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Southwest Decides to Expand Operations in Philadelphia November 28, 2005

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Encouraged by its success at US Airways hub Philadelphia International Airport, Southwest Airlines plans to double the number of scheduled flights in the coming months. Southwest is in the process of acquiring six more gates, bringing it to a total of twelve gates. The additional gates will be acquired from legacy carriers United and Delta Airlines, who are currently downsizing their domestic operations under fierce pressure from low-cost carriers such as Southwest and Jetblue. At its predicted peak, the low-fare carrier will operate 106 flights per day. US Airways presence will still be four times that of Southwest at Philadelphia, even after the two-fold increase in flights. Since Southwest entered the Philadelphia market, average one-way airfare has dropped twenty-six percent. Apparently unconcerned with the increasingly competitive environment, US Airways spokesman Philip Gee told “The Philadelphia Inquirer that the airline wasn’t fazed by Southwest’s expansion plans.” He added that “America West Airlines, which acquired US Airways out of bankruptcy court, has competed for years with Southwest in Las Vegas and Phoenix, where both airlines have hubs.”

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Jetblue Pioneers Online Bag Check November 23, 2005

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While airlines have been offering online check-in for passengers for nearly half a decade, cutomers with baggage still had to wait in the traditional lines to check their luggage. This week Jetblue Airways extended its online check-in policy beyond ticketing, allowing passengers to print baggage tags for their luggage and drop them off at a specialized Jetblue counters. While passengers cannot actually print the bag tags applied to their luggage away from the airport, they are issued a specific code, which when entered into a self-service kiosk, prints the tags. A Jetblue crewmember assigned to the area then applies the tags. The implementation of online bag check is the natural extension of online check-in, as it allows a passenger to take care of their ticketing and luggage needs before arriving at the airport. At Jetblue’s hub, John F. Kennedy International, the airline has devised a separate area for passengers to leave their checked bags. At all other Jetblue destinations the airline advises passengers to leave their checked luggage with a Jetblue customer service representative near the self-service kiosks. Other airlines are expected to follow Jetblue’s suit, as this new service makes check-in less chaotic for passengers and provides practical advantages for carriers.

Boeing Elects to Launch Larger 747 Variant November 15, 2005

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Capping months of speculation in the aviation industry over whether Boeing would update its venerable 747, the aircraft manufacturer announced today that it would indeed launch an updated 747. Although the program was given the 747 Advanced moniker while Boeing was debating whether to launch the program, the new version of the aircraft will be called the 747-800, to demonstrate the technology and expertise borrowed from the revolutionary 787, a completely new Boeing aircraft currently in development. According to Boeing chairman Allan Mullaly, “The 747-8 will use the technologies of the 787 Dreamliner to significantly increase the passenger and freighter capabilities of the 747, and offer greater fuel efficiency, improved operating economics, and be more friendly to the environment with reduced noise and emissions.” While the 747-800 is a stretched version of the current 747-400, it is not meant to compete directly with the largest commercial jet in the world, the Airbus A380. The 747-800 fits in a niche between the 747-400 and Airbus A380. The 747-800, which is significantly more efficient than the 747-400 and in some cases the Airbus A380, derives most of its efficiency from an updated wing, a greater use of composites to reduce weight, and more fuel-efficient GeNX engines. As of launch, Boeing has confirmed that it has orders from Cargolux and Nippon Airlines valued at $5 billion. Both carriers only ordered the cargo version of the aircraft, but orders for the passenger version are expected shortly.

Independence Air Elects to File for Chapter Eleven Bankruptcy November 7, 2005

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Hurt by a poor business plan, high jet-fuel prices, and inept management, low-fare carrier Independence Air (Flyi) agreed to file for voluntary Chapter 11 bankruptcy today. Launched one year ago under the premise that the former contract carrier could provide low-fares with high frequency flights to a variety of East coast locations, the airline has consisently lost money since it declared “independence” from United Airlines. Although Independence Air was the best financed airline startup in US history, it went from having $350 million one year ago to $24 million as of Monday, November 7. Flyi CEO Kerry Skeen attributed the bankruptcy filing to “going independent in what has been described as the most challenging economic environment in airline industry history, including record high fuel prices and extreme revenue weakness.” He added that “these circumstances have prevented us and virtually all U.S. airlines from meeting financial goals.” On the positive side, he professed his belief that the carrier would be saved because it had a “good, loyal fan base” in the Washington D.C area.
Independence Air, which is based at Washington Dulles International in the Washington D.C metropolitan area, won accolades for its inflight service; however, it’s excellent service could not save it from its disastrous financial condition. The carrier never seemed to have a clear direction; first it expanded to western cities with efficient Airbus A319 aircraft, then Independence Air retracted from these cities despite high loads, citing high fuel costs. The root of the carrier’s demise was its reliance on fifty-seat regional jet aircraft. These aircraft, which have inherently higher costs per passenger than larger jets, are rapidly being pulled from service by airlines worldwide due to high fuel costs. Coupled with unprecendented low-fares, the load-factors Independence Air had to achieve to turn a profit were nearly impossible in the current climate of the American airline industry.
Rick Delisi, Flyi spokesman, said that the airline would operate on a typical Monday schedule and that he did not expect any immediate disruptions. While in bankruptcy, the carrier plans to renegotiate aircraft lease rates, restructure its costs, and trigger a sixty-day court-supervised auction. Essentially, the carrier has put itself up for sale; if there are no serious offers before mid January 2006, the carrier likely will be forced to liquidate. Flyi’s assets aren’t of much value to other carriers, as most of its aircraft and gate space are leased. Although not officially confirmed by Independence Air management, there is a rumor circulating that Virgin Atlantic CEO Richard Branson may purchase the assets and flight certificate of Independence Air to speed the launch of his proposed low-fare airline, Virgin America.

Continental’s Fortunes Turn November 5, 2005

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On the heels of past profitable quarters, Continental Airlines CEO Lawrence W. Kellner said that the carrier lost $115 million in October alone. In a recorded phone message to employees, Kellner said that the fourth quarter loss could widen, but that he hoped “that a recent pullback in fuel prices would mean losses in November and December losses wouldn’t be as large.” The carrier had previously warned that a fourth quarter loss would very possible; however, this statement was the first time Continental management gave a quantifiable figure. Currently the number five U.S carrier, Continental’s fourth quarter performance likely will be disappointing because of exceedingly high fuel costs induced by the series of hurricanes in the Gulf region of the United States. According to analysts, other airlines are likely to post similarly dismal earnings reports. Even low-fare upstart Jetblue Airways, which has been profitable since its creation in 2000, predicts a fourth quarter loss.