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Delta Pins Survival Hopes on New Website July 31, 2005

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Delta Airlines, which just reported a staggering loss of $382 million last quarter, hopes to attract more customers to its redesigned website. The website will be promoted by an extensive advertising campaign covering nearly all advertising mediums. According to chief marketing officer Paul Matsen, the website is their “primary focus of marketing for the second half of the year.” Although Delta infused a large amount of money into the creation of a brand new website, Delta hopes to cut expenses in the long run by reducing the amount of reservations done through travel agents or over the telephone. Chief Marketing Officer Paul Matsen noted that “there are significant savings associated with getting people on Delta.com. It is a core part of our transformation strategy.” Reservations booked over Delta’s website cost less than $1, while tickets purchased over the phone often cost Delta from $8 to $10. Internal data shows that only 24% of Delta customers book through their website. By 2007, the airline aims to sell 40% of its tickets exclusively through Delta.com. The website alone, which features a flashier design and streamlined features, will not solve Delta’s financial problems. Rather, it is the step in the right direction, for an airline that has a very long way to go before reaching greener pastures.

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American Opens Phase I of New Terminal at JFK July 27, 2005

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American Airlines opened the first phase of its new terminal, at John F. Kennedy International Airport today. The new terminal, which will cost $1.1 billion, covers just over 1.5 million square feet. It will feature sixty ticketing positions, a ten-lane security check point, inline baggage screening system, and a direct connection to the main terminal via a new elevated nine-lane freeway. With the completion of phase I of the terminal expansion, terminal D and concourse 9 will close. In later phases, the terminal is slated for additional regional jet gates, lounges, and a massive customs facility. According to American Airlines CEO Gerard J. Arpey, this project “represents one of the biggest, boldest — and most expensive — projects in American Airlines’ history, and it underscores our commitment to JFK and our determination to preserve its status as one of the world’s premier domestic and international gateways.” The christening of the terminal, coupled with the tidy profit American earned in the last quarter, provides a glimpse of hope for other struggling legacy carriers.

America West- US Airways Merger Approved July 25, 2005

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The Air Transportation Stabilization Board (ATSB) approved the merger of America West and US Airways today. This announcement will allow the two airlines to begin the final two steps before the merger can occur. The two airlines are waiting on a final bankruptcy court ruling and approval from US Airways board. The new airline, which will be predominantly run by America West management, will retain the US Airways name and livery. America West CEO Doug Parker, the future CEO of the merged airlines, was quoted as saying that “[he was] grateful for the board’s unanimous endorsement of our proposed merger.” Current US Airways CEO Bruce Lakefield added that they appreciated “ATSB working closely with [them].” The debt owed by the two airlines to the ATSB will be consolidated and payments will begin in September of this year. Combined, the airlines owe $1.08 billion to the Air Transportation Stabilization Board. Amid the cheery news of the ATSB’s approval, America West, soon to be US Airways, announced direct service to Hawaii via Phoenix.

Auditions July 21, 2005

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A preview (and an excuse for my lack of posting) for what’s to come within the next few months. Prepare for aviation news in a 2nd dimension: audio.

Audition tape #1

Jetblue: Stepping on Continental’s Toes July 17, 2005

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Jetblue, the low-fare airline known for its airplanes equipped with free satellite television, has embarked upon a new chapter in its short history. David Neeleman, Jetblue’s CEO, has sent shockwaves through the airline industry, as his airline has consisently turned a profit since its inception, all the while developing a very loyal customer base. Jetblue’s sterling achievement, though, has been its ability to woo well-heeled business travelers away from the stodgy legacy carriers. This is no accident, as studies have shown that as legacy carriers have cut-back service, low-cost carriers (LCC’s) service has frequently exceeded that of the entrenched legacy airlines. Key to Jetblue’s success has been its approach to avoid highly competitive markets already dominated by the big five (United, Continental, Delta, Northwest & American). Like Southwest, Jetblue elected to fly to less-developed airport in big-city markets. For example, instead of flying into San Francisco International Airport, Jetblue operates out of its near neighbor, Oakland International. Jetblue doesn’t like to get involved into heavily-competitive markets, as its pullout from Atlanta, the hubs of Delta and Airtran Airlines, demonstrated. So far Jetblue is sticking to what it does best: milking underserved markets that demand a high level of service for a low price. At first glance, the announcement that Jetblue will begin operating out of Newark International in New Jersey, the third airport the airline will serve in the New York City metropolitan area, seems contrary to its behavior thus far. However, this ploy is an extremely shrewd business move on the part of Jetblue management. By playing off of its strong customer base in New York City (Jetblue has its lone hub at JFK), Jetblue hopes to cut into the market of Continental Airlines, which maintains its east coast hub at Newark International. Essentially, Jetblue is trying to position itself as the domestic carrier for the New York area. In addition, the airline seeks to spread its explosive growth in the NYC area between the three airports, thus minimizing delays. Already Continental has made it extremely clear that it will not view this intrusion onto its turf lightly. The legacy carrier, which is the best positioned financially of the bunch, has slashed fares on all routes from Newark it will be competing with Jetblue on, and increased frequencies. The question remains: will Jetblue endure a war of attrition with Continental at Newark, or retreat back to its comfortable confines at John F. Kennedy International? This will be the first of many battles the fledgling airline will have to endure to prove its place in the hardened airline industry.

United to Expand Los Angeles- Sydney Service July 13, 2005

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Between December 15, 2005, and April 27, 2006, United Airlines will offer three additional weekly flights between Los Angeles and Sydney. United’s senior vice president of Worldwide Sales and Alliances remarked that “this flight addition also reinforces United’s leadership position in the Pacific, on the U.S. West Coast and specifically at LAX.” United attributes the increase in flights during this period to greater than expected demand for flights between the United States and Australia. The airline will operate a four-class Boeing 747-400 on this route, with 14 first class seats, 73 business class seats, 88 Economy Plus seats, and 172 standard economy seats. Although United only officially announced the additional flights today, seats have been on sale since July 9.

US Airways Receives Additional Investment from Investment Firm July 10, 2005

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Tudor Investment agreed to invest $65 million into the soon to be merged US Airways on Friday. For this investment, Tudor Investment, a Connecticut based firm, will receive 3.9 million shares in the reformed airline. US Airways CEO Bruce Lakefield used this announcement as an opportunity to substantiate his claim that this merger would be successful: “The inclusion of Tudor as a new equity partner is a clear indication that investors continue to find great potential in our proposed merger with America West,” he said. Since the merger was announced on May 20, the two airlines have received $1.5 billion in outside investment.The new carrier will maintain hubs in Charlotte, Philadelphia, and Phoenix, along with focus cities Las Vegas and Pittsburgh. The business plan of the consolidated airline calls for the emulation of Southwest Airlines low-cost, low-fare approach. Many airline analysts are skeptical, though, because it will be extremely challenging to transform two airlines with high costs into an enterprise capable of competing with Southwest. While this new plan is fraught with risk, the two airlines must make this drastic change to prevent extinction.

Northwest Mechanics’ Union Set to Vote on Strike July 2, 2005

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The national executive council of the Aircraft Mechanics Fraternal Association voted today to authorize a strike vote. Members will have until July 19th to cast their votes. The mechanics union representing Northwest mechanics, AMFA, decided to authorize this vote because of Northwest Airlines “continuing refusal to take current contract negotiations seriously.” The current disagreement between the airline and the union is over staff reductions and wage cuts. Northwest management wants “pay cuts of 25 percent from mechanics”, while AMFA wants pay cuts of only 16.1%. The mechanics union would only save Northwest $140 million, in contrast to managements proposed savings of $1.1 billion. Northwest management expressed disappointed disappointment in the latest actions of the AMFA, however sources close to the matter indicate that Northwest is taking precautions to avoid a shutdown in the wake of a strike.