Remember, with Delta, US Airways didn’t try to get labor’s buy-in but it would have had trouble anyway. The US Airways plan then was to shrink the combined airlines, and that doesn’t sit well with labor. Meanwhile, Delta was able to rally its workforce and a huge groundswell of support to “Keep Delta My Delta” sprung up. That couldn’t be further from what’s happening at American.

US Airways doesn’t want to shrink, but more important than that, at American, labor hasn’t respected management for a decade. Sure, there’s a new CEO in town but Tom Horton is still part of the same regime. His announced plans for labor involved so many cuts to wages and jobs, that it wasn’t hard for US Airways to come in with a better plan.

Revenue Growth, Not Just Cost Cuts
See, the current management team at American blames nearly all of its problems on its costs. Sure, that’s an issue, but Doug Parker, Scott Kirby, and the rest of the US Airways team know that there’s a big revenue problem as well. Fix that, and you don’t need to slash labor to the same extent. That’s music to the unions’ ears.

The terms that American unions have agreed to will keep 6,200 jobs that would be furloughed under the American plan. While we don’t know details of where these jobs will come from, this plan should be a no-brainer for mechanics and those in the airports because they stood to lose the most under the current management team’s plan. But what’s really telling about the potential here is that the pilots and flight attendants have jumped on board.

American’s misguided plan is to flood the market with a 20 percent capacity increase over the next few years. Though incredibly misguided, that would mean more jobs for pilots and flight attendants. So even with that carrot being dangled, they’re supporting the US Airways plan. Why?

The pilots have been very vocal about it. In a memo, the message was blunt. “The APA leadership does not believe that AMR’s business plan will produce an airline that is viable long term.” In other words, they agree with US Airways and most airline analysts that they need some heft to compete with Delta and United. And they need that heft without organic growth since there’s no need for more capacity in the market. US Airways offers that opportunity plus the promise of a very smart management team that can make American competitive again.

A Better Team with a Better Network
The real issue here is that labor has no faith in American’s management team. They don’t believe that the business plan will work (read what the flight attendants say), and they have good reason to feel that way. They also don’t trust their management team and haven’t for years. In the pilots’ memo, it was pointed out that American has engaged the same attorney the much-hated Frank Lorenzo used with Continental/Eastern. Things like that do not help build trust. Neither does a Section 1113 proposal that will result in dramatic cuts.

More importantly, the US Airways efforts have started to help build trust with that management team. Some have worried that a combined US Airways/American would look like US Airways. It won’t. It will be American but better-run. The airline will remain American Airlines and will be headquartered right where it is today. There will just be a better team in place to run a better network.

Keep in mind, this is just an agreement with the unions IF an acquisition happens. That means there’s a lot of work to do, but this is a huge first step that might seal the deal. Why do I say that? Look at the creditors committee.

Swaying the Creditors
The unions hold 3 of the 9 seats on the creditors committee, and clearly they support this move. Boeing sits on the committee as well. With US Airways affirming the orders on the books, Boeing should be happy since it hasn’t sold an airplane to US Airways in years. This creates more opportunity.

The Pension Benefit Guarantee Corporation (PBGC) is also a member. It has been downright angry about American’s plans for its pensions, so you would think that US Airways would present a better option. And then there’s Hewlett-Packard. American has been working with HP on a new reservations system but nothing has come of it yet. US Airways, however, uses SHARES, a system that HP owns. You think HP will be onboard? Oh yeah.

That’s plenty of votes right there. If you have the creditors committee behind you, that’s huge. Of course, we haven’t seen what US Airways will offer yet, but you know that if it couldn’t offer something compelling, it wouldn’t be putting so much effort into this.

Can it Be Stopped?
What can American’s current management team do to stop this? Well, they continue through the process on breaking union agreements in bankruptcy (Section 1113). Could this move by US Airways make American reevaluate its proposal to try and keep labor? Probably, but labor is lost. A new proposal now will be seen as hollow. I don’t think American can get labor back, but really it doesn’t even want to try. The airline circulated some talking points that included this:

We believe statements of non-binding support from union leaders for alternative proposals are no coincidence given the timing of the 1113 process.

Right, it’s all just a negotiating ploy. Keep thinking that, American, and you’ll watch your airline slip away.

I’m sure there are still ways that American can try to maneuver, but so far it doesn’t seem to be trying very hard. It appears to be playing the “stay the course” game with a reminder that it has the exclusive right to reorganize until September 28. What it fails to mention, as has been reported by Holly Hegeman over at PlaneBusiness, is that the while American has the exclusive right, it’s not true exclusivity. The creditors can ask the court to end the exclusivity early if there’s another real option.

What About US Airways Unions?
Yet another common objection to this merger is the tired line that US Airways can’t get its own house in order, so how could it handle American? Very well, actually. The US Airways unions are being cautious, but they should be happy. US Airways has been clear that it needs to keep wages lower because it can’t produce as much revenue as the big three from it existing network. With American, that changes and raises will become possible.

Now, that might not please the pilots union USAPA since that group has acted against its own interests from the start, but that’s too bad. American’s pilots outnumber USAPA members handily. USAPA will disappear in a merger and then hopefully there will be a rational union leadership that will best represent its members on both sides. If the legacy American pilots can come to an agreement with US Airways so quickly, then the US Airways pilots would probably be insane not to take that same contract.

In the end, US Airways is making all the right moves right now. It has now become far more likely that we’ll see a combination of the two airlines.

[Original photo via Flickr user numberstumper/CC BY-SA 2.0]

I think my favorite headline was “United’s computer chaos” from The Economist’s Gulliver blog. Seriously, guys? A little dramatic, no?

The rationale behind that post was that United ran a poor on-time operation on Saturday, the day of the change. Sure, flights were delayed to some extent to accommodate passengers who were delayed by some glitches, but these weren’t awful delays. I went to masFlight to get more details on what happened.

masFlight has comprehensive flight status information that it can slice and dice in a million different ways. So I asked for details on the United operation from Saturday, and you can see the data here. First off, the combined airline completed 98.4 percent of all flights. That’s not a bad result at all, so there certainly wasn’t a problem with cancellations.

Regarding on-time performance, masFlight reports that the combined airline with all of its regional affiliates had 65.8 percent of flights arrive within 14 minutes of schedule (that’s what the Department of Transportation defines as “on time”). That’s not a stellar result, but it’s hardly a meltdown. It’s just a bad day that is fully expected when you make such a massive conversion.

Since the airline settled on Continental’s legacy system, it’s no surprise that the old United operation performed worse than the old Continental operation which ran above 70 percent. But even the old United saw 62.2 percent of flights arrive within 14 minutes. Again, not good, but not terrible either. In fact, it’s probably better that there were minor delays or a lot of people might have just missed their flights.

Reservations Intact
Let’s talk about what’s most important. When the new system went live, all reservations were given new record locators, and the newly-minted MileagePlus numbers should have replaced the old ones. While no work should have been needed by any passenger (the system would still recognize the old record locators if used), we didn’t want to take any chances so we reviewed all Cranky Concierge client records.

Everything was correct. The new MileagePlus numbers were in there. (And when partner frequent flier numbers were used, they were still in there.) All seats were retained, and it all looked as it should. That’s the biggest concern for any system switch – data loss. That didn’t happen here.

Of course, not everything went perfectly, and that’s where many of these other articles focused. So what did go wrong?

• MileagePlus accounts weren’t all showing the right mileage balances (including mine) right away. Mine was fixed by Sunday and others were trickling in as well. United warned this would be the case and allowed awards to be held until the balances were all fixed. So that wasn’t a big issue.
• There were check-in issues when people who checked in on the old United system didn’t have their boarding passes correctly registering in the new system. That is obviously a very short-lived problem because it was limited to those who checked in before the switch for travel after the switch. It shouldn’t be an issue anymore.
• Most of the other issues were with corner cases. The vast majority of travelers wouldn’t have had issues, but I heard some issues with employee travel, some with upgrades having trouble checking in, etc. None were overwhelmingly terrible – more like minor inconveniences that will undoubtedly be worked out.

Now that we have this switch out of the way, life should get much easier for United travelers. There will be no more issues with two mileage programs and codesharing across airlines. Any reservations agent can help with your reservation no matter what. It’s one airline from a customer perspective with only a few minor exceptions.

The Remaining Differences
Where are things still different? There are a handful of airports that still have ex-Continental flights in different places than ex-United flights. You can see the full list of non-combined airports, but most aren’t big issues because they won’t see much connecting traffic between the two sides anyway. It just requires being careful when you drive to the airport in places like Boston, New York/LaGuardia, Kansas City, and San Diego to make sure you’re in the right place.

Possibly the biggest standout is at London/Heathrow where ex-Continental flights are still in their previous SkyTeam home, Terminal 4. United and most other Star Alliance airlines are in Terminal 1, so many connections from Continental flights will require a longer connecting time.

The crews also are still not mixed, but that’s not likely to be noticeable for most passengers. That and other small vestiges of separate airline identities will continue to disappear over time. This last step was the biggest hurdle by far, so it’s exciting to have it behind us with minimal disruption.

In the wee hours of early Saturday morning, United’s Apollo reservations system will be shut down in favor of Continental’s SHARES system. In fact, we’ll see a lot kept from the Continental side, even though the United name will reign supreme.

Beginning on Saturday, you will no longer be able to book a flight on Continental – they’ll all be on United. This is great news . . . not that the Continental name is disappearing but rather that there is only one airline to deal with. This means no more problems of working with two different airlines even though they’re really one.

Considering I spent over an hour trying to use a Mileage Plus member’s miles to upgrade a Continental flight last week, this piece of the merger couldn’t come soon enough.

Of course, the transition won’t be easy. It never is. The United reservations folks will now be forced to use an unfamiliar system. Training undoubtedly helps, but it’s still a big change. And then there’s the physical switch itself.

It is no small task taking all that reservation data, putting it into a new system, and then hoping it all works as planned. It’s never a perfect transition. Remember when US Airways and America West flipped the switch? There were a lot of problems.

So, if you’re flying United for the week beginning this Saturday, give yourself some extra time at the airport just in case. Here are some other things to keep in mind.

Reservations
Since the airlines are moving to Continental’s reservation system, it’s those record locators (confirmation numbers) that will survive. If you booked on United before the system switch, I would assume that there will be a mechanism for the new system to still recognize those old numbers when you try to use them. But if you had a split reservation with both United and Continental flights, you’ll be fine just remembering the Continental number going forward.

UPDATE: I just received clarification from someone at United that this is not quite what’s happening. Both United reservations and Continental reservations will be transferred into a new SHARES system, so there will be a new reservation number assigned to each reservation. If you have a reservation with both United and Continental flights, you will have three record locators: the old United one, the old Continental one, and the new combined United one. The key point? Any of them will work when you try to pull up your reservation.

The Website
If you’re one of the few people who love the not-so-affectionately nicknamed United.bomb website, then you’ll be sad to know that the Continental website is the survivor.

It’s really going to be a carbon copy of the current Continental website. For a pre-production version of the new site, head over to pss.united.com and you can play around.

MileagePlus
March 3 also will be the effective date of the new MileagePlus combined frequent flier program. If you have a Continental OnePass number, that will be your Mileage Plus number. If you have a current Mileage Plus number from United, then that’s toast.

If you had both and linked them, then you’ll just consolidate under the Continental number. If you never had a OnePass number, you’ll be getting a new one from United.

Patience is the key in the next couple weeks. If you’re flying United, it could be rough going as the systems combine, but in the end, it will be a much better experience since the airlines will operate as one.

There are more things to be merged, but most of those aren’t as visible to travelers. This is the big weekend.

What’s so unique about this merger is that AirTran truly is disappearing. This isn’t a “merger of equals” or anything else like we’ve seen in other big mergers. This is Southwest taking AirTran and turning its assets into Southwest. Because of that, the transition can occur much more easily. Effectively, this is how it will work.

Southwest has already started slowly canceling AirTran flights and re-creating them as Southwest flights. For example, today, AirTran operates three flights between LA and Atlanta while Southwest has none. Flash forward to a Tuesday in September and there are now three daily flights on Southwest as well as one single redeye on AirTran. So Southwest replaces the AirTran flights and has the ability to grow a little as well.

If you fly on an AirTran flight, you’ll get the AirTran onboard product. There will be business class, assigned seats, bag fees, etc. If you fly on a Southwest flight, you get the Southwest product with open seating, all coach, and no bag fees. Over time, all the AirTran flights will disappear and the Southwest flights will be the only ones to remain.

It seems so simple, and really, it is. Southwest has dramatically reduced the number of AirTran flights starting this summer (from 680 daily departures on a Friday all the way down to 568). This will allow the airline to start pulling out airplanes from the AirTran fleet to send them through the car wash where they’ll come out looking exactly like Southwest airplanes inside and out. At the same time, crews will begin coming over from AirTran to Southwest. They’ll get training and will be assimilated into the Southwest operation.

If you’re a cook, it’s like slowly adding an ingredient and mixing as you go instead of just dumping everything in at once. It just makes a lot of sense to do it that.

So why can Southwest do this so effortlessly and the others can’t? Because the other mergers are completely different animals. Whether it was America West/US Airways, Delta/Northwest, or Continental/United, these were all true mergers in the sense that they took bits and pieces from each other to create the new combined airline. Think about the harmonization of the frequent flier program as just one piece of the pie. There isn’t one airline that stays the same in these mergers, but there is in the Southwest/AirTran merger. AirTran is effectively disappearing and will leave barely a trace, and that allows Southwest to gradually phase it out without making any big changes to the surviving operation along the way.

I’m not exaggerating when I say tat AirTran is disappearing. According to Southwest spokesperson Chris Mainz, “we haven’t announced or decided on anything concrete that we plan to pull over from AirTran and incorporate into Southwest.” There will be some things behind the scenes that need to come over. For example, Southwest isn’t capable of flying internationally but AirTran can. That not a customer-facing issue, but it is something Southwest will need to incorporate behind the scenes to allow it to fly internationally. That’s why I imagine that toward the very the end, AirTran will just be a collection of international flights and redeyes, the two things that Southwest doesn’t do today. (Southwest has said that some limited redeyes are likely to come over.)

In the meantime, Southwest and AirTran continue to operate separately with Southwest getting bigger and AirTran getting smaller. There are efforts to connect the two systems with codesharing, but Southwest’s technology team is the hold-up. It can’t codeshare yet, despite years of trying. The plan is to have that up and running sometime in the near future, and that will make it easier to transition AirTran out slowly without completely killing the feed in the Atlanta hub.

Meanwhile, Southwest is doing what it can to relocate AirTran flights to be near Southwest in airports around the US so they can operate together, even as they continue to operate as two separate airlines.

[Original Southwest photo via Flickr user fdenardo1/Original AirTran photo via Flickr user PhillipC/Original Car Wash photo via Flickr user Ralph Hockens/All via CC 2.0]

What we’re seeing is Delta being really smart, and really aggressive. That’s fun to watch from an airline that used to just be a sleepy old Southerner. The first thing people say about this is . . . there’s no way it would pass anti-trust review. But is that true? I’m not an expert in anti-trust law, but I have no doubt that Delta has been actively working with its lawyers to see what would work and what wouldn’t. If Delta is truly expressing an interest, then it’s done its homework to make sure that it would even be a possibility under the law.

I think the key here is that I imagine Delta isn’t entirely interested in walking away with all of American. Remember when I first wrote about how US Airways should buy American, I suggested that maybe US Airways wouldn’t have much interest in LA or New York? Well, guess who would be interested? That’s right, Delta.

In LA, the market is highly fragmented. I can’t imagine any sort of anti-trust concern if Delta took over American’s operation there. It might even benefit LA by finally building up a stronger single carrier. Sure, the Asian oneworld partners would have a fit, but that’s not Delta’s problem, or the US government’s.

In New York, it might be a tougher sell, but it’s not really that much of a stretch. At JFK, JetBlue carries around 40 percent of the passengers already. So Delta and American combined wouldn’t be a monopoly by any measure. LaGuardia would probably be more of a concern, but the DOT could require some more slots to be auctioned off to low cost carriers and fix that problem right up. I’m sure Delta would be happy to comply if it means eliminating a full service competitor and sprinkling the slots around to other low cost guys.

Of course, this is just one possible scenario, Delta might want Miami as well here, or some other pieces. The point is that the default assumption that the big three airlines can’t combine isn’t true. There are creative ways that they could try to come together with other entities to make a proposal that could work. With American in bankruptcy, it’s really anybody’s game to win, except American’s.

Sure, American could stay as a standalone entity, but the oddsmakers (analysts) aren’t giving that a good chance of happening. When you go into bankruptcy, you lose absolute control of your company. That doesn’t mean that you can’t get out unscathed, but it means that others are going to take a real shot.

Do I think it would be better if Delta bought American? Nah. I mean, I think it’s good to have three large airlines in three separate airlines that can compete with each other. That doesn’t mean, however, that I’m against bits and pieces being moved around to make each remaining airline stronger. But would American be able to survive if Delta took New York and LA?

I don’t see why it couldn’t work if US Airways took the rest. Were I the surviving American in this case, I’d look to buy Alaska Airlines immediately to solidify at least one strong position on the west coast and take that partnership away from Delta. Not sure if that could happen or not, but the point is that there are opportunities for three large airlines to survive even if Delta “buys” American in some fashion.

Will it happen? I have no clue, but Delta would be stupid not to be sniffing around. (And in case you were wondering, United would be stupid TO be sniffing around because it’s hands are very full right now.)

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The aircraft leasing business is an integral part of the aviation world, yet the travelling public knows relatively little about it. Currently about 38% of the world’s commercial fleet is leased. This figure is expected to grow to over 40% in just the next few years.

Ireland, you may be surprised to find out, is a bit of a hub for aircraft leasing. Nine out of the top 10 leasing firms in the world operate here. This is due to a few factors. We have favourable corporation tax rates and tax treaties that allow leasing companies to be competitive. In addition to this, there is a big pool of aviation expertise in our country. One of the first major players in the aviation leasing industry was Guinness Peat Aviation. After its dramatic demise, several companies rose from the ashes and ever since, Ireland has been a major player in global leasing.

But first, why do airlines need to lease planes – can they not just buy them, you might ask? Well yes they can, but owning your own aircraft can present problems.

Price
Aircraft are not cheap. You only need to look at the list prices of Airbus and Boeing to see just how pricey they can be. Therefore some airlines might not be able to afford aircraft, or in a bid to keep their balance sheets looking healthy might not want to have such large outlays. Leasing allows airlines a relatively cheap way of getting aircraft, as there isn’t the same extent of expenditure, and it stops their balance sheets from looking too asset heavy, tying up capital. Also from an operational point of view, it allows airlines access to newer planes and more fuel efficient aircraft. Cranky Air might be able to buy a 737-200 on the market, but could afford to lease a newer 737-800.

Economic uncertainty
The last few years have been a good example of why leasing planes can be a better alternative than owning them outright. When demand is unstable, the more flexibility you have in your fleet levels, the better.

Take for example Cranky Air, based in Long Beach. They buy 5 aircraft from Comac, yet owing to a major corporation opening a plant nearby they now have enough demand to have 8 aircraft in service – this is where a leasing company can be the airline’s best friend. They can step in and relatively cheaply (relative to buying an aircraft) provide them with aircraft to cater for the spike in demand.

Conversely, let’s say the largest employer in Long Beach were to shut up shop and Cranky Air now only needs 3 aircraft for the next two seasons. If they own the 5 aircraft they would find themselves in a major problem, trying to fill the aircraft or lease them out. However if their fleet was composed of a few leased aircraft, they could arrange for the early return of the aircraft, and with some penalty payments, address their capacity issues.

Here’s the view from the lessor’s perspective.

Risk
When dealing with a potential new customer, there will always be risk analysis done on the airline. Do they have a good safety record or have there been any incidents in their past? What are the chances they might not pay us? If a customer is risky, there are mechanisms to protect yourself as a lessor. This would be done by getting guarantees or large deposits that you can access in the event of default by the airline. If they are too big a gamble as an operator – don’t put your aircraft in there in the first place.

Maintenance
Long leases are better for the lessor than shorter ones. The fewer changeovers an aircraft does during its life the better! When an aircraft comes off lease with Cranky Air, in an all business class configuration (owing to a misplaced opinion that an all business class Long Beach – Topeka route was a guaranteed success), and we want to place the aircraft with a new operator, Concierge Air, who want it in an all economy lay-out, reconfiguring the aircraft comes at a huge cost to us. Lessors try to avoid bespoke aircraft lay-outs like this, a colleague of mine refers to them as “Aircraft with a sushi-bar and split galley.”

Other considerations are maximum takeoff weights (MTOWs), repainting the aircraft, and inflight entertainment systems. So if we can place the aircraft in 2 ten year leases, rather than four 5 year leases – this is incredibly beneficial to the leasing entity. Like commercial airlines, our planes don’t make money when they are sitting on the ground, so we also try and keep lead-in times between leases to an absolute minimum. Ideally, we like to have a new customer lined up for an aircraft before it even comes off lease with the previous operator. In an ideal world you would look to find a customer who wants the aircraft in its current configuration, but that isn’t always possible.

Legal
From a legal perspective an aircraft needs to be placed with airlines that aren’t surrounded by red-tape. Certain jurisdictions are typically avoided, as the red-tape to get the aircraft on lease and out at the end of the lease is too onerous and costly. For example, sometimes you see airlines across the world operating aircraft that are on the Irish register (EI-XXX), as their own national registers might be a nightmare to deal with.

The airline industry is unpredictable by its nature and despite all these checks, sometimes leases do not work out. The lessee might not maintain your aircraft as agreed, or simply not pay. If this happens you could negotiate with the airline for an early return, or if the relationship becomes hostile, you can use national/international authorities to seize the aircraft in a friendly jurisdiction who will be receptive to your plight. This could be done by an airport authority or someone like Eurocontrol, who may also be owed fees for the use of the same aircraft. It is typically easier to negotiate a compromise as seizing aircraft can get litigious and can restrict the use of the plane until it is all settled. A country’s aviation authority might not take kindly to you barging in and taking planes back, hence they could make your life hell trying to get the aircraft off the local register or drag you through the local courts.

In the future, it will become more likely that the planes you fly on will be leased as this area of the aviation world grows. Next time you fly, consider for a moment that you could potentially be on board a hired aircraft.

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David Soffe is a self-professed aviation nerd- he blames this on both his parents who worked in the airline industry. He is a Business and Law graduate from UCD Dublin. Currently he is working as a legal intern in an international aircraft leasing firm in Dublin. You can find him on Twitter @davidwilliamp.

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