A breathtaking week for the airline industry as Skybus Airlines ceases its operations, the week's third carrier -- alongside Aloha and ATA -- to fold in the face of soaring fuel costs and a tanking U.S. economy.
A fourth carrier, Champion Air, will shut down as of May 31.
The latest shuttering has created turmoil at airports dealing with stranded passengers. It's also left cities like Columbus, Ohio, holding the bag after investing millions in airport improvements following the fledgling carrier's arrival just last year.
A pall hung over Pease International Airport Saturday morning as stranded passengers, airport workers and vendors grappled with the news that Skybus Airlines had suddenly stopped flying.
Some passengers frantically booked flights on other airlines, making their way to Logan and Manchester. Others rented cars to drive home or to their destinations. Local workers said they were shocked by the news and concerned about the future. Thirty one employees of Port City Air, the local company that handled all Skybus’s customer service at Pease, had to wonder if they’d keep their jobs.
“We were all shocked to hear the news of the Skybus’ sudden closing last night,” Port City Air president Bob Jesurum wrote in a memo to his employees. “As recently as this past week, we had been reassured by senior officials at Skybus that everything was ‘fine and that they were looking at Portsmouth for future growth as a focus city.’ ”
In educational interest, article(s) quoted from extensively.
From the Associated Press:
WXII-Channel 12 [Greensboro-Winston-Salem] also has a full report up on YouTube, but has disabled embedding. View it here. Paul Makishima for the Boston Globe:
Dearly departed Skybus launched just last year and made a splash by offering 10 seats, each for $10, on every flight. They saved money by charging for EVERYTHING: water, checked bags, pillows. They also shaved costs by flying into places that don't get used much--or at all...
One of those off-the-beaten-path cities was Gary, Ind., with Skybus service (to Greensboro, N.C.) launched only a few short weeks ago. The Chicago Tribune's Jon Hilkevitch recently gave an inside look at the unique service the carrier offered its passengers via words and video:
Although I was not lucky enough to snag a $10 airfare that Skybus offers on 10 seats aboard every flight, my round-trip ticket was $142, including taxes and fees. On the day I booked the airfare on the Internet, the same non-stop itinerary to Greensboro from O'Hare International Airport was $756.48 on United Airlines and $1,118.97 on US Airways. ...
It took little time for the 17 passengers on my flight to go through screening conducted by the Transportation Security Administration and board the 154-seat Airbus A319 aircraft that Skybus operates on all its routes. ...
Shortly after takeoff, flight attendant Inna Djaniants was working the cabin's captive audience over the intercom system, asking for a show of hands on how many people paid less than $200, less than $100 or just $10 for their tickets. She explained that Skybus keeps fares low by hawking food, beverages and other items on each flight. Passengers are prohibited from bringing their own drinks or food onboard.
Passenger Kimberly Nelson, 31, a supervisor for a financial company in Charlotte, said: "I always wanted to go to Chicago over St. Patrick's Day. Thirty-two bucks round-trip, including taxes, you can't beat it. Skybus reminds me of Southwest Airlines when I flew it 15 years ago. It has the same kind of energy."
Unfortunately, things have changed quite rapidly for Skybus passengers in the new economy. From WBBH-Channel 2 [Florida]:
Confused and frustrated customers flooded into the Charlotte County Airport Saturday. The abrupt Skybus bankruptcy left many people stranded, wondering how this could happen and how they will get home.
Normally when you walk into the Skybus terminal at the Charlotte County Airport, either you go to the kiosks or to the help desk. But Saturday, the first thing people saw was a set of notices from Skybus letting people know they will not be offering any more flights. Right now, all flights are grounded and people like Ashley Fowlkes are trying to figure out how to get their loved ones home.
"Anything they can, I guess. They may have to rent a car and drive home. They may have to buy another late notice plane ticket which could be like $800," said Fowlkes.
Brandon Swartzlander and his family also had their dream vacation turn into a nightmare. He thought Skybus' $10 tickets seemed like a pretty good deal - until they found out they had no way to get home.
"It was a good deal," said Swartzlander. "And then you get blindsided at midnight last night. There's no way home." Perhaps what is worse is how he and his family found out. "I was flipping through the channels and I caught a glimpse of a Skybus plane and I heard them say, 'We'll tell you how it affected stranded passengers' and I thought to myself, that's odd," said Swartzlander.
But moments later it all made sense. He realized he'd lost the money he'd already paid for the tickets back to Ohio. Plus, he had to start searching and scouring the internet for an alternative way home - not an easy task for a family of eight. "Just for the eight of us to fly Southwest, it's going to cost us an additional $1,500," said Swartzlander's wife Jeanne.
Passengers aren't the only ones affected. From AP:
Skybus Airlines' $57 million in government incentives weren't enough to sustain its discount flights that ended today. The Columbus-based company plans to file for bankruptcy protection in the coming days.
The company's collapse will leave Port Columbus International Airport with fewer flights and about 350 Ohio residents without jobs. It will also leave the state and Columbus with a heavy investment that yielded just 10 months of air service. Port Columbus invested millions in terminal improvements tailored to the Columbus-based airline. It now has five open gates, a ticket counter and some soon-to-be-emptied offices.
The decision, made after a board meeting yesterday, left hundreds of Skybus ticketholders stranded and its 450 employees out of work. The company has lost millions of dollars and plans to file for Chapter 11 bankruptcy protection on Monday. Its chief executive, Bill Diffenderffer, resigned nearly two weeks ago. Skybus workers were stunned by the news yesterday. About a dozen employees gathered at the Skybus ticket counter, some taking pictures. Some were upset and crying, asking each other what they plan to do. Workers from other airlines came up to wish them well and tell them they will be missed. ...
Mike Boyd of the Colorado-based Boyd Group also has been a critic of the Skybus model, but he expressed surprise at the swiftness of the airline's demise.
"They had a dumb model. The original plan never had a chance, at $50-a-barrel oil or $100-a-barrel oil," he said. "But I really thought someone could come in and turn it around. The pressures on airlines today are very different than they have been in the past. They're shutting down suddenly now to preserve whatever assets they have for the creditors." ...
Skybus got off to a strong start last summer, bringing tens of thousands more passengers through Port Columbus. In turn, the airport added parking spaces and raked in millions in additional parking revenue as it reached an all-time record passenger count of more than 7.7 million for 2007.
But Skybus hit a rough patch during the winter. With a very short window between flights and a crush of flights all leaving within an hour of each other first thing in the morning, dealing with ice and snow took its toll on on-time performance. The airline had to cancel more than a dozen flights Christmas Day and the day after, when two of its seven planes went out of commission as a result of mechanical problems.
Poor performance coupled with a lack of customer service took its toll. Passenger numbers dropped in the slow months of January and February, as the airline struggled to build up its new base in Greensboro, N.C. Route cuts last month were quickly followed by the replacement of the CEO by former Chief Financial Officer Hodge, who was charged with improving performance and stemming losses.
But it was apparently too little, too late to turn the airline around.
The airline made 74 daily flight to 15 U.S. cities. It has about 350 employees in Columbus and 100 at a second hub at Piedmont Triad International Airport. On Mar. 19, the airline held interviews for flight attendant positions at PTI. Nearly two weeks ago, the carrier named Mike Hodge as the company's new chief executive officer. Hodge replaced Bill Diffenderffer, and had previously served as chief financial officer for Skybus.
Increasing customer service problems were cited, one being its interesting form of passenger communication as noted by Tom Barlow at WalletPop:
Intially, Skybus was best known for its policy of reserving at least ten spots on each flight to sell for $10 each. Later, it gained notoriety as the airline that could not be contacted by telephone, refusing to deal with customer service problems except by e-mail. When it ran into maintenance problems with a couple of jets on the same day recently and had to cancel a number of flights, its customer non-service brought a great deal of negative press.
As for Skybus labor, they also had email communication to contend with -- of a more worrying kind -- as Marla Matzer Rose of the Columbus Dispatch pointed out last month. The pilots were also quickly moving to become Teamsters:
The pilots for Skybus Airlines are attempting to unionize, with more than 80 percent favoring a vote by next month to join the Teamsters. ... "If the Teamsters are certified, the way this airline is run is going to change," said aviation consultant Michael Boyd of Colorado-based Boyd Group, who has been a critic of the Skybus business model. "The next group will be the flight attendants. I think the employees are saying, 'We just can't work at these rates.' "
Skybus, which was notified late last week of the action, said in a statement that the company is surprised to be facing a "union organizing effort when the airline industry is dealing with a slowing economy and oil prices" that are nearly $108 a barrel.
"We believe that a majority of our pilots will understand that we are better served focusing on building a start-up airline in a very competitive environment than we are going down a path that for other airlines has led to contentious labor-management issues," the statement said.
The starting salary for a Skybus captain is $65,000, while a less-senior first officer makes $30,000 to start. Pilots say those amounts are as much as 50 percent below industry standards, and Skybus pilots say the airline is not offering second-year pay increases. Still, Skybus has been able to attract experienced pilots with stock options and the opportunity to be home every night, because all planes return to either Columbus or the second base of Greensboro, N.C. ...
Victoria Gray, a spokeswoman for the airline division of the Teamsters, confirmed that the union has collected more than the required number of cards from Skybus pilots to proceed. The Teamsters asks for 65 percent of eligible employees to "submit cards" indicating they want to join the union; the organization then notifies the National Mediation Board of the vote and asks the airline for its employee list. The mediation board requires a simple majority for passage of a vote to join a union. Gray said that by this timeline, she would expect Skybus pilots to join the Teamsters Local 747 out of Houston by April.
Skybus has about 140 pilots, nearly 120 of whom are eligible to vote. In a phone interview yesterday, a Skybus pilot speaking on condition of anonymity said he was one of the more than 100 pilots who submitted cards favoring union membership.
The pilot said he still thinks the basic Skybus model is a sound one, and that the company can succeed. But he said pilots have become angered by having their work rules changed via e-mail with no direct communication and by being told that pay raises would come only in the form of profit sharing after the airline has a full year of profitability. ...
Extreme penny-pinching also has gotten on the pilots' nerves. In the pilots' lounge, "They took away the bottled water recently because they said it cost too much," the pilot said. "They got us these cheap plastic containers to fill up and take on the plane, but they leaked. They admitted they made a mistake and gave us bottled water again. But to save the delivery cost, they have pilots on their off-hours go to Costco and pick up cases of water and deliver them to the airport."
This week will go down as one of the worst ever for US airlines, as no fewer than four carriers -- Aloha Airlines, Champion Air, ATA Airlines, and now Skybus -- folded up shop this week, or announced imminent plans to do so. A fifth airline, Sun Country Airlines, announced it will place nearly 30 percent of its pilots on furlough over the summer, though company officials says it plans to rehire them in late October.
More bad news arrives with the folding of ATA, the second airline in a week to abruptly cancel all flights and cease operations. Dawn Gilbertson and Toby Phillips for the Arizona Republic:
ATA Airlines, which offered daily nonstop service between Phoenix and Hawaii, suddenly shut down overnight after filing for bankruptcy. The last flight to operate was a Honolulu-to-Phoenix red eye due into Sky Harbor International Airport this morning. ...
Indianapolis-based ATA, which has been struggling financially and recently ended its Chicago operations, blamed the shutdown on the loss of a key military charter flight contract. Many passengers aboard the final ATA flight from Honolulu this morning said they were thankful that they made it to the mainland, but many others didn't know how or when they would be able to get back.
"I didn't realize that there was no flight returning when I left," said Hannah Smith, in Phoenix to visit family. ATA typically offered the cheapest tickets to the islands, Smith said. "That's where I live," she said. "I've got to get back."
Frances Fuller said she lives in Hawaii about half of every year, flying to and from Phoenix often. "I have about $1600 worth of plane tickets booked," Fuller said. She was unsure what her next steps would be. "My bank card company certainly wont give me a refund," she said.
Shocked that the airline gave no warning of the shutdown, Fuller said she felt for those who were suddenly without jobs. When agents gave passengers the news that all other flights would be canceled, Fuller said, "All I kept thinking was that they all just lost their jobs."
"It was a very sad morning."
In educational interest, article(s) quoted from extensively.
Getting to the mainland is no easy feat for stranded ATA passengers. One day after the carrier folded, hundreds paid to hop on a special flight to the west coast, but thousands more are still looking for seats. The frustration is growing at Honolulu International Airport. Long lines and lots of waiting as another round of stranded ATA airlines passengers scramble to find seats out of Hawaii.
"I just need, I gotta go to school. I can't be down here forever," said Florianne Molina of Vallejo California. Fortunately, Florianne Molina and nearly 300 others left with useless ATA tickets got out on a special Hawaiian airlines flight to San Francisco. But they did have to pay for it. $320 each.
Lieutenant Colonel Loren Weeks on vacation before deployment to the war zone also got a seat, but his travel problems aren't over yet. "I'm heading to Kansas to get possibly another ATA, well, flight to fly us into theater, and who knows that flight's on hold as well," said Weeks.
ATA's abrupt demise marked the second time this week that a major carrier serving the Oakland-Hawaii route suddenly terminated operations. On Monday, Aloha Airlines halted operations, just days after it had filed for bankruptcy. Aloha's collapse also erased flights between Oakland and Hawaii, along with other destinations.
ATA blamed the loss of a military contract for its shutdown. The airline said it depended on the revenue from the government deal tooffset a "tremendous spike in the cost of jet fuel." Aloha blamed its shutdown on soaring fuel prices and fierce competition in the mainland-to-Hawaii corridor.
Passengers who arrived at the Oakland airport Thursday were greeted by a deserted ATA counter and signs that stated the airline had filed for bankruptcy and ceased operations. "Now what? I don't know what to do," said Ed Mitchell, who was traveling with his wife, Chang Chi, and their two sons from Seattle to Hawaii. "I've been all over the world. This is the first time we've gotten stuck."
The Mitchell family had planned a birthday celebration on Maui for children Ivan, 9 and Ian, 8. "I hope we get a plane," Ivan said. "We've been planning this for a long time." ... "This is very challenging for our airport," said Robert Bernardo, a spokesman for the Oakland airport. "We no longer have direct flights to Hawaii. Since 2000, we had direct flights to the Hawaiian islands."
Together, ATA and Aloha accounted for 4.8 percent of the Oakland airport's 14.6million departing passengers during 2007, Bernardo said. That equates to about 700,800 passengers. ATA represented about 3.4 percent, or 496,400 passengers leaving the airport. Aloha generated about 1.8 percent of the business, or 204,400 passengers.
"We are working very hard to find other carriers who will provide that service to Hawaii," Bernardo said. Officials were hopeful the airport could land one or more replacements before long.
Unusual measures are being used to help stranded passengers notes Mary Forgione for the Los Angeles Times:
The Hawaii Tourism Authority is going to pay for charter flights to help the estimated 9,000 tourists stranded on the islands since ATA went under this week — the first time the agency has spent money on such a venture.
“We’ve never done this before and we hope we’ll never have to do it again,” Rex Johnson, chief executive of the Hawaii Tourism Authority, said today after the agency had an emergency meeting to authorize funding.
Ted Evanoff and Zach Dunkin for the Indianapolis Star report on the employee reaction:
Two years after emerging from bankruptcy, ATA Airlines filed for Chapter 11 again today, surprising employees who doubt the Indianapolis-based carrier will ever fly again.
ATA, founded in the city in 1973, was purchased out of bankruptcy in 2006 by the New York investment firm Matlin Patterson. Laid-off pilots hope to secure new jobs with the other two carriers the investor has bought over the last two years - North American and World Airways, both based in Atlanta and part of Matlin's Global Aero Logistics.
Employees including pilots and flight attendants lashed out today at the management installed since the original October 2004 bankruptcy filing. "The most glaring single factor in cessation of operations was grossly incompetent management from the time of the bankruptcy going forward," said Seth Cooperman, a Boeing 737 pilot at ATA.
Dropping the New York LaGuardia and Washington Reagan routes sapped passengers from the West Coast leisure routes to Hawaii even as fuel prices rose and the airline spent heavily to bring online mothballed DC10s, employees said. A deal with Southwest Airlines funneled passengers to certain routes shared by both carriers, but Cooperman said it appears the transaction was not profitable enough to sustain the carrier.
"They’ve closed their doors. It doesn’t look like they are going to reopen,’’ said Jacki Pritchett, an ATA flight attendant since the 1970s.
ATA employs 2,300, including about 560 workers in Indianapolis. Local employment alone is down from more than 2,000 employees four years ago when the discount carrier was the nation's No. 10 passenger airline and the largest carrier serving Indianapolis. All the local routes were dropped in bankruptcy, including the popular Indianapolis-to-Florida flights.
Southwest in turn took over many of those routes.
The scathing response by ATA's pilot's union, ALPA:
The union representing the pilots of ATA Airlines is condemning the airline's management for its callous disregard of its employees and passengers in canceling all operations without warning early on Thursday morning.
"By shutting down in the middle of the night, this management group has let down its loyal customers and the flight crews, cabin crews, mechanics, and other employees who have made deep sacrifices over the past few years to keep ATA afloat," said Capt. Steve Staples, chairman of the ATA unit of the Air Line Pilots Association, Int'l. "It shows an utter lack of respect and illustrates the ruthlessness of Wall Street hedge fund managers who have no knowledge or interest in the companies they own."
ALPA was notified at approximately 4:00 a.m. Central time that the airline was filing for bankruptcy and shutting down all operations immediately. The airline's last flight was ATA Flight 4586, a morning red-eye from Honolulu to Phoenix that was scheduled to land at 8:34 a.m. Pacific time.
"ATA's customers and employees had absolutely no warning that the airline was going out of business," Staples said. "This abrupt withdrawal is the airline equivalent of getting on the last helicopter out of Saigon."
The April 3 announcement that ATA is ceasing operations is two days shy of the first anniversary of ATA's announcement that its holding company was buying World Airways and North American Airlines. On April 5, 2007, ATA Holdings changed its name to Global Aero Logistics (GAL) and, in August 2007 completed the transaction that gave it three airlines: ATA, World, and North American. GAL is privately held by the hedge fund MatlinPatterson Global Opportunities Partners II.
"We find it unusually coincidental that ALPA, which was in contract negotiations with ATA and had the best opportunity to change our collective bargaining agreement to reflect the new realities of the industry, was suddenly forced to shut down while World and North American will continue operating under the Global Aero Logistics banner," Staples said.
"Since when does the acquiring airline go out of business while the acquired airlines keep flying?"
Staples said that all ATA employees are the ultimate victims of a series of incompetent managers who chose to blame economic conditions for the airline's problems instead of admitting their own mistakes.
"We were telling management two years ago that they needed to institute a fuel management program, and even found a fuel consultant who offered to work with the company - but our overtures to help ATA reduce its fuel costs were repeatedly ignored," he said. "Management decided to outsource virtually all of our maintenance, then acquired elderly, unreliable DC-10s that needed extensive repairs. The ripple effect of years of poor management decisions - not the current economy - was what doomed ATA."
Staples said the union's top priority is making sure that all 585 ATA pilots and flight engineers find new jobs, especially since part of ATA's fleet has been transferred to World Airways and more airplanes could go to World and North American later.
"Our position is that we are pilots of Global Aero Logistics, which is still operating, and we deserve to be in the cockpits of Global's airliners. Our contract says that the pilots go with the airplanes, and we will use every legal means available to us to ensure that our members' rights are protected," he said.
Hawaii is holding a job fairs for Aloha and ATA employees now out of work due to the shutdowns. Melinda Peer at Forbes looks at the business aspects of the events of this week:
On Thursday, ATA Airlines became the latest carrier to land itself in bankruptcy, citing high fuel prices, competition and the U.S. economic slowdown.
The complaints have become a refrain for the beleaguered airline industry and aren't expected to get better anytime soon. In early April, the International Air Transport Association cut its 2008 industry earnings forecast for the second time just a day after reporting that February's global passenger load factor slipped 0.6% from a year ago.
"The broadening impact of the U.S. credit crunch has brought buoyant consumer confidence to an abrupt end. Oil prices continue to rise. Demand is softening and after the 64% improvement in labor productivity and an 18% reduction in non-fuel unit cost attained since 2001, efficiency gains are much more difficult to achieve," said Giovanni Bisignani, the association's chief executive.
Fuel has gone from 1.25 cents per available seat mile for the majors in the second quarter of 2000 to 3.50 cents in 2007's second quarter, Swelbar notes, adding that labour costs dropped from 3.50 per ASM to 3.00 cents between the same periods.
Although ATA operated only 29 jets, it had a long history and was an early proponent of a blending of the low-fare model with the network model. But ATA had gradually retreated from the low-fare scheduled business as it increasingly came to rely on charter business and on effective "virtual charters" it operated as codeshares for Southwest Airlines. Much like Aloha, it had gone through a bankruptcy from which it emerged as private carrier in late 2004. ...
At ATA, the challenge came when one of its major charter customers, FedEx, announced it would not be renewing ATA's military charter sub-contract for the next US government fiscal year, which begins in October. ATA said the contract was supposed to last another year. ATA had already trimmed its scheduled service dramatically, announcing a month ago that it would end all service at Chicago Midway, the airport it had made synonymous with low fares, and would also end its West Coast/Hawaii service in June. Southwest, which said its arrangements with ATA also ended on 4 April, had expanded its Midway presence significantly by buying ATA gates at the airport. ...
George Hamlin, a consultant with ACA Associates, called Hawaii "a microcosm of the US market: a duopoly of Aloha and the larger Hawaiian Airlines in a market that could not sustain the entry of an additional carrier in this fuel-price environment". Hamlin thinks other airline failures are entirely possible, and that Columbus, Ohio-based Skybus could fail "relatively soon". The larger US carriers may have enough cash for the year, says Calyon Securities analyst Ray Neidl, but "if high fuel prices and a lacklustre economy persist through 2009, cash reserves at many airlines might become a concern".
This week also claimed a smaller charter carrier, Champion Air, which said it was hobbled by its fuel-swilling Boeing 727s and would end its operations in May. Champion said it too lost a major customer when Northwest Airlines' vacations subsidiary MLT said it would stop using the carrier.
Elsewhere in the USA, Sun Country said it would furlough 45 of its 156 pilots for the summer in a 30% cutback forced on it by the cost of fuel. The decision was made by the privately held low-cost carrier's new chief executive, former AirTran chief financial officer Stan Gadek.
High fuel prices and intense competition has led the airline industry to push for consolidation. Unfortunately Hawaii's Aloha Airlines wasn't able to hold on long enough. On Sunday, the Honolulu-based airline said it would halt all passenger service after Monday, effectively bringing a close to a business that's been running since 1946.
"We simply ran out of time to find a qualified buyer or secure continued financing for our passenger business," said Aloha President David Banmiller. "We had no choice but to take this action." Hawaii's second-largest carrier has operated a fleet of 26 Boeing 737s to serve five airports in Hawaii and six destinations in the continental United States.
In educational interest, article(s) quoted from extensively.
Less than two weeks after filing for Chapter 11 bankruptcy protection, Aloha announced yesterday that it plans to halt passenger service with its last flight tonight. It will continue operating its cargo and charter operations. ...
Even before filing for bankruptcy protection March 20, Aloha had been shopping its overall business and just the passenger operation to other airlines and investor groups. Aloha came close more than once to striking a deal...those potential deals collapsed. ....While Aloha was searching for buyers, its lenders were pressuring the airline to stop selling tickets to passengers, taking the position that such sales would further expose the lenders to more potential losses, the person said. ...
An indication of how quickly Aloha is bleeding financially came in a court filing yesterday. The airline said its unrestricted cash had dwindled from $3.8 million on March 20 to $900,000 as of yesterday. ...Aloha cited the soaring cost of fuel and an interisland fare war, trigged by the entrance of go! airlines, when it filed for bankruptcy protection, a move that was meant to buy the company time while it restructured.
With no substantive offers for its passenger business, Aloha officials decided to stop the bleeding by shutting that operation, people familiar with the case said. A tight credit market nationally added to Aloha's woes, making it difficult to find new lenders willing to risk their money in a slowing economy and a bare-knuckles interisland fare ware, several people said.
"In this credit market, no one else is crazy enough to lend," said one attorney.
In its bankruptcy filing, Aloha said it was unable to generate enough revenue from its inter-island passenger business because of go!'s pricing. Aloha said it was forced to match go!'s "below-cost fares" at a time when the airline industry is facing unprecedented increases in the cost of jet fuel.
On Monday, Mesa said go! would increase the number of daily flights it operates from an average of 54 to 94, beginning on Tuesday. Mesa said go! would operate between 11 and 13 round trips a day from Honolulu to Maui, Lihue, Hilo and Kona, offering all seats at $49 through April 7.
The fuel price spike, coupled with a steadily weakening U.S. economy, has stalled the airline industry's modest recovery from the 2001-2006 downturn. Oil prices, which are directly related to jet fuel costs, remain above $100 a barrel. Big airlines are beginning to shrink to cope with much tougher operating conditions. On March 18, Delta Air Lines Inc unveiled plans to cut 2,000 jobs and scale back flights.
The previous downturn in the airline industry resulted in bankruptcies and unprecedented out-of-court restructurings.
Aloha Airlines announced today that it will be shutting down its inter-island and transpacific passenger flight operations. Aloha’s last day of operations will be Monday, March 31, 2008. On that day, Aloha will operate its schedule with the exception of flights from Hawaii to the West Coast and flights from Orange County to Reno and Sacramento, and Oakland to Las Vegas. Code-share partner United Airlines and other airlines are prepared to assist and accommodate Aloha’s passengers who have been inconvenienced. ...
The shutdown of Aloha’s passenger operations will affect about 1,900 employees. Aloha also announced that its air cargo and aviation services units will continue to operate as usual while the U.S. Bankruptcy Court seeks bids from potential buyers. On March 27, 2008, Saltchuk Resources, Inc., announced its intention to buy Aloha’s air cargo business.
“"This is an incredibly dark day for Hawaii,”" said David A. Banmiller, Aloha'’s president and chief executive officer. "“Despite the groundswell of support from the community and our elected officials, we simply ran out of time to find a qualified buyer or secure continued financing for our passenger business. We had no choice but to take this action."
“We deeply regret the impact this will have on our dedicated employees who have made Aloha one of the best operating airlines in the country. “Aloha Airlines was founded in 1946 to give Hawaii’s people a choice in inter-island air transportation.
“Right now everyone is just in a state of shock…we don't know what happens after today. All you can do is support each and everyone of us. There is over 3500 of us. We are not just co-workers, we're family,” Aloha Airlines flight attendant Kanani Kaopua said. For Kaopua flying for aloha wasn't just a job, it was an opportunity to support her education.
“This job enabled me to go to school and work you know and I have enough seniority where I could get the days off for school now, but all of that is so miniscule when you look at the big picture of what's going on,” Kaopua said.
At the Aloha Airlines check-in counter employees put on a brave face, trying to do their work without showing too much emotion. However, when you talked to them about the shutdown the emotions came out.
"My heart is really, really heavy this is my family. I've been here for 30 years. I had two babies -- married. This is my family. It's going to be really hard to work today, but we've got to take care of our passengers that are still flying," counter employee Chris Opiopio said. While workers did take care of the passengers they also took a few moments to shed a few tears and try to console each other.
Nicole Fong just spent six months training to begin a career at Aloha Airlines.
"I worked really had to pass probation to start a career here and it's devastating to know it's coming to and end just when I'm starting," Fong said. She said her heart goes out to longtime employees. "This is their life. This is their living. What are they supposed to do now?" she said.
Employees were told their sick leave and vacation is gone. Their health coverage is also ending. The company said their pensions and 401Ks are secure.
"I been 35 years with aloha airlines and, you know, it's like 85 percent of my life is working here. It's very sad to see that it goes," said Joe Kauweloa who worked for Aloha for 35 years.
Prior to the announcement, flight attendants Na'i McCarthy & John Baker representing Save Aloha Airlines were interviewed on KHON:
In related news, Gita Sitaramiah reports in the Pioneer Press:
Faced with rising costs and more competition, charter flight operator Champion Air announced today that it will cease operations May 31. The Bloomington-based airline's 550 employees will continue to receive their pay and benefits through that date.
"Unfortunately, our business model is no longer viable in a world of $110 oil, a struggling economy and rapidly changing demand for our services," said Lee Steele, Champion's president and chief executive. "Those factors also have impeded our efforts to attract new capital and new investors."
The charter airline flies Boeing 727 aircraft, which have three engines and are less fuel efficient. The airline also has faced more competition as scheduled airlines, including Northwest Airlines, offer more package deals.
The first plane has landed under the "Open Skies" agreement [pdf] between the United States and Europe, heralding what many hope will be a new era in air travel. The Continental Airways flight from Newark to Heathrow touched down under rainy London skies at dawn on Sunday morning. Jeff Smisek, president of Continental, was onboard the flight. He told CNN that Heathrow landing rights had cost the airline $200 million -- but that it had been "money well invested."
"The business traveler wants to come to Heathrow," Smisek told CNN's Richard Quest, who was also on the flight. "We have been locked out of Heathrow for decades and it is the most important business market in the world. We are delighted to be here." Quest said other airlines were already landing at Heathrow, including a US Airways flight from Philadelphia and Northwest Airlines from Minneapolis.
The new deal means that passengers on both sides of the Atlantic will now have more options when it comes to nonstop flights. ..."National boundaries will no longer determined where planes can fly," Quest said before today's flight.
In educational interest, article(s) quoted from extensively.
From AP:
As briefly mentioned in the close of the AP report, in January British Airways announced the creation of a spin-off airline -- called OpenSkies -- that would capitalize on the new aviation agreement. Via AFP:
British Airways on Wednesday unveiled plans for a new airline with daily flights from New York to Europe, taking advantage of last year's EU-US "open skies" deal to free up the key transatlantic market. The subsidiary airline, to be called OpenSkies, will be launched in June and initially use one Boeing 757 passenger aircraft that will operate from New York to either Brussels or Paris Charles de Gaulle airports, BA said in a statement.
The single-aisle plane will cater for up to 82 passengers shared between business, premium economy and economy cabins. The Boeing 757 is normally configured for some 200 seats. BA did not reveal likely ticket prices nor whether OpenSkies would be based on Maxjet, the low-fare business class airline which declared bankruptcy on Christmas Day.
"This is an exciting new venture for us and we're confident that it will be a great success as we build on the strength of British Airways' brand in the US and Europe," BA chief executive Willie Walsh said in a statement. "By naming the airline OpenSkies, we're celebrating the first major step in 60 years towards a liberalised US/EU aviation market which means we can fly between any US and EU destination," he added.
The problem with this exciting announcement, as far as it concerns the employees of British Airways, is that the growth would be outsourced (at a cheaper cost, of course). The issues, as explained by BA's pilot's union, BALPA:
British Airways is launching a new airline called OpenSkies. A very exciting new venture, one that will exploit the upside of ‘deregulation’ (routes being opened to non-national carriers) by flying out of European hubs across to the United States.
It should be a good news story, but it is not turning out that way. British Airways don’t want these British Airways planes to be flown by British Airways Pilots. They want to outsource these jobs.
We understand that ‘Openskies’ can only be successful if the employees initially have salaries and contracts commensurate with a ‘start up’ airline. That is not our issue.
Our issue is the fact that British Airways won’t allow the two pilot groups to be as one. This leads us to believe that the BA management has a different objective. That objective is to divide the pilot workforce and push any further new jobs generated by ‘deregulation’ through this ‘cheaper’ pilot cost base. This has happened in other airlines around the world.
This dispute is about job security. It is about protecting the jobs we train so hard for, the jobs that provide for our families.
BALPA has been working to resolve this issue for almost a year but it seems that British Airways is determined to proceed regardless. The only way in which we can secure the respect of BA’s management – a respect that is in very short supply, despite the job we perform, is to stand firm against such a direct attack. We sincerely hope that this does not lead to strike action, and we will exhaust every alternative means of influence before taking this course of action.
In February, British Airways pilots voted to strike over OpenSkies, and BA management quickly agreed to enter into mediation over the issue. Earlier this month 1,000 picketed at London Heathrow. Via Bloomberg:
About 1,000 pilots and their family members marched toward British Airways' offices near London Heathrow airport, in a protest that lasted two and a half hours, spokesman Keith Bill said today in a telephone interview. Police closed the A4 road to allow access to the pilots.
The British Air Line Pilots Association, or Balpa, has voted to strike in protest of BA's OpenSkies unit, which will fly between Paris and New York starting in June. British Airways wants to recruit pilots for the new business from outside its current pool, and the union says BA will use the subsidiary to force changes to pay and working conditions for all of the airline's flight crews.
"We want the pilots flying to be BA pilots," Jim McAuslan, Balpa's general secretary, said today in a telephone interview as the protest came to an end. "It's about job security, careers and respect."
British Airways Chief Executive Officer Willie Walsh has said the new carrier needs a lower cost base if it's to compete with larger network airlines. OpenSkies is part of the airline's response to a European Union-U.S. agreement that will liberalize trans-Atlantic air travel starting March 31. The airline has given assurances that OpenSkies will not affect the salaries and terms of mainline pilots. OpenSkies will use a single Boeing Co. 757 plane to operate the first Paris-New York service, growing to six planes by the end of 2009.
"British Airways wants to preserve their flexibility -- it wants business passengers for OpenSkies, they're going to be hard won and they need to do it economically," said John Strickland, director of London-based aviation specialist JLS Consulting Ltd. "They seem to have done their best to calm the fears of Balpa, but the union has been influenced by what they've seen in the States."
Indeed, British Airways' OneWorld Alliance partner pilots at American Airlines had an ominous warning of the consequences that may flow from the loss of protective SCOPE clause provisions for BA's pilots if they lose this fight:
Again from Bloomberg:
British Airways is trying to use EU competition law to prevent a strike, according to Balpa. The law gives EU nationals the right to establish businesses in another of the bloc's countries.
Balpa represents about 3,000 of the airline's 3,200 pilots. The Air Line Pilots Association, said it will support Balpa's demonstration this weekend by picketing at U.S. airports including New York's John F. Kennedy International, Washington Dulles, Los Angeles International, San Francisco International and Seattle Tacoma International.
American Airlines Inc. pilots were picketing at the British Airways terminal at John F. Kennedy airport at the same time as the protest march in London took place, McAuslan said.
Dallas Morning News' Terry Maxon offered some insight into a related issue concerning American Airlines and British Airways, both of which have been trying for the past decade to tighten up their relationship through lobbying for antitrust immunity for their OneWorld Alliance codeshare agreement:
As long as American and British Airways lack antitrust immunity for their alliance, I don't think we'll see American offering Executive Club miles on its U.S.-London flights or British Airways offering AAdvantage miles on its U.S.-London flights.
Their application for antitrust immunity would have allowed the two carriers to pool revenues across the North Atlantic, so that they'd get a share of the airfares regardless of which airline carried the passenger. But without immunity, they are competitors on the U.S.-London flights and have no reason to give potential customers an incentive to fly the other carrier.
Having said that, let me point out that the alliance may have a better chance with Open Skies in effect. The big drawback to allowing American and British Airways to cooperate is that BA dominated Heathrow Airport, American was a big player and most other carriers were shut out of the U.S.-Heathrow market.
Antitrust regulators in a 2002 decision said BA and AA could have limited antitrust immunity only if they would agree to surrender enough slots to let competitors operate 16 roundtrip flights a day into Heathrow. Thanks, but no thanks, the two airlines said at the time.
Maxon concludes that BA and AA may eventually revisit an application for antitrust immunity in light of today's opening up of the market to additional competitors. But what will the Open Skies agreement itself mean to passengers? Will it improve service, reduce prices and increase choice for the average consumer? No, says AP:
[A]irlines already struggling with sky-high fuel prices and an economic slowdown see open skies' relaxed route restrictions primarily as a way to attract more of the high-end business and affluent leisure travelers they covet and see as necessary to their financial survival.
British Airways, for instance, is launching a new trans-Atlantic airline to take advantage of the agreement -- aptly named OpenSkies -- but will offer only 30 economy-class seats on each 82-seat plane, with the rest evenly split between first and business class. "There is a move afoot ... to use smaller (airplanes) flown nonstop to push leisure customers by the wayside ... except for those willing to pay far higher prices," said Robert Mann, an independent airline consultant in Port Washington, New York.
As oil has pushed past $100 a barrel, propelling jet fuel prices to record levels, many carriers have cut domestic capacity and moved planes to international routes, where ticket prices -- and profits -- are higher. The open skies agreement appears likely to hasten the shift. While the number of overall flights may increase and some cities will get new service and routes, the vast majority of the new flights will be on the same well-trafficked routes. ...
Open skies may offer travelers more in the way of convenience than savings, but it is likely to help the airlines' bottom lines. Carriers say open skies' biggest benefit is giving them the freedom to quickly make changes to their flight schedules. Many airlines will also launch new code-sharing agreements -- which let them book passengers on one another's planes.
"Liberalization of the trans-Atlantic market allows us to pursue growth opportunities where and when they make commercial sense with less government interference," said John Tague, United's chief revenue officer.
For an industry with razor-thin margins, rising fuel costs can and do further pressurize current airline-labor negotiations.
Labor took large wage and benefit cuts during the state-of-emergency days following 9/11; many labor groups undoubtedly feel they deserve richer contracts this time around to make up for those difficult, but necessary, "pull together for the team" losses.
But air travelers are feeling their own pump pinch.
While airline employees can expect to see a more forceful pushback from management as the cost of fuel soars, customers will have to make peace with more expensive ticket prices and fewer air service options.
Northwest Airlines hiked its fares as much as $50 on Sunday, matching last week's hikes at five other U.S. carriers, Bloomberg News reports.
The cause, of course, is high jet fuel prices.
United Airlines hiked its fares Friday, followed by American, Delta, US Airways and Continental. Now, Northwest joins the crowd.
Sadly, the hike is just more pressure on Americans to vacation near home this summer. With high-season airfares between the U.S. and Europe running about $1,200 to $1,500 round trip this year, the dollar in free-fall against world currencies and gasoline headed for $4 a gallon, the backyard is looking better all the time.
And I'm the travel writer.
Bleak news. Witty messenger.
Priceless...
[UPDATE Mar 21, 2008]: More bad news on the upcoming travel season from Adrian Schofield at Aviation Week:
The latest FAA Aerospace Forecast proves once again how quickly fortunes can change in the U.S. airline industry. A year ago, the FAA's prognosticators foresaw healthy growth in airline demand in Fiscal 2008. Now they believe domestic traffic growth will sputter almost to a standstill as weakening market conditions hit home.
"We're seeing a definite pause in growth," FAA Acting Administrator Robert Sturgell says. "We didn't see [the pause] in last year's forecast, . . . but this year it's pretty clear - we're talking flat growth in operations and slow growth in passengers." Sturgell does stress, however, that while the near term looks bleaker, the longer-term outlook remains "vibrant."
The headline numbers from the FAA's annual forecast - which extends to 2025 - support Sturgell's comments. Overall traffic on U.S. carriers is expected to rise by 2.9% in Fiscal 2008, down markedly from earlier projections of a 4.2% increase. Domestic traffic will be hurt particularly badly: Last year's forecast predicted growth of 3.4% for 2008, but the new forecast sees growth slowing to just 0.6%.
Sturgell points to a "series of cascading events" as the cause of the forecast downgrade. Chief among these are oil prices continuing their climb past $100 a barrel, coupled with the U.S. economy's apparent slide into recession.
The FAA is hardly alone in revising its projections. The International Air Transport Assn. in December slashed its global airline profit forecast due to the expected economic slowdown, and another downward revision is anticipated in the next few months. U.S. airlines - even traditional growth engines like Southwest Airlines - have also begun scaling back their capacity plans for this year.
Ah, the days of breezy $200 fares to Europe. AA ad from '87:
Ilona Meagher is an independent Illinois-based online writer, new media developer and former 15-year employee of a major U.S. airline.
Currently completing a Journalism degree at Northern Illinois University, she's begun her next project: Airline 911: The Business and Psychology of Aviation, Labor, and Travel in Times of Change.
The information presented on this web site is based on news reports, government documents, medical studies and personal interviews, reflections and analysis.
Psychological explorations do NOT represent therapeutic prescription or recommendation.
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For an industry with razor-thin margins, rising fuel costs can and do further pressurize current airline-labor negotiations.
