Bags of money for the big carriers

Reports suggest that major US airlines had a good second quarter in 2012. According to the Bureau of Transportation Statistics, the largest air carriers reported a 6% profit margin in this period, up from 5.3% from the same quarter in 2011. Once again, it was baggage fees that swelled the coffers. Overall, the industry set a record in the first half of this year, which saw in excess of US$1.7bn levied in such fees. Top of the tree was Delta Air Lines, which earned in over US$420m in the first six months of the year. United Continental was not too far behind.

In the final analysis, Delta’s revenues stood at US$429m, with United posting a total of US$351m. In third place was American Airlines, despite Chapter 11, with US$288m. US Airways took the fourth position on revenues of US$260m.

If these figures seem disproportionate, it is as well to point out that the fifth in the list, with a mere US$80m accruing from baggage fees, was Spirit Airlines. Whilst it has some way to go to start worrying the likes of US Airways, its latest initiatives (if that is the right word) will see it levy US$100 for a bag being checked in at the gate. That represents more than a doubling of the current fee of US$45. By doing this, Spirit is hoping that the new fee will persuade passengers to pay in advance instead of waiting until the day of travel. Within the carrier’s low cost, low service business model, current fees make up about 40% of its revenues.

 

 

Airport investment continues

Kansas City Aviation Department is moving forward with plans to replace the existing triple terminal design at Kansas City International airport with a newUS$1.2bn multi-storey building. According to a US$4m case study carried out by the agency, construction on the existing site of Terminal A will not involve major highway reconstruction and would be completed in a shorter time compared to construction on undeveloped land. The study also revealed that a replacement terminal would be preferable because of its proximity to the main runway, the fuel farm, the cargo facility and the de-icer area. The project will be funded through federal grants, fees received from airline passengers and carriers and remaining from a bond sale.

Separately, Port Columbus International airport is considering undertaking a three-year, US$80m terminal modernization program to increase its passenger handling capacity.

Expected to commence in November 2012, work on the 835,000 square foot multi-faceted terminal modernization program will include enhancement of the ticket lobby, baggage claim and concourses A, B and C, along with mechanical, technological and security advances.

Columbus Regional Airport Authority President and CEO, Elaine Roberts, said that some US$627m had been invested in airport enhancements, which included roadway, runway and baggage handling upgrades.

 

 

Ten years – a suitable time limit?

There was recently an unusual case at Charlotte Douglas International airport, where an employee was apprehended at work after it was discovered there had been a warrant out for his arrest. What was interesting in this instance was that the warrant for his arrest dated back to something that had occurred over a decade ago.

In 2000, the man was accused of stealing from his employer in Concord. That same year he began working at the airport and was with Delta at the time of his arrest. The accused stated that he thought that the case had been dismissed. In consequence, the question of background checks has come under the microscope. A representative from the airport confirmed that in addition to the checks performed by Delta Global Services, the airport also would have followed TSA standards. Inter alia, these standards outline what would disqualify an employee from having unescorted access into secure areas and a number of potential crimes are itemized. The standards also say that potential employees cannot be convicted of any of such crimes within the last ten years. That said, there appears to have been no correlation between those standards and being wanted by the police.

The case against this individual was actually dismissed because of its age and the fact that there was a lack of evidence.

 

Putting the personal touch back into flying

Whilst many bemoan the hard-nosed attitude that has come to typify the aviation sector, a few airlines, including US carriers, have been looking at ways and means whereby they can differentiate their product. Currently faced with competition from price comparison websites, they are trying to win back customers through a personalized service offering.

To that end, IATA has been promoting an experiment that involves customized ticket pricing to include such factors as baggage fees and seat assignments. However, travel agents are concerned that such a “personalized price product” will entail difficult comparisons – and might lead to concerns over customer privacy.

Under the terms of this new comparison plan, airlines could ask potential customers for personal information, which might include membership of frequent-flier programs, travel history or even credit card usage. Armed with this information, airlines could then tailor a ticket price to each passenger, one that would embrace, for example, meal choices, extra legroom requirements and seat preferences. Then, an intermediary would collect the prices offered by various airlines and furnish these to the customer.

Currently, airlines say that they are unable to offer regular customers a lower price or eliminate a bag fee on comparison sites, simply because those potential customers are anonymous.

IATA’s Tony Tyler sees this as a valuable opportunity for a revolution in airline retailing, and says that this plan would allow airlines to customize their offering, even through travel agents. The industry association has now agreed to move forward with what it terms a new distribution capability. This experiment is scheduled to begin early in 2013 and could be rolled out before 2016.

Currently, around 40% of tickets are sold through airline websites and it costs the industry’s carriers significant sums annually to market their wares through these Internet outlets.

 

 

Pinnacle decision finally made

On November 6, Pinnacle Airlines flight attendants, who were represented by the Association of Flight Attendants, ratified a six-year agreement that will see salary levels maintained, attendants in receipt of affordable healthcare provision and guaranteed job security for over 1,500 staff in all. The agreement includes US$6.4m in concessions demanded by the management through the Chapter 11 restructuring process.

The agreement was reached with the assistance of the National Mediation Board.