What’s in a Merger?

The names change, but the problems remain. Airline mergers often mean travel headaches for customers — and they often don’t work so well for the airlines involved, either.

One constant of the U.S. airline industry since it was deregulated in 1979 has been change. In 1987, the largest U.S. airlines included Trans World Airlines, Eastern Air Lines, Pan American World Airways, Western Airlines and Piedmont Airways — all names that have been painted over on the side of airplanes because of mergers. Now Delta Air Lines Inc. plans to paint over the Northwest Airlines Corp. name. In each case, airlines exasperated by years of economic struggles saw acquiring assets as a path to stronger finances. But in few cases does it work out that well.

The history of airline combinations shows that travelers face a couple of years of more frequent missed connections, vanished reservations and lost baggage, flight delays and unhappy employees. Equally daunting for the companies themselves, many airlines have ended up losing the assets they bought.

“The track record of airline mergers is checkered, with few examples delivering on promised benefits,” Standard & Poor’s airline analyst Philip Baggaley said in a research report.

UAL Corp.’s United Airlines bought Pan American’s Miami hub and South American routes — and lost all of it to competitors. Delta bought Western Airlines and a hub in Los Angeles, and has little to show for it except a nice, underutilized terminal at Los Angeles International Airport. Delta/Western carried 12.4% of all passengers at LAX in 1988, the first full year after their 1987 merger. Last year, Delta had just 7.6% of the passengers at LAX. And Delta/Western is considered one of the more successful airline mergers.

AMR Corp.’s American Airlines bought AirCal and Reno Air to compete up and down the West Coast, but nearly all of that flying has gone to other carriers. US Airways Group Inc. bought Pacific Southwest Airlines on the West Coast and wiped the smile off of PSA planes. The result was the same — US Airways retreated from the West Coast.

Bottom line: Hubs and routes that were able to generate profits before the merger typically survive, and air service that struggled to make money before a merger often disappears after a merger.

“There’s no history of anything good that happens in mergers,” said Adam Pilarski, senior vice president at Avitas Inc., an aviation-consulting firm. “Two drunks holding each other up is not a good idea.”

Yesterday, Delta executives said their deal will be a different kind of airline merger, pairing airlines of equal strength. Customers will benefit from a larger combined route network offering greater travel choice in Asia, where Northwest has extensive operations, and Europe, where Delta thrives, they said. A spokeswoman for Delta said the Western merger worked because it “married complementary networks successfully.”

In theory, airlines should be the poster children for the benefits of corporate mergers. The air-travel business is a network business, not so different from telecommunications or banking. A bigger network should give you a disproportionately higher share of customers.

Today, the airline business is splintered between 10 major carriers in the U.S., and executives have argued that the industry would be financially stronger with fewer players. With oil topping $100 a barrel and recession at hand, airline CEOs who have slashed salaries and service and reorganized their businesses feel there are few arrows left in their quivers other than mergers to ride out the next major downturn.

“It’s the only real big idea we have left,” US Airways Chief Executive Douglas Parker said at a recent conference. He argues mergers would result in more efficient travel in the U.S. — better for airlines and for customers.

Putting two big airlines together puts all their corporate accounts and frequent fliers under the same umbrella. A Delta flight to Barcelona, Spain, or Boise, Idaho, or Boston should, in theory, have more demand for its seats, producing higher ticket prices. At the same time, a merger should generate savings by combining all kinds of departments in two separate headquarters into one.

But executives also acknowledge that there is tremendous complexity involved, and to merge airlines is far more difficult than simply changing airport signs and repainting airplanes.

For airlines, few new trips are generated simply because one airline can offer more destinations — airlines end up fighting to steal customers from competitors.

What’s more, airlines already share passengers and, in the case of alliance partners, already price and sell their product as if they were the same airline. That’s true in the case of Delta and Northwest; they’ve already merged their flight schedules as SkyTeam partners. Generating new revenue may be tough.

At the same time, history has shown that competitors can take away customers of the merged airlines when their flights run late or labor groups stage protests. Another pitfall: Losing alliance partners. Continental Airlines Inc. is currently partnered with Delta and Northwest, but could well enter into its own merger feeling the need to get bigger. That could result in the Delta-Northwest combination losing substantial presence in New York and Houston, two of the four biggest cities in the country.

“If Delta and Northwest merge, in a couple of years they will be smaller than they are today as separate entities,” said Mr. Pilarski of Avitas.

Discounters often step in, too. Since its 2005 merger with America West Airlines, US Airways mainline passenger boardings had dropped 16.5% in Philadelphia by last year; Southwest Airlines Co.’s increased 64.1% over the same two-year period.

While it’s tough to generate new revenue, it’s even harder to reduce costs at merged airlines. Sure, there’s some savings to be had by combining departments at headquarters and consolidating gates at airports. But costs can rocket upward quickly at airlines when things go wrong.

New contracts for employees can push costs higher. Different types of airplanes drive expenses up by requiring more spare parts, more training for pilots and mechanics, and refitting of cabins and cockpits, for example.

Even when planes are the same, there may be huge differences. TWA food carts didn’t fit American’s planes, for example. Cockpit switches are often different in aircraft: Some airlines set up switches so that the forward position on a toggle switch is “on,” while others set that as “off.” Pilots have to be trained on the differences, or new equipment has to be installed, or the merged airline has to segregate its labor so only pilots trained on those airplanes fly those airplanes. It all adds to expenses.

As with Daimler/Chrysler, merging corporate cultures can weigh down a pairing. Airlines also have the particular trip-wire of merging seniority lists at labor unions. At US Airways, East Coast pilots who flew for the former US Airways are challenging an arbitrator’s ruling on combining seniority lists, which determine pay and schedule for pilots.

That’s the last major hurdle for integrating those two companies, but whether the merger works long-term remains to be seen. Many argue that both US Airways and America West might have been liquidated by now had they not merged. US Airways was last among the 10 biggest airlines in on-time percentage last year and worst in baggage handling, according to the U.S. Department of Transportation.

“Be careful what you wish for because you may not like the results,” says aviation analyst Edmund Greenslet of ESG Aviation Services. “There has never been a successful combination of equals.”

Written by admin on April 16th, 2008 with no comments.
Read more articles on Airlines and Avaition News and airline news and cheap flights.

Flight Delays at a Glance

Flight Delays at a Glance
Wednesday October 3, 5:00 pm ET
A Look at the Worst and Best Performing Airports in August, According to Government Statistics

WASHINGTON (AP) — Nearly 30 percent of flights on the nation’s largest airlines arrived late in August. A flight is considered delayed when it arrived 15 or more minutes later than scheduled.
Here’s a look at the worst and best performing airports and airlines, according to the Transportation Department:

The five airports with the worst on-time arrival performance:

–New York’s LaGuardia International Airport at 57.6 percent

–New York’s John F. Kennedy International Airport at 58.7 percent

–Philadelphia International Airport at 61.3 percent

–New Jersey’s Newark Liberty International Airport at 62 percent

–Minneapolis-St. Paul International Airport at 62.3 percent

The five airports with the best on-time arrival performance:

–Houston Intercontinental Airport at 82 percent

–Salt Lake City International Airport at 80 percent

–California’s Oakland International Airport at 77.8 percent

–Phoenix Sky Harbor International Airport at 77.5 percent

–San Diego International Airport at 77.4 percent

The five airlines with the lowest on-time arrival rates:

–Atlantic Southeast Airlines at 55 percent

–United Airlines at 66.2 percent

–Alaska Airlines at 67.1 percent

–Comair at 67.2 percent

–American Eagle Airlines at 67.5 percent

The five airlines with the highest on-time arrival rates:

–Aloha Airlines at 97 percent

–Hawaiian Airlines at 93.7 percent

–Southwest Airlines at 77.7 percent

–ExpressJet at 77.6 percent

–Frontier Airlines at 76.7 percent

Written by admin on October 4th, 2007 with no comments.
Read more articles on Airline sector and Airlines and Avaition News and airline news and cheap flights.

Five “secrets” that will assist you in on how to find the best fares.

Five “secrets” that will assist you in on how to find the best fares.

1. Low cost carriers don’t always have the lowest fares.

Low cost carriers JetBlue, Southwest and AirTran have rapidly expanded the past few years, bringing lower fares to many markets and burnishing their reputations as discount airlines. But low cost airlines don’t always offer the lowest fares. That’s because traditional airlines, which have spent the past few years in bankruptcy court slashing their own expenses, are aggressively matching or undercutting their low-cost rivals.

And though airlines like JetBlue, Southwest and AirTran generally have lower operating costs than traditional airlines, they’re feeling the squeeze of rising fuel prices too. That means you shouldn’t count out traditional airlines when looking for the best deals.

2. You may pay more in taxes and fees than you do for your airfare.

Fees and taxes have always been part of the equation for air travel. But in the last few years, airline and government-imposed charges have escalated, especially on overseas trips.

Fuel surcharges and government-imposed security fees in particular have made airline travel more costly and sometimes add up to more than the cost of your base ticket price.

For example, this summer, Virgin Atlantic Airways was offering $198 roundtrip flights from the U.S. to London but that didn’t include $210 in additional taxes and fees.

Make sure you’re comparing apples and oranges when you’re buying an airline ticket by factoring in all charges, not just the base ticket price.

Many airlines don’t show the extra fees until you’re ready to book, though third-party ticketing sites like Orbitz and Sidestep do.

3. You can mix and match fares to get better deals.

Many airlines offer last minute weekend specials that are super cheap but may not go exactly where you want. You can combine two separate deals and still save, says George Hobica, founder and publisher of Airfarewatchdog.com, which scours the airline world for hidden fare deals.

For example, say you want to go from Boston to San Antonio but don’t see any deal on that route. If there’s a Boston to Atlanta flight for $128 roundtrip and an Atlanta to San Antonio trip for $108, you can buy both.

Hobica says it’s fine to fly two different airlines — most airlines, except Southwest and some smaller carriers, will transfer your bags to another airline but be sure to leave yourself enough time between connections on different airlines because they might be flying out of different terminals.

4. Your computer may be preventing you from getting the best deals.

Most Web sites use cookies, which are text files placed on your hard drive by a Web page server and are used to tell the Web server that you have returned to a specific page and retrieve information about you. This simplifies the process of recording your personal information, such as billing addresses, but also tracks the results you were viewing.

So, if you’re checking fares for a vacation to Baja and return to the same Web site, the fare search engine may return the same results you viewed earlier rather than the new results, thanks to the cookies.

Luckily, it’s easy to get around this by clearing the cookies on your Internet browser each time you do a search.

5. The most popular travel Web sites don’t have the same information — or the best deals.

It’s a mistake to assume that you’ll find the exact same fares on Travelocity, Orbitz and Expedia, the biggest online travel agent sites, says Hobica. The sites negotiate deals with specific carriers and often have exclusive deals. So it pays to check all three and then check out individual carrier sites — and not just to avoid the $5 to $10 booking fees that third-party sites charge.

Hobica says airlines increasingly are selling their best fares on their own Web sites, so sites like Travelocity and Orbitz (which don’t have JetBlue and Southwest fares anyway) shouldn’t be the only place you look.

The bottom line for fliers: Airfares are a constantly moving target, changing as much as three times a day. Sales come and go quickly. So, if you want to find the best deals, you’ll have to shop around. But knowing how the rules work will make you a savvier shopper.

Written by admin on November 8th, 2006 with no comments.
Read more articles on Avaition News and cheap flights.

Airline Terms

ASC

Administrative Service Charge. Usually it’s the same as the change fee, or the fee to exchange the ticket for future travel.

Circle Trip

Travel from A to B then back from B to A using different fare basis codes (see also round trip)

–OR–

Any trip involving a stopover in addition to the ultimate destination

(e.g. A–>B, B–>C then C–>A using the same or different fare basis codes).

Combinability

Whenever you are traveling on anything other than a round trip, fare combinations come into play. Combinability refers to whether two or more fares can be combined to construct an itinerary for a given passenger. Types of trips involving combinations include circle trips, open jaws and end-on-end combinations.

A few basic, general principles apply to fare combinations.

1) The most restrictive conditions apply. For example if you are combining a fare that is 50% refundable with one that is non-refundable, the whole ticket becomes non-refundable because the non-refundable rule is the most restrictive. As another example, if you are combining a fare that requires 7 days advance purchase with one that requires 14 days advance purchase, the entire ticket must be purchased 14 days in advance. The same reasoning applies for the minimum/maximum stay, change fees, service charges and other restrictions.

2) It is virtually impossible to sort out all the combinability details yourself. Usually the online reservations system will work out all the details for you. If you need additional help, call your travel agent.

Co-Terminals

Co-terminals are different airports that are equivalent with respect to fare calculation. For example, if FLL - MIA are listed as co-terminals, Fort Lauderdale and Miami would be equivalent airports for fare construction under that particular fare rule. Note that cities may appear as co-terminals for a given fare rule which have nothing to do with the routing between your origin and destination. The fare rule is of a general nature, and fares may be offered between many different city pairs under the same fare rule (e.g. a seat sale).

Direct

Used to describe a flight from A to B with the same flight number and no change of aircraft. May have one or more stops. Compare with nonstop.

Discounts

Fare rules will commonly refer to three types of discounts: infant, child and senior. Infants under 2 usually fly free on domestic flights provided they do not occupy a seat. Some fares offer children’s discounts, generally for children aged 2-11. Deeply discounted seat sale tickets may not offer a further discount for children. Many airlines offer senior citizen discounts, and some also offer discounts for a companion traveling with the senior citizen, even if the companion is not themselves a senior citizen. Different airlines have different age definitions of senior - check with your airline.

End-on-End

A special type of combination in which two round trip fares are combined to produce a complete itinerary.

From To Rule

AAA BBB Rule 1

BBB CCC Rule 2

CCC BBB Rule 2

BBB AAA Rule 1

In this example, the passenger buys a round trip ticket from AAA to BBB (Rule 1), and a separate round trip fare from BBB to CCC (Rule 2). The net effect is to travel from AAA to CCC, but breaking the fare at BBB, which may in some cases be less expensive than the round trip (through) fare from AAA to CCC. Fare rules usually specify whether end-on-end combinations are allowed. Sometimes end-on-end combinations can be used as a “trick” for finding low fares online.

End-on-end combinations are very different from back-to-back ticketing, which is expressly forbidden by most airlines.

Inventory

Inventory is another word for available booking classes (e.g. F,P,J,C,Y,M,B,Q,H,V,L, etc.). You may see a phrase in the fare rules like “INVENTORY MUST BE AVAILABLE FOR FARE TKTD” - often in the section on Rerouting.

Maximum Permitted Mileage

This section (MPM) was written by Yusuf Sunar.

In general, international fares are based on mileage and North American fares are based on routing. In the international fare tariffs there is an established amount of mileage called the maximum permitted mileage (MPM) between every point A and B. The carriers interested in the traffic between these points A and B, can use their own hubs to fly this traffic provided the maximum permitted mileage is not exceeded. In the event that the mileage is exceeded, a surcharge of 5%, 10%, 15%, 20% or 25% can be assessed for an additional 5%, 10%, 15%, 20% or 25% mileage, respectively. Beyond 25% additional mileage, the through fare must be broken.

In the MPM system backtracking is not prohibited, however there are certain other restrictions in place, such as:

1. The point of origin or the point of destination cannot be used as an intermediate point in the same fare breakdown (i.e. the following examples would not be allowed: YYZ LON PAR ZRH FRA ZRH or BKK SIN HKG BKK LAX YYZ)

2. You can travel via the same intermediate point more than once but you can only stop once (i.e. the following would not be allowed: YYZ LON PAR FRA PAR ATH (stopping in PAR twice would require a side trip PAR FRA PAR))

3. In some fares such as round the world fares, the rules state that travel must be in the same global direction, thus preventing backtracking.

NonRev

A passenger that is a non revenue paying passenger. Either a airline employee and family or a so called buddy pass.

Nonstop

Used to describe a flight from A to B with no enroute stops. Compare with direct.

Open Jaw

Travel from A to B then from C to A, with no air ticket from B to C.

Usually the distance BC must be less than both AB and CA (i.e. the part without the air ticket must be shorter than the shortest distance flown).

Open Return

An open return is a ticket valid for transportation between the destination city and the city of origin with no set date or flight. Many fares do not allow open returns. The rules might say so explicity, or you may see something like “segments using this rule must be confirmed”, which means no open return and no waitlisting.

Originating Flight

The first flight on your ticket is your originating flight.

PTA

PTA stands for prepaid ticket advice. This option allows someone other than the passenger to pay for the ticket, even if the payer is in a different city. The passenger then picks up the ticket from the airline or the travel agent in the passenger’s city. Sometimes a fare rule states “PTA satisfies ticketing requirements”, indicating that once the PTA is arranged, even if the ticket is not physically issued, the requirements for ticket issue (e.g. within a certain number of days after reservation and before departure) are met.

Since the advent of electronic ticketing, PTA is used far less commonly. Electronic tickets are a much better way to handle this situation. Usually the airline charges a fee for processing a PTA, unlike for electronic tickets.

Back to Top

Rerouting (Voluntary)

If, before departure, a passenger wants to make a change to their itinerary, we call that voluntary rerouting. The term rerouting may be confusing, in that the actual route does not have to change (although it could) - i.e. any change to flights, dates, times or destinations are considered rerouting.

First, consider some background. Recall that in the Penalty section of Fare Rule Basics, I said that certain conditions would apply to the ability to change a ticket for the change fee (e.g. $75). The rerouting rule describes conditions under which the itinerary can be changed for only the change fee.

The underlying principle is to provide the passenger with some degree of flexibility while at the same time not being unfair to passengers who have paid much higher fares (e.g. Full Coach) for maximum flexibility. For example, suppose a business traveler bought a full coach fare from New York to L.A. for $1680 return. She did so to provide maximum flexibility. Suppose also that a college student bought a ticket on the same route for $318 return. If the college student could make any changes he wanted for only $50 with no additional restrictions, then why would the business traveler pay $1680? As you will see, the rerouting rules attempt to be fair to both parties.

Rerouting rules usually are different before departure and after departure.

Before Departure…New Fare Required

At the time the passenger wants to make a change to his/her originating flight, the passenger becomes subject to the fares in effect on the date the change is made for travel on the dates desired. In other words in effect the passenger is making a new reservation, and is subject to all of the rules of the new fare, including advance purchase requirements, ticket purchase deadlines and minimum/maximum stay requirements. The new itinerary must usually be of equal or higher value than the original itinerary. The passenger must pay the difference between the original fare and the new fare PLUS the administrative service charge (e.g. $75). If the new fare is of lower value, you may get a refund, a credit for future travel, or neither, depending on the fare rule.

Suppose that today is March 25 and several weeks ago a college student living in New York bought a round trip ticket to L.A. with a departure date of April 1. The student now wants to leave March 26 instead of April 1. The only applicable fare at this time may be a Full Coach fare. The student would then be required to purchase a full coach fare, but he/she could use the value of his/her special fare ticket towards that purchase. The original non-refundable amount remains non-refundable. In other words one cannot “get around the system” by upgrading a discounted ticket to a full fare ticket and then getting a full refund for the full fare ticket as a way to in effect get a refund for an unused discounted ticket.

After Departure…Don’t Forget to Enjoy your Saturday Night Stay

One major difference is that after departure voluntary rerouting is not permitted except to the dates/times of your flights. That is, once you have departed from New York to Los Angeles, it is now too late to change your itinerary and decide to stop in Indianapolis on the way home. (At least, it’s too late to do so using any credit from this fare. It’s never too late to do whatever you want if you’re willing to buy a new ticket!) You can change the day or time you are traveling, provided that you don’t change the origin/destination/stopover points, that the change meets the minimum and maximum stay requirements of the original fare (you can’t cheat and come back before the Saturday night has passed), and that applicable inventory (e.g. M class) is available on the new flight.

If the inventory (booking class) at the original fare is not available, changes can be made to change the return to any combinable fare (not all fares are combinable with each other - see the section on Combinations). For example, if M class is not available, K class can be booked on the return, provided that the restrictions mentioned apply. The difference in the fare would have to be paid as well as the applicable service fee (e.g. $50).

As another alternative if the applicable inventory is not available, you may be able to standby at the airport. Check with your airline for details.

Revalidate

Generally airline tickets are valid for one year from date of issue. If the airline were to revalidate a ticket, its value could be extended beyond one year. Some fares specifically exclude revalidation.

Round Trip

Travel from A to B then back from B to A using the same fare basis code. See also circle trip.

Routing

The routing rule lists the allowed connecting cities for travel from A to B for a particular fare. Sometimes this rule indicates that travel must be nonstop.

Segment

A segment refers to a single flight with the same flight number. For example, if you travel from A to B, change planes at B, and then travel from B to C, you will have flown two segments. On the other hand, if you travel from A to C and the flight stops at B, but you don’t change planes, then your trip from A to C is one segment from the point of view of fare rules. Note that the US federal segment tax defines both of these scenarios as two segments.

Standby

Standby allows a traveler to wait at the gate for a seat to become available, usually minutes before a flight departs. Some fares which otherwise require a change fee allow passengers to standby for earlier or later flights on the same day at no additional cost. See also waitlist.

Stopover

Suppose you were flying from New York to Los Angeles, and you wanted to stop and visit your aunt in Indianapolis on the way. Such a visit would constitute a stopover in Indianapolis. Some fares allow free stopovers, others allow stopovers for an additional fee, and many fares do not allow stopovers at all. Now, your flight might be routed through Indianapolis anyway, and you might even have to change aircraft there. You might think you could “beat the system” by booking a connecting flight for the next day. You usually cannot do so, since if you do not depart your intermediate point (Indianapolis) within 4 hours of your arrival there, it would normally be considered a stopover. Therefore, such an arrangement would not be allowed if the fare did not permit stopovers.

Three important notes:

1. A connection in Indianapolis would be allowed provided that the time between flights was no greater than 4 hours. If your aunt wanted to come out to the airport to have coffee with you, this rule would not prohibit that. (An additional proviso is that Indianapolis must be on the fare routing. You can’t say that Los Angeles is on the way from New York to Miami and book a connecting flight through Los Angeles at no extra charge!)

2. You may still be able to stay over in Indianapolis for a few days using this fare if booked as a circle trip, rather than a stopover. See circle trip for details.

3. Generally speaking the 4 hour rule applies provided that there is a connecting flight departing within 4 hours. For example, if there is no connecting flight for 6 hours, then it is usually valid to take that flight and still call it a connection rather than a stopover.

TBM

TBM refers to Ticketing by Mail, meaning that one can order tickets from the airline to be sent in the mail.

Transfer

A transfer is a connection enroute from origin to destination.

Upgrade

While most of us think of an upgrade as an opportunity to sit in First/Business class, in the world of fare rules an upgrade means something entirely different. An upgrade refers to changing your ticket to a higher fare for the same or different flights. The higher fare may still be in coach, but you may be required to upgrade if you want to make a change that does not meet the conditions of the change fee for the lower fare. See example in Rerouting.

Waitlist

Some fares allow a passenger to be put on a waiting list for the required booking class if it is sold out. Usually the deeply discounted seat sale fares do not allow waiting lists, but intermediate and higher fares usually do. A waitlist refers to making reservations only, and it has nothing to do with the standby list at the airport. You cannot usually add yourself to a waitlist using online travel reservations - call the airline or your professional travel agent.

Written by admin on July 5th, 2006 with no comments.
Read more articles on Avaition News and cheap flights.