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Wednesday
Sep172008

« Olympic, Alitalia, American and the Wings Club »

And we thought the last 10 days of news regarding financial institutions was interesting. In this industry we have legacy flag carriers dying on many continents. We have continued, and even aggressive, consolidation activity in Europe. In the US we have Delta and Northwest pointing to a date before year end to complete their deal. All that remains a constant, it seems, is the Allied Pilots Association creating press releases that ignore the realities of the world to virtually everyone except Lou Dobbs. But before we go there………

Today, Greece finally announced that it would shut down Olympic Airlines and start anew. The Greek flag carrier has only been going through gyrations of Olympic-sized restructuring efforts since I began to study the industry. Nearly 30 years later, its legacy carcass is finally put to rest.

All the while, the investor group that has been assembled in Italy to rescue Alitalia has given certain unions that have not signed on to their business plan until Thursday to do so. Today, a small union caused the carrier to cancel flights as it struck. The bankruptcy laws in Europe are different than in the US and honestly, they are the kind that should be adopted here. If the investor group were to walk away, there is a high probability that Alitalia could be liquidated. Not that Rome is burning, but maybe a “Flying Pig" Roast is in the offing.

Whereas saving Alitalia has become a front-burner issue for newly elected Prime Minister, Silvio Berlusconi, Rome will not burn; Milan will not burn; and all other markets in Italy will not burn if flag carrier Alitalia does liquidate. The world really will not miss Alitalia. Just like the hub closures that have occurred in the US over the years, replacement capacity will be sure to find the market opportunities that are presented. Lufthansa and Air France and others have already identified markets where they will deploy capacity to address the void left by Alitalia should it exit the space.

So, two more carriers in Europe, each once proud flag carriers, are close to succumbing to the high cost of jet fuel, a slowing economy, a strengthening of the dollar, hyper-competition for traffic flows over European hubs/gateways and high intrinsic cost structures that simply cannot be supported.

Now we turn our attention to the US. Similar pressures are forcing its carriers to engage in gut-wrenching decisions of resizing networks in order to adapt to the new economic order. Leave it to the Allied Pilots Association to cause most interested observers of this industry to scratch our heads yet again. Not only did APA’s President write to the CEO’s of British Airways, Iberia, Finnair and Royal Jordanian advising them not to enter into an immunized alliance structure with American Airlines, they also wrote to the US Government urging them to postpone their review of the application.

When all other carriers, including Southwest, are actively seeking new revenue sources that can only work to bolster the bottom line, the APA continues to act in the most destructive of ways. The revenue sources its company is seeking to participate in are those carried by American’s competitors today. To ignore them only initiates American's walk down the path of Olympic, Alitalia, Sabena, and the many US carriers that have ultimately succumbed to the same fate.

But only APA’s membership can decide if they are being led for the better or ultimately to their detriment. I cannot answer that.

Finally, James Hogan, the Chief Executive of Ethiad, spoke to the Wings Club in New York about a 'New Wave' in Global Aviation. If anyone does not believe for a minute that this “new wave” coming from Dubai, Doha and Abu Dhabi will challenge the European partners of the US carriers in a big way, then you are just not reading the tea leaves.

There are traffic flows that are critical for American and British Airways to participate in that require competitive strength. There are possibilities for Iberia that do not exist today. Today, each of the carriers have a strong position in some markets. Absent a relationship similar to that of STAR and SkyTeam, oneworld’s global market position will only continue to erode and will result in less and less flying for US pilots working under the American Airlines’ seniority list.

Just look at the loss of legacy carrier employment in the US today. American has not suffered the half of what United, US Airways and others have suffered. There is no growth at home and that is precisely why APA’s actions of today just simply ignore the evolution of the global industry and the forces of a global economy. Tomorrow’s world is not about Abilene, it is about Asia. It is not about narrowbodies to Eugene, it is about widebodies to Europe. And it sure as hell is not about Midland/Odessa, it is about the Middle East.

It is also not about 12,000 American pilots that Captain Hill states he represents, it is about the other 65,000+ proud employees of American Airlines.

Thank god for Lee Moak and his counterparts at Northwest. At least they recognized that changes were needed to compete in tomorrow's marketplace.

Reader Comments (6)

American Airlines Pilots want the company to be successful. We also want our company to negotiate in good faith. Management has been and is not willing to address legitimate concerns of its labor groups. We will continue to say NO! until AA management decides to actually have a discussion. DAL/NWA have an agreement because BOTH sides decided talking vs stonewalling would benefit all.

09.19.2008 | Unregistered Commentermrubin777

AA labor groups have the most hatred towards management I have ever seen. How does APA propose success for AA? Double the payscales and reduce avg pilot productivity by half? I honestly am curious what APA's success plan entails, because I think they are too angry to think rationally about the industry and the future.

09.19.2008 | Unregistered CommenterAnonymous

This AArena in Ft. Worth is a wonderful venue to watch old style labor relations play out. Interesting in mrubin777's comments is the suggestion that AA is not negotiating in good faith. It was APA that petitioned the National Mediation Board and in the process the union ceded control of the talks. The NMB can make that determination.

As for the DL/NW point, I would suggest that each pilot group recognized that neither one of their companies was going to survive on its own, so they sat down and negotiated a contract that could be afforded. They recognized the environment was not ripe for 50 percent increases in pilot pay. In fact, it is this agreement that sets the pattern for this round.

I agree that the anger level is high and either they will figure it out or they won't.

09.19.2008 | Unregistered CommenterSwelbar

Mark,

Turn back! This web site is a shill for management propaganda. No where will you find fair and balanced reporting or opinions here because Tilton and Arpey are gods who can do no wrong. To protect the privileged few is paramount! If you are morally and ethically bankrupt then you are held in high regards on this website. Turn back!

At least over at Holly Hegeman or Mike Boyd’s websites you have some balanced reporting when it comes to the constant battle between management and workers but here the employees are always the problem and never management. Turn back!

He is not dumb. He knows management keeps pouring gasoline on the fire but will not acknowledge management's constant tweaking of the employees noses while they to continue to stuff their wallets with money from other employees is just the tinderbox to have a strike.

I question if this website is truly suppose to be balance or is it here to serve a higher master? Turn back!

09.20.2008 | Unregistered CommenterChitragupta

C

This blog actually writes about alot of different things. The only thing you care to respond on are those that discuss labor and/or American.

I did not know that change was morally or ethically bankrupt. In keeping with my promise when I began this blog, I do not promise to make friends. I have plenty. And I said I would post all responses and I have. So you get air time yet again.

So you are tired of my refrain that the industry needs to change and I am tired of your refrain on management compensation.

I will continue to write. You keep reading those sites that you agree with most of the time. I think Holly does a nice job as well.

Now go back to your sock drawer. Be careful, and don't mix those dark navy ones with the black ones.

Swelbar

09.20.2008 | Unregistered CommenterSwelbar

Chitragupta, if you have an opinion and want to provide a counterpoint to expound upon your opinion you should start your own blog.

You are a one-note johnny, but at least Bill puts some thought behind his opinions whereas I've yet to see any thinking from you.

09.20.2008 | Unregistered CommenterM Claire

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