Essential Travel News for 5/21/07

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AIRLINES

Virgin America wins final OK; plans to start SFO-JFK flights this summer

The Transportation Department has given final approval for Virgin America to start flying, and the San Francisco-based carrier says it expects to do so by mid-summer. Virgin America said it will begin with service between SFO and New York JFK, and within its first year will add routes from San Francisco to Los Angeles International, Washington Dulles, San Diego and Las Vegas. Exact schedules and fares have not yet been announced.
Virgin America’s application drew strong opposition from several U.S. legacy airlines, especially Continental. The Transportation Department initially was inclined to reject the application, claiming that Virgin America was in fact under the control of the U.K.’s Virgin Group, led by Sir Richard Branson, and thus violating laws against foreign control of U.S. airlines. But the company made a number of changes, including increasing the level of U.S. investment, and even promising to replace its CEO, who was hired by Virgin Group. CEO Fred Reid, a former Delta and Lufthansa executive, will have to step down, but not for six months.

Virgin America has ordered 33 new Airbus A320 aircraft with a two-class configuration; economy seats will feature black leather seats with 32-inch pitch and nine-inch personal video screens where passengers can watch live TV or select from 25 movies. The company said that it expects to be flying to as many as 10 cities within a year after its start-up, and as many as 30 within five years. Cities on its list of possible destinations include: Atlanta, Austin, Baltimore, Boston, Charlotte, Chicago, Cincinnati, Cleveland, Dallas, Denver, Detroit, Fort Lauderdale, Fort Myers, Hartford, Houston, Indianapolis, Jacksonville, Kansas City, Miami, Milwaukee, Minneapolis, Nashville, Newark, New Orleans, Orlando, Philadelphia, Phoenix, Pittsburgh, Providence, Portland, Ore., Raleigh-Durham, Sacramento, Salt Lake City, San Antonio, San Jose, Calif., Sarasota, Seattle, St. Louis, Tampa and West Palm Beach.

Midwest, Northwest form code-share alliance as AirTran closes in

Just hours after AirTran Airways said it is closing in on a takeover of Milwaukee-based Midwest Airlines, Midwest announced an extensive new code-share agreement with Northwest Airlines that it said would “enhance the value of the company for shareholders by providing significant revenue impact.” The Midwest-Northwest announcement came on the same day that AirTran again extended its tender offer of $15 a share for Midwest, this time until June 8 – even though AirTran says it already has commitments from shareholders representing 56.6 percent of Midwest’s stock. Midwest Airlines’ board has strongly opposed the proposed merger, claiming AirTran’s offer is inadequate, and that Midwest’s business plan for growth as an independent carrier is superior to anything a merger would bring to the table.

The matter could come to a head at Midwest’s annual meeting June 14, when three board seats are up for election; AirTran has proposed its own slate of directors for Midwest. AirTran said the agreement by so many shareholders to sell their Midwest stock at the current offer price – including “the largest institutional investors” – represents “a ringing endorsement of the business plan we have put together,” which includes adding jobs and increasing flights out of Milwaukee. AirTran said Midwest’s management should meet formally with AirTran “to discuss the terms of a merger agreement.”

Even if a majority of Midwest shares have been offered for sale to AirTran under its tender offer, Midwest general counsel Carol Skomicka noted that no shares have yet changed hands, and that AirTran’s exchange offer is subject to various conditions -- including waiving the provisions of Wisconsin law that protect Wisconsin corporations from hostile takeovers. “The (Midwest) board has declined to take action to satisfy any of the conditions,” she said. “While other scenarios are theoretically possible, as a practical matter, board approval would be required for AirTran to accomplish its goal of acquiring our company.”

Midwest and Northwest said their new code-share deal, still subject to a definitive agreement, is an expansion of the reciprocal frequent-flyer partnership they initiated a year ago. The code-sharing, expected to start this summer, will mean passengers connecting between the two carriers can get through ticketing and one-stop check-in, earning mileage on all segments in either airline’s frequent flyer program. Midwest’s code will go on Northwest flights out of Minneapolis, Detroit, Memphis and Indianapolis, as well as some Northwest flights to Hawaii and Alaska. Northwest’s code will go onto Midwest flights out of Milwaukee, Kansas City and Omaha, including flights from the heartland to Atlanta, Boston, Hartford, Los Angeles and San Francisco that connect to Northwest’s international network.

Study finds big drop in customer satisfaction for United, Delta

Bankruptcy may reduce an airline’s cost structure, but it apparently can cause a drop in service quality for passengers as well. That’s the implication of a new survey from the University of Michigan’s American Customer Satisfaction Index (ACSI), which rates consumer attitudes toward all kinds of industries. “Customer satisfaction among airlines is tanking,” said a spokesperson for the study. “The industry overall is down, and United has fallen an almost unprecedented 11 percent to a score of 56 on the ACSI’s 100-point scale.” To put that in context, the airline industry’s overall customer satisfaction index was 63, and the comparable rating for the Internal Revenue Service was 65. The airline industry’s overall satisfaction number was its lowest in seven years. According to the study group, Delta Air Lines – which also emerged from Chapter 11 recently – also showed a substantial decline in customer satisfaction, down eight points from last year to a rating of 59. “Delta and United may be out of bankruptcy, but they are now facing more problems with passengers,” the spokesperson noted. “Unless these problems are resolved, the future does not look bright.” Southwest Airlines rated the highest among all carriers, with a satisfaction index of 76. Continental was also above the airline industry’s average at 69, while the scores were 61 for US Airways and Northwest and 60 for American.

Court approves Northwest’s plan to exit bankruptcy

Northwest Airlines said last week it has received approval from the bankruptcy court to emerge from Chapter 11 on May 31, after the court gave its blessing to the company’s reorganization plan. Northwest said it expects to come out of bankruptcy once its new $750 million equity rights offering has been funded. The airline has been operating under court protection since September 2005. It filed for Chapter 11 the same day as Delta Air Lines, which came out of bankruptcy last month. Under the plan, Northwest’s existing common stock will be canceled and new shares will start trading on the New York Stock Exchange under the symbol NWA.

AirTran wins rights for Atlanta-Washington Reagan National flights

According to wire reports, the Transportation Department has selected AirTran for rights to new service between Atlanta and Washington’s close-in Reagan National. Four other airlines were also in the running, but DOT said it thought AirTran would provide the most competitive service. DCA has a limited number of takeoff and landing slots, and some became available when Spirit Airlines dropped its Detroit-Washington service earlier this year. The award requires AirTran to begin flying the route no later than August 1.

US Airways plans another schedule reduction at Pittsburgh

US Airways, which once depended on Pittsburgh as one of its largest hubs, will continue to cut back its presence there in July when it drops service to five cities and reduces flights to several more, according to the Pittsburgh Post-Gazette. The newspaper said US Airways will discontinue service to Baltimore, San Diego, Seattle, Buffalo and Altoona, Pa. effective July 7. Some cities currently served with multiple daily flights will be cut back to just one a day, the report added, including Albany, Erie, Newark, Chicago O’Hare and Syracuse; Providence, Indianapolis and Toronto will be cut back to two flights a day, and Pittsburgh-Philadelphia frequencies will drop from 10 a day to eight.

FAA/SECURITY

FAA cites need for airport expansion; passenger fees likely to increase

In the latest version of its annual study of U.S. airport capacity requirements, the Federal Aviation Administration warned that several facilities around the country need to start work immediately on expansion projects to keep up with growing passenger demand. Transportation Secretary Mary Peters said the most urgent need for expansion is at LaGuardia, Newark, Chicago O’Hare and Ft. Lauderdale-Hollywood. She also warned that based on existing traffic growth patterns, travelers who use the Atlanta, Las Vegas and San Diego airports could also be facing chronic delays by 2025 if nothing is done to increase their capacity. The Airports Council International-North America, an organization representing the nation’s airports, said last week that nationwide, airports will have to invest $87.4 billion to keep pace with rising passenger demand. To that end, the group said it intends to start lobbying Congress for an increase in the Passenger Facility Charge (PFC) -- currently capped at $4.50 per departing passenger – which is due to expire at the end of September. Airports rely on PFCs to fund most of their capital improvements. The general manager of the nation’s busiest airport -- Atlanta’s Hartsfield-Jackson – told the Atlanta Journal-Constitution he wants to see the government increase the PFC maximum from the current $4.50 per segment to $7.50 – a 67 percent hike.

El Al offers the ultimate security screening convenience: house calls

Israel’s national airline, El Al, has always been in the forefront of security innovation, for obvious reasons. But now the airline has come out with what could be the ultimate convenience for harried travelers who dread that hassle at the airport: House calls. Now available in Israel for persons flying out of Tel Aviv, the new service lets passengers call up from 24 to six hours before their flight time and place an order. “A member of the El Al ground staff and a security representative will come directly to the passenger’s home, hotel, office or other venue of choice and carry out the airline’s full security check process, including baggage weigh-in on-site, eliminating the need for a wait at the airport,” the company said. Passengers will get their boarding cards during the process, and their bags will be taken to the airport; all they have to do is clear passport control. The cost is $49 for up to four passengers, and $5 for each additional passenger.

INTERNATIONAL

United, Northwest form new international partnerships

United Airlines said it has signed a memorandum of understanding with Brazil’s TAM Linhas Aereas to develop a code-sharing and frequent flyer partnership between the two carriers. TAM serves 49 destinations within Brazil and also flies to North America, Europe and other countries in South America. The partnership is subject to definitive agreements and government approvals, and could be in the works by late 2007, United said.

Meanwhile, Northwest Airlines said it has signed a cooperation agreement with Taiwan-based China Airlines that will be phased in this summer. Starting August 1, Northwest WorldPerks members will be able to earn and redeem miles on all China Airlines flights, and will also have access to China Airlines’ Dynasty Lounges worldwide. The agreement also calls for implementation of interline e-ticketing with one-stop check-in for passengers connecting between the two airlines.

American plans big increase in service to Colombia

American Airlines said last week it will start flying an additional 14 flights a week between Miami and Colombia starting December 13. The carrier said its plans include new daily service between Miami and Barranquilla with two-class 737s; three new weekly flights (in addition to the existing daily service) between Miami and Medellin, on Mondays, Thursday and Saturdays, also with 737s; and four more weekly 757 flights between Miami and Bogota, in addition to the existing twice-daily service. American also operates daily Miami-Cali service, which will continue with its current schedule.

AIRPORTS

AA moves JFK international operations to new Concourse B

American Airlines has moved its international service at New York’s Kennedy Airport into its new Concourse B, the latest phase of a $1.3 billion improvement project for the airline’s JFK terminal. The newly opened Concourse B, close to the terminal’s new Customs and Immigration facility, increases the number of American gates from 18 to 28, 15 of them capable of handling international arrivals. By the time all work is completed next year, American’s JFK terminal will have 36 gates, including 19 for international flights. American said it expects a June opening for an 11,200-square-foot Admirals Club in Concourse B, as well as a 7,000 square foot Flagship Lounge for first class customers on international and some transcontinental flights. The new Concourse B has an array of retail shops including Tumi, Hugo Boss, Estee Lauder, Lacoste, Oakley, the Metropolitan Museum of Art and IN Motion Entertainment. Food and beverage outlets include an O’Neals restaurant; a wine-tasting bar ands store; a New York Sports Bar and a branch of a New York pizza restaurant, Abitino’s.

Todd English steakhouse, Balducci’s market coming to JFK terminals

Airport concessionaire HMSHost plans to bring new dining concepts to three terminals at New York JFK as part of contract extensions it has won for Terminal 1, Delta’s Terminal 2, and British Airways’ Terminal 7. At both the Delta and BA terminals, HMSHost will open steak house restaurants from celebrity chef Todd English (who also has a restaurant on the Queen Mary 2). Todd English’s Bonfire Steakhouse will open June 6 in Terminal 2 and this fall in Terminal 7, offering signature dishes like steak frites, crabmeat nachos, roasted swordfish and Kobe beef burgers. Now open in the Delta terminal and coming this fall to the BA facility is Balducci’s Food Lover’s Market, a branch of the well-known Manhattan gourmet food store, with made-to-order sandwiches, salads, soups, desserts and pastries. Also newly opened at Terminal 2 is a French Meadow Bakery and Café; coming this summer is a Legends Sports Bar and a Starbucks. In Terminal 7, other new concessions in the works include a Bombay Sapphire Martini Bar; a Wolfgang Puck Gourmet Express; and a Zoom Interactive Café, where customers can download music, surf the Internet, and buy tech products. Plans for Terminal 1 include an Idlewild Wine Bar, Medalist Sports Bar, Sbarros/Greenwich Village Bistro, and, of course, a Starbucks.

Continental to switch terminals at Boston Logan

Continental Airlines will move its Boston Logan operations this fall from Terminal C to Terminal A, according to the Boston Globe. The newspaper said the move will give Continental six gates at Logan instead of the current five. The move is expected to take place by November 1. Space has opened up in Terminal A due to a cutback in service by Delta Air Lines as part of its restructuring plan, and the newspaper reported that Continental’s existing gates in Terminal C are likely to go to JetBlue and possibly AirTran. Continental and Delta are partners in the SkyTeam alliance.


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