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Jon Talton

Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.

Category: Airlines
June 3, 2014 at 10:33 AM

Delta: Help or threat to Seattle?

Delta Air Lines has begun daily non-stop flights between Seattle-Tacoma International Airport and Seoul. It’s the eighth international route from Sea-Tac and, according to a press release from the Port of Seattle, “The new service continues to highlight Delta’s growing commitment to building Seattle as its West Coast hub.” This no doubt helped the airport’s 10…

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Comments | More in Airlines | Topics: Alaska Airlines, Delta Air Lines, Seattle-Tacoma International Airport

December 10, 2013 at 10:11 AM

More concentration for airlines hurts jobs and fliers

US Airways merged into American Airlines on Monday.  (AP Photo/Susan Walsh)

US Airways merged into American Airlines on Monday. (AP Photo/Susan Walsh)

As Bill Ayer prepares to retire as chairman of Alaska Air Group at the end of the year, one of the greatest achievements of his 31-year career has been to keep the company independent as the industry has consolidated into a handful of giants. The latest came Monday, as US Airways merged into American Airlines.

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Comments | More in Airlines | Topics: American Airlines

November 4, 2013 at 10:51 AM

Why the American-USAirways case matters

TrooseveltIn 1901, some of the richest men of the Gilded Age formed an entity called the Northern Securities Co. It made peace over the inconvenient competition each faced from the other in railroads, the most important industries of the day.

Among them were the two transcontinental lines serving the Puget Sound, the Great Northern and Northern Pacific, as well as a third transcontinental that served the region via trackage rights, the Union Pacific. In the convoluted “trust” holdings of Northern Securities, former rivals James J. Hill and E.H. Harriman reached a profitable peace.

Using the reasoning of the 1980s onward, this should have been just fine. The “free market” was working and the market never makes mistakes. If passengers, farmers and other shippers faced less choice and high costs, then the market would provide a solution or they deserved it — so the theory goes.

Theodore Roosevelt, although our most intellectual president aside from Jefferson, was not one for theories when the public interest was concerned. His Justice Department sued in 1902 and Northern Securities was broken up, serving as a marker for the next seven decades.

Another marker is before us with the Obama Justice Department’s opposition to the merger of American Airlines — with the wardrobe malfunction new paint scheme — and USAirways.

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Comments | More in Airlines | Topics: American Airlines, USAirways

March 7, 2013 at 10:34 AM

For the Dreamliner, the fix is definitely not in

Earlier this week, I wrote about Ray Conner, head of Boeing Commercial Airplanes, implying that the trouble with the 787 Dreamliner lithium-ion batteries has been identified and can be fixed — and all that’s necessary is for federal regulators to sign off. It was a risky P.R. strategy and now it’s blown up in Conner’s face (but vented to the outside). The Wall Street Journal reports that when the National Transportation Safety Board releases documents today on the battery fire aboard a parked Japan Airlines 787 in Boston, it won’t pinpoint the cause. Instead, the documents may cause even more trouble for Boeing and an overly friendly FAA:

The report also is expected to delve into how the batteries were certified as safe by the Federal Aviation Administration. The NTSB already has challenged the assumptions and procedures the FAA relied on six years ago to allow extensive use of the powerful batteries aboard 787s.

Meanwhile, the agency announced two public hearings on the battery issue — for next month. And the fire aboard an All Nippon Airways 787, which forced an emergency landing and ultimately grounded the entire fleet, continues to be investigated by Japanese authorities. Like the NTSB, the Japanese “appear equally stymied in pinpointing the exact cause.” Whether this prevents Boeing from even conducting test flights with a its proposed solution to the li-ion battery issue remains to be seen. But, the Journal reports, “Less than a week ago, Akihiro Ohta, the head of the Japanese transport ministry, told reporters that Boeing’s proposal was merely a ‘starting point’ for getting the planes back in the air, noting that it is bound to ‘take some time’ to analyze the package.”

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July 3, 2012 at 9:30 AM

Airbus rolls tide in Alabama

Southerners, to generalize, like to tout their superior patriotism compared with socialist, gay-loving, abortion-giving places such as Seattle. But economic development definitely doesn’t stop at the water’s edge. So order some Freedom Fries and welcome Airbus to the Cradle of the Confederacy. Boeing will soon have a rival on American soil making A 320s, the competitor to the 737. Yes, parent EADS wants a foothold for “Made in the USA” defense work backed by a powerful state delegation, and the dollar is a more favorable currency. But Job 1 is to win Boeing customers.

Analyst Scott Hamilton at Leeham Cos. wrote on his blog that “in many respects, Airbus has mouse-trapped Boeing — and there is very little the company can do about it.”

Both companies have big backlogs. According to Hamilton, “with a two year lead by Airbus with the NEO EIS over the Boeing MAX, Airbus’ decision to open a Mobile (final assembly line) gives the company the ability to initially open four slots a month from 2016 and the potential to boost this to eight a month. This gives Airbus a major opening to offer the NEO to 737 and 757 operators who need fuel-savings airplanes long before Boeing can hope to offer them.”

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April 23, 2012 at 10:00 AM

Another anti-competitive airline merger

USAirways wants to acquire American Airlines as it emerges from Chapter 11 bankruptcy protection. This is yet another anti-competitive, job-killing airline merger that will fail to fulfill its promises, no matter how much the top executives make. The Obama administration needs to stop it.

The old USAir was a product of many mergers. It had a reputation for acquiring well-run airlines, especially Piedmont and Pacific Southwest, and promptly ruining them — but not before destroying thousands of jobs and closing hubs, such as the efficient Piedmont hub in Dayton, Ohio. Not for nothing was the joke that USAir stood for “Unfortunately, Still Allegheny In Reality,” harkening to its original, troubled roots. America West Airlines merged with USAirways in 2005 and CEO Doug Parker has been more interested in selling off the airline than actually serving customers ever since.

American, led for clueless years by Bob “Lumpy” Crandall, plans to slash at least 14,200 jobs and abrogate union contracts — the joys of Chapter 11. It may want to emerge as a stand-alone carrier. USAirways has been wooing the unions, promising a better deal. A merger won’t be a better deal for customers or, ultimately, the remaining workers.

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April 3, 2012 at 10:15 AM

Does the airline industry need re-regulation?

As everyone knows, Jimmy Carter’s 1978 deregulation of the airline industry has led to lower fares and more choices for travelers. Oh, you thought Ronald Reagan did that! In fact, deregulation brought a host of troubles, too. While new players did emerge, such as People Express, they didn’t last. The Reagan administration’s look-the-other way approach to antitrust encouraged destructive anti-competitive mergers, exemplified by Frank Lorenzo’s acquisition of five airlines and aggressive union busting. Venerable Eastern Airlines was destroyed, Continental badly wounded, Lorenzo got richer.

Dismally run USAir bought good airlines — Pacific Southwest and Piedmont — and ruined them. In the process, USAir shut down the Piedmont hub in Dayton, Ohio, which the city had spend millions upgrading. In addition to the jobs killed, the city lost a critical asset for its businesses. After this loss, its business community dwindled. In recent years this also played out in Cincinnati, where Delta Air Lines, after merging with Northwest, radically downsized its once huge Cincinnati hub, costing thousands of jobs. It’s really not a hub at all now. Meanwhile, USAirways CEO Doug Parker, who has been wanting to sell his airline for years, is still preaching further consolidation.

In a USA Today column, Phil Longman, a senior fellow at the New America Foundation, reminds us that fares were actually falling more rapidly in the decade before 1978 than the decade after. And the legacy of deregulation continues to plague the industry.

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March 1, 2012 at 10:00 AM

Getting down to business with the UAE

Seattle becomes the sixth American city with service by Emirates Airline, the national airline of the United Arab Emirates. The airline is a big Boeing customer, helping make Washington the biggest state exporter to the Arabian peninsula country. Exports totaled $2.75 billion in 2011. In addition to the big transportation sector, $119 million in Washington agricultural products were exported, as well as $24 million in computer and electronics products.

According to Danny Sebright, President of the U.S.-U.A.E. Business Council, “the U.A.E. and Washington have shared a rich exchange of goods and ideas in the areas of aerospace, agriculture, information technology, and manufacturing. Washington-based companies such as Boeing Commercial Aircraft, Microsoft, and Starbucks have been instrumental in driving this flow and expansion of commerce. Further, this exchange has helped to support American jobs with a growing number of exports leaving Seattle’s port for the Emirates — a transit point to significant Asian markets, including China and India; and America’s top export market in the broader Middle East North Africa region.”

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Comments | More in Airlines, Boeing, International economy, Ports of Seattle and Tacoma

October 11, 2011 at 10:00 AM

American Airlines’ lesson: Being big isn’t enough

Another dip in the economy means trouble for airlines, especially for AMR Corp., the parent of American Airlines. Like Alaska Air Group, AMR went through the tough times after 9/11 without going through bankruptcy reorganization. But the resemblance ends there. Alaska shares are trading above $60, while AMR stood at $2.73 this morning. For weeks, fears have grown that the carrier will be forced into Chapter 11.

American, once one of the nation’s most innovative and service-oriented airlines, faces high labor costs, more than $12 billion in outstanding debt and big unfunded pension costs (why weren’t those highly compensated executives fulfilling their duty and funding the pensions…?). Its fleet is aging, hence the recent 460-jet order split between Boeing and Airbus.

Unions have concessions but it hasn’t been enough to save the airline from repeated losses and now speculation about its future. The conventional wisdom, of course, is another merger, perhaps with US Airways. That’s the last thing AMR needs.

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April 12, 2010 at 10:20 AM

United-US Airways deal will pose antitrust challenge for Obama

If United and US Airways go forward with a merger, it will be the first major test of whether the Obama administration intends to apply more antitrust scrutiny than its recent predecessors. The merged entity, which would be called United Airlines, according to the Wall Street Journal, would become the nation’s second largest and have commanding market share in many parts of the country.

That would give it pricing power to raise fares and cut choices, although in some markets that might be eased by an expansion of Southwest. Might be. Southwest has been reluctant to move against “fortress hubs” such as US Airways in Charlotte, because the dominant carrier can lower fares so much as to make a venture there by Southwest ruinous. Cities such as Phoenix, which have enjoyed wide choice and cheap fares, would no doubt suffer.

More problematic would be the many jobs lost, not only in US Airways’ suburban Phoenix headquarters, but also at hubs such as Phoenix Sky Harbor International Airport, which would probably become redundant. More job cuts would come as other “redundant” routes, facilities, etc. are pared back to make the merger attractive financially. These job losses are no small thing with real unemployment remaining stubbornly high.

If you want to see the damage to communities these deals have caused, check out St. Louis (TWA), Minneapolis (Northwest) and Cincinnati (which lost its huge Delta hub in the downsizing following the Northwest deal.

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