discharged.

 

Both the captain and first officer had earlier donned oxygen masks and smoke goggles after smelling a "strong acrid smell" and observing smoke coming from the windshield, says NTSB.

 

The pilots declared an emergency and initially were being given vectors to land at the closest airport, which turned out to be Harrisburg International airport in Pennsylvania, according to air traffic control conversations captured by the website LiveATC.net.

 

The crew later noted that the fire "was under control now" and requested to be diverted to the Dulles International airport in Virginia, a hub location for the airline.

 

The crew advised controllers that no airport rescue and fire fighting equipment would be needed for their landing, though fire crews later did meet the aircraft on the runway and board the cabin.

 

The NTSB notes that the captain's windshield cracked at approximately 500ft mean sea level (MSL) altitude during the landing, There was no evacuation or injuries to any of the 105 passengers or seven crew members after the uneventful landing.

 

NTSB says a preliminary examination of the cockpit area revealed that the inner pane of the captain's windshield had cracked and that one of the five terminal blocks attached to the inside lower left windshield "was consumed by fire", with associated damage to a wire harness.

 

The agency notes that two previous windshield fire events on Boeing 757-200s had prompted it in 2007 to issue a safety recommendation to the US FAA to require operators to replace the windshield heat terminal blocks on Boeing 747,757, 767 and 777 aircraft with a new design.

 

The FAA issued a proposed airworthiness directive (AD) to address the problem in March 2008, but has not yet finalised the action. An FAA spokeswoman says the AD was to be finalised in August, but the action will now be accelerated and issued "as soon as possible".

[Pieter C. 5]

United Flight Diverted After Turbulence, 10 Hurt

 

May 25, 2010

 

A United Airlines jet was diverted to Montreal on Tuesday after 10 people on board were injured by severe turbulence over the Atlantic Ocean, airport and airline officials said.

 

The airline said a crew member and nine passengers needed immediate medical treatment. The jet had been en route to Los Angeles from London's Heathrow airport.

 

According to United's website, the flight operates using a Boeing 777 airliner.

 

(Reuters)

 

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UAL CEO Optimistic Can Address CAL Merger Concerns

 

May 25, 2010

 

The chief executive of United Airlines is confident that any US regulatory concerns about the carrier's proposed merger with Continental Airlines will be satisfactorily addressed.

 

Glenn Tilton also told reporters on Tuesday after an industry conference he is "very optimistic" the deal can clear antitrust review by year's end, the deadline set by the two companies when they proposed their merger earlier this month.

 

"My view remains very optimistic we can address the concerns they have expressed, well within the timetable," Tilton said.

 

Tilton said the companies have already had "initial conversations" with Justice Department staff and he expects a "full and robust review" of the all-stock transaction.

 

Antitrust officials focus on how the proposal would impact competition, if at all.

 

Antitrust experts, analysts and industry consultants see few, if any, regulatory problems and widely anticipate government approval.

 

However, they say United and Continental may be required to divest some assets at one or more airports, possibly in the New York area where Continental is strong at Newark, to enhance competition.

 

Tilton would not discuss specific antitrust matters although he called the merger necessary to reduce industry fragmentation and industry overcapacity.

 

He and Continental chief executive Jeff Smisek are scheduled to appear before US Senate lawmakers at two hearings on Thursday to answer questions about the merger.

 

US Attorney General Eric Holder told a congressional committee this month that his agency would conduct a vigorous review of the proposed merger but would not take longer than necessary.

 

Two other airline chief executives, Dave Barger of JetBlue Airways and Bryan Bedford of Republic Airways, joined Tilton, union, government and other industry officials at a Transportation Department conference on the future of US aviation.

 

With his deal on the table, Tilton still believes that consolidation "extending all the way down to the regionals" is a "necessary and good thing."

 

Barger said he does not believe the industry -- after the 2008 merger of Delta Air Lines and Northwest Airlines, and United and Continental -- will be done "with M&A activity."

 

But he said JetBlue was neither seeking a purchase nor did it want to be acquired. He did say, however, that the company based at New York's Kennedy airport, an international gateway, would pursue more marketing deals with overseas carriers.

 

JetBlue said earlier this month it would cooperate on an e-ticketing venture with South African Airways at JFK and has a similar deal with Germany's Lufthansa.

 

(Reuters)

[Pieter C. 5]

Here's a link with more details about the UA 777 turbulence:

 

http://www.ktla.com/news/landing/ktla-turbulence-la-bound-jet,0,4353377.story

 

"fasten seatbelts while seated" I always recommend/say !

[Pieter C. 5]

US Panel Seeks Answers On UAL/CAL Merger

 

May 26, 2010

 

United Airlines and Continental Airlines should provide more information about their merger to a US congressional committee concerned about possible jobs and service cuts, key lawmakers said.

 

House of Representatives Judiciary Committee Chairman John Conyers and competition subcommittee Chairman Henry Johnson said on Wednesday the companies' written responses failed to answer key questions raised by the panel.

 

The two Democrats said United and Continental did not provide specific information about possible job reductions related to the merger to create the world's biggest airline.

 

The airlines told the panel that they expect few layoffs from the integration of 87,000 employees and carrier operations due to the fact that there are few overlapping routes and no common hubs.

 

The lawmakers also said the companies "failed to provide sufficient assurances" about service, refusing a committee request to commit to retaining all of their hubs.

 

United and Continental told the panel that such a promise would not allow proper flexibility to make business decisions, the lawmakers said.

 

The new airline, to be called United and based in Chicago, will be positioned as a stronger entity with an unmatched global reach, experts said.

 

United said in a statement it was "respectful of the process" but that it would be "inappropriate for two separate companies to provide the answers they are seeking."

 

Houston-based Continental said in a separate response it plans to further address the committee's concerns at next month's scheduled hearing on the merger.

 

The Judiciary Committee has oversight of the Justice Department, including its antitrust division, whose job is to review the merger's impact on competition.

 

United chief executive Glenn Tilton and Continental chief executive Jeff Smisek, will testify before US Senate antitrust and commerce panels on Thursday.

 

Continental's Smisek will lead the new airline.

 

Antitrust experts, analysts and industry consultants see few if any regulatory problems and widely anticipate government approval of the deal.

 

Tilton told reporters on Tuesday that he is "very optimistic" the carriers will be able to satisfy any concerns raised by Justice Department antitrust officials by year's end.

 

(Reuters)

 

Turkish Air Union May Strike Over Pay, Hours

May 21, 2010

(Reuters)

 

Turkish Air Reaches Agreement With Union

 

May 26, 2010

 

An agreement has been reached between Turkish Airlines and an air workers union, the company said on Wednesday, potentially averting strike action by employees of Europe's fourth-largest airline.

 

"Having secured an agreement between our partnership and Hava-Is... the sides have signed an agreement protocol. The protocol in question will be presented to the partnership's board of directors," the statement said.

 

Late last week Turkish Airlines had been informed of a move by air workers union Hava-Is to strike over wages and working hours.

 

The rapid expansion of Turkish Airlines into new markets has seen the company more than double since 2005 the number of international and domestic destinations it serves.

 

That growth has meant longer working days for pilots and flight attendants. Hava Is wants to shorten hours to comply with European and US flight-safety standards, union chairman Mustafa Yagci said last week.

 

The summer months from June to September are Turkish Airlines' busiest, as millions of tourists travel to Turkey.

 

Hava Is represents 11,000 workers, more than half of whom are pilots and flight attendants. The two sides had been negotiating since January without reaching agreement.

 

(Reuters)

[Pieter C. 5]

UAL/CAL Say Long-Haul Travel Drives Merger

 

May 27, 2010

 

Creating a network that can compete for long-haul, high-volume business travel is a driving force behind the proposed merger of United Airlines and Continental Airlines, the companies' senior executives said on Thursday.

 

Glenn Tilton of United and Jeff Smisek of Continental told a Senate antitrust subcommittee hearing that the intent to create the world's largest airline would not harm competition or consumers in what they called a hyper-competitive environment.

 

"The changing dynamics of the airline industry have resulted in robust competition that maintains significant downward pressure on fares," Tilton and Smisek said in joint testimony.

 

The executives pointed to the potency of Southwest Airlines, the largest domestic carrier by domestic passenger volume, and rivals with strong international ties, as evidence the industry can absorb consolidation.

 

"Our combined company will be well positioned to succeed in an increasingly competitive global and domestic aviation industry - better positioned than either airline standing alone," the two said.

 

United and Continental had combined operating revenue of USD$28.7 billion in 2009, compared with USD$28.9 billion for Delta Air Lines, which merged with Northwest Airlines in 2008, a Government Accountability Office report on the deal showed on Thursday.

 

Senators did not object to the United-Continental merger, but some were concerned about the impact it would have on jobs, especially in Houston, where Continental is now based, and Cleveland, where Continental operates a hub.

 

The new airline will be called United and will be headquartered in Chicago, where the current United is based.

 

Smisek said there would be some job loss as the two companies integrate their operations, but there are no plans for large cuts to the combined workforce of nearly 90,000 employees.

 

Smisek, who will run the merged company and shook hands with United pilots as he entered the hearing room, expects job growth as the airline matures.

 

The antitrust subcommittee's chairman, Herb Kohl, did not take a position on the deal and other lawmakers did not speak out against it.

 

"I should stress that we consider this merger with an open mind, and do not reflexively oppose or support this merger," Kohl said.

 

But Kohl said Congress must ensure that competition and consumer interests are preserved.

 

Antitrust officials at the Justice Department are reviewing the proposal. United and Continental hope for regulatory clearance by year's end.

 

Antitrust lawyers, analysts and consultants expect the deal to pass regulatory muster over the next several months. They say United and Continental may have to give up some assets at big airports, including New York, to ensure competition.

 

Tilton said greater access to New York, a rich environment for travel by financial services firms and a jumping off point for overseas travel, was an important factor for pursuing the tie-up with Continental, which has a strong hub at Newark, New Jersey.

 

"This merger will put us in a position to create a network far more attractive to corporate travellers," Smisek said.

 

Darren Bush, a former Justice Department antitrust attorney and currently an associate professor at the University of Houston, told the committee that the sheer size of the combined airline "may make it difficult for smaller carriers to compete" for high-volume corporate contracts.

 

(Reuters)

 

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Air NZ To Allow SMS, Emails, But No Calls

 

May 28, 2010

 

Air New Zealand is planning to let some passengers send text messages and emails mid-flight by the end of the year but fellow passengers need not worry -- phone calls will not be allowed.

 

New Zealand's national carrier said it expects to let people send and receive text messages and emails on their iPhones, Blackberries and GSM mobiles on its new 777-300s by November.

 

The new service will also enable customers to use their Netbooks or laptops in conjunction with their mobile broadband connection to access the Internet.

 

The airline said the new mobile text and data service is being introduced after feedback from passengers who want to stay connected on long-haul flights but it is subject to regulatory approval.

 

However based on customer feedback, Air New Zealand said it did not currently plan to enable voice calls onboard.

 

"Customers onboard our new Boeing 777-300 aircraft will be able to use their own GSM/GPRS devices safely when the system is activated during the cruise stage of flight," airline spokesman Ed Sims said in a statement.

 

"Passengers will also be requested to keep their phones on 'silent' mode."

 

Sims said passengers will be billed by their own mobile service, like any other global roaming plan, but standard in-flight roaming costs will apply.

 

(Reuters)

 

-----------------------------------------------------------

 

Woman Sues United For Leaving Her Asleep In Seat

 

May 28, 2010

 

A woman left locked alone in a plane asleep for about four hours after landing at Philadelphia Airport is suing United Airlines.

 

Ginger McGuire, 36, is suing for false imprisonment, infliction of emotional distress and negligence, her attorney Geoffrey Fieger told the US newspaper Detroit Free Press.

 

McGuire fell asleep on a late-night United Express flight from Washington, DC, to Philadelphia. She failed to wake up after the 50-passenger plane touched down at 12:27 am local time and everyone else disembarked.

 

A cleaning crew eventually roused her, but she was kept locked in the plane until federal officers were satisfied that she was not a terrorist, said the newspaper.

 

"We are working closely with our partner Trans States Airlines to investigate the cause and remedy the situation with the customer," United Airlines spokeswoman Sarah Massier told the paper.

 

No one at United was available for comment.

 

Fieger is a high-profile attorney whose clients have included euthanasia practitioner Jack Kevorkian, and a US soldier who claims the producers of Oscar-winning war movie "The Hurt Locker" stole his story.

 

(Reuters)

[Pieter C. 5]

Brussels Air To Post EUR€40 Mln 2009 Net Loss

 

May 30, 2010

 

Brussels Airlines suffered a 10 percent fall in sales and a net loss of around EUR€40 million euros (USD$49 million) in 2009, a spokesman said, confirming newspaper reports.

 

Brussels Airlines, in which Lufthansa took a 45 percent stake last year, was hit by both the economic crisis and by an unsuccessful fuel-hedging strategy.

 

The operating loss was EUR€73 million in 2009, compared to EUR€4.7 million a year earlier, spokesman Geert Sciot said.

 

"The result is mainly due to the hedging policy of last year," co-chief executive Bernard Gustin told the De Tijd newspaper.

 

The hedging strategy had a negative impact on the results of around EUR€80 million, said Sciot.

 

The company had not planned to announce the results until its general assembly on June 7, but they were published this week by Belgium's national bank, he added. It was not immediately clear why this happened.

 

Brussels Airlines' 2010 results took a hit of at least EUR€10 million due to the ash cloud from the Icelandic volcano, which grounded planes around Europe in April.

 

There is also uncertainty about impact of the dollar-euro exchange rate this year, but the company is aiming for a positive result, said Sciot.

 

(Reuters)

[Pieter C. 5]

Blue1 adopts new livery as it opts for 717s

 

SAS Group's Finnish operation Blue1 is to start introducing Boeing 717 aircraft in the second half of this year, and intends to build a fleet of nine of the type.

 

The Helsinki-based carrier has also unveiled a new varied colour scheme for the aircraft which, it says, is designed to reflect flowing water and represent Finland's lakes.

 

Blue1, whose fleet already includes five Boeing MD-90s, says the 120-seat aircraft will enable it to increase frequencies and serve a rapidly-expanding network.

 

The first 717 will arrive in autumn this year and the carrier says it intends to move to a single-type fleet, initially phasing out the MD-90s and then removing its seven BAE Systems Avro RJ85s.

 

The airline describes the 717 as "representing the tip of the whole regional jet category", and a good fit for Blue1's future traffic programme.

 

Blue1 has not identified the airframes involved but says they will be drawn from different sources. Thai carrier Bangkok Airways has recently phased out its examples while European carrier Quantum Air, which collapsed earlier this year, also had a 717 fleet.

[Pieter C. 5]

US Airline Shares Jump On Continental Traffic Data

 

June 2, 2010

 

US airline stocks shot up on Wednesday after Continental Airlines posted strong May traffic revenue, underscoring the industry's newfound pricing power and the beginning of a rebound in business traffic.

 

Continental, which announced a merger with United Airlines last month, said its mainline unit revenue rose between 22.5 percent and 23.5 percent in May.

 

The carrier said consolidated unit revenue, which includes the performance of its feeder airlines, rose 24 percent.

 

The beat was due to higher-than-expected fares, a rebound in higher-fare-paying business travellers, and fare surcharges put in place during peak travel days, CRT Capital analyst Michael Derchin wrote in a research note.

 

Shares of Continental rose over 11 percent to USD$22.54 on the New York Stock Exchange. Shares of United parent UAL jumped 12.56 percent to USD$21.78.

 

US Airways shares added 9.26 percent to USD$9.44.

 

Continental's report "is expected to kick off a multi-week, across-the-board strengthening of consensus, the magnitude of which is unlikely to go ignored by equities, in our view," JP Morgan analyst Jamie Baker wrote in a note on Tuesday night.

 

May figures were based on easy comparisons, as a year ago the industry was hit by fears of the H1N1 virus and a deep recession.

 

Continental also saw a boost from a pull-back in oil prices during the month. The airline now estimates its second-quarter fuel cost will average USD$2.25 per gallon.

 

"The lower jet fuel price could potentially save CAL approximately USD$25 million during the second quarter if oil prices remain under pressure in June," Derchin said.

 

(Reuters)

[Pieter C. 5]

SAS Sells Estonian Air Stake To Govt

 

June 4, 2010

 

Scandinavian airline SAS agreed on Friday to sell its 49 percent stake in Estonian Air, giving the Baltic state a 90 percent share in the regional carrier.

 

SAS has been selling off non-core assets as it looks to turn its business around after years of losses.

 

SAS, half-owned by Sweden, Norway and Denmark, said the Estonian government would raise around SEK205 million kronor (USD$26.2 million) of new capital for Estonian Air in a rights issue and SAS would convert about SEK20 million of loans into equity.

 

The deal will be neutral in terms of profit and liquidity to SAS, the airline said.

 

After the rights issue the Estonian government will hold 90 percent of Estonian Air and SAS 10 percent. Estonian Air will continue to carry loans of around SEK70 million owed to SAS that mature in 2014.

 

SAS has struggled for years with an unwieldy business structure and higher staff costs than rivals and was hit badly by the global downturn, making a SEK3.4 billion pretax loss in 2009.

 

A volcanic eruption in Iceland that closed European airspace for part of April added to the airline's woes, and it lost another SEK972 million in the first quarter this year.

 

(Reuters)

[Pieter C. 5]

US Air/American Link Could Bolster Global Routes

 

June 7, 2010

 

The pending marriage of United Airlines and Continental Airlines leaves US Airways and American Airlines logical partners with their survival possibly at stake.

 

While the pairing would not be perfect, an alignment of their operations would give premium business travellers foreign and domestic options similar to those of the new United and Delta Air Lines, which merged with Northwest in 2008.

 

"There's not too many options available to American and US Air because the dance partners have already matched up," said Vaughn Cordle, chief analyst at AirlineForecasts, an airline investment research and strategy company.

 

"In the end, we think US Air and American make the best match-up," Cordle said, adding that they stand little chance of long-term success separately.

 

A marketing alliance could be sufficient or the prelude to a merger, industry experts say.

 

Soon after United parent UAL and Continental announced their plans in May, rumours began that American and US Airways were sizing each other up for an alliance to coordinate their overseas flying and generate new revenue.

 

Both United and Continental, and Delta and Northwest took similar paths before moving to merge.

 

US Airways chief executive Doug Parker has aggressively - but unsuccessfully - sought consolidation since 2005 when the current airline was lifted out of bankruptcy through a merger with his America West Airlines. American Airlines bought Trans World Airlines in 2001.

 

POSSIBLE PAIRING

 

American and US Airways insist they can compete as stand-alone carriers, which supports the idea that they would first pursue a marketing alliance.

 

If that is their route, US Airways likely would move to the Oneworld global alliance with American, British Airways and Japan Airlines. Delta leads SkyTeam, while the new United would top the Star Alliance as the world's biggest airline. US Airways is currently part of Star.

 

In that scenario, US Airways and American would seek an exemption from US antitrust law to share scheduling and pricing details. This would highlight US Airways' transatlantic service from its Philadelphia hub -- a quietly successful complement to the allied New York service of American and British Airways, which dominate traffic to London.

 

Bob McAdoo, senior research analyst for Avondale Partners and a former airline executive, said in a note to clients that the Philadelphia hub for US Airways is more productive in collecting connecting traffic to Europe from northern and eastern US areas than the Newark hub is for Continental.

 

He also said investors tend to view the American/British Airways transatlantic partnership as being larger than it is because of its potency between New York and London.

 

In fact, the Oneworld alliance has fewer US connecting points via American at New York's Kennedy airport than does SkyTeam with Delta at JFK and Star with Continental/United/US Airways at Newark, Washington Dulles and Philadelphia.

 

US Airways would be a "nice addition to someone's existing larger network," McAdoo said.

 

NOT SO "UGLY"

 

In Washington recently, US Airways chief executive Parker would not say whether he had discussed merger or alliance possibilities with his AMR counterpart Gerard Arpey, who has stated that AMR does not have to merge to compete.

 

A US Airways/American combination would give the joint entity about a 22 percent market share - based on 2009 figures reported to the US government. That compares with 18 percent for a merged United/Continental and 17 percent for Delta.

 

A month ago, Parker bristled at an inference by Continental chief executive Jeff Smisek that US Airways was an "ugly girl" of sorts and thus a less desirable merger partner for United. Smisek later apologised.

 

But to Wall Street, since the USD$3.2 billion all-stock Continental/United merger announcement, US Airways is hot. The carrier has revamped its network to stress hub flying and has a bullish second-quarter outlook.

 

AirlineForecasts' Cordle said that without a merger, AMR and US Airways risk trouble as the industry overall seeks more altitude following a recession-driven downturn in 2008-09. American did not restructure in bankruptcy, so labour costs are a concern.

 

"They would be foolish not to explore the concept at the very least," Cordle said. "What's Arpey going to do at American? Ride the share price all the way down to zero in bankruptcy? That's the long-term path we believe they're on."

 

(Reuters)

[Pieter C. 5]

Turkish Airlines looks to continue rapid growth

 

June 8, 2010

 

Turkish Airlines, one of Europe's fastest-growing carriers, does not intend to slow its pace of expansion anytime soon, CEO Temel Kotil said.

 

Speaking on the sidelines of the IATA AGM in Berlin, he said, "The demand is very strong and that's why we are searching the market for additional wet-leased aircraft." The carrier recently took delivery of a wet-leased A330 and as many as four additional A330s could join the fleet during the summer season, he said.

 

Kotil explained that THY’s focus is on improving quality and keeping fares competitive. "If you combine…good price and good quality, it is a big advantage," he said. The carrier has started installing new business-class seats with 41-in. pitch and full IFE systems on four narrowbody aircraft and eventually plans to operate 65 narrowbodies in Europe with the enhanced business class product.

 

It has 10 737-800s and 10 737-900s on order, all of which will be fitted with the new seats. It has options on 15 additional 737NGs. It is slated to take delivery of its first new A330-300 in September and its first new 777-300ER in October.

 

THY currently operates to 134 international and 37 domestic destinations. Kotil said an Istanbul Ataturk-Jakarta-Sydney route likely will be launched in 2011. He expects the airline to carry 31 million passengers this year.